Celsius Holdings Stock

We're going to get started. It's a pleasure to welcome Celsius CEO, John Fieldly; and CFO, Jarrod Langhans, to the stage. Last year, we were here, we were discussing the potential of a much broader energy platform. And today, Alani and Rockstar are integrated. The portfolio has roughly a 20% share of the U.S. energy drink category and the focus has shifted from assembling the platform to now proving what it can deliver.

So I wanted to start, kind of, at the same, sort of, high level and knowing that a year ago, the investment case was largely about the strategic opportunity by having this rebrand portfolio. After running that full portfolio through PepsiCo's route to market now for a few quarters, what would you say you understand today about the business that you didn't fully appreciate when you first expanded the partnership?

Yes. It's a really exciting time right now, just really finalizing the integration of all 3 brands. The biggest opportunity we have today is the amount of consumers we can touch with this portfolio. When you look at Alani, very female-focused. It's treats in a can. It's guilt-free indulgence. You have Celsius with its fitness lifestyle position, and we have Rockstar. So we have 3 distinct brands going after 3 distinct consumers and the amount of opportunities with touch points on where we can take these brands through the Pepsi partnership and as we continue to invest in our internal teams, the white space is just massive.

Alani has done an amazing job bringing new consumers into the category. And the integration on behalf of the team, it was another flawless integration. Alani is an amazing brand. We just launched Witch's Brew. Anyone out there, please try it. We have some in the cooler. It's going to be the biggest LTO in the energy history, maybe even beverage, just really excited about the opportunities we have with the Alani portfolio.

And then one thing learning with the Celsius portfolio when integrating these -- this portfolio, we did some rationalization, and we've been talking with a lot of investors today about that. And we have a much stabler portfolio of core SKUs within the Celsius portfolio. That sets a really firm foundation. But going through that integration and some key learnings, we really went too deep on simplifying the Celsius portfolio for this year. But we're going to take those key learnings, and we're really excited on what's in store for '27.

Okay. Great. And I guess, where would you say that, sort of, improved execution has come about with the expanded partnership with PepsiCo and the route to market? And then where is, sort of, the added complexity maybe been greater than what you expected by now managing the 3 brands on your side?

Yes. I mean any time you do an integration, especially the size of -- now we have $2 billion brands within our portfolio, massive opportunities. One thing that we were able to unlock by bringing the portfolio together is this category captain of the energy category with Pepsi. So that allows us to set our own priorities and really leverage their whole sales distribution system on prioritizing around key moments with each one of these distinct brands. So we have distinct commercial plans for each brand that we'll be executing. And now that the integration is done, now it's really time to unlock that value. We're going to be able to really maximize the full potential of the energy captaincy.

As an example, about 5 weeks ago, we were out in Vegas at the Pepsi AOP meeting, where we spoke with over 1,000 managers and executives and just getting everyone really excited about our priorities, our innovation, some of the big brand plans we have in place and they're excited to get started. So that's a big unlock now.

And the other piece is, this is the first year the organization is going to market with a portfolio approach into the selling story. So we've already kicked off a variety of discovery meetings with some of the major retailers in the U.S., and it's been really, really positive. So innovation is planned. We got great assets to leverage, activate consumers, expand usage occasions and bring that all to life on the retail floor.

So when do you think you start to see some of the -- like that -- this going to market differently with the full 3 brand portfolio? Is it kind of early calendar '27 that you start to see expanded shelf space?

In regards to shelf space, we're in a really good place within we operate in the energy category. Not only is you're seeing pricing taken, right? So we're seeing growth on dollar, growth in pricing, you're also seeing units. So we're in a really good category. We're hearing early feedback from retailers that they'll be expanding their space again. They expanded their space last year. Energy sets are getting bigger, especially in large format, more availability in cold placements and coolers. And retailers are realizing energy drinks are being consumed in multiple occasions. So they're leaning in as the category continues to grow.

Can you just maybe -- actually, the question about the full brand portfolio being captain, how would you say it's enabling having better or different decision-making than might have been the case historically. So now that you've got oversight of all 3 brands.

Yes. I mean when you report, you're an allied brand, and you were dealing with a distribution partner that had a vested interest in one of their own brands. So there's always prioritization challenges you would have on managing your brands. And -- so this now as a category captains, we manage the full energy category. So now having Rockstar, Alani and Celsius, we're able to not compete against these brands independently, but actually use this portfolio as leverage. Alani right now, Witch's Brew, extremely popular. Retailers want it. We're able to use that now managing the portfolio to bring the other brands along and opportunities that you might not have to get that secondary placement and third placement.

So it's really taking the value and the opportunity of the brand and really making sure you're maximizing every lever. And that's our go-to-market strategy for '27. We're going to market with a total portfolio. We have prioritizations from our own people when we're investing in merchandisers and territory managers, but then also working very closely with Pepsi so we can have -- improve the execution. We also are doing suggested orders. So our sales team can place orders on behalf of the Pepsi sales rep. So we're working much closer together, and that's only going to get improved -- continue to improve in '27.

Okay. And then can you just remind us how to think about, sort of, the mechanics of accountability. When the strategy is yours, but the physical execution sits within the Pepsi distribution system?

Yes. I guess when you think about it, any distribution, right, there's always going to be challenges and opportunities. And I think when we really think about it internally, it's the opportunities, right? So distributors are going to drive efficiencies, they have a lot to sell. A sales rep within Pepsi has hundreds of SKUs, right? So how do you make sure your stands out? How do you make sure that you have that opportunity for that sales rep? How do you create that selling opportunity? That's where the territory managers come in, the merchandisers and then most importantly, the wiring and programming at the key account level. So getting the key account level strategy and commercial plans, validated and executed and aligned with the key accounts, getting that sold through and aligned with the distribution partner will get you to show up. And that's where it matters.

You have a 1.5 seconds for a consumer to purchase a product. You have to disrupt the path to purchase. The energy category is extremely, extremely competitive. We know this, right? We have to get secondary placements, third placements, disrupt that path to purchase. We need to bring these brands to life at retail. So the wiring is very, very important. That's why the category captaincy is important and continually focusing on improving execution, improving the placements at retail and getting the product cold.

Okay. Coming out of the second quarter print, I think an area that investors have been focused on is the trajectory of the Celsius brand itself specifically. So you've been clear, you just mentioned already that the SKU rationalization went deeper than it should have in hindsight, but the remaining assortment is becoming more productive, but we're not yet, I think, where the total brand has returned to growth. So what more needs to happen to get there?

Yes. I mean commercial plans for '27 are fairly locked. We have an LTO strategy. Spritz Vibe is another winter Spritz that's coming out in the fourth quarter. But that LTO is not going to put enough sales on innovation to cycle last year's innovation -- that permanent innovation, which was in place. So there's weakness on the Celsius portfolio. We've seen that down anywhere between 5% to 10% on the scans on IRI data. The rationalization slowly starts to fall off towards the back half of the year and into the first quarter and first half of '27. But we're seeing really strong performance within the core SKUs that we're focusing on prioritizing.

As an example of some of the SKUs are Cherry Cola, Grape, tropical vibes. Some of these really great velocity SKUs. You're seeing the ACVs gain as the teams are focusing and prioritizing a really strong base portfolio. So Celsius will be down as we're finalizing and exiting the year, we're hoping to get it back to growth at the end, but it's going to have a really firm stable base of SKUs that we're going to build on for 2027, where we had permanent innovation on our core or Vibes lines.

And also, we'll be launching a new subline in the 16-ounce space, which we're really excited about. We're going to be announcing that at NACS coming up next week or next month, which is really the Super Bowl of the energy drink category. It is a fun time if anyone can ever -- wants to go. You'll see a lot of great new innovation within the energy category there.

Okay. [indiscernible] sort of getting through this period, we cycle it and then the stable base to grow from in the innovation and activity.

That's correct.

Great. And then also, I just wanted to just clarify also, is some of this recovery relying on the time of retailer shelf resets or anything with in-market execution, would you say?

We're completely focused on getting Celsius back to growth. The innovation will slowly start to roll out in the first half of the year as retailers are resetting, but we're also making strategic investments behind the Celsius portfolio. We just partnered with GameDay. We've been activating college campuses across the country. And now we're leaning in on college football more than ever before. We're getting a lot of great feedback from retailers where we're going to be able to bring this property to life. So innovation is going to be a key driver for '27, but also leveraging these tentpole programs and wiring that we're wiring in through the key accounts is going to also drive additional velocity growth and loyalty.

And how -- I guess, should we on the outside evaluate the recovery in the brand? Like what are the data points that you think would be the best leading indicators? And like what are you watching most closely to say that this is working.

Sure, you want to talk?

Yes, you talked about -- I mean, scans obviously, is a key thing. Most of our investors are watching them on a weekly basis. But we look at them as well also not just from a percentage but gross dollars. So how have the gross dollars been trending? Are they stabilized, which we've seen stability for a number of months? We also are looking at kind of productivity. So if you look at, kind of, dollars per point of distribution, we mentioned in our Q2 earnings call that from Q1 to Q2, we're up 16%, even with 7% loss in points of distribution. So we're seeing the productivity go.

If you look at just the singles, which is about 70-plus percent of our business, of the remaining SKUs, those are in double-digit growth. So the remaining SKUs are working. They are resonating with the consumer as we get everything set and going. Those are kind of the, call it, third-party data things you can review. If you go beyond that, we look at a number of displays, inventory on display, so NOD, IOD is very important for us, like John said, it's about getting in that path to purchase.

So we need to keep that up and keep growing the different merchandising and the different setups that we're doing. ESPN GameDay will be helpful with that with getting displays across the U.S. and all the big retailers and even some of the convenience locations. And then it's the coolers, how many coolers are we able to add. We've been adding a lot of permanent fixtures this year. That's caused a little bit of delay on some of the space gains that we've had, and we've talked about that back in our Q2 call as well, where because it's more labor-intensive and we're getting, kind of, permanent space, it takes a little longer to get that set as opposed to just getting another 6 inches on the shelf. So those are the key things we're watching and monitoring and as we go through the year, and then obviously, you've got the innovation productivity as we, kind of, end the year and go into 2027.

Yes, I think it's -- when you look at -- you get all those key indicators and then you have what's happening macro within the category, right. I talk about pricing opportunities, unit growth, more consumers coming into the category than ever before. And you look at a Celsius and Alani, it's incremental, right? We're bringing new consumers into the category. And I think that's really a differentiator when you're going to these buying desks with buyers, right? They're looking for us to bring innovation. They're looking for us to bring some of our marketing initiatives and some of the unique things we do to bring these brands to life at retail.

If they're looking to sell bigger basket rings, right? We hear that a lot with the convenience channel. They want to do more food pairings. What brands to pair with food on a meal than a Celsius and Alani? Some of the really great flavor profiles to have there. We know those occasions are expanding.

Also, the other opportunity we have is revenue management. We've been investing in revenue management apartment. We are really excited about really going to market with this revenue management strategy in regards to pricing, promotional strategies, pack size, and this will really be the first time we're really maximizing the value of the portfolio.

These brands -- commercial plans were designed individually. They weren't designed as a portfolio. So this is the first time we're actually going to be putting that to work, and that's going to unlock value.

Okay. Great. Just sticking with the innovation topic for a moment. You said you're moving back towards permanent flavor innovation for Celsius in '27, whereas like the LTOs and optimizing the lineup were more of the focus this year. How is the innovation process changing? So you don't end up again with a long tail of low ACV products?

Well, that is now corrected this year because the tail is -- there's -- the tail is cut. So what you're going to do is, kind of, continue to rationalize the lower moving SKUs and refresh. That's what you do every year. This year in '26, when you look at what the strategy was, it was to simplify the Celsius portfolio, increase the faster-moving SKUs, bring those ACVs up higher to have more consistency across the country. We cut too deep that we know, and we didn't have permanent innovation coming in. So now when you look at the tail, there isn't really not a tail. So now you're able to continue. You have a really good base. Now you're going to build upon that and definitely taking the key learnings, you have to replace our SKUs, you have to bring new innovation back. And that was a flaw in the commercial plan this year.

Okay. Let's shift to Alani. So a different point in its development, where the question is more how to maintain momentum as the brand becomes much larger. Distribution, velocity innovation are all really strong. So as the initial PepsiCo expansion, sort of, matures, how would you describe the next phase of growth for the brand?

Well, Alani, it's really exciting what's going on. The brand is extremely hot. What we're also seeing, as it's going and expanding into convenience, you're seeing more males consume the product, some of the flavor profiles are so unique. What gives us the opportunity with Alani is the LTO strategy. You get the test.

And then once it's validated, you can bring that back in as a core SKU. So this year, we put in 3 SKUs into the core of Alani. So we have 6 core SKUs. Next year, we're going to bring in more. And we'll continue to build upon that base as well as test and continue to grow the LTO strategy, which has been really meaningful for the portfolio. But over time, those LTOs will have -- they will grow, but the base is growing on Alani because you're increasing that daily consumption. You're seeing these SKUs will start to grow at 98 ACV. You're going to go into additional foodservice. You're going to go on additional college, universities and really leverage the breadth of the PepsiCo distribution networks. And that's a lot of white space opportunity in '27 where Alani can go.

Okay. I think Alani takeaway has been much stronger than reported net sales growth for a few reasons. Could you maybe talk about that a bit and give us an update on when you expect that gap to narrow?

Yes.

I can jump on that. We can parse it into, kind of, 3 or 4 pieces. One of them is you've got non-RTD kind of program they were running that was low or no margin. And so we discontinued that. So that was discontinued in Q1. So as we roll over Q1, you'll see that, kind of, easing and that was just different things that they had added as a part of the nutrition program that we didn't feel we needed anymore. There are a number of things that we kept, like we still kept pre-workout. We still kept On-the-Go sticks and things like that, but there was a number of other things we discontinued.

The other piece -- and we do have a bridge that we have issued each quarter. There's another piece there is the Canadian business. It's growing at a different rate than the U.S.-based business. So if you pull that out because a lot of people are trying to measure the scanner data versus the reported data, and then, kind of, the [indiscernible]. There's another piece, it's the captaincy amortization. So we -- as a part of the Rockstar purchase and also gaining the captaincy, there was an asset that we put on the books that's actually amortized into revenues.

And so that piece will be -- it's straight lined. So it will be, kind of, year-over-year. It will be the same. So you won't have that as an outlier. It will just be consistent across the board for the next 16, 17 years.

And then the last piece is really the mix in the DSD. And so they were -- the Alani brand was heavier mixed into non-DSD in the prior year, and it's mixing into more DSD as we get the captaincy and go into the Pepsi system. A big part of the growth is convenience, which is DSD based.

And then the other piece is, historically, the LTOs would just get directly sent in to retail. And in order to get more breadth and depth, we were able to use the DSD system. So you've seen what happens with the ACVs of, like, which is Brew and how much depth we can get across the U.S. with that. So that's all causing a bit of a mix impact.

As we look out to next year, it's about 60% right now. So it's, kind of, stabilized around that. As we go, kind of, through resets, you'll see it, kind of, be more of an apples-to-apples comparison. So you won't see as much of the flux. If you, kind of, remove everything besides RTD Energy, it was about 39% versus 56%. So it looked a little bigger, but once you, kind of, got rid of, like, non-RTD and some of that stuff, the gap got tighter.

The other thing that will support it is as we implement the true portfolio RGM programs, that will tighten things up a bit, too, because right now, you're seeing some promotions and some build backs and things that are running through. We'll be able to get those running through at a much more efficient rate.

Okay. Great. And I think there's also a sizable gap between growth and net revenue at a total company level. I think it's also largely driven by Alani, but it's a similar question, if you can just, kind of, walk through the ongoing dynamics that you use over time.

Yes. From GAAP versus non-GAAP, there's timing differences that can happen across the board. So you've got the scanner data, you've got the depletions, which are coming from our DSD partner into the retail outlet or our shipping product to the direct businesses that we do business with. And so there could be some timing versus orders, right? So we get paid based on delivering product to the Pepsi warehouse or based on delivering product to the -- call it, the Costco warehouse.

And then they obviously hit the scanner. So there's -- sometimes, there's timing gaps there based on when the orders were, when the depletions took place. So you'll see some of that across the board.

As we continue to scale, that should tighten because our business is going to get bigger and bigger and you won't be able to have those, kind of, disparities in order to make sure we're getting service properly. So you'll start to see it smooth out. But as we're loading Alani in and trying to bring a $1 billion-plus business on where we already had a $1 billion-plus business, and then get Rockstar into the system. We also did some rationalization intentionally on Rockstar. Rockstar has been trending along with way back in August, what we, kind of, expected for its sales this year. So that's -- you're going to see some of those nuances. But as we continue to get some time under our belt, you'll see that start to tighten.

It really starts in Q1 of next year.

Yes. For the Alani piece, you'll see a significant, like, kind of, easing, but from an overall portfolio perspective, you'll continue to see that over the next couple of years.

Okay. Let's stick with Rockstar. So what would you say success looks like for you on this brand?

Yes. We're excited about Rockstar. We're actually getting a lot of great feedback from retailers as well. We have a redesign and a whole refresh look, "Live Loud" is tagline we're going with, going back to music and action sports. And it's been positive, really, really positive. And a lot of retailers were saying it's, kind of, falling off. And -- but they're excited to give it -- have it come back and give it a try. I think we've got some really great tentpoles and some investments we're making within music and culture. The teams are really excited about it, 18 to 24 male and we're going to evaluate it as -- and figure out what is the right investment algorithm, most importantly, driving profitable growth.

It is about a 6 share in the Pac Northwest, so does a considerable amount of volume. And can that scale East, right? And how does that -- what is the turns, what is the velocity? So I think there's a lot of things to learn there, but retailers are leaning in and they're offering a variety of different programming. I think they're excited, just to see Rockstar back and initial feedback from consumers on the repackaging and the redesign is really good high results and feedback from consumers.

Okay. Is -- are you taking the position to 18 to 24, is that the positioning of the brand in the Pacific Northwest would basically take what's working?

Correct.

And then push it further everywhere else around the U.S?

Yes. Exactly. We've got some great flavors. There will be some innovation coming in, in '27 as well. But the big move is the packaging redesign and then getting back to its core, which is music and action sports.

Okay. And then also, is the brand because it's been like fallen off for so long, frankly, is it to where it's like a brand discovery? Like is awareness very low? Do people not even know this brand exists or do you need -- when you get out of the Pac Northwest, right? Or is it a -- are you launching effectively a new brand to a lot of consumers?

It's effectively a new brand in a lot of places. Once you get outside the Pac Northwest. And I think there's -- some people heard about it, but they've never experienced it or tried it. So it's very much a new brand coming in.

Okay. So clearly, we're in rebuild mode here. How do you think about resource allocation though across the whole portfolio, sort of, balancing the degree of reinvestment that might be needed to get Rockstar going to effectively launch a new brand in a lot of the country versus supporting the ongoing momentum you've got in the other two.

Well, I mean, when you're looking at your investment strategy and you're looking at priorities, you're looking at -- we put the same rigor on every single investment that we're spending. So everything is getting analyzed, right? How is it touching the consumer, is it increasing frequency? Are you bringing a new consumer in? How are you driving velocity at retail? We've got to drive velocity at retail. It's the most important thing. So how do we take these tentpoles that we're investing in and bring them to life at retail at the point of purchase?

That's where the decisions are made. So really working with the teams and driving that through the organization is so important. And then on the investment thesis, we've said it from the beginning, how we build this company even in international markets, which is a big opportunity. It's timing, it's sequencing. We are driving this company for profitable growth. So we'll make strategic investments, but we're not going to over-invest. We're taking it -- but we'll work closely with the retailers, where we start to see growth and opportunity, we'll lean in more. But we're not going to get ahead of it.

Okay. Sorry, I'm coming back to Rockstar again. I find it very interesting. In effectively launching a new brand, though, how much of this is experiential in market with consumers, how much of it is online, digital, social attention, how would you say you're balancing...

Yes. Well, it's a little bit of both. So we have a music festival we partnered with. We'll be talking about that and having cans in hands and tie-ins culturally. And then we also have the Rockstar Open, which has been a property they had where action sports is a big part of it, and we're going to continue to leverage. So it is experiential, but social is so important as well, you have to own the phone. So there's a whole strategy on social media, also tying through to get that and how it shows up at retail. So you have to touch consumers where they live, work and play. We're going to run that same playbook. We're going to activate the brand locally and create trial awareness and loyalty.

Okay. Let's talk a little bit about revenue growth management. So you've described this as being the largest opportunity for the company. Revenue growth management covers a lot as a moniker. So can you just give us some tangible examples of, kind of, where you're most excited and where you see the biggest opportunities?

Yes, I'm really excited about the opportunity pricing architecture, but leveraging this portfolio. Do you want to touch on some more on that? So much opportunity in the revenue management piece. And you're right, it is vast.

Yes. So I mean if you think about this year, we didn't really get to put a full program in because we were on a transition service agreement with Alani last year. We didn't acquire Rockstar until the end of August. So a lot of the, kind of, commercial plans were set. So it wasn't really a portfolio approach. So we've been spending a lot of time this year in building out our RGM team and really putting a focus on how are we going to go to market in 2027. There are some things you can do with productivity across the back half of this year, but the bigger pieces are going to be more of a '27 and '28 play.

So there's simple things like, kind of, your price pack architecture like making sure that Alani is the super-premium, Celsius is a premium, Rockstar is, call it, the premium economy. So making sure you got that set up right. So you don't walk into a store and see Rockstar price higher than a Celsius, right? So making sure every store you walk into, you've got the right architecture there, same with the packs and the different packs we're going to market with. Are we going to go to market with minis for Alani? Are we going to do that with Celsius? Multi packs, 12 packs, all those, kind of, things really by channel. What is the strategy there? Also, what is kind of the pricing within the category. You're seeing pricing is expected to go up. So where do we fit within that architecture?

So those are all things that we're talking with our retailer partners with, and that will be bringing to the market next year. Then there's -- so think about that more like price pack architecture. The next piece is really the promotional effectiveness.

So an easy example there is don't have all 3 brands on promotion at the same time competing with each other, right? We want to compete against them. In the past, when we were only brand Celsius, we were constantly being attacked by some brand or 2 brands or 3 brands. So this allows us to, kind of, strategically position each of the brands so that we can win and that we're not going after each other. We're going after the competition instead. So making sure that the timing and sequencing of our promotions.

Another good example is when you run on a Witch's Brew LTO, let's not have it on discount because we know that people are going to buy the product regardless of whether it's on sale or not. So really driving execution through those kind of tactics to make sure that the promotional effectiveness is there.

And then the last piece is really just the mix assortment and how we're handling mix relative to the contra revenue, relative to the trade promotions and those kind of things to say where do we want to blend out on a margin perspective. And so putting those into place, you'll see more execution in '27, further execution in '28, but we see this as a multiyear opportunity to really strengthen our margin profile but also strengthen the effectiveness of our program.

And the breadth and depth, right, on how you're showing up on those promos, what's the frequency by channel, by brand and pack size is a big unlock.

Okay. Great. I'm going to stick with margins. So currently at a 48% gross margin, what are kind of the key drivers to getting back into the low 50s?

Yes. I mean some of the impediments this year, as everybody knows, is the Midwest premium skyrocketing. A lot of that's tied to tariffs, but also you've seen inflation come through. You've got the LME, which is up significantly year-over-year. Conversion costs not too much for us, really, it's those other 2 pieces and then fuel cost/freight costs. Those are kind of outside of our control in a bit.

I'll talk about price locks in a minute. But if you put those to the side, we've got kind of 3 buckets that are driving it. So right now, we were sitting at a 48% in Q2. We talked about based on where the LME was, the Midwest premium and fuel was 6 weeks ago, we're, kind of, in a position to stay in that kind of high 40s for Q3 as well. I'd say in August and September, you've seen oil -- or fuel spike a little bit. But nonetheless, if you, kind of, look at what are the drivers that are going to strengthen our margin, call it, across the next 6 months to 2 years.

We've got our integration program. So yes, we integrated Alani as of the end of Q1, and we integrated Rockstar as of the end of Q2. But that means we've got them into our supply chain. There's still optimization and work to be done around cost structure. So if you look at freight per case as an example, our most efficient case from a freight perspective is Celsius, than Alani than Rockstar. So we still got work to do on Alani and Rockstar in terms of getting those freight rates more consistent with Celsius.

The way to do that is less out-of-orbit transportation, less cross-country transportation so getting more efficient with the SKUs and with the plan we have in place with Alani and Rockstar. And you have seen that improve across this year. So we see opportunity to do more there. We also see opportunity to continue to improve the freight rates with brand Celsius as well. Similar thing when you're looking at COGS, our most effective kind of, call it, finished good is brand Celsius. There is some, kind of, rollover we're seeing because of inventory. It's first in, first out. So you're seeing some of those higher cost things roll out for Alani and for Rockstar. But we see opportunity to drive more efficiency and more cost reductions through there.

Second piece is really direct and vertical integration. So direct -- going direct instead of using middlemen is an opportunity to drive cost out of the system. Yes, we're not going to be able to drive it out of the Midwest premium, but there's different ingredients and other packaging and opportunities to drive costs out and the vertical integration. We've got second line that will be up and running fully for Q4 and then we'll have that fully in place for next year. We also see opportunities for further vertical integration. That will help drive or strengthen our margin. And then the last piece is the RGM program we've been talking about, we see that as a very big opportunity for us across 2027 and 2028 in particular.

Yes. I think when you look at all the opportunities we have on leveraging this portfolio, we talked about the commercial strategy is selling a portfolio to retailers, taking advantage of that 20 share and then taking advantage of the P&L. So supplier purchasing strategies, revenue management. There's just a lot of synergies to unlock over the next year. And now that this integration is done, we got really all these brands in the system. Now it's time to really maximize that value. So not only from a sales perspective, but really to drive the bottom line.

Okay. So fair to say that if aluminum and fuel remain at current levels, everything you've just listed kind of helps prevent margins from going backwards.

Yes. I mean commodity relief gets us there faster, right?

But the question point was if it doesn't change?

We still have a trajectory to get there. It will just take longer because of the commodity exposure right now.

Okay. Great. We have a few minutes left. So I did want to touch on international. I -- you have a little tease. So you've set an ambition for international to account for more than 15% of total company sales over the next 5 years. I guess, what have you learned from the Celsius brand international launches that will inform, kind of, when and how and et cetera, with Alani?

Yes. So I mean it's gone the international market expansion with Suntory is our major partner. We are in France, we're in U.K., Ireland, Australia, New Zealand, Benelux. So we're starting to lay the foundation. We're really still in that second year in a lot of these newer markets, but we're seeing a lot of opportunity like in Paris, the brand at Celsius is around a 6% share. And we're seeing some really good other opportunities in a variety of markets. The key is timing and sequencing. We are going to bring Alani to international markets for the first time next year, it's in our plans. So we'll start to roll out some expansion with the Alani portfolio.

We're getting a lot of interest in international markets as well. We have building out an international management team. So we have Garrett, who's the President of International. He's got a tremendous amount of expertise. We've been building our local teams in each market and then having 2 brands is just going to add for those synergistic opportunities and gain further leverage.

So it's going to be a win-win as we're going to market with a portfolio of brands in years to come in these international markets, which will help drive those targets and growth achievements. The same health and wellness trends that we're seeing in North America are all over the world. So this portfolio and the consumers coming into the category.

We're seeing category growth in the energy market in international markets, just like the U.S. and actually at a much higher rate in many markets. It's even growing faster. So that opportunity is real. It's there. We have a portfolio that's bringing incremental sales, incremental consumers in, fitness lifestyle, more females coming to the category. These are global iconic trends that are changing the way consumers see and perceive the energy drink category for today and tomorrow.

Okay. Great. I'm going to leave it there. We'll go to breakout. And please join me in thanking Celsius also for having all of the drinks.

Thank you, everyone. Thank you for your interest.

Hello, everyone. Thank you for joining us, and welcome to the Celsius Holdings Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the call over to Paul Wiseman, Investor Relations at Celsius. 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. And 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. And we continue to scale Alani Nu. All while our combined portfolio maintained a strong position at approximately 1 in 5 energy drinks purchased in the United States or roughly 20% dollar share in tracked channels.

Energy remains one of the strongest-performing categories and 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-dollar 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. And for many of them, it is the first energy brand they ever try, which makes it an entry point into the category. And Rockstar reaches the 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 give the brand permission the others do not have.

Together, they give us more 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 break through, 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. But 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. And we purposely delayed innovation while we brought on Alani and Rockstar into the system to minimize complexity in the distribution 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. And in some instances, these activities were pushed to later in the reset periods. And innovation, which is one of the biggest growth drivers in the category, was not there to bridge the gap.

But when you look at what is happening underneath, we feel good about where CELSIUS brand is going. Dollars per point of distribution are up 16% from the first quarter to the second. Fizz-Free is growing with dollar sales in tracked channels up over 20% in the second quarter versus the first. We are growing at Amazon, and retailers are leaning in on 2027 planning earlier than they ever had before.

We're also investing behind execution, moving more of our volume closer to the retailer to improve service, and adding hundreds of 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 in tracked channels, an important milestone for a brand we acquired just over a year ago. And it happened in a category with more competition than ever before, with more entrants and established players alike. Tracked 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 tracked 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 have become seasonal moments that alone consumers generally look forward to. But 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. And there is meaningful runway ahead. The brand remains underpenetrated in certain channels where our portfolio is strong, which gives us a clear road map for continued growth.

With Rockstar, we completed the integration in June, on the 9-month time line 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 rock star in everyone, focusing on the core brand and its identity across motor sports, 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're 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. And 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. And we just launched our summer limited time offer, Spritz VIBE's 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.

And 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 road map we have been building. International is one of the largest white space opportunities because both CELSIUS and Alani remain significantly underpenetrated 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. It is one of our longest-standing international markets. And this quarter, the team delivered the highest 4-week sell-through in market history, nearly 3.5 million units purchased by consumers. That is what strong local execution and consumer loyalty built over time can deliver, and it is the playbook we're running in every market we enter.

Our newer European markets continue to progress alongside our partnership with Suntory. We are also identifying select international markets in which to introduce Alani Nu in 2027. And with our international center of excellence in Dublin, we have a strong operating infrastructure in place to help execute this road map for years to come.

With that, I'll turn it over to Jarrod to walk through the financials. Jarrod?

Thanks, John, and good morning, everyone. I will walk through the quarter by brand, then cover profitability, operating discipline and capital allocation.

We delivered second quarter revenue of $818 million, up approximately 11% year-over-year as a portfolio. Starting with brand CELSIUS, net sales were down approximately 12% year-over-year, while retail sales in tracked channels were down 2% in the second quarter. I'm going to discuss those 2 numbers separately because they are telling you 2 different things.

The scanner number, down 2%, is the consumer. That reflects the optimization and moderation and innovation John just walked through. As he described, the rationalization landed immediately, the space came later, and we purposely limited innovation in order to prioritize the existing portfolio and integrations. The GAAP to reported net sales came from 3 things: shipment timing related to inventory rebalancing, increased trade and promotional investment, and softness in the club channel.

On shipment timing, this is the same optimization work we have discussed, but showing up in a different way. As we remove SKUs from the DSD system, distributor inventory rebalanced down across the first half of the year. That was most pronounced this quarter and at quarter-end in particular when depletions versus orders accounted for roughly half of the gap between scanner and reported results.

Trade and promotional investment was largely tied to our variable spend, promotions and price pack activity. During the first half of the year, we saw some negative mix and channel impact as well as some inefficiencies in our programming. This was further complicated by fixed costs that are less efficient when volumes are down. This is the core of the revenue growth management program we are building, with the team in place now that we did not have a year ago. We have begun implementing parts of the improved programming in the back half and we see a significantly larger opportunity to drive better returns on trade spend in 2027 and beyond.

What is most important to stress, the productivity story is intact. Dollars per point of distribution are up approximately 16% in the second quarter versus the first, on approximately 7% fewer points of distribution.

Turning to Alani Nu. Net sales were approximately $364 million in the second quarter, up approximately 21% year-over-year, while retail sales grew 56%. As in the first quarter, tracked growth and reported growth are 2 different numbers. So let me walk through how to get from one to the other, and we have again included a bridge in our earnings deck posted online.

The difference reflects discontinuation of certain non-ready-to-drink products, a higher mix of DSD versus direct sales, which carries higher trade investment and billbacks that reduced reported net revenue, product mix and the timing of inventory builds as well as a noncash entry as a part of the distribution and captaincy agreements.

So excluding Canada and our non-RTD business, all-in gross revenue growth was approximately 39%. And from gross to net, we got to approximately 21%, with the difference reflecting promotional allowances and channel and pack mix in the DSD system, the same dynamics we walked through last quarter.

The integration into the Pepsi DSD system is complete and it is working. Our limited time offer program continues to elevate the brand, build the core and drive trial, and we have strong plans for 2027: new launches, new activations and new programming along with the market expansion John described.

For Rockstar, net sales were approximately $66 million in the second quarter. With the integration complete and the reconfigured assortment in place, our focus is on stability. And as John said, we are encouraged by what we are seeing in the early data and by how the brand is positioned for 2027.

Turning to profitability. Second quarter gross margin was approximately 48%, in line with our expectations and consistent with the first quarter at approximately 48% as well. Improvements in outbound freight and the continued integration of our acquisitions into our supply chain offset ongoing commodity inflation, primarily aluminum.

As we look towards margin expansion, I think about it in 3 buckets. The first is integration. With Alani and Rockstar both now fully in our infrastructure, our raw material purchasing, our freight lanes and our orbit model, those benefits build to our back half. Even with the integrations complete, we still saw some carryover of higher costs this quarter because we have to work through existing inventory before the improved case costs flow through. That improvement started with Alani in the second quarter and builds into the third, with Rockstar flowing in during the third quarter.

The second is structural cost opportunities. Our second manufacturing line in North Carolina begins producing in the back half with the full benefit in 2027, and we are advancing vertical integration and direct sourcing beyond that. Our supply chain center of excellence in Dublin is playing an increasing role in how we procure and how we move products across the network.

The third is revenue growth management. The price pack architecture work we have referenced delivers initial impact in the back half with a much larger opportunity as we look at 2027 and 2028. And this work, as well as other programs we are launching, will help offset some of the mix impacts of more cases through DSD while supporting margin expansion.

On gross margin, the initiatives we just walked through are delivering continued improvement. At current diesel and aluminum levels, margin expansion is largely offset. So based on what we see today, we would expect the third quarter to be consistent with the second and remain in the high 40s. If fuel or aluminum moderates, you would expect to see improvement.

Selling, general and administrative expenses were $238 million, essentially flat with the prior year in dollars, and 29% of revenue compared to 32% a year ago. Adjusted SG&A was 28.6% of revenue. We held costs flat while revenue grew 11%, and we did that while investing behind the summer selling season as planned.

We will continue to invest behind our brands. We would expect sales and marketing in the third quarter to be broadly consistent with the second quarter, and we continue to work to keep general and administrative costs down, with third quarter also consistent with the second.

Adjusted EBITDA was $184 million or approximately 22.5% of revenue, compared to $210 million for the same quarter last year. For the first half, adjusted EBITDA was $380 million, up 36% year-over-year, at approximately 23.7% of revenue. The year-over-year comparison in the quarter reflects the gross margin pressure from commodities and the investments we are making behind the brands.

On capital deployment, our balance sheet remains a source of strength and flexibility. During the second quarter, we repurchased approximately $100 million of stock, bringing first half repurchases to approximately $124 million. We intend to continue utilizing the $300 million authorization this year. We also reduced our interest rate by 25 basis points in July, with the opportunity to reduce it another 25 basis points.

The reason why we are leaning into repurchases is straightforward. Our cash flow return on investment is among the strongest in the beverage category, and at current levels, we view repurchasing our own stock as an attractive use of capital. Our approach continues to be grounded in the same 3 priorities: investing to support brand growth and execution, maintaining the strength of our balance sheet, and returning capital to shareholders.

Let me close with how we are thinking about the third quarter. As it relates to brand CELSIUS, we had some rebalancing continue in July, and we are moving certain SKUs into the distribution centers to be closer to the consumers and out of the mixing centers. This movement will have some onetime timing impacts as the distribution centers hold less inventory as it turns quicker. So reiterating what John said, given the sequencing, we would expect the third quarter to look a lot like the second for brand CELSIUS. And then we exit the year back into growth.

Our focus in the third quarter is execution, improving service quality and driving efficiency through the network, moving more volume closer to the retailer through our distribution centers from the mixing centers, and continuing the retailer conversations and partnership work that appropriately set us up for 2027.

For Alani Nu, we expect our momentum will continue. Service levels continue to grow, and we have a robust limited time offer calendar in the back half of this year that we believe will drive not only the brand but also the category. For Rockstar, our focus remains on stabilizing the brand, getting Rockstar back to its roots, strengthening its core identity and setting it up for 2027. Across the portfolio, we are adding merchandisers and sales reps to improve in-stock levels and get more product on the floor.

With that, I will turn the call back to the operator to open the lines for questions.

[Operator Instructions] Your first question comes from the line of Peter Grom with UBS.

I wanted to just ask on the path forward for brand CELSIUS, and I understand there's a lot of work going on for the brand. But just given kind of the weakness we're seeing in tracked data, what we saw this morning, what gives you confidence that we will see improved performance exiting '26 and into '27? It sounds like 3Q is going to be under similar pressure, but a return to growth exiting the year into '27 is feasible. So just curious, if you were to look out in the next 6 to 9 months, what does success look like?

Yes, Peter. With the CELSIUS brand, as we said in the prepared remarks and discussed the rationalization, is really producing a core portfolio of core SKUs on a national basis. We did make strategic decisions to not lean in as much on the brand CELSIUS as we were integrating Alani and Rockstar, which is now behind us.

The base business within CELSIUS is strong. It has an extremely healthy consumer base. And we have robust innovation plans in the works for '27. We've already been meeting key retailers. We have a variety of initiatives, strategic investments in marketing. Brand health metrics are strong. And one area of weakness, as we mentioned, is the 16-ounce. And we have a new offering, which we'll be launching in a meaningful way in '27.

So I think when you look at where brand CELSIUS is, the rationalization is behind us. It will flow through through the third quarter. As we exit the year, we expect to continue to get CELSIUS back to growth, and category growth in '27 and beyond. The brand has a reason to believe, retailers are -- see the opportunity, it's driving incrementality in the category.

And then when you look at CELSIUS and you look at the portfolio that we've established, and you look at Alani driving 50% growth in Q2, great momentum heading into '27. We're building a base business of SKUs there on a national basis. Rockstar has stabilized. We'll have a portfolio of brands entering 2027 that we'll truly be able to capitalize on, and which is driving incrementality retailers want. There's a lot of me-too competition out there. But when you look at CELSIUS and Alani, these are truly iconic brands. We have a reason to be there. Consumers love that's out there.

And then I think when you look at the overall investments as well within our -- we've made through operational investments, Jarrod talked about revenue management, stable -- further vertical integration investments, and you start to walk down the P&L and the opportunities we have to continue to drive shareholder value, we're on track for that. We continue to improve in '27 and beyond.

The retailer meetings have gone very successful with Celsius, with the total portfolio. We just got done with the PepsiCo annual operating meeting, where we spoke with over 1,000 key Pepsi employees, working on our plans for '27 and aligning on plans and priorities.

So I think we're in really great shape for the portfolio. And your specific question on CELSIUS, we're excited about CELSIUS and where it's positioned and are confident in our strategy is as we're exiting 2026, into '27, working on the strategies, optimizing, investing in retail, making sure CELSIUS and Alani and our portfolio are disrupting that path to purchase, our brands show up at the right point, at the right time, and we continue to drive incrementality and category growth.

Your line is open, Bonnie.

I didn't hear you guys call my name. Can you hear me?

Yes, Bonnie.

Sorry, I didn't hear my name being called. I actually did have a follow-up on that, just in terms of the SKU rationalization, John. As you sit here today, I'm just trying to understand, do you believe ultimately this was the right decision? And maybe is there anything you would have done differently as you kind of look back?

And then could you give us a little more color on the disruption you called out that's going to continue to pressure the brand in Q3? And how much risk there is that sales for the brand won't be even more pressured? I guess I'm just trying to understand how much visibility you have.

Yes. No. Great question, Bonnie. I think one thing -- I think we did. We went too deep on the CELSIUS rationalization. I think when you look at we're entering the year, we could have done a much lighter job on that. But then there's also puts and takes. The integration on Alani could have been further challenged, and Rockstar.

Looking back, I definitely would have not cut as many SKUs within the organization through these commercial plans. But I think taking the key learnings we have today, we've added stability within the portfolio. We see opportunity with Fizz-Free. That is now a core subline. We have the VIBE line, and we have our core flavors, and we're leaning in with innovation for '27.

So I think that's definitely something we would have done -- I would have done different and the organization would have done differently. But taking those challenges, reacting, I mean that's the most important thing. Each and every day, you got to continue to analyze the moves, what's going on within the organization, and adapt. And that's what we're doing now. We have robust innovation plans for '27. We're going to further leverage the opportunities we have with Alani. And we're going to bring Rockstar along. There's opportunities there.

So I think when you look at the organization for where we are today, from where we started the year, the foundation of the organization is extremely strong. And we're in an extremely great place to capitalize on the growth trends in this category. More health and wellness consumers are coming into the category, more female consumers. The category is going broader with our PepsiCo distribution. We're touching more consumers in more places from food service, hospitals, college universities and programs. So many great things are going on where we're bringing our portfolio of brand CELSIUS and Alani to more people and more places and more often.

And when we're talking about Q3, I think when you look at the weekly run rates, we expect those to be somewhat similar within the CELSIUS portfolio. We are cycling prior year innovation. So when we talk about kind of a look of similar from Q2 to Q3, we do expect slight increases, but we don't have that robust innovation we had in the prior year. So we're cycling those higher comps. So that will still continue, as it did in Q2, to Q3. So hopefully that further explains kind of the question around the sidestep from Q2 to Q3.

But the brand is healthy. We're seeing strong, continual repeat purchases, and there's just a massive opportunity with the CELSIUS portfolio.

Your next question comes from the line of Kaumil Gajrawala with Jefferies.

First, just a very quick one on CELSIUS. 3Q for the CELSIUS brand being the same as 2Q. Is that dollars or is that percentage?

Yes. I think we're talking about the dollars, looking at scan data. You'll have some fluctuations, when you look at the dollar level, but also on a percent level.

Okay. Got it. And then you just mentioned a little bit about cycling and innovation, that sort of thing. You've got some of that that you just laid out in 3Q and then a very big one in 4Q with the LTO on Alani. So as we think about all of these moving parts, there's so many things going on, which leads to a weaker net all-in number than we would have expected, I think than you guys would have expected as well. But it also feels like you're going into an area of more difficult comparisons for more than 1 quarter as it relates to top line.

So how do you plan for that? How do you sort of continue pace when sort of simultaneously a very big comp on Alani, which has been driving the overall top line, and then trying to reverse the trends of CELSIUS?

Yes. No, great question. And so you have the trends, we've talked about CELSIUS. From Q2 to Q3, we're looking at somewhat of a sidestep as we still have the cycling of the optimization. That's going to continue to improve in the fourth quarter, and we expect to get back to growth in 2027 as we continue to have robust innovation plans in place.

As it relates to Alani, you're referencing Witch's Brew, which we'll be launching. It's going to be the biggest LTO in history. We have a comp there. We know what that comp is. We're going to continue to -- Witch's Brew will be bigger than it ever has ever before. We're really excited about some of the plans and marketing initiatives we have around that.

Now how do we continue to grow those comps on the Alani portfolio? That's building out that base portfolio. So over time, the LTOs become less relevant to the total top line revenue because you're building out that base business, that base SKU count, building that loyal consumer and that repeat purchase. And we're seeing that unfold as we started to do that in 2026. We'll continue to do that in 2027. So we have the base business growth as well as leveraging the LTO opportunities, which are seasonal, which are connecting with consumers, which are bringing new consumers into the category more than ever before.

So when you take that into consideration and how we're building out strategically Alani and the opportunities and the strategy behind CELSIUS going forward, we feel we're set up for great success in '27 to cycle those comps and drive growth, not only within our top line, but the overall category, which is expected to grow as well.

Your next question comes from the line of Jim Salera with Stephens.

I wanted to see if you could give us some more detail on the recovery in 4Q and maybe if you could just help contextualize the magnitude of that. I think the decline in core brand CELSIUS in 2Q/3Q is probably greater than expectations. And so should we think about that helping amplify the magnitude of the recovery in 4Q? And maybe if you can offer some thoughts about kind of the run rate as we think about modeling FY '27.

Yes. No, I think when you look at 4Q, you're starting to cycle some of the rationalization that has come out. So that will be a positive on the year-over-year comps, as you're looking at that on the weekly data. You do have some seasonality that needs to be taken into consideration that we do see within the category every year.

And then we'll be when you're looking at also the expanded distribution, we've talked about that, with retailers with permanent fixtures, investment in cold placements. So those will be continually coming through through the rest of the year as well. So that should give us expanded distribution, better placement for the CELSIUS portfolio. And then also, you have the comps from the prior year when the rationalization really started to progress through. So those are some things that will benefit the CELSIUS portfolio.

So can we think about that as kind of being up into the mid-single-digit range? Or just, again, trying to contextualize that step-up, and then maybe any detail on the pacing of international given some of the opportunity that you highlighted there. Just trying to think about, like I said, kind of the pace of recovery, if we should expect a quick snapback or if this is more of a gradual build 4Q and then through 2027?

Yes. I think I'll let Jarrod comment further on some of the scans versus the revenue that we're recognizing. But it should be more of a build as we're going through in Q4, because some of those SKUs slowly come out, right? So it will be more of a slow build on the CELSIUS portfolio. Do you want to touch-base on that, Jarrod?

Yes. We'll also have more information on our next quarterly call as we kind of set timing and sequencing of when we're going to do load-ins and different things for the 2027 innovation. If you look at, just in general, brand CELSIUS, as John talked about, you'd see the build come through the scan data. Wouldn't necessarily look for a direct snapback, but that's from a scanner.

From a reported perspective, we do have a softer comp year-over-year that would be seen in Q4. So the anticipation would be, with that, you have an opportunity to actually be in the opposite direction versus scans for brand CELSIUS. Now for Alani, we did have an inventory build in Q4 last year, which was partly why we had some soft comps for brand CELSIUS.

So as we kind of get to building out the timing and sequencing of the 2027 innovation, because some of that will get loaded in Q4, we'll be able to better kind of map out for everyone what we're expecting on Q4 versus Q1, because we do have a nice, robust plan of innovation coming forward for 2027.

And then just to touch on your question in regards to international, that's an amazing opportunity. We've been building out the teams this year. We have a really strong foundation, building up the sales and marketing teams. We're seeing green shoots in a variety of markets, from Australia, Paris. And we expect to further launch Alani for the first time in a variety of international markets that we're working on.

So I think we're in really good shape, although it's a smaller piece of our overall top line revenue. International can be a meaningful piece over the years. And as in prepared remarks, we anticipate a 15% over time, that we're looking at, and it could be even higher. So we'll see how the brands resonate. But health and wellness trends and what we're seeing in the category in the U.S. and North America are the same trends globally. And the awareness is a lot higher than we anticipated as we further conduct an analysis and research within these markets.

Your next question comes from the line of Eric Serotta with Morgan Stanley.

First, in terms of the shelf space gains that you talked about back at CAGNY and earlier in the year. Clearly, some of these gains have been a lot slower than expected in coming. Where are you today versus that original target? I believe over the past quarter or so, you talked about some imminent space -- permanent space increases in the mass channel. Has that happened? And how is it performing if it has? And if it hasn't happened, why not? And then a quick follow-up after that.

Eric, this is Jarrod. In terms of space gains, one of the things that happened is, I would say, the timing was a bit off from our initial expectations as we were going into the year. With some of it being fixtures and cold, it did take a little longer, more labor intensive. So I know Toby had referred to a large retailer that was in place. We put a time line out back in June in terms of when we thought the cadence would occur.

So that's come to plan. So that kind of as we go through July, we were able to pick up that space. We do have an opportunity to swap out some end caps with some cold space. That wouldn't really change the space equation. It's just better space as we look at September and into Q4 with another retailer. And then the same kind of new channel retailer that we talked about coming onboard in Q4 is coming onboard.

So those are kind of the nuances of the ones that got pushed a little bit. The rest of them have been reset with the rest of the resets as those were just your typical shelf gains. And then Alani is in place as well.

Great. And then just in terms of the innovation strategy, this year you pulled back on sort of permanent extensions for brand CELSIUS. It sounds like you're planning on bringing that back next year. Could you just talk about some guardrails that you might have in place in terms of SKU proliferation just to kind of make sure that we're not in the same situation in another year or 2 in terms of over-proliferation and sort of undoing the work that you're doing of turning the tail?

Yes. I think as you're managing a portfolio and you're managing brands, you're always going to continue to optimize the tail. But I think when we look at your base SKUs, you're always evaluating do you have the fastest cars on the track and making sure you're optimizing that, to maximize the shelf space, to maximize the distribution. So those are something that you continually do through your commercial planning process, that continues to be evaluated, and replacing the tail. I think that's the most important thing.

We need to continue to drive incrementality with the portfolio, make sure we continue to leverage the maximum billboard so we can disrupt that path to purchase, and versus cutting tail, replacing it with new innovation that's permanent throughout the year. So I think that is something that will be a strategic change going forward.

Your next question comes from the line of Andrea Teixeira with JPMorgan.

I was just hoping to see if you can elaborate a little bit more on Alani. We clearly have seen, as you mentioned, like about half of the gap, the 10% gap, was about like basically the shipment depletes. And that is set, right? I mean you can't -- it seems like you're not going to have an improvement. And that's more brand CELSIUS, I understand that.

But then as we think about the deceleration and disruption and the changes in distributor, you still have $8 million charge, and that's a cash charge, I'm assuming. How to think about the cadence with Alani itself? I understand all the fuel dynamics and you're going to put Witch's Brew even stronger this year. But as we think about like all the dynamics that you highlighted in terms of the shipments in the fourth quarter that were strong last year as well, how we should be thinking of the improvement that you called out in the fourth quarter?

I know it's a loaded question, but as we see CELSIUS in the same situation for the third quarter, unfortunately, then you have an improvement in the fourth, but then Alani has this kind of tough comp, so how we should be thinking about the fourth quarter for Alani? And then when do we see this noise of distributor charges coming out?

I'll take this one, John. In terms of the fourth quarter, I think like I was referring to back with Jim, we need to take a look at the timing and sequencing of when we're going to bring our innovation in because that will impact the comps that we're going to be seeing. We've got a lot of good innovation we're going to be coming out with in Q1. And so we're going to have some of that coming in November, December. Some of that will come in throughout Q1.

And so we're mapping that out right now. It's not fully baked in. And so we're working with our DSD partner on that. That will impact the timing and sequencing of what we're seeing from an Alani perspective where we're going to have Alani growth, but we're also going to have the comp that we're rolling over from the pipe fill last year.

But also we have a lighter comp on brand CELSIUS and we've got new innovations coming in at the same time. So we've got an easier comp with brand CELSIUS plus new innovation. We've got a tougher comp with Alani with new innovation. And we're going through that right now with our DSD partner to see how that shakes out, and we'll be able to provide more data on that once we get to our next call after the Q3 earnings.

And I'm just -- great question because there is some nuances from quarter-to-quarter, especially on the -- the load-ins on Alani going into the PepsiCo system. So that is a comp. And as Jarrod mentioned, when you look at our revenue, we do have innovation going in. So there are some offsets there.

But I think the most important thing for the long term and the long-term health of these brands is truly happening at the registers. That's something that we continue to focus on. We have to focus on that. We'll have nuances from month-to-month, quarter-to-quarter on inventories and warehouses. But at the end of the day, it's how are those scans performing? How are consumers reacting with these brands? That are going to continue to drive this portfolio for and to continue to create opportunities in this fast-growing energy category, which is going beyond energy, is going to more day parts and occasions. That's really the value behind these brands.

And we've now reached the end of the Q&A session. I'd like to turn the call back to Mr. John Fieldly for closing remarks. Please go ahead.

Thank you for joining us today. The second quarter was a meaningful progress in advancing our scaled portfolio of leading brands. We're entering the back half of the year with a clear set of priorities. We have a strong slate of fall programming and new campaigns ahead. Alani Nu has what we believe to be the biggest launch in all history for that brand. And we are on track for planning our 2027 priorities with key retailers and we're doing it earlier than we have ever before.

I want to take this opportunity to thank our employees, our partners and all of our customers for their focus, their teamwork and what makes this all possible. To everyone listening today, we appreciate the support. We look forward to updating you next quarter. Until then, grab a CELSIUS and live fit.

This concludes today's call. Thank you all for attending. You may now disconnect.

All right, everybody. Thanks for joining. For our last session of the day, we decided to end with an energy drink company to keep everybody fired up. Welcome back Celsius Holdings to our conference. Welcome back Chief Executive Officer, John Fieldly; and Chief Financial Officer, Jarrod Langhans. Thanks, guys, for joining.

Thank you for being invited back.

Of course. Of course. Okay. So we've got a lot to cover. So I'm just going to jump right in. And I'll start with you, John. We're now a year further into -- last year, we talked a lot about the beginning of Celsius becoming a portfolio-driven company and a multi-brand modern energy company. And we're a year further into that journey. The platform is further established. What do you think is maybe not fully appreciated or misunderstood about where Celsius is and the opportunity that lies ahead?

Yes. No, I mean, great question, and it's a massive opportunity here at Celsius. We are the last Q&A section here. We'll bring in the energy. And we're really excited where this portfolio is going. When we sit here today, 1 in 5 energy drinks are sold through Celsius Holdings. We have a portfolio now of not only 1 distinct brand, but 3. Celsius was one of the early -- one of the original all zero sugar fitness lifestyle brands, really built modern energy.

And then you look at Alani, a health and wellness female-focused brand that's inviting and approachable, comes with very unique flavors and is on trend. Massive opportunity within that distinct portfolio. And then we most recently acquired Rockstar, and Rockstar allows us to play in that traditional energy drink space. And we've got great plans and -- the teams have built and working on and refining for 2027, and we're excited.

And I think Q1 was a great quarter. That was the first quarter this organization managed a portfolio of brands through PepsiCo. And we sit here really looking to '27 as we're building our plans, and we're going to go through this process for the first time as the energy captain of Pepsi managing their portfolio within the energy segment. So exciting times. It's very -- so much opportunity in energy as well, one of the fastest-growing categories and sugar-free is really driving it.

Yes. Maybe we talk a little bit about -- just to ground everybody at the category level, as you say, it's been a phenomenally vibrant category for a while, but especially as we move through '26 despite all the concerns on the consumer. How do you view the category and its future opportunity? And it's gone from more of an impulse-driven occasion to, I think, one of more routine for a lot of consumers. Do you see it that way? And how durable do you think category growth is?

That's what gets us really excited. Energy has gone mainstream. I think when you look at it and you look at the consumers that are coming into the category, so many new consumers are coming in, and they're looking for health and wellness, zero sugar, products that align with their health and wellness trends. And then what we're seeing is more females are coming into the category than ever before.

And what's interesting is we hear it all the time from investors with the female consumer, their consumption occasions isn't as frequent. But what we're seeing is they're increasing in frequency. So that's really great for the Alani portfolio, which is focused on female and also our Celsius portfolio, the health and wellness, which is 50-50 male, female.

So lots of opportunity to really capitalize on the growth we see in the energy category with the portfolio. And also what you're seeing in is increased usage occasions and higher frequency throughout the day. Look at Celsius and Alani, look at the portfolio, these brands have really refreshing flavors, fruit forward flavors. And when you think about it -- we did a research study, and we found that in the energy category, over 33% of consumers are drinking energy drinks with meals. That didn't really happen 5, 10 years ago.

And look at the partnership that just happened with Red Bull and Monster with refreshers. Redbull and McDonald's with the refreshers. That's so unusual of a relationship. But today, it's mainstream. These products are being consumed in everyday lives and expanded use of occasions. The other opportunity is social gatherings. Over 30% of consumers are drinking energy drinks instead of an alcoholic product in a social gathering. So the opportunities for our portfolio in the energy category has grown, and we expect to see continued growth rates within that channel.

Okay. I want to dive into each of Celsius and Alani. But maybe before you've mentioned the 3 brands in the portfolio. Maybe just talk -- spend a minute on what the distinctions between those brands are and what role they play in your portfolio vision.

Yes. Like I said, Celsius is a fitness, health and wellness brand for today's health minded consumer. Our mantra is LIVE FIT. It's here to help you accomplish your goal inside and outside the gym. And it's designed to be the world's most refreshing energy drink, which is fruit-forward. Then you look at Alani, it's a health and beauty offering. It's approachable, it's inviting, has great unique flavors that are fun. It hits the season, and it's reaching a totally new consumer in the energy category than ever before and growth opportunities for that portfolio are extremely strong.

And then Rockstar, going after that traditional energy drink male consumer, 16-ounce can, likely will not be that consumer holding a Celsius or Alani, just doesn't fit into the DNA. Got to remember, these brands are more than the liquid in the can. It's like the threads on your shirt. It's the sneakers you wear. It's the authenticity of that brand. These are products that say something about you, that's really unique, and that's what makes these brands so special.

Okay. So let's talk about Celsius, which I think is front and center for most investors. You have -- the growth of that brand has slowed this year as I think in part as the PepsiCo system is focused on the expansion of Alani Nu and as you essentially rationalize the Celsius portfolio down to what will hopefully be a stronger core. You talk a little bit about what you're doing with the Celsius brand, how you're positioning it for growth. And then just we can talk -- you put out some information today around the time line to get that brand back to reaccelerating growth. But let's talk about -- start with what you're doing and then we talk about the path forward from here.

Yes. And I think before we get there, I think it's really important. We get a lot of questions about the rationalization strategy within Celsius. And I'm going to have Jarrod talk about some of the integration of Alani and Rockstar and the complications of that.

But you got to go back to where we started within Celsius. And you got to think that before we went into the PepsiCo network, we were in the ABI network, fragmented network, over 300 distributors, all independents. Celsius was considered prior as a gym rat brand. We couldn't penetrate into the energy category. We actually built this brand through health and wellness in many retailers. And today, we're still in a few health and wellness categories within certain retailers.

But I think what we did strategically to really pound through is we've made strategic partnerships with key retailers on creating unique flavors and allowing that opportunity to prove ourselves. We knew we had the consumers in their store. We knew the product would work in a variety of these retailers.

And as an example, this one retailer that's out West, about 300 stores. We had difficulty getting in. They didn't believe our product portfolio work. So we came up with a unique flavor for them. It actually was Cherry Cola and we launched it with them. We have a full shelf today in that retailer, which is a high-velocity convenience store and -- but it's only in 30 stores.

So on the ACV level, it comes into 20% ACV, 30%, not very productive when you're trying to build a brand nationally. But regionally, it worked because we had a local distributor that serviced those stores. We could sell it very effectively, and we got new distribution in a high-velocity convenience store. We had to make choices like that along the way to build this new modern energy category, which Celsius has been the leader in and fitness lifestyle.

So that is something that we structurally did to build this new category because we couldn't compete with Red Bull and Monster. The world doesn't need another energy drink, but this segment was growing of sugar-free, better for you, and we were able to penetrate and break through.

Now we're with the Pepsi distribution system. What are the benefits of that? We've talked about that. The benefits are national execution, being able to launch and innovate and leverage your marketing plans nationally to compete at the highest level within the energy category. So as we were going through this process, we had a lot of these fragmented SKUs that were in 20% ACV, 30% ACV in great retailers. But in order to really maximize and unlock the value, we want to have a consistent portfolio around the country. As we say internally, we want to keep the fast cars on the track, highest velocity, what is the opportunities?

So the example of this Cherry Cola that was only in 300 stores is now gaining national distribution because it has done really well on velocity. You're seeing that with our great brash flavors, just to name a few. So you're starting to see the rationalization as the SKUs are coming out, and you're seeing the increase in velocity or ACV with these SKUs that are remaining that we're going to have a solid portfolio as we move forward.

Now we're seeing some timing from resets where when these SKUs are falling off, that's a little -- that's been a challenge as we're not cycling the prior year innovation where we had 6 innovation items hitting particular retailers. So those are things that we're working through within the portfolio. We're super confident on where we're going with the Celsius portfolio. It's building a base. We've got great innovation planned for '27. We have some LTO strategies we've implemented this year to reduce complexity, bringing in Alani and Rockstar. And we've done extremely well, bringing in Alani. Jarrod, do you want to talk about the Alani integration?

Yes. I mean we had a pretty aggressive plan to get them integrated within 12 months, and we've got them completed substantially in March, just a few months back. Rockstar is also being integrated. That one is even a tighter window, so 9 months. So that will be completed this month. And so it's been a lot of work. And at the same time, we were doing the integrations, we were doing the optimization.

This is one of the reasons why we didn't push to do additional innovation for brand Celsius, trying to take some of the complexity out of all this work to make sure that we got Alani in properly. We've got Rockstar moved over to our platform, and we're able to kind of get the entire portfolio set, get the fast cars on the track for brand Celsius. We've kind of got a tiered approach to that. So it's -- think of progression. So you got, call it, your top 8 to 10 then your next handful of Celsius SKUs and your next handful across our core brand, our VIBE brand and then also our fizz-free.

And then the fizz-free also became a focus this year where those had a really low ACV, and we see a great opportunity for growth with that. So really getting those set across this year to make sure that we've got our fizz-free and much higher ACV than they have historically had.

Okay. So talk us through where we where we are or where we go from here in terms of time line to this first wave of rationalization being complete to you starting to build strength on top of that newly established foundation. How long will it take to get through that phase to get back to some sequential acceleration that can ultimately lead to year-over-year growth?

Yes. I think where we are in the resets, we expect the majority of the resets to be done before the end of June, July time frame. Each retailer is different. There's capital allocation, resource constraints. We expect the majority of those to be done. We are getting some permanent fixtures, which are a little bit more difficult to place, premium locations. And those will take place throughout the rest of the year as we look to get these seeded and set, and that's basically one retailer.

But all the other retailers, we expect to be set by the end of June and July time frame based on constraints and everything seems to be on progress there. And I think when you look at kind of the cycling, talking about brand Celsius specifically, which is the focus, we expect to pick up, see some stability over the next several months and then start to get back to growth by the way we're going to finish the year.

So a lot of plans in place to drive growth, a lot of great exciting things going on for this summer around Celsius, brand Celsius. A lot of great programs in place that will be kicked off leading into '27. We have a major convenience store retailer today in our offices at Boca Raton with a variety of key buyers talking about planning together for our portfolio. We're meeting with retailers for discovery meetings earlier than ever before.

Retailers are really positive about the Celsius portfolio. So we're hearing a lot of great positivity from Celsius and Alani and Rockstar getting that back and giving that an opportunity. So I think we're in a really good space for Celsius. We are just going through a time of really getting the foundation right so we can continue to drive growth on a national level and drive additional scale.

Okay. The natural question that follows this conversion when I talk to investors about Celsius journey and we pivot to Alani is, what's going to prevent Alani from being in a similar situation a year from now? So can you talk about the compare and contrast...

Yes.

Of those different brands and why Alani in your mind is protected from a repeat?

Yes. I think one thing, you got to go to the path on how these brands have gotten here. So like I said, I think it was important to start off really because a lot of why was the rationalization, what is the need for it. And going back to how this portfolio was built to be the leading sugar-free, better-for-you functional energy drink in the U.S., it had to go through an uncharted territory before.

And working through distributors and retailers had to create a new category is extremely difficult, and Celsius broke through that and established that category, as a category leader. Alani was able to come in behind it, very differentiated with female, but this modern energy category already started to evolve. So they didn't have to take the fragmented approach. where we acquired the brand and going into Pepsi, we were able to optimize the portfolio with a base of SKUs that have national distribution.

So it's really set up correctly from the beginning to have consistency to leverage a national distribution network like Pepsi and a national commercial plan that we're building. So the foundation is strong, has high-velocity SKUs.

Will we rationalize SKUs? Absolutely. Every brand does that every year, right? Some innovation doesn't work, you'll cycle through it. We'll have more permanent SKUs coming in for Alani next year, which will further build out the base because one thing we hear from a lot of investors is it's an LTO brand, eventually, LTOs will fade and the brand will fade away as a lot of comments we get.

But what we're doing is you look at the core SKUs, we're building a solid foundation of SKUs that have recurring revenue. Brand is now almost a 10% share in the U.S. And that doesn't come by just LTOs or just trying once. These are repeatable purchases. There is a strong consumer dynamic, a loyal consumer behind that brand, has loyal brand affinity, and it's here to stay.

Okay. Great. So maybe, Jarrod, a question for you. As Alani -- as you've watched Alani expand, I mean, pre-Pepsi and then with -- on the Pepsi backbone, and you've seen it expand into channels like convenience into new geographies kind of go beyond its core. How have you -- what have you seen in terms of velocity momentum as that distribution scales? And are you happy with it? Are you positively surprised? How should investors think about the durability of Alani's velocity even as distribution expands?

Yes. So when we were evaluating them over a year ago, we we saw they had very strong -- sorry, very strong velocity. And something that we were impressed by even more so is their velocity within the convenience channels they were in with such a small number of SKUs. As we've seen them go kind of go up to a 90-plus ACV, we've actually seen the velocity dollars expand from January to April.

Most people would have been happy and satisfied if they were just flat over that period of time. So that's something that's been very good and really gives us the confidence that it's got that staying power. It's got -- even as it's expanding distribution, it's got that repeat purchases in. We're bringing new customers in. We're bringing more customers in, and we're bringing a lot of loyal customers that are consuming more and not just coming in for trial. So very excited about what we've seen over the first, call it, 5 months in the Pepsi system with that low 90s ACV.

Yes. And I think also on the expansion, a lot of times, when you're expanding into new markets, they were really strong in the center of the country. But as it scaled, as Jarrod mentioned, some of these pockets where it's just gained availability. I mean it's getting trial. And the good news is when we launched it and we launched it with an LTO strategy. So it had a lot of great retail theater that we call it, and that gained a lot of trial and interest, and we're seeing those recurring purchases come flow through it.

I mean you talked about a little bit about this, but the Pepsi partnership and your category captaincy as a total portfolio is what, 10 months old, if.

Yes.

So it's still very recent. And we're seeing a lot of adaptation and a lot of work to kind of bring the total portfolio into the system. And I guess when you think about this 10-month journey, I guess, what have you learned? And as we fast forward to '27 and beyond, how is the business -- is your partnership with Pepsi going to manage these brands, this portfolio differently to not only cement some of the benefits of what you're doing now, but to prevent reversal back into SKU proliferation or what have you. What are the disciplines, the muscles that you're building that are going to enable sustained growth in cooperation with Pepsi?

Yes. I mean, well, as a category captain, we control the strategy, the SKU prioritization, the planograms. When you look at the key learnings along the way, looking back, it's -- especially on Celsius, we should have had more innovation. That would have added more complexity with the integration of Alani and Rockstar, but we should have had more innovation, and we're cycling over 6 innovations versus last year.

The LTO strategy is an opportunity, but it's not as strong as permanent SKU placements that we were working strategically with key retailers. So those are some key learnings along the way. And we -- when you look at where we are today, we are better positioned today than we were back in January. We have a stronger team, we have retailers' interest. We have 2 amazing brands that are leaders in their category that are iconic brands.

Retailers see this. They're leaning in. Our team is extremely excited about the innovation plans we have in place. But -- and it's constantly learning every day. That's the most important thing you can do as an organization is to continue to evolve. We brought on a lot of new individuals to help us manage this portfolio that have portfolio managed capabilities.

We're working through that, building out a revenue management team so we can be better focused on timing of promotions, pack size strategies and purification of our pricing. But those are some key attributes that when you look back, I think that's an opportunity. We know innovation is driving the category. And we're a little bit light on the Celsius side.

I mean, Jarrod, is there -- when you think about the transition, are we in the late innings of the transition into the Pepsi system as a portfolio? Or are there material aspects of the transition still to come and to look forward to as we go into '27?

I mean I think you'll see we're picking up quite a bit of space for brand Alani this year. We see a big opportunity to pick up space for Rockstar next year, and we got the 17% space, we talked about with Celsius as well as opportunity for more space for both Alani and Celsius next year. So I think from that perspective, there's still lots of opportunity.

With brand Alani in particular, we have that fully integrated into the DSD system for Pepsi with the distributors that we had terminated back in December. I think you might see some opportunity for others along the way as we kind of work through this year. And Rockstar is already kind of in the Pepsi system. So from a DSD perspective, they're fully baked in there.

So I think you'll see opportunities in working with Pepsi to get more NOD, more IOD, so a number of displays, inventory on display, continue to build more space and they'll really work together to drive incremental opportunities across this year and into the next 2, 3, 4 years coming up.

And the other area we're investing in is merchandisers and territory managers. You look at our share versus the footprint of some of the competition. Pepsi does an amazing job, but the energy category is a really high-touch category. So right now, we're going through robust recruiting. Merchandisers and territory managers to really make sure the Celsius portfolio is placed right within retail.

We're taking advantage of disrupting that path to purchase, making sure we have the progressions correctly and working alongside Pepsi on suggested orders and driving further efficiency and sales is the main initiatives we have. And that's another big opportunity we have now as an unlock and managing a portfolio. We're selling 3 brands, driving even further efficiencies and building further partnerships and collaboration with these retail partners.

And you mentioned this a little bit, but as you -- I guess, as you're both leaning into more LTOs on the Celsius brand, but also trying to drive disciplined innovation across the portfolio. I guess what have you learned about the right cadence within each brand or across the portfolio, about innovation timing, LTO timing so that you're really driving sustained growth and building brand equity and not just driving spikes?

Yes. I think -- well, let's talk about Alani first because that's really where the LTO strategy really started. And that's one thing we did this year, bringing it into Pepsi is start to form and round out a solid base of SKUs. So we took some of the top-performing LTOs and brought them in as permanent. And we're going to continue to do that each year as we build a further consistent base.

And then the LTOs are designed to elevate and lift the overall portfolio. So that's going to add stability and greater predictability with that Alani portfolio as we build out those core SKUs and fill more presence and have more consistency on a national basis across the portfolio. On Celsius, this year was really the first year of LTOs. We've had 2 so far. We did 1 in Q4. And then we just are launching right now an ELECTRIC VIBE that's going in market right now. It won't be as large as Alani, but it's driving incremental, as Jarrod mentioned, NOD and IOD, really cases on the floor, working to elevate the overall portfolio.

But I think when you look at the Alani consumer, they're really designed for this surprise and delight and hunt for the next flavor. So that's the way that consumer is really engaging with the brand. And on the Celsius side, it's something we've introduced and tried. And when you look to '27 and beyond, we're going back to more permanent SKUs, more permanent strategic innovation with key retailers and doing what we've been doing with the brand that works best and driving the portfolio back to growth.

Okay. All right. Let's talk a little bit about the cost backdrop and implications for margins, Jarrod. Overall, you've outlined a path back to the low 50s ultimately. I guess what are the -- on the plus side, what are the drivers to get there that are going to help you kind of ladder up to that level? And then what are the external variables that you're navigating through now that may sort of delay that progress versus what you would have hoped maybe 6 months ago before the inflationary backdrop built?

Right. So I think -- think of it as kind of 3 buckets. So the first bucket is really what we've been working on for -- what we worked on for, call it, 12 months with Alani, and it will be roughly 9 months with Rockstar, and that's getting them into our infrastructure, our raw material purchases, our supply chain, our 6-orbit model, our freight lanes and really getting all that set up.

If you go back to when we acquired each of these businesses, their, call it, margin structure was much lower than brand Celsius. And so it's really getting them into our supply chain. So Alani through the end of Q1 was fully integrated. You got a little bit of inventory rolling over into Q2, but that's kind of as we look to the back half, we talk about margin expansion opportunities into Q3 and into Q4.

Rockstar is similar, get them fully baked into our integration and our supply chain by the end of this month. And then you'll see opportunity for expansion in Q3 into Q4. And so you'll have a structure where all the brands are on a very similar margin profile from that perspective in terms of what their BOM costs are, what their freight structure looks like and those kind of things.

That's kind of step 1. Step 2 is there's always going to be further opportunity for us to improve on the COGS line. So as we continue to scale, there's opportunities around manufacture production and tolling. We do have a plant in Charlotte that has one line. It will have a second line installed or running in Q3. Then we'll have it fully running in Q4. So we'll get a full impact of that benefit in 2027.

There's opportunities to further vertically integrate the business. So we're not looking to in-source everything, but if you had a kind of a plant on the East Coast and a plant on the West Coast, there's opportunities to help with leveraging our business and optimizing some of that cost structure. There's opportunities to go direct. In some instances, we don't go direct straight to the source as a business with our scale, there's opportunities to do that.

We've also built a center of excellence in Dublin, where we're -- we've set up our supply chain and our supply chain operations. So there's opportunities in utilizing that group in terms of how we procure things and how we run things through the supply chain. So further opportunities to take miles off the road from an orbit model structure and further optimize the BOM costs within our business.

And kind of then the third piece is really the revenue growth management piece. When we were brand Celsius, it was really you have pricing, but -- and you had different pack sizes, but you didn't have where you could really utilize the whole portfolio to create a price pack architecture across the portfolio, drive certain promos, certain campaigns, work together rowing in the same direction as opposed to fighting against other brands.

So really an opportunity to further get and build ROI and efficiency. There's some -- I think John mentioned, there's some low-hanging fruit in the back half of this year, but really opportunity to further optimize our price pack architecture and our entire promotional strategy as we look at '27 and '28 and beyond. And so there's a significant opportunity there within revenue growth management to further drive margins beyond what we've been talking about.

And that's what's really exciting about managing a portfolio. As we said, from a singular brand, it offers you additional levers. You have additional tools in the tool belt to compete at the highest level within the category. So it gets us really excited about that. And then the synergy savings, we haven't talked about that on the Alani integration. We did capture and secure over $50 million in synergy savings as -- within the integration. So just lots of opportunities all the way through the P&L, cash generation, cash management, deployment. Just -- it's an exciting time within the company.

Yes. When you think about the current inflationary backdrop, you think about aluminum and you think about the energy cost backdrop, how big of a headwind is that lined up to be as you move into the back half and into '27? And what are your -- aside from revenue growth management and scale, what are you doing additionally to try to mitigate some of those impacts?

Yes. So depending upon what pieces you're looking at, we did talk about Q2 would be probably the most impacted quarter because we do have some of those levers I discussed in Q3 and Q4 and beyond. So if you look at really the LME and the Midwest premium, as I look into the back half of '27 and '28, you'll see more capacity coming online.

So even with the current pressures, if those pressures stayed in terms of the supply chain, you do have a number of new smelters coming on. You've got production coming in the U.S. So even if you look at kind of the forward rates, those are going down. So we do see opportunity for some of that pressure to alleviate. So it's almost -- there's a short-term impact that we're seeing here that we need to manage our way through. We do have opportunities with the integrations to help drive those margin expansion regardless of where we sit today.

When we went back to kind of February before kind of the March and beyond, that you've seen additional inflation within the LME and the Midwest premium. We were talking about getting to the low 50s by the end of the year. With some of that pressure, and that's likely to be here for a handful of months, even if it were to let's say, some of the activity in the Middle East were to halt, you'll still have a handful of months that will need to happen for it to work its way through the supply chain.

So even with those pressures, we see the opportunity to work our way to low 50s, but it will take a little longer than getting to the end of the year because of those additional impacts from commodities. If it were to go away tomorrow, you'd see us work our way back into it. If it were to go away in a couple of months, you could see us work our way back quicker. But with the levers I was talking about, we still have the opportunity, although it will take a little longer to still get to the low 50s and hit that target.

Okay. What about raw price? If the category was to see pricing from your peers, are you inclined to think about following? Or are you anchored to the current pricing given the value constraints on the consumer?

I think pricing is an opportunity. We're the #3 player, strong #3 and #4 going into -- from a competitive perspective, I think we look at ourselves as premium brands at least with Alani and Celsius. We don't want to get priced out of the market. We don't want to be a value brand, but we do want to follow as opposed to kind of lead the way. So we see opportunity if our competitors are taking the pricing. We believe elasticity is there. So that could be another opportunity in terms of -- from a margin perspective.

And just add like consumer pressures, right? So look at gas, you look at the pressure on the consumer and a lot of talk on that, I'm sure, today with all the companies. And -- but what we see in the energy category, these products are really -- it is an affordable luxury.

And you start to look at the pricing between CSDs and other adjacent categories in energy and the value proposition, what you get in a Celsius and Alani, it's more than just energy. It's a multivitamin in a can, additional functionality. So there is a perceived value there. And then you look at the coffee houses, the bulk of their sales now are cold offerings and the pricing is substantially higher. So if you're looking to cut, these products are really there to offer a great alternative for you.

Yes. Okay. I want to talk about international before we wrap up. You've been -- obviously, it's a secondary priority given everything that lays before you in the U.S. But -- maybe update us on what your plans and priorities are in the Celsius brand, where there's -- we've seen good execution in this market. I was in the U.K. last week, good execution there...

Excellent...

Just kind of where you're at in that evolution and prioritization and also where Alani is -- sits with respect to international opportunities.

Yes. So we've talked before about some of the newer markets that we're bringing the Celsius portfolio to. It's France, U.K., Germany, Australia, New Zealand, Benelux and Spain. Those are the most early phases, and many are just 24, 18 months in. We're seeing great progress and great opportunities. We sit here in Paris. Last time we sat here, we were just a 2 share. We're over a 5 share today in Paris.

And ACV has grown to about 66% in Paris, and we're gaining more distribution. We have some of our great team members here locally. And that opportunity is there. The energy category, the growth we're seeing within sugar-free is substantive. It's massive. In international markets, we're seeing growth of in the high singles, even over the teens.

But if you break it down by sugar versus sugar-free, the growth underlying is so high. And that's the real opportunity for the Celsius portfolio, where Jarrod mentioned our center of excellence built out of Dublin. We have Garrett Quigley who started as a President this year, leading those initiatives. We have our sales, marketing initiatives. We're investing in infrastructure. We see great opportunities and a long road map ahead within Celsius.

And then Alani, we're identifying and looking at additional markets for '27, and we'll likely introduce Alani into a few markets. We want to take a very methodical approach. We're very disciplined. We're focused on driving profitability. We're focused on improving the algorithm. Where we see success, we'll invest more, but it's all timing and sequencing. It's very important we get the timing and sequencing right because we just don't want to gain trial.

We want to gain consumer loyalty, which is very -- needs to be very strategically done. So those are some things that we're working on. Expect to find Alani in a few markets in '27 and expect us to lean in further into Celsius portfolio. And on our earnings call, we'll have some updates at our next earnings call.

Okay. Great. Just about time, I guess, just to leave us with if there are 1 or 2 key milestones as we think about the remainder of this year or between now and the next time we're on the stage, what are the key points of success that you're hoping to achieve over the time line?

Yes, Key points of success next year and we're standing here. We're larger than a 20% share in the United States. We've truly integrated a portfolio of energy drink brands in one of the leading categories in sugar-free. Celsius back to growth. I know everyone is focused on that, 100% committed on that, building out Alani of great commercial brands and further success in an international expansion in markets.

10% share in Paris? All right. Thanks so much. Appreciate it. Thanks to you all for joining, and look forward to seeing you next year.

Thank you, everyone.

Appreciate it.

Appreciate it. Thank you.

Good morning, everyone. Welcome to our Staples Forum. It's a pleasure to introduce our first speakers of the day, Jarrod Langhans, CFO; and Toby David, Chief of Staff of Celsius Holdings. It's certainly an exciting time for Celsius having fully integrated the Alani Nu and Rockstar acquisitions into Pepsi distribution system, while the company's full portfolio of brands now holds an impressive 21% dollar share of the fast-growing energy drink category.

Now Celsius just released impressive Q1 results last week and has some exciting new innovation within the better-for-you functional beverage space that is poised to generate significant shelf space gains this spring. So with that, let's jump into things this morning. Welcome, you two. Thank you so much for joining us.

Thanks for having us.

All right. So I thought we'd start off high level on the category. And it's really been on fire this year. It's incredible how fast the growth has been despite some of the macro headwinds that we've seen, and I'm thinking about lapping the tough comps from last year. So curious to hear from your perspective, really what's been driving this recent category growth? And ultimately, where has this category been sourcing from?

Yes. I think when you take a look at the category, it's really the evolution of energy really over the last 15 years has gone from more of an impulse-driven male-oriented category, convenience store driven to it's really morphed into an occasion, a part of a lifestyle. You look at the different iterations of energy out there, sugar-free is really driving it, lifestyle. So instead of just strictly that impulse convenience, you're seeing the growth across MULO. You see it becoming part of a daily lifestyle for people, whether it's something they drink before going to the gym, pairing it with meals, later in the day just for a pick me up instead of maybe an evening to get you going for the evening or in the morning to get you going for the day.

So the category really is exceptionally strong. I think it's probably exceeded most people's expectations, even ourselves. This year coming off -- you mentioned the tough comps from last year, I thought maybe it would be in upper single digits this year. But I mean, really across the board from the 2 biggest players, including our green friends out there in Corona, they're having a tremendous year. Alani is really driving the category quite a bit. You take a step back and look at when we acquired Alani last year, I think they're about a 4% share. And you look at it today, and they're really getting close to a double-digit market share with so much room for growth to continue, still growing at 50-plus percent.

And really, the whole category, it's an exciting time. We're getting a ton of shelf space, the category as a whole, as you see other categories are getting shrunk, alcohol. I think alcohol is really the interesting one. I don't know if you'll see it as much this year in the resets, but I think even next year, as you see the consumers really -- I mean, everyone's spoken about this at length. So no reason to really dive into it. But I think you're going to continue to see energy as a category grow in space. And you'll see maybe alcohol could see some space, especially within convenience. When you're growing as much as this category is, I mean, the retailers see it. So a really exciting time within the category and the view forward is really strong.

And that's helpful. And are you also seeing some of the existing consumers in the category consuming more? So has their usage occasion also increased once you convert or...

Yes. I think -- I mean, there's -- you're seeing a lot of different iterations in packaging. Even Alani, for example, we have the minis out there that are maybe a different daypart later in the afternoon, people are sometimes concerned to really maybe should I have an energy drink at 3 or 4 in the afternoon. So I think having some different iterations out there are helping within our portfolio right now. But yes, you're seeing people -- I mean, it's really -- caffeine's always been a staple for a large portion of folks out there, whether we start with coffee and now with energy.

But you look at it and people really consuming energy early in the morning. But throughout the day now, it's becoming part of that lifestyle, as I mentioned earlier, whether it's going before you go to gym or just as a pick me up in the afternoon or with the meal. So yes, you are seeing people pick up a second beverage throughout the day and the growth has been phenomenal.

All right. Let's pivot a little bit, thinking about your results last week, impressive 138% top line growth in Q1, certainly a benefit from the Alani Nu acquisition. Thinking about your Celsius brand, growth has been a bit tempered recently. So I wanted to kind of unpack that a little bit and maybe hear from you what you see as some of the drivers more recently of some of this slowdown? Is it limited innovation, I think we've talked about before, maybe some cannibalization occurring from Alani Nu and then certainly the SKU rationalization. Anything else or...

I mean it's a bit of each of those, right? We've got an optimization project that we undertook with brand Celsius to really boost productivity, boost velocity, dollars per location. You're starting to see that come through. At the same time, we moved Alani into the distribution system. We finished integrating Alani as a business. We got significantly along the path on plan with the Rockstar business as well. So we undertook quite a bit in Q1.

I'd say probably the optimization project in terms of -- from an execution perspective, we hadn't -- we want it to be a little quicker than it was. So it's probably kind of like Eric said last week, about a 2-quarter roll as opposed to a little quicker from that perspective. So I'll let Toby talk about a few of the data points, but we had some of that. We also, from an innovation perspective, we pushed some of our innovation out to early 2027 for brand Celsius. That would have provided a little bit of a buffer when we're going through that process.

So if you kind of look at those as a mix, we did executed phenomenally on a lot of what we did, but probably there, we were a little slower than we had anticipated. As you look at our resets, they're going well. And if you look at kind of the space gains, they're going well. In addition, we're doing -- seeing a lot of permanent space gains. So think of more of coolers, what we call IVARs, which are kind of the -- they're not cold, but they're these big units that you find throughout retail, the kind of hangers. And so we're getting a lot of good space that's more permanent in nature and not kind of temporary. So that's all coming through, and we should see more or less the optimization and the space gains all completed by the end of this quarter.

Yes. And just to piggyback off of what Jarrod mentioned, listen, we talk to folks all the time. Obviously, everybody is looking at the scanner data. The one thing that definitely want to get across today is we are really pumped about where brand Celsius is today. Obviously, everybody is looking at the revenue numbers and the tough laps and comps we have from last year, but there's really 3 things that we're looking at. First of all, through the optimization progress, we're putting those fast cars on the track. Would we like to get them there a little bit quicker? Absolutely, it's going to come.

But first of all, if you look at where we were in terms of dollars per TDP back in January and where we closed April, we're up 17% in terms of velocity, in terms of dollars per TDP. So from a velocity standpoint, strong. Number two, Jarrod mentioned the optimization project that's underway. When you look at a couple of different data points and really the health of the brand, brand Celsius. On Amazon, in the last year-to-date, we're up 23% on Amazon. That's an area where we didn't undergo a SKU rationalization because that's where we're flowing through the remainder of the product that we were optimizing out of the portfolio.

So when you look at the disconnect that you're seeing in the scanner data, it's really being driven by this optimization process and just a little bit of a short window in time versus what's really for the benefit of the portfolio and of the brand over the mid and long term. So on Amazon, we're up 27% just the last week. So when people are looking at the scanner data and seeing a little bit of pressure right now, when you don't have the rationalization process as part of it, you're seeing strong growth. And even in New York City. So in New York City, we didn't undergo as much of a rationalization process. We kept a number of the SKUs in there because our folks up here, our distributor said, "Hey, listen, some of these are our stronger SKUs, so we're keeping them in New York City."

In New York City, we're up -- I believe it's around 23% in Q1. We're up 29% or 27% just in the last month. So really, when you take a step back, the health of the brand is really strong. This is a moment in time. We're setting up that foundation for the remainder of the year, the back half of the year. And then in '27, we have some incredible innovation we're going to layer on with these fast cars that we have on the track, the most productive SKUs. So we feel really good about where the brand is. Obviously, we don't like this little disconnect in timing, but we feel great about where the brand is today.

Got it. Two follow-ons. So the optimization, is it halfway finished? Because now you mentioned it's also going to continue lower this quarter? Or is it more than halfway done as you kind of again optimized or rationalized. And then would love to hear if you could help quantify what you're removing, the SKUs that you're removing from the Celsius brand and maybe what percentage of the mix they represent in terms of either volume or sales?

Yes, I would say without putting a firm dollar amount on it, it's a significant chunk of revenue. I don't want to put the figure out there today. But -- and the issue that we've seen is that the SKUs fall off that we're optimizing out of the portfolio prior to when we're getting the faster-moving velocity SKUs on the track. So there is a little bit disconnect in timing. I would expect that over the next handful of weeks, you should start to see some improvement.

I do think when you look at it, and Jarrod kind of alluded to it a little bit, we have one of the larger retailers in the country without naming them. When you see -- because I know a lot of people look at TDP as an example, we're down 10% at that particular retailer in TDP. But the overall space gains that we're getting because of incremental placements, we're going to be up when the optimization is done, up 45% in total space within that store. And where we're getting that space gains from is these incremental end caps that are going to be permanent. We're getting a ton of cooler placements. So you're getting higher velocity locations in the store instead of the warm placement on the shelf.

Now the issue that we've seen is the SKUs fall off first, and then sometimes it's up to a 12-month process to get all of these -- or excuse me, 12-week process to get all these SKUs put on the shelves in these incremental placements. So unfortunately, there is this timing dynamic that we're seeing right now. But that's why we referenced at CAGNY, we are still confident about getting 17% shelf space gains in totality, but it's just taking a little bit more time, tough comps from last year. There's that disconnect in timing. That's why I wanted to reference those data points earlier because the health of the brand, Celsius, is actually really strong. And once we get this -- the whole process complete, we're going to be really set up for success.

And then remind me because you touched on innovation, too. My understanding is it's more limited innovation this year versus prior, you had several launches behind Celsius. And now I believe you've rolled out Electric Vibe, and I think you've mentioned there's one other. Do we know what that is?

Yes. Yes. So last year, we -- I mean -- and really for the last 3 or 4 years, we had quite a bit of innovation at Celsius, and that's part of the reason why we've undergone this optimization process. I mean we used to get questions of do you guys have too many SKUs? Maybe. And that's why we've kind of trimmed the tail. But what we're seeing right now is we've had a limited innovation launch. Now part of the reason -- logic behind that is when you're integrating a $1 billion to $1.5 billion Alani business into the Pepsi system, we really wanted to create an environment where we simplified that. So you weren't launching a bunch of SKUs like we did last year. I think last year, we launched 4 SKUs, 4 flavors in Q1, a couple of flavors in Q2.

So as part of the integration process with Alani, we decide, okay, let's limit the innovation for the first half of this year. Let's make sure that we get all the right Alani SKUs on the shelf as part of this integration. You're seeing a lot of success with Alani because of that, which I think is still exceeding folks' expectations because of that integration process. But because of that, we limited it for Celsius. That being said, we do have an LTO that we will be rolling out in Q3. It might have some crossover in terms of revenue into Q2 because of the timing of when we have to sell out the Pepsi system.

I don't think we've announced what that flavor is. My marketing team would kill me if I announced it up here. I'm sure folks could find it on Reddit or wherever else they're looking these days to find the innovation. But between Celsius, we do have another LTO coming out in July. We'll have another one in the back half of the year as well. And then Alani has a very robust innovation pipeline. We'll probably talk about it later, but I'll reference it now. I know we have some tough comps with Alani because of how productive they were last year with our Cotton Candy launch in June of last year.

We're going to be -- we have an LTO for them that's going to be coming out roughly around the same time that we're really excited about. I think it's going to -- it's really going to do well. We're confident in that one. So Alani, we've really maintained the same cadence and maybe even a little bit more as far as innovation this year. And for Celsius, we did limit it this year. I would expect that you'll see quite a bit more in '27 once you've had Alani fully integrated into the Pepsi system, gotten them the strong expansion that we expect this year. And again, we feel really good about the portfolio right now. We're sitting at roughly a 21% market share.

I mean think about that, 1 out of every 5 cans of energy drinks consumed today is part of our portfolio. And while I know that people are looking at the pressure that Celsius is under, it's really, I mean, almost entirely because of this optimization process. And once we get that complete, we feel great about where we're at.

And you bring up a good point in thinking about the acquisition, you mentioned Alani's share being so much smaller. And these 2 brands, would you agree are better coexisting at this point? Any learnings from that given what are we close to a year in, in terms of putting these brands together?

Yes, absolutely. Listen, I know that you look at Celsius, and I think we were probably the original brand that was characterized as maybe female leaning or -- and even though we were neutral 50-50. So when most women were coming into the category originally, it was really an opportunity for us to capitalize on that. You've seen some other brands come into the fold, Alani really being the most significant one. But as I always say, I know people speak about cannibalization quite a bit.

We really haven't seen up to this point any more cannibalization with Alani than we see with a Red Bull. So you look at the -- and what I'd like to talk to folks about is just try an Alani. And if you stop in and meet with us today, we have some Alani in there as well. So if you're familiar with the taste profile of the Celsius, it's a very different taste profile, has a sweeter profile more whether it's a Cotton Candy or a Pink Slush or more and more fruit forward leaning. They are a strong female demo, but a little bit it's a younger female, but that's expanding into even an older female and even some males are starting to enter the fray there.

But it's a very different taste profile. We feel like -- as you look at what's growing in the category, the 2 biggest drivers are sugar-free and female. And I can't think of a portfolio that is going to be able to lean into that any more than Celsius. So we're well positioned. Obviously, we have Rockstar as well, which we don't have a lot of conversations about them. We're still excited about what we can do with Rockstar. We're trying to temper expectations, undersell, overdeliver. That's a very different profile of very male leaning. But as far as Alani, it's a different profile than we have for Celsius. And I'd just say try the product, and you'll see it's a different consumer than it's consuming Celsius.

You touched on this a little earlier because Alani Nu, the growth has been so robust. And you mentioned difficult comps. So ultimately, what gives you the confidence that Alani's growth is going to continue? I mean you mentioned some of the innovation. Anything else that gives you the confidence that...

Yes, I think just distribution. They're just getting into convenience for the first time, obviously, the biggest growth driver within the category. I was in a 7-Eleven, I believe it was Sunday, but one that I happen to frequent that's by my house, I heard an ad coming over the radio or sound system within the 7-Eleven, it was talking about Alani, which always gets me excited when I hear one of our brands being advertised while I'm in there. And these retailers are really leaning in into especially convenience to the female consumer because it's a new different dynamic and drawing the female from the pump in the store now that -- prior, you had really Celsius was the only one when they might go in and consume.

Now it's Alani. Convenience is a huge opportunity for them because they're underdeveloped there within convenience. You look at geographically, I mean, they're really strong up the central part of the country, coastal. I mean, good luck in New York City right now. It's very limited. It's a huge opportunity here down in Florida, the whole East Coast, the West Coast. I talk to folks all the time, and they know Celsius. Now it's really changed. I've been with the company, it's my 14th year. Back in the day, it was more -- it was like spotting big foot when somebody actually knew what Celsius was. Now everybody knows what Celsius is.

When I tell them, oh, have you heard -- we own Alani Nu, you have to kind of like spell the name for them or they don't even understand what you're saying, you're like, this is great. I love that. That speaks to the opportunity as people are learning this brand. So there's a ton of runway left. You have the power of the Pepsi distribution system for not only the planogram traditional retail, but the up and down the street, the foodservice opportunity, the university opportunity. There's quite a bit of runway left with Alani. I think that's what's most exciting.

If you think about where this brand was last year when we acquired them. I think a lot of the folks probably listening in the room today, they had to do some quick recon back at CAGNY last year when we announced Alani Nu, like who is this brand? And you see this high growth. I think Alani was growing around 70% at that time, then accelerated in the triple-digit growth. And if you had told anybody 12 months ago, that Alani would be sitting close to double-digit market share, I think people would say, holy cow, what is the opportunity for this portfolio. And we're sitting on a 21% share today, and we certainly think there's quite a bit of runway left, not only with Alani, but as we get back to Celsius, as we get Celsius and that foundation firmed up over the next month or 2 and then get into the back half of the year and early next year, we certainly expect Celsius to grow again.

That's why I wanted to give those anecdotal data points on what you're seeing on Amazon, what you're seeing in New York City, what you're seeing with the velocity, there's, I mean, a ton of runway left with both of these brands.

A couple of thoughts on Alani before maybe we move on. You mentioned differentiated customer for Alani. I think you mentioned that last week. So how are you expanding the reach. And then what are some of the key innovations on Alani Nu that you're excited about in the near term that you're rolling out that you can share.

Just one more thing out there that gives us confidence is if you look at as we're expanding the ACV and expanding all these distribution points, you're seeing the velocity sticking, if not even getting stronger in some places. So especially convenience where they were -- they're underdeveloped there, but the velocity is very strong there. So sometimes we get comments about a female-focused brand, how is it going to do in convenience. And as we expand into convenience, we're seeing the velocities really hold, if not strengthen. Alani has got a super strong velocity, a super loyal following.

From an LTO perspective, we've got a lot of good flavors and a lot of good things in the hopper. I think when we get to the back half of the year, when you see the Witch's Brew, we got something interesting and unique that will be coming out from that perspective. So that's something we're excited about. And the team is just -- it's such a great community, and they continue to expand that community as they expand the distribution points, and it's a very loyal following from that perspective.

Yes. And I would just add, I mentioned Celsius' strong velocity that we've seen from January through April through this optimization project. You look at Alani, and I think the expectation from a lot of folks was as you get this really robust growth from a TDP standpoint because they were so underdeveloped in convenience, that there was an expectation that, okay, velocity will probably dip and then it will have to climb back through the remainder of the year. What we've, in fact, seen with Alani is their community is so strong and there's such a passionate base in people that want this product is that their dollars per TDP from January through April went up 13%. It actually increased, which I think was surprising to a lot of folks.

And that's again, when you talk about what gives you confidence about Alani is I think a lot of people thought, okay, as they get stretched out across the country, will it reach a tipping point, I think maybe some of the bear cases was, okay, they're going to tap out and max out. What we're seeing now is velocity increasing as they're getting all these massive TDP gains. So as people get accustomed to walking into stores and seeing a full shelf, shelf and half of Alani in convenience, there's really a huge opportunity in the back half of the year to capitalize on that with these increased velocity numbers as we're getting this higher TDP number.

Okay. That's helpful. And one other thing I wanted to ask you about and talk about is obviously now in Pepsi systems and they're distributing it. Can you talk about or how should we think about the contra revenue on Alani Nu now that it is again being distributed by Pepsi? Will that start to increase as we think about greater distribution from Pepsi and maybe the cost of doing so.

I think it's -- like if you're talking margins, I wouldn't say there's a huge disconnect on the margin profile. From a contra perspective, it's -- there's a couple of things. There's the channel mix, there's the pack mix and then there's the DSD versus direct mix. So as we're going into places like convenience or food service or what we call OTS, which is where the metals programs are, these are locations that you really need that white glove service to get to. And so that's where we're really seeing our ACV expansion.

And so we are moving a bit into more of DSD areas with Alani. They were underdeveloped in those locations that while you don't really have access to foodservice and OTS if you don't have a blue truck or a red truck. So from that perspective, we're getting incremental space that we wouldn't have gotten. And a lot of these areas are higher velocity like Toby was talking about convenience as an example. And so from a margin profile perspective, it doesn't necessarily change the margin profile. There's a different cost structure to it. But because of the turns and because of the opportunities, it's more of an incremental play for us.

So it's -- we're seeing really good gains out of that. I think the mix that we're seeing is kind of ending up somewhere in the 60-40 range in terms of DSD versus non-DSD. They were much more developed from a direct perspective when we picked them up than Celsius was when we moved into the Pepsi system. So there was a little bit of shifting that happened where they were probably more like 50-50 DSD versus direct, and now it's more 60-40. So you saw a little bit of that happen in Q1 on the bridge. But that was really just a matter of getting into, from a mix perspective, more areas that are DSD focused as opposed to direct focused.

I guess maybe the message is as we look at the scanner data, which you're right, a lot of us obsess over, but we've got to think potentially about hair cutting that growth that we're seeing for Alani Nu as it flows through the P&L.

Yes, from a DSD because as we're mixing a bit more into DSD, there's a little bit of a shift in terms of the -- a little bit more of the contra.

Okay. But bottom line, long runway, innovation, channels, increased channels and further penetration, right, and shelf space.

Even next year, I mean, the retailer meetings that we're having right now for the portfolio as we meet with some of the larger retailers in the country because these really start early around this time of the year, super productive. They're excited, obviously, about Alani and what the opportunity is there. But even with Celsius, there is a lot of excitement about what the opportunities are there. They like the innovation that we're talking about for '27. They see the stronger velocity numbers.

So as we sit here today and you're near 21% market share as a portfolio, retailers are leaning in. We're excited about next year from a distribution standpoint, I would anticipate Alani is going to continue to get very robust distribution into next year as well. So there's a lot of expectations for this year. You're seeing it flow through. But even for next year, there's quite a bit of runway left for Alani.

Okay. And then in the context of all of this, I wanted to ask you about pricing. And maybe can you talk at a high level how you're thinking about pricing on a go-forward basis and more importantly, revenue growth management. Maybe talk a little bit about some of your capabilities, the initiatives and what you're implementing on your broader portfolio?

Yes. So for revenue growth management, it's really changing for us. So it's changed multiple times because we started out as a year ago or a year and a couple of months ago, a single brand, right? So a single strategy. As we added Alani, it was, okay, now a 2-brand strategy. And then we added Rockstar and now it's a whole portfolio strategy. So as we've been doing that, we have been building the team. It's really about people, processes and technology. There are some things -- I always say you got to do them in that order.

There are ways to speed it up. So there are things we have done. We've brought the leadership on that. They're really managing the RGM process for us and the strategy. So we've got the leadership teams in place to do that. We're working through all the processes. There's some low-hanging fruit that you can do such as looking at some different price packs, looking at kind of the sequencing. So Alani needs to be the super premium, Celsius is premium, Rockstar premium economy. So we're kind of getting that sequence in order. Those are some quick easy wins you can do, making sure that the multipacks are set up properly.

And then it's kind of going retailer by retailer or channel by channel to make sure that we structure everything properly. And also, we need to -- where we are versus our competition, right? So we don't want to be at the very top. We don't want to be at the very bottom, but there's different price points that we're working through in terms of where does each of those brands play. And that strategy will help us drive more efficiencies. Other things that are easy low-hanging fruit is not promoting on top of each other, right?

So if we're going to promote -- do a huge Alani promotion, pull back on the Celsius ones, so they're not promoting against each other. You can see that in more of like the club channels or some of the direct channels where that can be much more impactful. So being more thoughtful about those kind of things, but it is a 12- to 18-month process to get everything set up. So if you talk about August 28 of last year was just when we got Rockstar in the system. So there's some work to do, but you'll see in the back half of this year, you'll see us take advantage of some of the quick wins. And then as we go into 2027, you'll see a ton of opportunity from an RGM perspective.

Is there a way to -- I'm thinking about your promos, which you just mentioned, staggering those. If you were to kind of think through your promos today versus where they were maybe in Q4 and a year ago, are they up, down the promo spending?

It's probably fairly consistent at the moment. You'll start to see that change as we get to the back half of the year and into next year. We were just moving Pepsi -- or sorry, Alani into the Pepsi system in December. So there's only so much work you can do. And a lot of times, you have to do it during certain time periods. So you'll see some of that in the back half of the year versus kind of what you've seen now. Some of this is getting the people and the processes in place, and then we'll start moving through actual seeing changes come through.

Okay. I wanted to ask a little bit more about the shelf space gains. I mean, I know you talked about this earlier this year about 17% space gains for Celsius and triple digits for Alani Nu. How should we think about where most of the space will come from for Celsius. I know you called out, I think, one of the larger retailers. And I think you just touched on this, Toby, I mean without saying who that retailer is. Is that where the bulk of that space, that 17% increase will come from? Or is it more evenly split on Celsius across different channels?

Yes. I think it's going to be across the board, probably leaning a little bit more into just MULO because within -- when we talk about shelf space, and I know, unfortunately, there's only certain metrics that are privy to the public, and I know a lot of folks are looking at the TDPs. And TDPs are just how many SKUs you have in the store. So if you're actually going through a rationalization process or an optimization process, you're actually going to see a little bit of a dip in TDP. But what we're actually seeing is far more space that we're getting, and that's not going to be on the warm shelf that you're traditionally seeing in the planogram. It's going to be in your incremental placements within the store.

So as I referenced and alluded to, it's the retailer that I mentioned, which we've all heard of in this room that will go unnamed, you saw that dip in TDP, but a 45% growth in total shelf space. And a lot of times within convenience, you don't have a lot of opportunities for incremental placements in the store. You won't get a display occasionally within a 7-Eleven. But within MULO, that's where you get the opportunity for the end caps, more cooler placements, IOD and NOD, so getting displays. I think that's another big opportunity for Celsius to capitalize on and Alani this year. So you're going to see these incremental placements in stores.

And what's really important is we believe we're going to be getting higher velocity locations within these -- that 17% space gains that we referenced at CAGNY because if it's cold, it's sold is the language we always use. And if you're getting incremental cooler placements or in the front checkout coolers, and I'd much rather be there than on a warm shelf in the back corner of the store somewhere. So that's where we would anticipate mostly in MULO, but you'll see some incremental placements within convenience as well.

Okay. And then before we run out of time, I want to pivot to gross margins, of course, which is always topical. How should we think about your cadence of margins for the rest of the year? I know you mentioned, I guess, last week that Q2 gross margins, we should think about being more in line, I believe, with Q1 or flat. And then should we expect a ramp in the back half, but maybe not getting quite to that 50%, but possibly into next year? Or how do we think about that path back to low 50% gross margins given...

Yes, that's consistent with kind of what we walked through last week. If you look at kind of the plan in terms of where we're going to get the margin expansion, if you go back to when we acquired Alani and when we acquired Rockstar, Rockstar was probably a 30% to 35% margin profile. Alani was probably low 40s. So the path to there was really if you go and kind of look at the Celsius profile from a freight perspective, we were probably 3%, 3.5% outbound freight, which we include in our gross margin.

If you looked at Alani and Rockstar, they were running between 6% and 9%. So huge gain there. So getting them into our orbit model and getting into our freight infrastructure, it also takes a lot of miles off. So even with fuel costs spiking, if you got much less miles in your orbit, you can keep those costs down. So that's a big piece. The other piece is the raw materials. Now we have seen commodity inflation. With that said, getting them into our contracts allows us to get some of those costs down. Some of those costs are already locked in. So by getting them into our contracts, we move from, call it, a more variable to a more fixed with a lot of ingredients with the conversion. We do have a little bit of pressure from the LME and from the Midwest premium, which most people do because typically, you don't lock everything out because you want to have a little bit of optionality there.

Also, when we acquired Alani, when we acquired Rockstar, some of those costs were already inflated to begin with. So you can't kind of eliminate costs that already exist. So there's some of that. Some of that was already built in. Some of that we're seeing some of the pressure because of recent spikes back in March and April. But overall, we have a path to getting them into our scale, our orbit model, our raw material purchasing, and you'll see that improve as we get into Q3 and then again, as we get into Q4. We've also got a number of other projects. So we've done some direct sourcing, but we've got opportunity to do more direct sourcing of ingredients.

We've got our second line coming on, I think, July of this year, July, August for Big Beverages. So that will be up and running fully in Q4, and then we'll get that full benefit in '27. There's some other vertical integration things we're in the middle of working on. I'm not ready to talk about them right now, but they're in process. So those will come to fruition in 2027 as well. And then we have additional opportunities from a scale perspective and then working with our manufacturers and in our orbit structure. So good line of sight to get there. A little bit of hedging because we don't know where the commodities are going. We're at kind of all-time highs. If they go above that, that could put a little bit of pressure on getting to our target.

We do see the ability to get there. Can we get there by the end of the year? Does it take a little bit into 2027. That will kind of be dependent on where we see commodities go. But we've got a good plan in place, and then we've got opportunities again in 2027 as well.

All right. We only have a minute left, and I did want to ask a couple of things. I wanted to talk a little more on Rockstar, but maybe we should talk on international because quarter was quite impressive, 55% growth. How should we think about that business for you in the next few years? I mean we've just talked through the long runway of growth you see in the United States. But increasingly, is that going to be a bigger priority for your business? And if so, what are the advantages that you think you have to succeed?

Yes, a huge opportunity internationally. I mean you can see what the competition is doing. Same kind of macro and same kind of trends that you see here, you see there. So we think modern energy is a huge opportunity there. We're seeing with the fruit forward, with the flavor profile, with the lifestyle, with the fitness that's resonating in the markets we're going into with brand Celsius. We see the opportunity to do the same thing with brand Alani. We see sugar-free is taking -- is becoming a bigger play, especially in, let's call it, some of your more Western locations.

And then we see it even moving into kind of the EMEA region and into Asia and those kind of markets as well. So we think sugar-free is a huge opportunity. We think the female consumer will continue to be a big opportunity. And we see huge runway for both Alani and Celsius as we look out over the next 3 to 5 years from a global perspective. And we do have kind of that team built up now in Dublin that can really help launch our international expansion.

Okay. That's great. Thank you so much for your time today. It's great catching up with both of you. Thank you.

Thanks, Bonnie.

.

Hello, everyone. Thank you for joining us, and welcome to the Celsius Holdings' First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Paul Wiseman, Investor Relations. Please go ahead.

Good morning, and thank you for joining Celsius Holdings' First Quarter 2026 Earnings Webcast. With me today are John Fieldly, Chairman and CEO; Eric Hansen, 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 first 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 statement 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 Q1 press release and 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 first quarter 2026 results. We delivered a record first quarter revenue of $783 million. And across the portfolio, we continue to see the kind of progress that reinforces the strategy we laid out coming into the year. In Circana tracked channels, our combined portfolio continued to expand its share position over the course of the quarter.

This trend has continued into April, with portfolio dollar share reaching 20.9% in the 4 weeks ending April 12. Our portfolio strategy is resonating with both consumers and retail partners. The quarter reflects what we said we would focus on strengthening the platform, executing with discipline and staying closely aligned with the consumer. And as we look at the progress across CELSIUS, Alani Nu and Rockstar, we are confident about the position we are in as we enter Q2 and the summer beverage season.

At the core, our focus remains straightforward. We stay close to the consumer and we execute with consistency alongside PepsiCo and our retail partners, which creates the opportunity to grow in a sustainable and profitable way over time. Today, our portfolio reaches more consumers, more places, more occasions and more price points across the category than it did a year ago. And that is increasingly showing up in the marketplace.

Our combined portfolio represents approximately 1/5 of the U.S. energy drink market in tracked channels. And that share is expanding. Said another way, 1 out of every 5 energy drinks purchased in the U.S. is a CELSIUS portfolio product. We have 2 billion-dollar brands. And what is becoming clear is that the portfolio is giving us more ways to grow with each brand playing a distinct role and helping us participate more fully across channels and usage occasions.

CELSIUS continues to perform across a broad range of channels and occasions. Alani Nu is expanding our reach with a differentiated consumer base and a meaningful runway and channels where it remains underpenetrated. And over time, Rockstar gives us another point of participation in the category as we continue to integrate the brand into our platform. Even as the broader consumer staples environment remains challenging, energy continues to be one of the strongest performing categories in beverage, which reinforces our conviction in the long-term opportunity.

As the portfolio is scaled, we have [ since ] equally focused on strengthening how we operate, improving alignment across the business and building a more repeatable and scalable operating model over time. One of the most important areas of progress in the quarter was execution across our integrations.

Starting with Alani Nu. We completed the integration, and we have captured approximately $50 million in synergies we outlined at our modeling call last May. That is an important milestone. It simplifies our operating model and creates a more connected commercial structure. I want to recognize our team members across our organization and at PepsiCo for making this happen.

We also made substantial progress on the Alani Nu distribution transition with the majority of the work completed across December and January. With Rockstar, the integration remains on track for completion in the first half of 2026. This is not just about completing an integration, it's about strengthening our growing portfolio. With the SKUs transition now substantially complete, and the reset activity taking hold, we are starting to see the early signs of improved velocities on the core items we are prioritizing.

We view 2026 as a stabilization year for Rockstar. We expect to have more to share on the brand's trajectory as we move through the balance of the year. Innovation remains central to how we grew in the quarter, driving trial, reinforcing the core and keeping us aligned with consumer preferences. At Alani Nu, the Lime Slush limited time offer performed especially well and became the brand's top-selling flavor in tracked channels.

We view that as an important proof point that the brand's innovation model is durable and that is not dependent on any one particular hero flavor. Following the success of Cherry Bomb, Lime Slush reinforces that the flavor rotation strategy is working, and we continue to see Alani Nu innovations supporting share gains and strengthening the connection between the brand and consumers. More than just product launches, Alani's limited time offers have become seasonal community moments that we believe consumers look forward to, which is a meaningful part of what makes the brand so strong.

At CELSIUS, fizz-free continues to emerge as a meaningful platform. We saw encouraging expansion in distribution across multiple flavors, including Dragon Fruit Lime, Pink Lemonade and Blue Razz Lemonade. Fizz-free is now broadly distributed, but still early in terms of items per store, which represents a meaningful opportunity to expand as the platform matures. As we look at CELSIUS innovation for the year, Q1 was focused on prioritizing the assortment and strengthening the foundation of the portfolio. With that work substantially in place, we are now moving into a more active period across Q2 and the back half of the year.

We just launched Electric Vibe, a limited edition flavor inspired by soccer culture, timed ahead of the global soccer tournament taking place in North America this summer. It's a great example of how we're using innovation to connect the brand to broader cultural moments and reach new consumers. That same focus and discipline is also shaping how we manage the shelf.

We continue to sharpen the portfolio through disciplined SKU optimization and recent resets, putting more emphasis behind the items that perform best with consumers and that is starting to come together and show up in the data. Across our single-serve portfolio, the items gaining distribution represent a significant majority of tracked channel dollar growth in volume, which gives us confidence that the shelf is becoming more aligned with demand.

We are seeing that in the flavors such as Cherry Cola, Retro Vibe, Playa Vibe, and Grape Rush, which continues to build distribution and momentum. The resets are about quality of assortment as much as space. Heading into the summer selling season, we remain confident in the space gains we outlined at CAGNY, approximately 17% for brand CELSIUS, driven by expanding cooler placements and additional points of sale across national chains and over 100% for Alani across all channels and for Rockstar, maintain net space alongside reconfigured items and assortments.

International represents a meaningful long-term growth opportunity for us. And we took another step forward in the quarter with the launch of the brand CELSIUS in Spain through exclusive sales and distribution agreement with Suntory Beverage & Food Spain. This builds on our core existing collaboration with Suntory and other international markets and reflects our approach to focus on key markets, strong local partnerships, disciplined launch plans and sustained marketing and distribution support.

Portugal is next on the European footprint, also with our Suntory partnership. With our global headquarters in Dublin now established, we have the operating infrastructure in place to accelerate deeper execution within existing markets and new market entries in years ahead. As we look ahead, the progress we made in Q1 positions us well for the next phase of the year.

We expect to build on the recent resets as we move through Q2, and we have additional innovation planned across both CELSIUS and Alani Nu, including a summer CELSIUS limited time offer that we are excited about. Our partnerships and activations are also part of how we support the momentum as we enter the summer beverage season.

We are proud to announce a multiyear global partnership with Aston Martin Aramco Formula One Team as our official global energy drink partner. We have also kicked off a global partnership with Palm Tree Music Festival as well as our continued partnership with Breakaway. Building on strong preference, we have established at the intersection of music, fitness and culture. And at Alani Nu, we opened our first ever slush pop-up in Fort Lauderdale, which reflects the kind of consumer-facing activations we are building and bringing to life beyond the traditional retail.

For Rockstar, we kicked off the Formula DRIFT season opener in April. We also announced a new partnership with 23XI Racing and Tyler Reddick who has had one of the most remarkable starts to the NASCAR Cup season in recent history. These partnerships continue to connect the brand with its core motorsports and action sports audience. These programs are designed to connect awareness to trial and then the retail activation. Taken together, Q1 was a quarter where the strategy translated into results across the portfolio, across our integrations and at the register.

With that, I'll turn it over to Jarrod to walk through the financials.

Thanks, John, and good morning, everyone. From a financial perspective, I will walk through the quarter by brand, then cover the rest of the P&L, operating discipline and capital allocation before handing it back to John for closing remarks.

We delivered record first quarter revenue of $783 million, reflecting continued strength across the portfolio and solid execution against the operating priorities we laid out coming into 2026.

Starting with brand CELSIUS. We delivered net sales of $348 million in the quarter, representing growth of approximately 6% year-over-year. As we discussed last quarter, we have been focused on tightening the alignment between shipments and underlying consumer takeaway and we saw progress on that front in Q1.

As John mentioned, we undertook a SKU optimization project during the quarter, and we are seeing the velocity improvements that have resulted from that work. We are moving into a more active innovation period for brand CELSIUS, including activations around the global soccer tournament this summer in North America and our 100 days of summer programming.

Turning to Alani Nu. The brand delivered net sales of $368 million in the quarter, representing a pro forma growth of approximately 60% year-over-year. As a reminder, we acquired Alani Nu on April 1, 2025. We continue to see strong execution as the brand builds on the distribution gains from the PepsiCo system transition. With the integration now complete, we are operating with a cleaner structure and believe we are well positioned to continue expanding reach and solidifying execution through the balance of the year.

For Rockstar, net sales were $67 million for the quarter. With the SKU reconfiguration and reset activity substantially complete, we are focusing on stabilizing the brand as we complete the integration in the first half of 2026. The U.S. business is substantially on the finished goods model with some remaining components still in transition.

Let me spend a moment on Alani. As tracked scanner growth and reported growth are 2 different numbers this quarter, and I want to walk through how to get from one to the other. We have also included a bridge in our investor deck posted online. Tracked scanner data shows Alani at approximately 100% year-over-year. The cleanest comparison number is 85%. That adjusts for Cherry Bomb, which sold in during Q4 2025, but landed in Q1 2026 scanner data.

To translate 85% scanner growth into reported revenue, the right starting point is Q1 2025 RTD U.S. Energy revenue, which was $198 million after excluding the Canadian and U.S. non-energy business. From there, the 85% growth implies organic Q1 2026 RTD revenue of about $340 million when adjusting for the higher sales mix associated with the DSD system relative to our direct business as our ACV gains have been focused in DSD channels.

Adding back Canada and the remaining non-U.S. energy business, which together contributed $28 million, brings reported Alani revenue for Q1 2026 to $368 million or approximately 60% growth year-over-year. Bottom line, the underlying business is healthy and scanner growth remains strong.

Turning to profitability. The integration-related cost headwinds we discussed in Q4 have largely rolled off, which gives us a cleaner foundation entering the year. And the underlying initiatives that drive margin expansion, our orbit model, which optimizes how we move inventory across our manufacturing and distribution network, freight structure improvements, raw material alignment across Alani and Rockstar and mix improvements through price-pack architecture continue to progress.

In Q1, gross margin was approximately 48.3%. Underlying raw material COGS improved quarter-over-quarter as we continue to bring Alani and Rockstar into our purchasing structure with the COGS write-offs and transition costs from Q4 largely behind us. We did see a few discrete items in the quarter that partially offset that progress. The Midwest aluminum premium moved higher as did the LME. Severe winter weather in parts of the Northeast created incremental freight costs and we incurred some additional freight expense as we rebalanced Rockstar inventory across our network.

On commodity and input costs more broadly, we are watching the macro environment closely, including aluminum, freight, fuel and resin pricing. While we have sourcing strategies in place, if the elevated costs remain across the year, we will see some impact on the timing and sequencing of our margin expansion back to the low 50s.

None of these changed the broader trajectory and the underlying initiatives that drive margin expansion, our orbit model, freight structure optimization, raw material alignment and mix improvement through price-pack architecture continue to progress. At the same time, we remain disciplined on operating expenses. Adjusted SG&A came in at approximately 26.4% of revenue, down from 31.8% in Q4, reflecting continued cost control across the business and the benefits of operating leverage as revenue scales.

We also continue to make progress on the SKU optimization work I mentioned earlier, which supports a more productive operating model over time. Taken together, those efforts remain important components of how we think about margin progression and overall quality of earnings through the balance of the year. As we move through 2026, we remain focused on investing behind our brands to support growth including additional marketing investment across the summer selling period while continuing to improve the quality and consistency of our earnings profile.

The progress in Q1 gives us additional flexibility to lean into those investments while sustaining the operating discipline we have built. On profitability, we reported GAAP net income of $110 million in the quarter, more than double the $44 million we reported in the prior year quarter. Adjusted EBITDA was $195 million, an increase of approximately $125 million versus a year ago, and adjusted EBITDA margin expanded to 24.9% from 21.2% and roughly 370 basis points of margin improvement year-over-year.

The result reflects continued top line momentum, the benefit of the operating model work we have been doing across the portfolio and the benefit of the synergies captured from the Alani integration. On capital deployment, our balance sheet remains a source of strength and flexibility. During the first quarter, we repurchased approximately 700,000 shares for $24.1 million at a weighted average price of $35.39. At quarter end, $236.1 million remained available under the $300 million repurchase program the Board authorized in November 2025.

We have continued to utilize this program in the second quarter. Our approach to capital deployment continues to be grounded in 3 priorities: investing to support brand growth and integration execution, maintaining the strength of the balance sheet and returning capital to shareholders. We will continue to evaluate repurchase activity based on cash generation, market conditions and capital priorities while preserving flexibility for strategic opportunities.

Overall, Q1 demonstrated the consistency of our financial plan and the operating leverage available as the business scales. We are executing against the priorities we laid out coming into the year, and we are well positioned for the balance of 2026.

With that, I will turn the call back to the operator to open the lines for questions.

[Operator Instructions] Your first question comes from the line of Bonnie Herzog with Goldman Sachs.

I wanted to ask about the CELSIUS brand. I guess I was hoping for some more color on the growth, which has been moderating. Could you give us a sense of the drivers behind this and maybe frame or quantify the impact the brand is facing from limited innovation during Q1 versus last year, the SKU rationalization? And then I assume the cannibalization it's experiencing from Alani Nu. I guess how should we think about growth on CELSIUS for the rest of the year between any kind of shelf space gains and planned innovation?

Thank you, Bonnie. Great question. Regards to CELSIUS portfolio, you've touched on a variety of initiatives that really impacted that in the quarter. One thing we did focus on in the quarter is the fizz-free. We see great opportunities within fizz-free as we're optimizing the distribution to get a broader consistent ACV across the U.S. in the U.S. market. And we've seen the focus on that in the first quarter seeing velocity and takeaways increase. And we see a lot of opportunity within that really differentiated segment within the category.

Within the optimization, there's a little bit of a timing sequence there as we've optimized some of the slower items. But we are trying to get and as we progress out of resets, looking to really get optimized, consistent placements across the portfolio that are driving the highest velocity in ACV. I have Eric Hansen, our President and Chief Operating Officer with us today as well. I'm going to have him make some comments around CELSIUS and the distribution gains we anticipated coming out of NACS where we made some comments.

Yes, I think to John's point, as we talked about coming into the year, we said we would be focused on optimizing the SKU assortment, driving focus on fizz-free as a permanent innovation and leveraging our LTOs and partnerships to continue to drive growth for the brand. Optimization, generally, as John mentioned, plays out over a couple of quarters where we see the reduction faster than the ACV build. We are continuing to progress on that, and we'll continue to see that build over the next quarter or so.

We do have 2 LTOs on the brand here over the next several months, Electric Vibe, which is launching now and then another one that will be available in summer. So we feel that will continue to drive excitement and anchor strong merchandising for the brand. And we'll continue to make sure that we're managing our space appropriately. As we build out more space, we are seeing for example, increases on dollars per total point of distribution. We'll see TDPs soften a little bit as you think about TDP is really about total SKUs available. While we gain space, we're getting more holding power and more ability to translate that into growth for the brand. So we feel good about the plans ahead. And obviously, we're monitoring it closely and we'll continue to work through.

Your next question comes from the line of Peter Grom with UBS.

So I wanted to come back to Alani Nu, Jarrod, the bridge that you provided and walked through was helpful. But in the release, you mentioned that there was increased orders from Pepsi. So just trying to understand whether there was any sort of shipment benefit or an inventory build that occurred in the quarter and maybe the delta is just kind of the impact from the promo and allowances as you move into the Pepsi system.

Yes. I think that comment was more to refer to that as we were going more into the Pepsi system across Q1 that we're building ACV and therefore, building expanding the locations that the availability of the brand was in terms of average SKUs per location and in terms of just locations in general, which was helped driving the scanner growth and helped driving our internal GAAP numbers.

Another question you may ask in terms of some of this build, the DSD to direct mix. There's a couple of things -- a couple of nuances that are different between brand CELSIUS and between Alani. The first is, as we were moving into the DSD system for our largest distributor, when we were brand CELSIUS, our direct business was smaller than the Alani business. The Alani had built out and we had helped build out the direct business pretty well by the time we moved into the DSD system of Pepsi. You can see that in the ACV that existed between CELSIUS and Alani at the time of moving.

The other piece is we were taking pricing with brand CELSIUS as we're moving in, that was back in 2022. So that helped as you moved in and had a little bit of that mix shift. And then the third thing is there is a bit of GAAP impact in terms of roughly $5 million, where a couple of things happened. If you remember back in 2022, we had the preferred shares that we issued and we also had -- going into the distribution system, we had the terminations that were paid for by Pepsi. We had to record those expenses immediately on the P&L, but then we recorded the actual payments on our balance sheet and are amortizing those over. That impacted the CELSIUS brand by about $1 million a quarter. So very minor, and you didn't really notice it. With Alani because we also had a couple of other things going on when we did this transaction, including the [indiscernible], there's about a $5 million impact in that number that's in the bridge. That's really a non-cash item. That's just the amortization from the balance sheet.

Your next question comes from the line of Filippo Falorni with Citi.

I wanted to go back to the shelf space gains for both CELSIUS and Alani. Maybe on CELSIUS first, you mentioned previously 17% shelf gains, including foodservice. Can you give us a sense of how much food service distribution you have in the figure? How much you're realizing in more tracked channels?

And then on Alani, obviously, a lot of the distribution, you mentioned over 100% in gas and convenience. How far along are you in that shelf space gains? How much have you realized so far? And when do you think we should see more of those flowing through in tracked channels? That would be helpful.

Yes. No, I appreciate the question. It's really an exciting time within the energy category. When you look at the energy category overall, it's one of the fastest growing within LRB. We're seeing new consumers enter the category than ever before and retailers are leaning in. Historically, over 60% of the sales were derived from convenience, impulse purchases, and we're seeing retailers lean in, in a much bigger way than ever before and when you look at the Celsius Holdings portfolio with CELSIUS, Alani and Rockstar, we have differentiated offerings, hitting differentiated consumer segments and really being incremental and driving incremental growth.

With that, I'll turn it over to Eric to add a little bit more color around the distribution gains we anticipate and what we're seeing in the overall environment.

Yes, I think to John's point, and we've had a number of conversations with retailers, obviously, over the last several weeks and months. And I think what we hear generally is that the category, they feel very strongly about the category and the growth trajectory. They anticipate adding more overall energy space, in some cases, very significantly. And so while we're also talking about shelf gains, it's also about permanency on space outside of the main gondola. Cold space has been expanding rapidly across a lot of different formats and then obviously within CNG expanding overall doors. And so we continue to see that space opportunity. Obviously, for Alani, a very strong space opportunity. And a lot of that is largely in place. You'll continue to see some resets finalized here probably through the course of May and June, but probably before summer, we'll be almost fully done. And again, we're going to plan that space according to the best SKUs that we have available and ensure that we've got the best velocity profile and efficiency of space in those. And so we feel very good about the conversations that we've had.

On your question around foodservice, difficult to break that out. In some cases, foodservice becomes a zero-sum game, you're in or you're not. And so it's really about adding new outlets that help in overall space gains. And we'll continue to put a lot of focus on driving workplace, college, university and the relevant channels, restaurants, et cetera, and continue to make progress on that front as well.

And I think when you look at it as well when you look at the first quarter, and you see that we are -- really, this is the first quarter of the organization managing a portfolio of brands under the category of [indiscernible] within the energy category of PepsiCo. So that has really unlocked a lot of opportunities. As Eric mentioned, foodservice, a variety of nonreported tracked channels as well. So those opportunities are going to continue to progress throughout the year and years to come as we further leverage the capabilities of this partnership that we forged.

Your next question comes from the line of Gerald Pascarelli with Needham & Company LLC.

A question for John. Just on your LTO strategy, like Cherry Bomb and Lime Slush where -- they were big contributors to the underlying strength in offtake this quarter. And so as we move forward, just given the success of some of these new rollouts that you've had, like how do you think about balancing new flavor innovation for these LTOs versus bringing some of these same flavors back every single year, just given how popular they are. I'd be curious of your thoughts there.

No, I think it's a great question. It really gives us a lot of optionality when you're looking at leveraging the portfolio and planning within our forecasting and strategies for the coming year. If you look at -- the LTO strategy allows us to do a lot of surprise and delight, especially with the Alani portfolio as well as leverage the seasonal trends.

When you see the opportunities with the success of Cherry Bomb and Lime Slush and just with the CELSIUS portfolio, Electric Vibe, we have a lot of great opportunities ahead. We get trial. We get feedback and then we can bring that in as a permanent SKU, midyear resets or even into the new selling season as we're entering the new year.

So I think it gives -- as you look at our brand managers, it gives them optionality -- trial, gets to learn, and we get the leverage and learn the capabilities of the PepsiCo distribution network and really maximize that to our capabilities. So when you look at really Cherry Bomb was really the first LTO launch within the PepsiCo system. Number two is Lime Slush. Now we have Electric Vibe coming in. We're going to have a variety of others throughout the back half of this year. We're learning our collaboration. We're learning the partnerships and flavor. But when you look at the LTO strategy in flavors, it's driving. It's driving trial, it's driving awareness, it's driving new incremental consumers into the category.

We have a 21% share in the U.S. with the portfolio today. And it's an exciting time within the opportunities you have here managing the CELSIUS portfolio, our brand teams are super excited about what's to come.

Your next question comes from the line of Peter Galbo with Bank of America.

John, Jarrod, just wanted to come back on the margin piece, obviously, with Midwest premium and LME moving up. Maybe you can just kind of help us think about if there is a resolution of the conflict, kind of what you're starting to hear or starting to see in terms of potential downside for aluminum. I know that, that may stall or hinder the ability to get back to low 50s by the back half of this year. But maybe you can help us think about the trajectory over the next, call it, 18 months.

Yes. No, we're not unique to any other consumer products company out there. Those are real costs we're looking at. I'll turn it over to Jarrod for more comments around that on the operation where the environment we're operating under and some of the opportunities we see ahead of us and some of the disciplined approach we've taken and strategies in the past that we're going to be able to leverage today and into the future, especially as we further optimize and integrate this portfolio. Jarrod?

Yes. Probably I have a little bit of a long drawn-out response. So kind of as we discussed in our prepared remarks, gross margin in Q1 was roughly 48.3%, which represented an improvement of around 90 basis points from Q4. So we are moving in the right direction. We saw a few discrete items partially offset that progress. We had severe winter weather in parts of the Northeast creating incremental freight and freeze protection costs in February. We incurred some additional long-haul freight as we continue to rebalance Rockstar inventory across our network during integration.

And then to your point, we saw both the LME and the Midwest aluminum premium move higher through the quarter. As John mentioned, that's best described as an industry-wide packaging dynamic, not a company-specific issue. The first 2 of these are largely behind us as we move through the second quarter with the latter being more impactful in Q2 versus Q1 as it really started to spike in March.

With that said, as we noted in our prepared remarks, we are watching the macro environment closely, aluminum, freight, fuel, resin pricing. We do have sourcing strategies in place across the major input categories. We're fully locked on aluminum conversion. We've also got price locks on a variety of other ingredients and vitamins. We've also -- we're working actively to extend coverage into 2027 and 2028 across the back half of this year. But if elevated costs do remain across the year, we may see some impact on the timing and sequencing of our ramp back to the low 50s. But the broader trajectory and the structural margin algorithm are intact.

The underlying initiatives that drive our margin expansion continue to progress. We mentioned those in the prepared remarks, the orbit model, freight structure optimization, raw material alignment as we bring Alani and Rockstar fully into our structure, mix improvement through price-pack architecture. So we do have a clear plan and a clear path back to the low 50s.

We also have another opportunity, as you mentioned, going out 12, 18 months that we're working through, something a little sooner. Back half of the year, we'll see our second manufacturing line in North Carolina begin producing. So we'll start to see some benefit in the back half of the year with full benefit in 2027. We've got some other vertical integration opportunities that we're in the middle of securing that will benefit us in '27 and beyond.

We also have some direct sourcing opportunities that we're working through that will benefit us. And then the price-pack architecture programming that we're working on is really a -- we'll see some initial impacts in the back half of the year, but we'll see a lot more when we look at 2027 and 2028. So we do have good visibility to get to the 50s. Depending upon where commodities fall, whether they stay where they are for the whole year or whether they subside can impact a little bit of that timing. But we do see -- we do have visibility into the low 50s and beyond with the initiatives and the programs that we have in place.

I think one more thing just for modeling purposes while we're at it, probably as we look at 2026 in particular, Q2 is probably more of a side-step-type activity and then Q3 and Q4, where you're going to see the stair step and then continue on to 2027 with further stair steps.

Your next question comes from the line of Andrea Teixeira with JPM.

So if we step back and analyze the CELSIUS brand as you exit the quarter and some of the puts and takes you mentioned, right, rationalization of the SKUs, can you help us understand like on a more comparable basis, like if the places where you had the [ stats ] perfectly fine in the new planogram you wanted. How has that performed relative to what we calculated being the North America performance for CELSIUS?

And in terms of the intersection between Alani and CELSIUS, that has an intersection of consumer, have you seen kind of that cannibalization kind of phase off? Or you think that's going to -- that's the way we should be thinking and take the company as a portfolio and go from there.

And then a clarification of the margin commentary that you just gave, should we be thinking so [ side-step ], meaning on a sequential basis, you're probably flattish against first quarter? Or is there any improvement? As you said, you don't -- you obviously have higher aluminum, higher Midwest premium but then you don't have those freight one-timers that you had in the first quarter, how we should be thinking sequentially, as you said, like and then in the second half, above 50% already in the third quarter. Just want to make sure that we understood it correctly.

Excellent questions. Andrea, I appreciate that. Like we've made some prepared remarks as well as some comments earlier, the CELSIUS brand. We're really bullish on the CELSIUS portfolio. It has a unique consumer segment. When you look at the rational optimization that we've done with some of the slower items, as we're getting consistency across the portfolio, we're seeing those SKUs increase velocity with the optimization of larger ACV gains and consistency across the U.S.

One thing we know is that we need to have consistent flavors and consistent SKUs amongst all of the retailers. And that's something we've been working on over a variety of years. And we're really leaning in to get that really optimized. So when you come in and you see watermelon, you see Grape Rush. You see a lot of our great flavors in Peach Vibe. It is consistent. Consistency drives repeat purchase. And that's one thing we're really leaning on.

Where we saw great success is in the quarter, the organization leaned in on fizz-free. We saw those SKUs optimize at higher velocity rates as it was scaling ACV, which is really promising. We think fizz-free is a great opportunity as a sub-line for CELSIUS we're going to build upon. When you look at the cost of aluminum, and Midwest premium, it is at a high level. And we're keeping -- we're watching that extremely closely. As Jarrod mentioned, on the prior question, those -- if those stay at sustained higher levels, it could provide further impact. When you're looking at Q1 to Q2, we're anticipating for modeling purposes, a sidestep in overall margin with additional opportunities for further enhancements leading into Q3 and Q4 as we progress closer to that low 50% gross profit target.

And as the optimizations and investments we're making into vertical integration, that will further help that margin profile as well as the revenue management opportunities and pack size strategies that we have in place.

We have reached the end of the question-and-answer session. I will now turn the call back to John Fieldly, Chairman and CEO, for closing remarks.

Thank you again for joining us today. We believe Q1 was a strong start to the year. We delivered record revenue of $783 million, expanded our portfolio share in tracked channels, completed a major integration milestone with Alani Nu, continued to advance the Rockstar integration, expanded our international footprint with the launch in Spain through Suntory and saw encouraging consumer responses and innovation across both CELSIUS and Alani.

We're also entering Q2 with a clear set of priorities. We expect to build upon the recent resets, layer in additional innovation across CELSIUS and Alani Nu and activate the brands across the summer cultural moments, including Formula 1, the global soccer event, music, fitness and motorsports. And we are heading into the most important selling season for the category with a winning portfolio that reaches more consumers and more places and during more occasions.

I want to thank everyone for this opportunity. I want to thank our employees and our partners and all of our customers for their focus and their teamwork and making this all possible. So everyone listening today, we appreciate your support and look forward to updating you next quarter. Until then, grab a CELSIUS and live fit.

This concludes today's call. Thank you for attending. You may now disconnect.

All right, everybody. Good afternoon. Welcome to the UBS Global Consumer and Retail Conference here in New York City. My name is Peter Grom. I'm the U.S. consumer staples analyst here at UBS. And we are very excited to have joining us this afternoon from Celsius, CFO, Jarrod Langhans; and Chief of Staff, Toby David. Celsius is a leader in the energy drink category and has been one of the best growth stories in our staples coverage as we speak today. Over the last year or so we've observed remarkable growth in the U.S. energy drink category with Celsius being at the forefront.

We have a lot of ground to cover in terms of format for today. I have a number of questions that I plan to run through for the majority of the conversation here. And yes, and then we can kind of go from there. But before we start, I'm required to read a legal disclaimer. As a research analyst, I'm required to provide certain disclosures relating to the nature of my own relationship and that of UBS with any company on which I express a view on this call today. These disclosures are available at www.ubs.com/disclosures. Alternatively, please reach out to me, and I can provide them to you after the call. So with that, Toby, Jarrod, thank you.

So why don't I start with the category growth? Obviously, we've seen the category return to solid growth in '25. That has continued year-to-date. What are you expecting in terms of category growth this year? And even longer term, the company has talked about the household penetration opportunity relative to other nonalcoholic ready-to-drink categories. But curious how quickly you think the energy drink industry can close that gap?

Yes. We've never publicly disclosed what we view as where we think the category is going to be. I mean we look at a number of different sources, Mintel being one of them. We certainly believe that energy is going to continue to be the biggest driver within beverage and consumer goods. What I will say about energy, though, it's really pivoted from this impulse consumption type of beverage into more of a daily lifestyle routine for folks. And I know when we were at CAGNY not too long ago, we talked about -- I believe it's 54% of all LRB, Liquid Refreshment Beverages growth is coming out of energy right now. And 85% of all consumption and growth -- excuse me, 85% of growth within energy right now is sugar-free. So I certainly think that Celsius in our portfolio is well positioned to continue to grow and the category is going to continue to grow.

Awesome. In the last few months [indiscernible] pretty topical given what's going on recently, gas prices have ticked higher, obviously, a very uneasy consumer backdrop. As it relates to the convenience channel, are you expecting or have you seen any impact to volume just given the increase in prices? Or is it kind of business as usual? And then maybe related, is there anything you've seen over time as it relates to kind of higher gas prices and the impact it has on consumption either for the channel or for your category?

Yes. Good question, Peter. From our perspective, the first couple of months of the year have been great for both brands. We see convenience as a huge opportunity for Alani this year as well as an opportunity for Celsius. The singles in convenience have been a really good growth driver for brand Celsius over the last probably 6 months or so. So we look at that -- look for that to continue to be a good channel for us this year. In terms of foot traffic and those kind of things, I think there's been a couple of reports that have come out lately. One actually came from you guys that looked at kind of correlations between foot traffic, gas prices, beverage sales.

And I think there wasn't a correlation, which is a good thing. There's another report that came out, I think, on Monday talking about foot traffic was actually up in January and February. And then one that came out last week that talked or that looked kind of back to 2022, when we saw some pressure on fuel and things like that and didn't find a correlation either and the energy category continue to grow well. So from a historical perspective, the data points point to it not being a huge issue and that energy will continue to have the opportunity to grow and kind of be the leader in non-alc beverages.

That's helpful, Jarrod, I guess a question on your business and just in terms of the sourcing of sales, right? At CAGNY, you noted the differences in the core consumer. And for the long time, your growth really wasn't coming from kind of the category leaders, but in many ways, it is coming from adjacent categories, bringing new consumers into the category, if you will. So is that still the case today? And maybe can you give us some perspective on each of the brands?

Yes. I think if you look at where energy is still continuing to source from, including Celsius and Alani, RTD and drip coffee still seem to be really a strong area for us to source from. A lot of opportunities continue there. The biggest coffee players in the country have conditioned their consumers to drink cold caffeinated beverages and we absolutely love that. One of the things you're seeing retailers do from just a space allocation standpoint is you're even starting to see some retailers lean in and maybe shrinking, including in convenience, shrinking the beer case. We're seeing that right now. I think maybe even next year, you'll start to see that even more if the trends continue. But yes, we're sourcing from a number of categories, whether it's hydration, coffee, premium waters. So we feel really good about -- I mean, I mentioned it out. I feel really good about the category, the strength of it. There's just so many different usage occasions for energy right now that it's continuing to source from all these different categories.

Great. A lot of changes to the business over the last year, and we'll get into a lot of that. But I think one of the bigger shifts, if you will, has been the category captainship with the Pepsi system. And so for those in the room or listening that might not be aware, can you explain what that means? How is it different to -- how the company operated several years ago? And in the few months since the change, I mean, what have been the biggest tangible benefits, if you will? And I guess as we move into the key summer selling season, what are some of the benefits or unlocks that having this captainship will allow you to achieve?

I'll jump in that. From -- we went in, in '22 into the Pepsi system and I think over the years, we've learned a lot of things. And one of the things that we've been talking about is how to strengthen that partnership and that relationship. And the captaincy really allows us to do that. So what the captaincy allows us to do is really to focus on being the insights and the growth and marketing engine of the energy category for Pepsi and allows them to use their world-class DSD system to really get the product there, get that white glove service. So we're able to use some pretty strong core competencies and really help drive North American beverages for both our brand and for their brand, and really put our portfolio to work.

It comes with other different things, so there's different priority periods that we get as a part of the captaincy. We're able to really manage the planogram for those Pepsi-controlled coolers across the U.S., whether it's in mom-and-pop shops or Walmarts or things like that across the U.S. So it allows us to have more kind of control over the marketing and management of that piece and really allows Pepsi to make sure that we've got the strongest ACV and distribution that we can get to. So it's really strengthened the partnership, given us certain things, but really think about it as more as really focused and structured so that we can win together.

Okay. And then another big change in the last year has been the acquisition of Alani Nu. So I'd be curious what you've learned in terms of the level of interaction and overlap across both the core Celsius brand and Alani Nu. I know we'll get into this a little bit more, but more recently in the data, we've observed some slowing growth for the core Celsius franchise, while growth for Alani Nu seems to be accelerating. So could there be greater overlap, particularly as you're expanding distribution and shelf reset benefits start to take hold for Alani Nu?

So I think we went through the acquisition last year, and we announced it at CAGNY, we cited some data that really looked at the crossover consumer between Alani and Celsius. And what we observed was it was very similar to what we see with Red Bull and Monster. So it wasn't as significant as I think some people had suspected. Now fast forward 12 months, and you saw a triple-digit growth for Alani off of a pretty robust number already. And we ran the same data set to see what had changed over the past 12 months. And really, we didn't see any significant change in that data. And I think a couple of things.

Number one, if you go back to Q1 of last year, Celsius was at negative growth at that point in time year-over-year and I believe Alani was somewhere between 70% to 75% growth when we acquired them. And then what you saw was Alani accelerated into triple-digit growth and just accelerated, whereas Celsius turned the business around from negative growth into -- in Q4, we saw a 12%, 13% scanner at the register. So you saw this Alani brand really take off. And at the same time, Celsius was able to grow as well. And those are just some data points. But I think anybody who's tried the products say they taste completely different. And just like there's different male consumers, I think it's taken some time for maybe some folks to wrap their heads around the fact that there's different female consumers also. And if you try a Celsius, it's more fruit forward, that is sweet flavored and you try an Alani, Lime Slush is here, the LTO that we've got out for them right now. It's a very sweet profile, very different consumer. And when you look at the category, I mentioned it earlier, the two biggest growth drivers in the category right now are female and sugar-free. I can't think of a better portfolio that I want to have out there than both an Alani and Celsius profile.

That makes sense. And I know you don't want to make too much out of a few weeks of data but have you been able to uncover maybe why trends have been a little bit weaker for the core Celsius brand? It looks like Essentials is underperforming for a bit. And I think like -- look, I think the concern people have, especially considering the net inventory impact in 4Q, that this is a sign of things to come, particularly as the brand, right, you alluded to the fact that Celsius was declining at this point in the year and you've turned it around. So this slowdown is kind of occurring. I think people are a little bit concerned that as comparisons get more difficult, could this be a sign of things to come?

Yes. So there's a few things going on right now. So when you look at Celsius, what we're doing a couple of things. We've talked about it for probably the last 9 months or so that we were going to go through a SKU rationalization process that coincides with trying to put the fast cars on the track, which that simply means we're trying to take our highest velocity SKUs and expand their distribution as much as possible. And that's what you're seeing right now in Q1 as we're trimming the tail of the least productive SKUs. And we're a company that some people have thought was over skewed, and we're trimming that right now.

And at the same time, we're trying to take -- take Orange, for example, our top-selling SKU in the low 80s ACV. That's something we're aspiring to try to get that in the mid-90s, upper 90s ACV. But we've got a whole host of flavors that are in the mid-50s in an -- from an ACV perspective, and we want to get those up to 80% or above. So what I encourage everyone to do is over the next like 8 weeks as the data continues to roll out, take a look at our top 10 to 15 SKUs, you're going to see those continue to go up in ACV, and we're putting the most productive SKUs out there. And that's really for the health and well-being and foundation of the brand. And then what you'll see is we're going to start layering on our innovation in Q2, Q3 and Q4. And when you take a look at Q1 last year, we had 4 flavor launches in Q1 last year.

So we're lapping that with zero launches this year. And we just think this is in the best interest of the business. We've got a healthy business right now. Jarrod alluded to it earlier. We've been outpacing the category in singles and in convenience for the last 6 months, 7 months. Most months were over 20% growth in convenience. That tells me that the brand is doing very well. Essentials, yes, sure. We'd like to see that, that brand do better. That's been a little bit of a drag. I don't think that speaks to the health of Celsius. I think that's just an area of focus that we need to have this year to improve upon. But overall, we're really excited about where the brand is today and where it's going.

Okay. No, that makes sense. And maybe in a second, I want to get to the innovation. But just on Essentials, any thoughts on maybe why it's been a little bit weaker? How committed are you to the brand?

Yes. The 16-ounce format is one that's important to us because it's a little bit different consumer. I think it's a matter of maybe some different marketing tactics and ways to differentiate that brand versus core brand Celsius. We don't want it to be viewed as just a value brand because it's 16 ounces versus 12 ounces. So that's a work in progress, and we expect for that to improve throughout the year. We're certainly not giving up on that format. But again, we're very confident in the brand Celsius, what we're seeing, the health of that brand and the growth that we're seeing in most other channels for it.

Awesome. So maybe on -- you alluded to the innovation. Can you just talk about for core Celsius, the innovation pipeline, right, Fizz-Free flavors, what should investors be looking for in the coming months?

Yes. So as far as Fizz-Free, I wouldn't classify that as true innovation. So that's -- our Fizz-Free's are noncarbonated line. We decided to do more of a marketing campaign as well as that's -- a couple of those SKUs are ones that we're really trying to expand the TDP for. We had two flavors that we launched last year that are only about 30% ACV. I would expect to see those go up quite a bit. Peach Mango is one of our top-performing SKUs. We want to grow that one as well. So Fizz-Free is more of a marketing play and trying to get further distribution there.

From an innovation standpoint, it's about cadence for us. So right now, for Alani, you see the Lime Slush is the LTO that's out. As you start to see that wind down, I would expect to see a Celsius LTO come to fruition. And then as that one winds down, I would expect for an Alani LTO to reappear. And then as that winds down, I would expect to see a Celsius LTO. So it's really about cadence for us throughout the year, make sure there's as little overlap as possible between the two brands. And really for us, this year, it's an opportunity to become much more efficient with the two brands. When we took over Alani last year, April 1, much of the promotional cadence had been set up for the year. So we had a lot of retailers that would be running overlapping promotions with Celsius. And that's obviously not a great benefit. So this year, it was really critical for us that we didn't have that overlap but instead that we were able to, between Alani, Celsius and Rockstar, make sure that one of our three portfolio brands is always on promotion, but with as little overlap as possible so we could take full advantage of it.

Great. And then maybe pivoting to the LTO strategy. I know we're going to get into this for a lot of new, but you dove into the LTO strategy with Celsius a few months back. So you could just talk about key learnings and how that informs your strategy moving forward?

Yes. I mean Alani has had quite a bit of success with the LTOs, obviously. When we've taken a look and evaluated what they've done, you obviously see the big spikes in sales, but -- and that's great. Obviously, we're capitalists here. We want to drive as much revenue as possible. But it's really about brand health and lifting the totality of the brand. So if you take a look at where Alani is typically right before an LTO versus right after, that lift big spike that you see ends up lifting the overall portfolio for Alani, and you continue to cycle that through the year, and they've had quite a bit of success with that.

Now what we did with Spritz Vibe, the first Celsius LTO last year was it was really an opportunity for us to dip our toe in the water, not only for Celsius, but within the Pepsi distribution system before we migrated Alani over to Pepsi. And we took a lot of key learnings from that. And then we had Cherry Bomb come out for Alani, which was a very successful LTO. At the same time, took some additional key learnings so that we're going to be able to fully maximize lime slush and then future LTOs. So really excited about the LTOs that are coming out for Alani and Celsius this year. I would expect for Alani to be bigger because their community is more accustomed to them. But that doesn't mean that the Celsius ones can't drive success and lift the entire portfolio as well.

Can you just touch on the LTO strategy for Alani Nu and maybe why -- you touched on why it's been such a driver of success. But like what does it do to the broader franchise?

Well, it creates excitement within their community. I mean, if you ever log on to TikTok when some of these LTOs, and I know you're a big TikTok guy. So I know that whenever you log on to TikTok or some other social media platforms, you can see the sell -- or excuse me, Alani consumers showing up to a Target or some other retailer, and they're actually videotaping themselves, like wiping out entire inventories of a particular flavor and you hear about this quite often. So it creates excitement. I think the #1 thing that you see with LTOs, whether it's an Alani or a Red Bull or a Monster is it drives frequency of consumption within your existing base, but it also provides an opportunity to maybe recruit some new users because you've got some different fun flavors.

So when Alani we launched Cotton Candy last year, it drove incredible excitement, and I believe it brought in some -- a really nice base of consumers. And it also provides us an opportunity to evaluate those new flavors as they come out and say, you know what, that performed so well. We want to bring that back full time, which is what we did when we migrated over to Pepsi. There was 3 flavors that were LTOs early last year, Cotton Candy, Sherbet Swirl, and Strawberry Sunrise that we relaunched. And now Cotton Candy is the top-performing SKU in our portfolio, and it's only at a 40% ACV. It's really remarkable, ton of upside left.

It's about like listening to the community. So a lot of the flavors are actually born out of requests coming from listening to the consumer. And so you'll see some of these flavors come out and people are super stoked because they've been asking for them. And then some of the flavors like the Cotton Candy coming back is that was such a popular flavor and the consumer just kept asking, bring it back, bring it back. So we decided let's bring it back, and it's been great.

How do you decide that? Like, I mean, they kind of -- because they generate a lot of buzz. But then to your point, they want it more frequently. So how do you kind of make that decision around like when something becomes from an LTO to something that's more permanent?

I think it's listening to the consumer, right? So it's how well was it doing? What was the velocity looking like? What are the consumers telling us? The Lane team does a fantastic job of listening and communicating back and forth with the consumers. So there's a lot of data that we can get just from those insights and from doing different types of activities and doing different surveys and things. So they do a great job with that, and that helps us. The other thing that helped us is we -- as we were going to expand our ACV, we also wanted to expand the SKU count for Alani. So we had the opportunity to add a handful of SKUs. So it was just the perfect time to add those SKUs in and reward the consumer for the -- for being a good buyer of our products.

Yes. I'd also add that some of the LTOs are more seasonally based. So you typically see that later in the year with their Witch's Brew and their Winter Wonderland. I wouldn't expect us to launch a Witch's Brew in February. So we'll keep those where those are, but some of the other flavors are not as seasonally oriented, let's say. And those are the ones that you evaluate and say, okay, these makes sense to bring back.

I know plenty of people that like to celebrate Halloween and Christmas year around, so you never know. So I guess maybe just going back and just looking at Alani in totality, right? Just early observations as you've moved into the [ pet season ], the growth in the data has been exceptional, as you alluded to. So maybe just how would you characterize the performance of the brand relative to what you would have thought? And then I guess, what should we expect as we kind of look forward here, right? It's been very, very strong year-to-date. Toby, you alluded the fact that comparisons do get a little bit more difficult. So just how would you kind of frame growth expectations for the brand from here?

I think Alani has massive opportunity this year. They've -- I think they've outpaced probably our expectations this quickly. I certainly felt like they were a brand that could get to like a 9% or a 10% share. I don't know if I would have thought it would have been in less than 12 months. And what is really incredible about that is that's mostly without the power of the Pepsi distribution system, only a couple of months of that. We've barely scratched the surface of what we're going to get in planograms as the planogram resets actually occur in January through May. So we're barely getting into that right now.

And just from a brand awareness standpoint, I mean so many people that whenever I bring up Celsius, they say, "Oh, I love Celsius. I know Celsius. And say, well, you know a lot new and most people are scratching their head. They've never heard of a lot new before, which is a huge opportunity. That's why that's great. I love hearing that. And there are so many regional areas around the country where they're just really being underserviced right now. I mean, good luck finding a lot in New York City right now. And I think that's, again, a great opportunity for the brand. The coasts are a great opportunity. They're really strong in the central part of the U.S. So the fact that they're sitting at the market share they're sitting now, the growth they're sitting now and you have all those items that I just referenced as opportunity for future growth, it really gets us excited.

So we put some guard that probably [indiscernible] maybe just one pivot back to the LTO strategy. And I guess you're probably not going to say much on this, but I feel like I have to ask. But like anything in terms of specifics that you can share as we move into the key summer selling season number of LTOs, size relative to what you did last year? And just maybe more specifically, right, it sounds like there's -- they're coming for both brands. I guess, how do you balance the strategies around LTO for Celsius and Alani Nu?

Yes. I would say, number one, just don't believe everything you read on Reddit. So if you're on there trying to figure out what date the new LTOs are coming, be careful with that. For us, I would anticipate a similar number of LTOs for Alani this year. I mean there could be a slight modification, but I would expect something similar. For Celsius, we only had one last year. There's going to be multiple for Celsius this year. And again, this is really to drive frequency of consumption within your existing base, gain excitement, hopefully recruit some new users or even to re-recruit some folks that maybe had stepped away from the brand before. So that's the way we're looking at it. And then for Celsius, there's some potential for some back half of the year innovation that's not necessarily LTO driven. So we're really excited about the plans for the year and really think it's going to -- and believe it's going to uplift the entire portfolio.

Okay. And then when you think about market share, both brands have been gaining share. Longer term, is a -- is there a world where Alani has a larger share of energy drinks versus Celsius just given the momentum you just talked about?

Yes, that's a good question. They're pretty close to us right now, and I just outlaid a pretty encouraging path forward for them. I don't know if we're necessarily looking at it from that perspective. Obviously, we're aware of that dynamic. Now that we've gone from a singular brand Celsius to portfolio, it's really for us, it's about what's the health of the entire portfolio, how do we drive growth for the two brands, Celsius and Alani, how do we flatten out Rockstar before we start growing that one again in the future. And we look at it from that perspective. But you look at what Alani is doing right now, and it's -- I mean, there's a pretty significant path forward.

Now for Celsius, our goal is to get back to category growth and exceed that. If you had told me last year or the beginning of the year that Celsius would have grown 13% in scanner in Q4, I have thought, okay, that means we're probably gaining market share now with Alani growing at triple digits and Monster had a really incredible quarter as well with some lofty numbers within the category, and the category is still dynamic. As I think it comes back down to Earth, I think there's a great opportunity for us with this foundational work we're doing right now in Q1, then layering on the innovation throughout the year for Celsius to grow category share as well. So we look at it as a portfolio, we think 20% share, that's certainly not where we expect to finish the year.

Got it. And then on Rockstar, maybe just to round out the brand discussion. Can you just talk about the opportunity and if we're sitting here a year from now, what does success look like for that brand?

I'll jump in there. Yes. I mean think about this year is really about stabilizing the business. So we're rationalizing some SKUs. We're really going to focus on the core SKUs that drive the sales and drive the revenue of this business, really focus on the core consumer. So skew back and really focus on more of a male-heavy type consumer, 16-ounce and get refocused. And so kind of a year from now, it's probably too soon, but the goal is really stabilize that business and get that business back into growth. We believe it's incremental to our portfolio. It does go after a different demographic and a different consumer segment. That's actually a big segment within the energy category. So we've got a lot of people that were with Rockstar back in the day and really going back to a lot of the tactics that made Rockstar, Rockstar and really going back to that focus. And then, like I said, stability and then growth.

Great. And then maybe pivoting over to international. It's been less of a topic of discussion, but there's a lot of white space for the category, certainly a lot of white space for your portfolio. So can you just give us an update on the international strategy, key takeaways as you moved into new markets like the U.K. in recent years? And I guess, how do you assess when to make it a bigger push or a bigger priority, if you will, particularly as you just announced the new Head of International very quickly.

Yes. I mean there's a ton of white space there, right? Our -- the #2 player is 40% international in terms of sales. So we see that as an opportunity. We're 5%. So tons of white space. We added [ Garrett ] recently. He's about 4 months in. So he's kind of formalizing his plan to compare against the kind of global expansion plans we had. We have been tweaking them, doing the Alani acquisition and the Rockstar acquisition, it did drive some additional priorities. So the #1 focus, obviously, is integrating these businesses and really getting that 17% shelf space for Celsius and 100-plus percent shelf space for Alani. So we're staying focused, but there is a huge global opportunity. I think as you look out 3 to 5 years, you'll see much more activity then. We're also looking at different options around that.

There's different markets that make sense to not necessarily go in with a premium finished goods model, but there could be a concentrate model or a license model or a franchise type model. So we're looking at kind of all the alternatives across the world to see what makes the most sense, and then we'll line up that timing and sequencing, but a huge opportunity for us. We did announce Iberia, so we did just launch Iberia in March. So we'll continue to add markets as we go and continue to make sure we're investing behind the markets we're in, in order for those to be successful, but definitely more to come in that area.

And then I guess on that, the dynamic we've seen in the U.S. around the energy category, zero sugar, health and wellness, female consumers, older consumers. Is that the same opportunity outside the U.S.?

Absolutely. I mean we've seen that in all the markets we've gone into, where sugar-free is growing. Female consumer is growing. That functional beverage is growing, the same kind of macro trends, healthy, better-for-you, functional, great tasting and energy are in all the markets we've been in and all the markets that we're evaluating as well.

Awesome. Just two last questions on top line. And I guess just more near term, I guess, but just last quarter, the $25 million net inventory benefit, -- maybe just, Jarrod, you spoke to the fact on the call that maybe at least quarter-to-date shipments were more in line with consumption. Is that still the case as we sit here today? And then just given that Alani is still building distribution, doing incredibly well, how should investors think about kind of the reported growth for the brand versus maybe what we observe in the track data?

So there's a couple of things there to unpack. So as had [ Garrett ] referenced on our earnings call, we are seeing that the Celsius scanner is looking very similar to the sell-in of Pepsi from the inventory dynamic. For aligning new, that $25 million that we had net revenue benefit that we saw in Q4, kind of see that as a little bit of a pull forward out of Q1 into Q4. I'll give you an example of why. the Cherry Bomb LTO was a Q1 phenomenon in scanner data sold completely in Q1. We loaded that into the Pepsi system in December. So we captured that revenue in December, and you won't be picking up any of that in Q1. So that was a big bulk of that $25 million. I would also just be cautious about anticipating some sort of pipe fill -- additional pipe fill. We feel like December, Pepsi, that was the full pipe that ended up coming to fruition. They've got plenty of inventory right now.

And also remember, Alani has far fewer SKUs than Celsius had when we launched in Pepsi. So it's easier for them to monitor. And as distribution ramps up and we head into the summer season, it doesn't necessarily mean that they're going to start carrying more days on hand. Days on hand is a function of what's getting sold through the system and at the retail. And we expect for that to hopefully maintain some sort of a linear line instead of having peaks and valleys, and we're doing the best we can to manage that with Pepsi. And we've got 4 years of experience now with the system. We've got better alignment, brought on Eric Hanson as our President, who has 26 years of work with those folks. We have two new Board members from Pepsi that really help tying us in even more with that organization. And just quite frankly, we just -- we're able to work better with them now.

And then being category captain, we're just tied even more, not just a traditional Allied brand. I mean, just being the eyes and ears and really the energy lead for them that this alignment hopefully is going to be able to mitigate some of these inventory swings that we've seen in the past. We'll see what ends up coming to fruition throughout the year. We certainly think that we're in a much better position now than we've ever been.

So it sounds like this dynamic that occurred several years ago, you don't anticipate a similar dynamic.

Yes, I hope not. So I mean, listen, we're doing the best we can with them right now. And obviously, they manage their inventory to the levels they feel are necessary. That being said, we're working very closely with them to make sure that we can mitigate that.

Okay. No, that's really helpful, guys. So maybe pivoting to profitability. And I think last quarter, you guys framed 2026 as a step-up story each quarter from 4Q from a gross margin standpoint. Can you maybe just remind folks what to expect from first half -- second half perspective? And what gives you confidence in delivering another year of margin expansion?

Yes. So we talked about in kind of Q4, if you start from there, more of a stair-step approach as you get to Q1, Q2 and then kind of back half of the year back into the low 50s. We did have some one-timers in Q4 as we were moving out of the old distribution system and into the new distribution system, obviously, that being Pepsi. So there's some scrap and returns and freight and things that are more onetime type costs. In addition, we'll have Alani fully baked into our system and our orbit model by the end of this month.

Some of that in terms of timing and sequencing, you do have some rollover of the inventory that existed for Alani inventory on our books back in kind of at the end of Q4. So there's some of that rolling in, which is why it's more of a stair step. So as you get to Q2, you'll have kind of the fully baked in Alani margin profile. Rockstar is about a quarter behind. Remember, we didn't buy them until August 28 of last year. So there's a little bit more work to be done there. They'll be fully integrated by the end of Q2. And then as we roll into the back half of next year, we'll see that benefit come through. And it's savings across freight by getting them into our orbit model. It's savings across raw materials by getting them into our supply chain and the scale that we've built within that supply chain. And then there's another -- a number of other factors that we'll see improvements upon scrap, aged inventory and those kind of things.

Awesome. And then maybe related, right, there's been a lot of discussion on aluminum, the Midwest Premium. As spot rates for aluminum have continued to rise, Midwest Premium is still going higher. How do you think about managing that exposure going forward relative to maybe what you've done historically, especially as you're kind of integrating these two brands into the system?

Yes. So we're pulling them fully into our contracts and our supply chain. So the same tactics we use with Celsius, will be used with Alani and Rockstar. As we get scale, we will get some savings because of that scale. Some of that at the moment will have to be used to offset some of the aluminum costs and the tariffs as well. As you look at that step model, we did have kind of the increase in aluminum and the tariffs kick in, in the back half of last year. So we will be rolling over that as opposed to that being an additional cost, but now Midwest Premium has gone up a little bit. If you kind of look back 2 weeks ago when we had our earnings call, we kind of factored in those different things for the year. There is obviously some short-term, hopefully, issues that we're dealing with right now with the activity going on in the Middle East. Not ready to call that one way or the other. I'm hoping it ends quickly and we can all move on. If it doesn't, I think short term, we're comfortable. I know some people are concerned about does the Middle East get shut off completely, which is about 9% of the aluminum production. We don't currently source from there at the moment.

So short term, we're good. But as you look out into kind of 2027 and beyond, you're seeing a lot of capacity come into the system across a number of areas. And that capacity is set up to be more than enough to offset that. We're hoping that it gets -- it doesn't get turned off, that it can get going in the next couple of weeks here, and then you've got additional capacity coming into the system in '27 and '28 to be beneficial to us. If not, you're probably just looking at some short-term gaps, but there's different levers we can pull if we need to with those.

No, that's great. And I guess maybe related, right, it sounds like some of the savings will be used to offset inflation. I mean, how do you think about pricing right? A key competitor of yours has been a little bit more active on the pricing front. So I guess, as we think about '26, how are you thinking about the pricing and promo optimization for Celsius in totality? And I guess, how do you balance potential pricing opportunities against the momentum that both of your brands are seeing right now?

Yes. I mean, this year, as we were kind of getting to the middle of last year and starting to plan for this year, it's much different than we historically have done because historically, we've gone in with just one brand. And it's a completely different mentality. If you're going one brand and you're kind of getting pinched by all the other brands around you. With the portfolio, it allows us to really have not only kind of like a price pack promotion strategy, but a multi-brand price pack promotion strategy and really allows us to use revenue growth management from an exponential level.

So some of the core things we're doing, Toby mentioned it, we're working on -- you don't want to promote on top of each other. You want to promote against the competition. You don't want to help the competition. The other things we're looking at is really setting it up so that Alani is kind of our super premium play. Celsius is our premium play and Rockstar is kind of what we call premium economy play. And so there's different things we can do with that. And so we're looking at by channel, we're looking by retailer. We're looking by different demographics and also different regions in terms of how to set that up across the board. So there could be instances where we got to move some of those around. If Rockstar is higher priced in certain areas, that's not necessarily where we want it to be in the portfolio. So there's opportunity from a price pack and really promotional strategy to start driving additional margin and additional profits across the board and really drive additional velocity and additional efficiency by using that portfolio together.

Makes sense. And I guess rounding out the gross margin discussion, when you think about the long-term profile, I mean, what are the 2 or 3 most important drivers to get from where you are today from ultimately where you want to be? And Jarrod, I think you mentioned on earnings that you felt like there was a clear line of sight to, call it, mid-50% gross margin. How quickly can that be achieved?

So I think we said a handful of years on the call a couple of weeks ago. There's a number of tactics and levers that we'll look to pull. Some of that will depend on what the macro environment is doing. But we see additional opportunity in the cost of raw materials. We see additional opportunity in our freight lanes. We see additional opportunity in tolling charges with manufacturers. We've got a second line that will be going online in the back half of this year, really a Q4, which will give us opportunity to get additional margins. So as we continue to scale our business, having an additional line that we're operating in the same plant, which in general will drive additional efficiencies because you're driving it with 2 lines instead of 1 line. So there's different opportunities from vertical integration, from cost savings in the COGS line. And then really RGM is a big opportunity for us really with that promotional pack strategy to really drive additional margin to get into that mid-50s.

Makes sense. And I guess maybe pivoting to selling and marketing and just other opportunities for leverage. I mean you made significant investments in marketing people over the last year. As this business grows and matures into a multi-brand portfolio, how do you think about the right level of investment going forward? Like where do you see the most opportunity to drive efficiency?

You want to add that?

Yes, sure. So I think when you look from a sales and marketing perspective, I wouldn't expect for us to slow that down. We need to continue to press forward. It's a very competitive space right now. Obviously, you've got the two biggest players that invest quite a bit. One is public and another one is private and the private one is dumping quite a bit of money into the category. And then you've got so many new players coming in. And we still expect to grow. So if we want to grow, we need to continue to fuel this thing. So historically, we've been in that 22% to 24% of revenue has been our sales and marketing costs. I'd anticipate it probably being in the same neighborhood in the near future. We're going to invest in more people on the sales front. I mean you got to win in the streets. Both of those 2 large organizations have a lot of folks on the street, and we need to be competitive out there. So we're going to continue to invest there. Over time, that's something we could probably lever, but certainly not right now. I think G&A is an area that is an opportunity for us to continue to improve upon as we scale. And then even above the line that flows down is promotional allowances. I think that's an area that we can continue to work on and improve the overall margins of the company. So I think those are the areas we're going to focus on right now and continue to really press forward. We're really excited about the plans we have in place for all 3 brands really. But in order to do that, we need to continue to fund it.

Awesome. Last one from my end, and it's just maybe rounding out the discussion on capital allocation. So with this integration work largely going to be -- or expect to be behind you by midyear, like how are you thinking about your capital allocation priorities as free cash flow normalizes?

Yes. I mean we're a high cash generating business, right? So we do have a lot of cash on the balance sheet, and we'll continue to build that. There's a number of things that we'll look at. Of course, we're going to focus on what Toby was just talking about really investing into the growth of the businesses. International is an opportunity as well to continue to invest in that. Do we turn that on a little more as we bring [ Garrett ] on and as we've scaled our team in Dublin, where we've got basically a supply chain built out and really the international or global leads from a sales and marketing perspective.

We also got the debt to pay down. So we have about $700 million in debt that we'll look to continue to pay down. And then we've got a share buyback program. We've got $40 million we spent back in Q4. So we had $260 million left on that to continue to work on. So those will kind of be the top 3. And then obviously, from an opportunistic perspective, M&As will be on the table if there's something that we see that will be incremental and value add and drive value for our shareholders. That's kind of the core areas we're staying focused on.

Great. Well, we are at time. So on behalf of UBS, everyone in the room, those listening online, thank you both for being here today. We wish you nothing but the best, and we'll have lots moving forward.

Thanks a lot.

Thank you. Great to be here.

Hello, everyone. Thank you for joining us, and welcome to the Celsius Holdings Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

I will now hand the call over to Paul Wiseman, Investor Relations. Please go ahead.

Good morning, and thank you for joining Celsius Holdings 2025 earnings webcast. With me today are John Fieldly, Chairman and CEO; Jarrod Langhans, Chief Financial Officer; and Toby David, Chief of Staff. We'll take questions following the prepared remarks.

Our fourth quarter and full year 2025 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 Q4 and full year earnings release. And 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 fourth quarter and full year results for fiscal year 2025. As I look back in 2025, the message is clear. We continue to execute with momentum and operating discipline. We are reinforcing the scale of our platform as we build a modern energy portfolio.

One of the reasons we feel good about the progress is that we delivered full year record revenue of $2.5 billion, reflecting our disciplined approach to growth and the material scale we've accomplished.

At the core, our focus is straightforward. We stay close to the consumer, and we execute with consistency alongside Pepsi and retail partners, which creates the opportunity to grow in a sustainable and profitable way over time.

With that as context, let me start with the portfolio, what we see across CELSIUS, Alani Nu and Rockstar Energy. Across the portfolio, we continue to manage and invest in CELSIUS, Alani Nu and Rockstar Energy with the intent to broaden our reach. Our combined portfolio represents approximately 1/5 of the U.S. energy market in tracked channels for the full year, which we believe to be very impressive both on an absolute basis and relatively. In addition, our portfolio includes 2 billion-dollar brands, validating that sustainability and scale of our portfolio.

Each brand can win in its own way, and our focus is to enable that to happen more and more. We operate with precision, making sure that we are present where it counts, bringing the right innovation and activating demand in a way that strengthens our core, not just a moment. When you look at the CELSIUS brand, the opportunity is about strengthening momentum and executing in a way that positions us to outgrow the category over time. We are focused on the fundamentals that drive that outcome, staying disciplined with SKU productivity, sharpening revenue growth management and promotional efficiency, maintaining a consistent innovation cadence and elevating market execution with Pepsi and our retail partners, particularly during key priority periods.

Live. Fit. Go continues to be the core part of how we connect with consumers, and we remain focused on the long-term runway and household penetration, expanding reach while also driving frequency and loyalty as modern energy becomes more embedded in daily routines.

For Alani, we continue to see momentum supported by the strength of our core brand and the opportunity to expand distribution. As the brand transitions into the PepsiCo system, we are focused on what is complete, what remains in motion and what improves as the transition finishes. We saw the momentum with Cherry Bomb as the first limited time offer in the PepsiCo system, and we are taking those key learnings forward.

And with Rockstar, our integration remains on track, and we expect to complete the remaining integration in the first half of 2026. Importantly, this is not just about completing 1 integration. It's about strengthening our growing operations. We are building repeatable processes, executing transitions with discipline and refining a playbook that improves how we manage complexity across our growing portfolio.

On that note, let me give you a quick update on the integration and transition progress across the portfolio. Starting with Alani Nu, we are making strong progress moving the business into the PepsiCo system. As of year-end, we are substantially complete on the U.S. DSD transition. The way we're approaching the remaining work is intentional and methodical and is designed to make sure we set up the portfolio the right way with Pepsi and our retail partners. And they are brought in on this too. We believe we are set up for success and we continue to expect the Alani implementation and integration to be completed by the end of the first quarter of 2026.

With Rockstar, we are progressing through the remaining integration steps and staying focused on the work required to fully bring the brand into our operating model. We are executing against a clear plan and remain on track to complete the integration in the first half of 2026.

And when you talk about success, it is very clear. It is consistent execution, a more focused SKU set and improving the margin structure over time as we bring the brand further into our platform. As we think about brand health and durability, our view is rooted in what drives loyalty and relevance. Across the portfolio, we continue to differentiate through sugar-free and flavor innovation. And we really believe the category continues to support brands that stay closely aligned with evolving consumer preferences.

Looking at 2026, our focus is on making sure that loyalty and brand relevance remains durable. That means staying consistent on what each brand stands for, continuing to bring innovation that creates trial and drives frequency, and executing with that kind of operational discipline that protects the long-term value of our business.

We kicked off 2026 by making our [ Fizz Free ] line available nationally. And we see a meaningful opportunity as there's many consumers that prefer beverages without carbonation or like the optionality of Fizz or Fizz Free. Across 2026, you will see a more intentional innovation and a limited time offer cadence, supported by broader distribution and strong end market execution.

For Alani, that also includes expanding distribution of the core SKUs as we complete the transition into the PepsiCo system.

International represents a meaningful long-term growth opportunity for us. Today we are present in approximately 10 markets. While international remains a smaller portion of the total business, we see a significant runway as global consumer trends increasingly mirror what we're seeing in the U.S., particularly around fitness, wellness and better-for-you energy.

Our approach to expansion is intentional. We are prioritizing focused market selection, clear entry plans and ensure the right execution model is in place before we scale. This is not about entering as many markets as possible. It's about building our brands the right way, with strong local partnerships, disciplined launch plans and sustained marketing and distribution support.

To support this next phase, we brought on Garrett Quigley as President of International. Garrett brings deep experience, scaling beverage brands globally and is building a dedicated international sales and marketing organization to expand our footprint in a thoughtful and profitable manner.

As global consumer behaviors continue to shift towards zero sugar, functional energy that fits into daily routines, we believe our portfolio is well positioned to participate in that structural growth. We will continue to prioritize strong execution and long-term value creation as we build our international presence. That same focus on execution and scale also shapes how we're evolving our marketing capabilities.

On marketing, we're continuing to sharpen how we tell our story and activate demand across the portfolio. Historically, our brands use separate creative teams across different companies. A key step forward in the creation of our new Brand Studio, a full-service in-house agency built to drive brand growth with speed, consistency and sophistication. More than a creative team the Brand Studio is a strategic engine that will shape, produce and scale how our brands show up across every consumer touch point, from packaging and campaigns, to digital-first content and 3D motion graphics. And importantly, this strengthens our ability to run the portfolio in a more intentional way, helping us reach more consumers and connect awareness to trial and, ultimately, to retail activation. The scale of our portfolio allows us to leverage the team, maintain clear control of each brand's voice.

Innovation remains central to how we grow the portfolio. That includes leaning into consumer preferences, like Fizz Free, while also deploying limited time offers in a disciplined way. For us, LTOs are not about chasing short-term spikes. They are about expanding the funnel, driving incremental trial, reinforcing the strength of the core portfolio. When executed with the right distribution and retail alignment, they can become a repeatable lever within our broader growth framework.

Energy remains one of the most attractive growth areas in beverage, with zero sugar offerings leading expansion. We believe our positioning allows us to help grow the category, not just participate in it. By staying relevant to consumers and executing with discipline across both mature and whitespace markets. And that matters because it speaks to the runway.

In more mature markets, the work is about consistency, innovation and driving frequency. In white space markets, the focus is on building awareness, expanding distribution and scaling trial, all while staying disciplined to how we execute. Our partnerships and activations are part of how we do that. We continue to leverage partnerships and others to connect awareness to trial and then the retail activation. These programs are designed to put the brands in motion, in real consumer moments and to convert that energy into [indiscernible] where consumers shop, through our social media community building as well as our macro and micro influencer bases, we are building excitement, brand awareness and loyalty to further grow the brands.

And we're also proud to see Alani Nu recognized by BevNet's 2025 Brand of the Year. Congratulations to all of our team members. That recognition reflects the strength of our brand and the momentum we're building as we expand reach and execution.

Finally, as we look ahead, we have a clear strategy and priorities for 2026 and believe they will support sustainable, profitable growth. Our focus on continuing to strengthen the platform we have built, executing with discipline across the portfolio and staying closely aligned with consumers as the category continues to evolve. Across each of these priorities, our intent is the same: execute consistently, strengthen our operating system and create long-term value.

With that, I'll turn it over to Jarrod to walk through our financials. He'll begin with some context around the Rockstar accounting treatment, then cover full year and quarterly results. Jarrod?

Thanks, John, and good morning, everyone. From a financial perspective, we have a lot to cover. As John noted, I'll begin with Rockstar given the accounting treatment during the integration, then move to Alani and brand CELSIUS to walk through the components of our consolidated results.

Beginning with Rockstar, during the quarter, we were actively integrating the brand into our supply chain, back office and commercial organization, which impacted how certain sales activities reflected under generally accepted accounting principles. As a result, some components were required to be recorded in other income rather than net sales.

For the quarter, $45 million was recorded within net sales and an additional $6 million was recorded in other income. As we move into the first quarter, we expect to fully transition the U.S. portion of the business to the finished good model, and we expect that only the Canadian portion will remain in the other income. We expect the Canadian portion of transition to the finished goods model in the first half of 2026.

On a full year basis, we recorded $56 million in net sales for Rockstar and an additional $13 million in other income. And as we sit here 6 to 8 weeks into 2026, we remain confident the brand continues to resonate with many consumers, and we have a plan to stabilize the business and move it back into growth over the next handful of years as previously discussed.

Turning to Alani Nu, during the fourth quarter, Alani achieved record net sales of $370 million, benefiting from significant ongoing customer demand, increased distribution points and increased orders as we move the business out of its prior distribution system and into the PepsiCo distribution system. On a pro forma basis, that would equate to growth of 136% for the quarter compared to the prior year.

In the 9 months since we purchased the brand, Alani has contributed $1 billion to our net sales. During the quarter, we continued to execute against the integration plan we presented in May, and we are pleased to note we remain on track, including moving the business into our supply chain, back office and commercial operations. We have also moved a substantial portion of the distribution network into the Pepsi system with only a few pieces of the DSD network remaining outside of Pepsi today.

Moving a substantial portion of the business into Pepsi was a significant operational milestone, and I want to recognize the teams across our organization, our former distribution partners and Pepsi for making that happen as seamlessly as it did.

We also saw the execution show up in innovation. Cherry Bomb, our first Alani LTO launched in the Pepsi system and was very successful running out in record time. With strong pull-through, we saw increased orders in the last few weeks of the year above and beyond our initial projections, supporting triple-digit growth in the first 6 to 8 weeks of the year. As we look across 2026, we expect continued expansion into more locations with more SKUs and overall triple-digit space gains.

As expected, the transition of Alani into Pepsi drove increased orders and strong execution, which in turn impacted reported results for brand CELSIUS as we manage the timing and sequencing of inventory movements within the Pepsi system as we balance the Alani load-in with total inventory across the network. As a result, scanner data is a healthy 12.8% for the quarter, while underlying GAAP sales for CELSIUS showed a 7.7% decline due to the timing activities noted.

When combining brand CELSIUS inventory movements with the Alani load-in, the company had a net benefit of approximately $25 million.

Just a year ago, we were coming off a period in which both the category and brand CELSIUS experienced pressure in the back half of 2024, with some continued softness in the first quarter of 2025. As a result, we put a plan in place across our commercial organization, and we are pleased by the improvement seen since then where track sales are more aligned with the upper range of the energy category growth.

As a result, for the full year, brand CELSIUS delivered $1.46 billion of net sales, growing 7.5% year-over-year. So combining everything for the fourth quarter, consolidated revenue was approximately $722 million and full year consolidated revenue was $2.5 billion, including having 2 billion-dollar brands.

Taking a step down the P&L, for the 3 months ended December 31, 2025, gross profit increased by $175.1 million to $341.8 million from $166.7 million for the prior year period. Gross profit margin was 47.4%, compared to 50.2% in the prior year period, reflecting dilution from Rockstar Energy, higher cost of product related to integration costs and tariffs, partially offset by improved outbound freight, lower consolidation billbacks as a percentage of revenue and favorable product impact mix.

As previously discussed, gross margin was impacted by onetime integration and distribution transition costs associated with the timing and sequencing of integrating Alani Nu and Rockstar and transitioning Alani into the Pepsi DSD system. While operational efficiencies and revenue growth management will be ongoing initiatives, we continue to expect the Alani integration to be completed by the end of the first quarter of 2026, and we expect the Rockstar integration to be completed in the first half of 2026. As integrations progress and ongoing initiatives take hold, we expect margins to expand across 2026 and return to a more normalized profile with gross margins in the low 50s driven by savings across raw materials, scrap, manufacturing tolling fees, freight and package and brand mix, offset in part by tariffs and aluminum costs.

For the full year, gross profit increased by approximately $1.27 billion from $680 million in 2024. Gross profit margin increased by 20 basis points from the prior year to 50.4% in 2025.

Sales and marketing expense in the fourth quarter was $249.2 million or 34.5% of sales, and administrative expense was $66.6 million or 9.2% of sales. Adjusted for distributor termination and integration costs of $81 million, sales and marketing expense in the fourth quarter was 23.3% of sales, and administrative expense was 8.5% of sales when adjusting for $5 million in acquisition and integration costs.

On a GAAP basis, we reported a net income of $24.7 million for the quarter. On a non-GAAP basis, adjusted EBITDA was $134.1 million, up from $62.9 million in the prior year period. Adjusted SG&A for the quarter was 31.8% of sales.

For the full year, sales and marketing expense was $876.3 million or 34.8% of sales and administrative expense was $250 million or 9.9% of sales. Adjusted for distributor termination and integration costs of $327.5 million, the full year sales and marketing expense was 21.8% of sales, and administrative expense was 7.5% of sales when adjusting for $60.2 million of acquisition and integration and other costs. Adjusted SG&A for the year was 29.4% of sales.

We had an adjusted EBITDA margin of approximately 18.6% for the quarter. For the full year, on a GAAP basis, we reported net income of $108 million, and adjusted EBITDA was $619.6 million, representing an adjusted EBITDA margin of approximately 24.6%.

On cash flow and the balance sheet, we remain focused on free cash flow generation and working capital discipline. We ended the year with $399 million in cash and approximately $670 million in total debt. Operating cash flow was $359 million. Working capital reflects the timing dynamics we discussed earlier, including inventory positioning and customer order cadence during the transition period. As cadence normalizes, we expect working capital volatility to moderate.

On capital deployment, we remain focused on 3 priorities. One, investing to support brand growth and integration execution; two, strengthening the balance sheet; and three, returning capital to shareholders.

During the quarter, we reduced debt by approximately $200 million and repurchased $40 million of shares. We ended the period with $260 million remaining under our share repurchase program. We will continue to evaluate repurchase activity based on cash generation, market conditions and capital priorities while preserving flexibility for strategic M&A opportunities.

As we look at 2026, I want to briefly frame how we are thinking about cadence and variability following an active fourth quarter. As I mentioned, the fourth quarter included integration and distribution transition activity that we expected, and those actions created timing effects within the Pepsi network. At times, reported results can vary when shipments, inventory positioning and promotions are not perfectly aligned with consumer takeaway. When that occurs, it is typically a function of timing and sequencing, and we will continue to be clear about what we believe is transitory versus what we believe reflects underlying trends.

As we progress through the first half of 2026, we expect those impacts to moderate as integration milestones are completed. We remain focused on tightening alignment between shipments and underlying takeaway where possible, while recognizing that periods of integration and large customer ordering cycles can still create some quarter-to-quarter variability.

On pricing and revenue growth management, we are taking a portfolio approach with greater precision and ROI discipline. Revenue growth management for us is not about broad-based price increases. It's about shaping the business through mix price pack architecture by channel, pack strategy and disciplined promotion to improve both growth and quality of earnings. As we scale, we are tailoring price pack architecture by channel, sharpening priority periods and using data to allocate investment where it drives the highest return. Over time, this should lead to promotional activity that is tighter, more intentional and more measurable.

In addition to line planning and the captaincy with Pepsi support more consistent in-market execution and a more repeatable commercial playbook across retailers.

With that, I'll turn the call back to the operator to open the line for questions.

[Operator Instructions] Your first question comes from the line of Filippo Falorni with Citi.

The shelf space gains that you discussed last week at the CAGNY conference for both CELSIUS and Alani, can you give us a bit of an update on the spring shelf space resets and when we should start to see some of the benefits from the shelf mix gains? And then in particular for the brand CELSIUS, you explained the gap versus consumption in Q4, that was very helpful to add it to the release, so thank you for that. So could we see an improvement in Q1 as you think about on a reported sales basis given the shelf space for brand CELSIUS?

I appreciate the questions. In regards to the shelf gains, historically, we've seen them really materialize through and kind of finalize right around the end of spring, has historically been when the final resets take place as everyone is gearing up, as we call, the beverage summer selling season. So we do expect those to continue to materialize through the end of spring, really with the biggest gains especially for Alani would be in convenience. So that's been a big white space opportunity for the portfolio as well as with the CELSIUS portfolio. And really excited about as we're heading into summer, especially leading off with a lot of our innovation that's coming.

In regards to some of the timing and some of the differences as we look through consumption data versus the revenue that's recognized as we sell through a distributor, there is timing and sequencing. Jarrod made some comments on that in our prepared remarks. Jarrod, do you want to provide any color? Historically, we don't provide any forward-looking information. But we do anticipate there could be gaps going forward within consumption on a weekly or within a moment of time. But over the long term, we'll start to see some more consistency there. But Jarrod?

Yes. I mean if you look at it from a portfolio perspective, I think you'll see it tighten up quicker than if you're going specifically brand by brand, because we are looking at different things across the calendar. So for instance, we just launched an LTO, the Lime Slush It's Delicious with Alani, so you'll see some spikes in some of the data. We also have LTOs coming out with CELSIUS this year. So depending upon the timing of those activities, you might see some differences within the scanner data versus load-ins and those kind of things. .

And then as we continue to expand distribution with Alani in particular, as we continue to move across the Pepsi system and gain shelf space. you'll see some expansion there. And then you'll also see expansion within CELSIUS with the 17% space gains that we had as well.

Your next question comes from the line of Peter Grom with UBS.

Great. I wanted to follow up on that. Obviously, a lot of moving pieces as it relates to the top line growth. But when we think about the $25 million net benefit from CELSIUS versus the 1 year, can you help us unpack what that looks like from a brand perspective? And then I guess, Jarrod, maybe more specifically, as you think about Alani, would you expect inventory levels to remain elevated as we move through the transition? And similar to kind of what we saw when CELSIUS moved into the Pepsi system a couple of years ago, implying that maybe more of the unwind would be a 4Q into '27 dynamic? Or would you anticipate maybe kind of some under-shipment to [indiscernible] faster?

Thanks, Peter. So as we're looking at Q4 and into the future, I'd say John and I are committed to tightening up the peaks and the valleys of the data. With the captaincy and the more aligned partnership we have with our largest distributor, we're definitely much tighter and working very closely. We actually had the supply chain from their team in back in January. So we're committed to really tightening up those peaks and valleys.

From an operational perspective, we'll continue to have our supply chain and commercial teams focused on what ultimately is going to drive the success of our modern energy portfolio, which is winning at the register as that is -- that's where we're going to win or lose. So if we have the opportunity to load an additional volume of 1 brand kind of at or near the end of the quarter while adjusting another brand, while maintaining our service levels and the growth of those brands, that's something that we're committed to doing so that we win.

So as we look at kind of the results that you saw in the quarter, we benefited to the tune of roughly $25 million in our reported results. We were excited to see brand CELSIUS come out of gate with low double-digit growth and great service levels while seeing Alani kind of rocket out of the gate with triple-digit growth. And we have seen brand CELSIUS orders align more closely to the tracked data as we look at kind of the initial deliveries and orders in 2026. I will caveat that by saying there are 4, 5 more weeks in the quarter, so we'll continue to manage the business holistically and make adjustments along the way as we do manage the portfolio.

So I think there -- again, we'll manage the peaks and the valleys, I think, as a portfolio play in a much more scaled business. We'll be able to get those a bit tighter and manage that, so we don't have as many kind of as much volatility as we've seen historically when we just had a 1 brand and when we were really learning each other within that supply chain.

If I go back to kind of Q4 and I boil it down, if I'm looking at our supply chain around DSD in particular, as we approach the end of Q4, we did adjust an additional week for brand CELSIUS and loaded in additional Alani, that benefited Alani, and it benefited the portfolio from a net basis, as I said. So this didn't have an impact on service levels, and we continue to win at the register with both brands. And as John mentioned, as a proof point, we're picking up roughly 17% additional space with brand CELSIUS in '26, really as a result of that scanner growth and, obviously, even more with Alani, triple-digit space gains with Alani.

Your next question comes from the line of Bonnie Herzog with Goldman Sachs.

I guess I had a question on gross margins. You mentioned you expect your gross margins to return to a more normalized profile in the mid-50% range across this year. So maybe first, could you touch on the potential impact that the Midwest premium is having on your business near term? And then second, can you give us a sense of phasing gross margins this year? And then I guess beyond this year, how should we think about the evolution of your margins over the next few years? Can you highlight maybe some of the key puts and takes that we should think about?

No, excellent question. And I would say in regards to the margin profile and a lot of the infrastructure and strategies we've built about building on our Orbit model with the CELSIUS portfolio, further looking at opportunities with supply chain, purchasing strategies as well as vertical integration with the acquisition of our [ co-packer ] over a year ago, really driving further leverage and scale and efficiencies through that location.

We also, as we're further integrating Alani and Rockstar, as it's moving through Orbit over the next several quarters, we'll be able to gain additional leverage as well. Jarrod, do you want to provide additional color in regards to some of the timing around that and also some of the opportunities we see as we're progressing to this low to mid-50% margin profile by the end of the year?

Yes. So I think our target for this year is to get back to the more normalized low 50s. In terms of the opportunity, we do see our ability to move up into the mid-50s like you noted. I wouldn't necessarily call that a '26 target, but definitely a near-term target into the next handful of years.

Some of the things that are going to drive our benefit in order to get back, call it, from the 47.4% that we sat in Q4 and work our way to the low 50s are really getting the cost of sales of the COGS, the raw material prices in line with what you see with brand CELSIUS. So we are working through that with Alani and with Rockstar. We're a bit ahead on Alani, so we should have that cost structure in place by the end of Q1. For Rockstar, we should have that in place by the end of Q2. Some of that has to do with integration, some of that has to do with just moving through the inventory balances and moving through some of the higher raw material costs as we have them fully integrated. So Alani will be fully integrated by end of Q1 and Rockstar by the end of Q2. So we've got those costs.

Some other things that are going to benefit us is our Orbit model and our freight structure. Getting them fully baked into that structure will provide us with benefit. Our mix, when you kind of look at a blended mix of our price pack and promotion strategy, will also be beneficial. So you kind of put those together, if you look at Q4, some of the kind of onetime things we had, we did have some transition costs, where we had some COGS write-offs and we had some scrap and things like that, that were more onetime, so those will be gone after Q4. And so we'll have that benefit directly into Q1.

But really, the goal is once we get through that first half of the year to be in good shape to get into that low 50s as you look at the back half of the year. Those do also factor in the Midwest premium that has picked up as well as tariffs. So depending upon where the Midwest premium goes, there could be some impact in terms of timing. And as well as tariffs, if the tariffs kind of subside quicker, then there's an opportunity to get to some of those numbers quicker.

Your next question comes from the line of Andrea Teixeira with JPMorgan.

I was hoping to see, John, if we step back and think about the 3 brand portfolio and the opportunities of trimming at some point the SKUs and -- or you think that this cadence of LTOs now with CELSIUS, like how is the experience that you've had? And how do you think Velocity, obviously, with increase in shelf space, you obviously will have a reduction in Velocity at some point, but thinking of how to position the SKUs, how to position the category. And we all know this is a record year of innovation for everyone in the space. So hoping to see how you're seeing that set. And what are you hearing from the retailers as far as the competitor set and the -- what we think going forward?

And just also on the -- just a clarification on the margin. It's very encouraging to see that you see the opportunity for synergies and improvements in the execution. I also was encouraged to hear from you guys at CAGNY in terms of the systems and visibility. So I was hoping to see if you can kind of wrap it up on how predictable your sales have been with the view from Pepsi and how you can see margins evolving as we go from a promo perspective.

Excellent, Andrea. And your question, you're absolutely right in regards to the overall category and what we're seeing is driving growth. Innovation has been a key factor of that. And also, innovation has been a great, not only for our portfolio, but the total category. It's bringing new consumers in. And we're starting to see, as in CAGNY, we were talking about the evolution of a category, expanding dayparts, expanding usage occasions. Big opportunity is social occasions with energy drinks as we're seeing alcohol and liquor come into some challenges and headwinds. And what we're seeing is consumers are switching to energy drinks to -- as a replacement. And that's a huge opportunity with our CELSIUS, mocktails and dirty Alanis that we have out there. So that's a big push for us as well. They continue to bring excitement and new consumers, new occasions in.

When you look at the SKU prioritization, that's the beauty of a portfolio. We're able to really maximize the value of the portfolio now with CELSIUS, Alani and Rockstar, making sure we're maximizing the SKUs and really for the channel and also for a regional basis. So that's going to allow us to put the fastest-turning SKUs on -- in the coolers, in the planograms. The space allocations are also, that we're seeing with resets, 17% with CELSIUS and over 100% with Alani, is allowing us not only getting additional slots and distribution and more flavors and availability in retail, but also additional points of disruption. And having that path to purchase is so important, those cold checkouts, the impulse purchases, the expanded shelf space and the dry sets.

So that's all going to come into landing on exactly what you're talking about, velocity. Velocity is very important in the category. That's when it's going to continue to drive it. We feel confident with the innovation. We're going to see the space gains. We're focused on velocity with some of our marketing strategies. Jarrod mentioned Lime Slush just hitting within our LTO strategy.

And the LTOs are designed to lift up the core, to bring new consumers into the portfolio, into the franchise, and then [indiscernible] that daily consumption, daily routine.

The other big area we see a huge opportunity is with the female consumer. That's a big opportunity. We're seeing them expand purchase occasions. There's a higher adoption rate that's taking place as well. And our portfolio is really positioned to lever that tailwind with Alani and with CELSIUS. So we think we're really well positioned there, especially as coming through the finalization of the resets at the end of spring. Really excited about great innovation from an LTO standpoint, not only for Alani, but also for CELSIUS. We got some great innovation coming out and it's going to be an exciting summer for us.

Talk about the synergies and some of the costs within our system, Jarrod touched on that in our prepared remarks and I also covered it, in regards to some of the investments we've made, the vertical integration, the optimization of our purchasing strategies, the further investment we've made in revenue management. Revenue management, RGM, is a really big component as we maximize the value. We're not just a singular brand anymore going on promotion against many other brands. We're really to maximize that value within the portfolio, gain that trial, gain that scale and compete at the highest level within the energy category.

So I think when you look at all those components there, where consumers are, where our portfolio is connecting with consumers, and then also the infrastructure we built here with the organization, really sets us up to continue to optimize and improve and continue to grow this category.

Your next question comes from the line of Kevin Grundy with BNP Paribas.

Great to see you at CAGNY last week. John, just a follow-up, and Jarrod, for you as well, the distribution gains again. Not to beat the dead horse. But obviously, super strong Alani, up triple digits, CELSIUS up 17%. Three questions here, if I may. Number one, what -- can you quantify what you sort of estimate the distribution gains to be for the category given the strength? That would be question number one.

Number two, where are the shelf space gains coming from for Alani and CELSIUS, to the extent it's sort of above and beyond what you'd expect with the category, which certainly would seem to be the case, where are the shelf space gains being sourced from within the category?

And then just lastly, I think Andrea was sort of touching on this with respect to velocity, when we think about holistically the innovation that's coming on and which seems like a really strong pipeline, but you're moving in to new areas, new geographies, particularly in convenience, how should we think holistically about velocity growth for CELSIUS and Alani this year sort of vis-a-vis the TDP gains that you're going to benefit from?

Kevin, great questions. We spent some time on the category on the space gains we anticipated for CELSIUS. But I think to your point in regards to the category, like where is that coming from? And when you look at the energy category and it continues to grow as a larger percentage of LRB, retailers are expanding more space. They're expanding half coolers and doors and more dry shelves. And like in the convenience channel, we're hearing from a lot of retailers that are optimizing some of the beer coolers. Just to -- they're trying to get as much productivity out of these coolers as possible. So you've heard that -- juice category as well and high premium waters as well has been under pressure.

So those are areas that retailers are making those decisions. I think each retailer is a little bit different on how they're being able to carve out more space. But there is a lot more space coming in the energy category as it's becoming part of a daily lifestyle, daily routine, daily -- and expanded usage occasions. Historically, it's been an impulse purchase and convenience has been a main driver of that, over 60% of sales.

But if you look at large format, when you look at the space gains we saw over the last 2 years, we expect anticipated space gains in large format as they can capture a larger share of that -- of those energy drink sales that will continue to grow. So seeing a variety of different retailers react differently, but many in convenience are, we're hearing, cooler doors within the beer category, getting a little optimized there.

And if you look at where we are within velocity, we're here to grow velocity. That's really important. That's a major KPI within our organization, within our teams. I think with the space gains, when you look at Alani particularly, we're expanding that distribution, right? So it's going into a lot of locations that are new. Many retailers, many regions, Alani is going to be new. So we will likely see a lower velocity entering new segments of the regions within also channels and retailers that we're going to have to build up those velocities.

So each channel is going to be different. Each market is going to be different. But any time, just like when we saw CELSIUS, as you expand out broader, we did see reduced velocities as that expansion takes place. And then you build upon that. Remember, consumers are -- it's a daily routine, it's a daily lifestyle. We've got to get these brands into a cadence where consumers are purchasing on our frequency. And gaining distribution just doesn't mean the product starts flying right away. There is great momentum behind these brands. We're really excited about it. It's part of the LTO strategy, the innovation strategy to get trial and awareness. But that is something we're very keen on, is continuing to build velocity over time.

Your next question comes from the line of Gerald Pascarelli with Needham & Company LLC.

A couple of things. Just a housekeeping question, going back to the cadence, Jarrod. I just want to make sure I'm understanding this correctly, but are there any parts of the inventory benefit that Alani got this quarter that should in any way be considered a pull forward in revenue? It doesn't sound like it just based on the distribution opportunities ahead, but just wanted to confirm that.

And then John, just going back to the shelf space growth that you're expecting for Alani this year, is there a way for you to broadly contextualize that in terms of what we saw for core CELSIUS back in 2022 when that brand transitioned? I understand that back then, CELSIUS has been benefiting in part from lost shelf space from Bang. But yes, just curious if you could provide your thoughts on how we should view that 102% in the context of the prior transition. Any similarities and differences? And then I guess, how that compares in this environment with a more competitive landscape.

I'll jump in first, Gerald. In terms of pull-through, I do think we saw opportunity to load in even more of Alani with the ability of the Pepsi distribution system and really how quickly they were able to get Alani out from an ACV perspective across the shelf. So I think there was, I would call that more of an opportunity than a load-in that we took advantage of. And you saw coming out of the gate with the triple-digit growth that Alani has hit pretty quickly, and we continue to see that expand. .

And then with our Cherry Bomb, we did -- that was kind of one of the pieces that was loaded in at the end of the year, and that really got depleted pretty quickly, record time. So we got the Lime Slush going out. We're looking for, hopefully, another record from an LTO perspective. But I would definitely see that as more of an opportunistic move as opposed to pull back or pull forward.

In regards to some of the expansion when we look back on the CELSIUS integration expansion to the PepsiCo network and then timing of resets upon that, CELSIUS went in, in September, Alani's going in, obviously, in December. There are some similarities, but there's many differences as well. I think when you look at CELSIUS and Alani, when they were starting off, CELSIUS was at a lower ACV versus where Alani is. I think when you look at Alani, similar opportunities and convenience on distribution gains there.

And yes, you are right. When we went into -- through that process, CELSIUS did take a lot of space from Bang at that point in time. But I will say when you look at Alani and the opportunity and you look at the category, this category has extremely strong growth. And although Alani will not likely be replacing brands, the category is expanding. We're hearing retailers expand their shelf presence for energy. So that's what really allowed Alani to gain some of that -- the large distribution gains as well. Also, the consumer dynamics have changed as [indiscernible] energy from a lot of retailers and the excitement about CELSIUS and now with the partnership with Pepsi being the energy captain with the Celsius Holdings portfolio and having that distribution confidence and breadth. A lot of retailers really want to make sure you can keep those shelves full, especially with the velocity and how quickly these products turn.

So that is really a show of confidence and really allowed our key accounts team to take advantage of those opportunities and gain that additional distribution for the total portfolio.

There are no further questions at this time. I will now turn the call over to John Fieldly, Chairman and Chief Executive Officer, for closing remarks.

Thank you again for joining us today. 2025 was truly a defining year for Celsius Holdings. We recorded a record $2.5 billion and continue to scale a true modern energy portfolio with Celsius Alani Nu and Rockstar Energy.

As we move through 2026, our priorities are clear: execute with discipline, strengthen our operating system and stay closely aligned with consumers as the category continues to evolve.

I want to take this opportunity to thank our employees, our partners and all of our customers out there for their focus, their teamwork that makes this all possible. We appreciate your support, and we look forward to updating you next quarter. Until then, grab a CELSIUS and live fit.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon. Again, it's now my pleasure to welcome Celsius Holdings back to the CAGNY stage. Before I get started, please join me in thanking Celsius for their generous sponsorship of the conference with their beverages all week.

Struggling to read this a little bit because it's been a long day, and I'm a little tired. So might as well get this kicked off right. I feel much, much better. Celsius manages one of the most exciting portfolios in beverages, which is anchored by rapidly growing better-for-you energy brands, Celsius and Alani Nu. The company holds a greater than 20% market share in the U.S. energy category and grew consumption 31% year-over-year in 3Q with plans to keep the momentum going in the U.S. and internationally.

Please help me welcome to the stage, John Fieldly, Chairman and CEO; Eric Hanson, President and Chief Operating Officer; and Kyle Watson, Chief Brand Officer.

With that, I'll hand it over to John.

All right. Good afternoon, everyone. We're bringing the energy, and we're excited to be back. So excited to be here for our second year coming back. What we want to talk to you about today is really where this company is going, where this organization is going and we're going to talk about how we're having resilience in our operating models. I've got Kyle and Eric here today. We couldn't be more excited about what's in store in the future.

Some -- before I begin, I want to encourage everyone to read our safe harbor disclosure, including in our presentation today. Some remarks today will include forward-looking statements, and we will reference non-GAAP financial measures.

As I was introduced, I'm John Fieldly, I'm the Chairman and CEO of Celsius Holdings. I've been here over 14 years, and I've never been more excited about our business today. Why Celsius Holdings? Today's discussion is not about a single moment in time. It's about building a high-performance company. Last year, we took a bold move and a bold step to move beyond one brand company to become a functional beverage platform with the acquisition of Alani Nu and Rockstar. Over last year, we validated that strategy. What we said what happened last year is exactly what you're hearing today. And today, we're excited to show you how the evolution is coming to life.

Let me talk to you about why Celsius is setting the stage for a really exciting future. First, we compete in a large structural growing environment and category with functional, better-for-you segments expanding faster than the total liquid refreshing segment and beverages. Second, consumer preferences and behaviors are shifting from occasion functional towards everyday energy. You're going to hear more about this. We're seeing frequencies increase within the category and occasions expand, and we are capitalizing on it. Third, we have a leading total energy portfolio that is positioned to win. We have 3 category defining energy brands all with strong loyalty, clear brand roles and everyday relevance. Fourth, we are evolving our operating model. You're going to hear more about that today. We're strengthening our PepsiCo partnership. Celsius delivers greater connectivity, executional discipline and scale as our business continues to grow. And lastly, we have a strong cash generation model, operating leverage, and we're positioned to continue growth and improving profitability.

We've been building this company for over 20 years. From the beginning, we have been ahead of consumer trends, not reacting to them. We had early conviction in Zero Sugar, functional ingredients and performance positioning well before the attributes became mainstream in the category. We are built ahead of demand, not chasing it as it emerged. And in 2025, has been a defining year. In fact, since last time I stood here, we've acquired Alani Nu, strengthening our partnership with PepsiCo, added Rockstar Energy to the portfolio and elevated our leadership team to build and take advantage of the scale.

When we stood here on stage last year, we had a single brand. Today, we have a portfolio of 3 category-defining brands each built to win with distinct consumers and distinct roles within the category. Our portfolio includes Celsius, a functional fitness lifestyle brand with refreshing flavors that empower you to accomplish your goals inside and outside the gym. We have Alani Nu, a female-focused wellness brand for today's health-minded consumer with fun flavors that are inviting and approachable. And we have Rockstar Energy, which allows us to play and operate in the core energy drink segment, each brand serving a distinct need state and role. Together, we have a true total energy portfolio with premium brands, functional ingredients and relevance across how consumers live today.

This portfolio is our competitive advantage. We have 3 powerful brands that are scaled, differentiated and positioned to win as energy becomes more every day and more intentional. Let me give you a snapshot of our business today. As Andrew mentioned, we hold approximately a 20% share in the U.S. energy drink category with broad distribution, which is up over 8% a year ago. Our ACV reaches at 99.5%, and we're sold at over 250,000 retail outlets. When you step back and look at the numbers, the Celsius portfolio has generated $5.2 billion of retail sales last year. As a top 2 growth portfolio in energy, a top 3 energy portfolio overall. This shows us that Celsius is winning not in particular pockets, but winning at scale and across categories that matter.

I want to step back and talk about the categories itself. Energy has evolved from a narrow transactional category, driven by impulse purchases to a lifestyle-driven one. Zero Sugar, functional benefits and wellness alignment are now mega trends in the category. Mainstream usage occasion has expanded daily routines with multiple occasions throughout the day. Celsius is at the forefront of this category shift. Our [ fizz metier ] advantage is why our brands are aligned with consumers and how they live today and why we're leading the evolution of the category rather than chasing it.

Not only has the category evolved, it's also growing massively. Energy is the primary energy engine in LRB, driving 54% of total energy growth over last year. Last year, total LRB growth was $5.5 billion. More than half of that growth came from the energy category. What's even more important, 85% of the energy growth is now coming from Zero Sugar, driving roughly $2.7 billion in incremental growth in the category. That tells us this just isn't a category expansion, it's a structural shift in what consumers want, zero sugar, functional energy is powering the majority of the growth. And that's exactly where Celsius has been focusing from the start.

This is not a saturated category. It's an evolving one, fueled by changing in usage occasions, rising consumer expectations around health, function and daily consumption. Modern energy is expanding the category, bringing incremental consumers and occasions to LRB. It is clear that Zero Sugar is experiencing tremendous growth.

So why does Celsius fit into this growth? How does it fit? I'm pleased to say that Celsius Holdings is driving the largest share of Zero Sugar Energy Group accounting for 33% of category growth, more than any other portfolio. And as an early mover advantage in sugar-free, Celsius has helped define what modern energy looks like today, function without compromise. The leadership position of our portfolio to continue to win as Zero Sugar adoption expands and energy becomes more embedded in our daily routines and our daily lifestyles.

Energy isn't niche. It's universal, and it's showing up differently across genders. Now consumers remain a critical foundation of the category with strong impulse purse driven, continued delivery of scale and frequency. And as they consume energy more often later in the day. At the same time, female consumers are increasingly driving category growth, with energy becoming part of a planned daily routine, and this is an area we've built a clear leadership position, and Kyle will dive more into this. As energy comes part of a daily lifestyle, winning means showing up both in the moment and in the routine. Our advantage is that our modern energy portfolio meets both these states, routine-based consumption and impulse-driven moments, allowing us to grow with women while maintaining a strong moat with men.

That sounded amazing opening up one of our product portfolios, cheers, keep the energy going. There is a fundamental shift happening in this energy category that's happening right there, evolving from functional energy to everyday consumption. We're seeing consumers drink energy more often. So what do we mean by this? 32% of consumers tell us they're drinking energy more often because they're using it across more occasions. More importantly, 51% of the category growth is coming from increased frequency amongst existing consumers.

What does that tell us? It tells us that it isn't just about recruiting new consumers. It's about becoming part of that daily lifestyle and daily routine we talked about. And not only are they drinking it more often, they're drinking it in more occasions. 33% of consumers drink Celsius as a social drink. Many of you had our Celsius mocktails yesterday at the conference. Today, we had [indiscernible] Alani's. We're leveraging and expanding into that social gathering, that social segment. We're seeing alcohol consumption being decreased, impacting a variety of categories. This is where energy is showing up in a unique way. This is how Celsius Holdings is showing up.

Also, 37% consumed with a meal. We've talked about that meal occasion. It's expanding opportunities. Those are moments in energy that simply didn't play for, and they're playing now in a big way. Put it all together and the takeaway is clear. Energy is no longer just a boost. It's becoming an everyday choice. And our brands are built to show up more often and more moments across how consumers actively live today.

All of the fundamental shifts that have led Celsius to where we are today in the category, Celsius is a top 10 beverage company, well positioned to win in the fast-growing category. We are ranked #6 among global beverage companies by retail sales in North America, reflecting scale and relevance. As a brand in North America, Celsius is ranked brand as #9, and Alani Nu is just outside the top 10 and #11 and growing. Growth has expanded beyond a single brand to a multiple brand platform. Celsius and Alani Nu both contribute meaningfully to velocity, distribution and revelance. And growth is driven by execution, strong velocity, expanded distribution and consumer alignment and demand.

This is simply put, and more importantly, Celsius builds brands. We are not a single product company. We're not just a beverage company. We're a multiple brand platform serving distinct consumers, occasions and energy needs across all 3 brands: Celsius, Alani and Rockstar Energy, each brand serving distinct consumers, mindsets and usage occasions. This gives us not only scale and credibility amongst modern energy. We're showing up authentically across fitness, wellness, fashion, lifestyle, music and sports. Our brands are culturally grounded, occasionally led and designed to recruit different consumers in energy in a way that feels intentional and authentic.

That 20% share, I just discussed is a result of how we build brands that stay culturally relevant. And what I want to spend some time on is the platform that's now behind our powerful brands, the platform that turns insights into execution and makes the kind of relevance repeatable. Eric will speak shortly. We'll touch base on how -- where our operating model has evolved significantly as a result of growing into a portfolio of brands. But I want to discuss how we're operating all of our capabilities in a connected way. It's where insights, brand building and execution work together to drive repeatable growth. We have a tremendous consumer insights team, investment in their insights, that's driving us a clear understanding of how consumers fit into the daily life and where real growth should come from.

Kyle will go deeper here, where we have truly unparalleled insights into our consumers that sets the direction for the entire system. These are insights fueled by innovation and marketing, shaping everything from flavor innovation, to formats, usage occasions and brand storytelling. That work can then show up at shelf through sales, retail execution, where strategies and distribution and displays, and availability win in the moments that matter. Strong execution enables operating excellence, running friction from demand creation, translating momentum into reliable, repeatable revenues.

Revenue performance and learnings from these feedback continue to funnel back into the flywheel. Eric will go deeper in our processes, but revenue management is a key opportunity and a function we've been building upon. We're enabling faster launches, stronger execution and improving returns over time. You can see this outcome with our most recent launch with Alani Nu's Cherry Bomb, which sold out in a week. And in our Fizz Free line across our Celsius portfolio, opening new occasions and expanding the energy category. You'll hear more about this from Eric, but at a high level, our partnership with PepsiCo has evolved into a true growth engine for the business, combining Celsius brand leadership and portfolio strategy with PepsiCo's unmatched scale and execution. As PepsiCo's energy captain, Celsius leads brand portfolio strategy, one of the fastest-growing segments in beverage, where PepsiCo, one of the world's greatest beverage companies and distributors drives world-class execution. You'll see the impact of this clearly in the numbers.

Since expanding the partnership and achieving a 99.5% ACV through the PepsiCo DSD network, this is a level of reach and consistency that very few brands can achieve. Together, the partnership allows us to reach more people and more places and more often and do it in a way that supports long-term growth.

The portfolio-led approach allows us to better serve both retailers and consumers. We're expanding availability and across key partners, Walmart, Target, 7-Eleven, Circle K, Dollar General. We have a whole account team we're leveraging. Specifically in channels, we invested heavily in this, and it's enabling our brands to show up consistently where energy is purchased every day. What changed is not just where we're present, it's how we show up, an expanded assortment that gives retailers more choice and consumers more relevant options from single-serve to multipacks, to dedicated coolers that anchor the energy set. The broad assortment and strong execution is delivering strong retail outcomes, where increased shelf space is more than 25%, increased cooler placements and velocity is up 6%. These are key metrics that matter most at shelf.

This is the advantage of operating as a portfolio, and we can solve at different retail formats, shopper missions, including availability, consistency and performance while creating a better experience for both the retailer and the consumer and maximizing value creation. Energy is becoming part of a daily routine, driving structural change in the category, from pantry purchase behaviors to single serves, to pack mix and expanded shelf spaces. Retailers are responding by allocating more shelf space to energy, which now represents 20% share of LRB sales, up roughly 14% just 5 years ago, reinforcing modern energy as a function, as the future of the category.

We are focused on expanding cooler placements, shelf placements and channels in energy and being most important in store. Distribution expansion is a key growth driver with clear signs of momentum, including acceleration of gains with Alani Nu and convenience, and continued overperformance with Celsius. The convenience channel represents a particular significant opportunity, accounting for approximately 60% of energy drink sales and remains one of our biggest white space opportunities with our portfolio. We're also seeing a significant future opportunity to expand our retail footprint by unlocking new occasions and formats across club, large format and small, driving incremental shelf space as energy continues to move beyond that single-serve occasion.

Coming out of the resets, we anticipate Celsius to gain distribution gains and space gains within our retail footprint by over 17% and shelf space allocations. And Alani Nu, we anticipate over 100% increase with a significant portion of this space coming from convenience.

Let me reinforce a core message. Our strategy is working, and it's translating into real financial strength. You've heard how the energy category is structurally evolving and importantly, evolving in ways that directly benefit our portfolio. More people are entering the category with expanded appeal across new consumers, including women which continue to broaden the base. We're showing up in more places as distribution expands across retail and convenience and food service, increasing accessibility, relevance across more occasions and channels. And consumers are expanding and drinking more often with higher frequencies and expanded usage occasion driving repeat behavior.

Put it simple, it's more people, more places, more often. We haven't changed the strategy, but what we changed is how we're operating against it. That execution is being supported by strong financial fundamentals, cash generation giving us the flexibility to invest, expand and stay focused on long-term value creation. The result is a platform built for scale, one that's capturing category tailwinds by delivering consistent performance.

And to fully realize this opportunity, you need the right leadership team in place. We've built a leadership team to match the opportunity and further execute against our growth. We have added new leaders with specific capabilities to scale the business. This is the team that has built brands and driven growth inside some of the most competitive environments in CPG. You'll hear directly from Eric Hanson shortly, who brings deep operational discipline and executional rigor as the President and Chief Operating Officer.

Most recently brought on Rishi Daing as Chief Marketing Officer; and Garrett Quigley as President of International, rounding out our leadership bench that strengthens both our brand and our global growth ambitions, bringing perspective and experience that meaningfully expand on how we think about scale, innovation and international opportunities. At the same time, we've elevated proven internal leaders into expanded roles like Kyle Watson, our Chief Brand Officer, who you'll hear from next. These leadership appointments ensure continuity, accountability, speed as we grow. Leaders who know this business and are empowered to take on the business for the next phase of growth.

The bottom line is, this is a leadership team not built for just for where we are today, but built for where we're going next. We have the strength, we have the capabilities, we have the people to execute.

With that, I'll turn it over to Kyle Watson, who will walk you through our brands and consumers we serve in more depth.

Thanks, John. Good afternoon, everyone. It's great to be back speaking to you all again. John spent time walking through how the energy category and consumer have evolved. What I want to focus on is what that shift means for Celsius Holdings and our total energy portfolio and how we're performing because of it.

As energy becomes part of daily routines, growth is no longer about trial. It's about repeat behavior and habit formation. For Celsius, this shift is translating directly into loyalty and frequency. Our consumers are returning more often, expanding usage occasions and building Celsius into everyday routine, you can see this clearly in the data. 52% of our repeat consumers are purchasing 5x or more, which is over 7 points higher year-over-year. Importantly, this is happening despite energy being a high switching category, which tells us the product experience is consistently delivering.

When we look at the data, we see a strong loyalty moat, high repeat purchase, increased purchase frequency and growing engagement across multiple dayparts. That loyalty is what gives us confidence in the durability of our growth as the category continues to expand. What's especially compelling is that this loyalty foundation allows us to bring new consumers into the category, and that's where we're seeing the next phase of growth.

One of the clearest signals of energy's evolution is who is entering the category. Growth is increasingly driven by consumers who, again, historically are not core energy drink users. And because Celsius performed so well on repeat and habit, we are able to bring new consumers into the category without sacrificing our core. Female consumers are a key growth driver, integrating energy into planned daily routines rather than impulse only occasions. Hispanic consumers are also fueling incremental growth with strong engagement driven by flavor, functionality and lifestyle alignment. Across these new entrants, expectations are consistent, energy without trade-off, Zero Sugar, functional benefits and modern ingredients. Our portfolio is uniquely built to meet these needs.

With Alani Nu and Celsius resonating strongly with new and female consumers while we continue to maintain a strong foundation with male users. This allows us to expand the category by bringing in new consumers and without giving up the core demand that has historically driven the energy category. What's important about the view entrants is that they come with higher expectations around flavor, functionality and how energy fits into their lives. Meeting those expectations consistently requires more than a one-off innovation. It requires a system.

As new consumers enter the category, expectations around taste, format and function are higher than they have ever been before. They are looking for flavor, for energy, for better-for-you ingredients and functional benefits. Meeting those expectations consistently requires more than just one-off launches. That's why we don't think about innovation as individual launches or individual products. We build innovation as a system. It's holistic, intentional and deeply connected across the business. Nothing lives in a silo.

Importantly, this isn't new for us. We've been operating this way since the beginning, ahead of trends, not reacting to them. Innovation sustains demand when it reinforces brand purpose, and that's how we've always approached building the category. We have a unique advantage in how closely we're connected to our consumers, their routines, their motivations and what they want from both the product and the experience.

A great example of this is our Celsius Vibe line. We recognized early that consumers weren't just looking for functional benefits. They want more. They want exciting thematic packaging, something social, something that they want to share. Vibe was directly built from that insight and addressing a desire for more expression in energy from both the beverage and the brand. And what's most important about that is it grew the brand. It didn't cannibalize it. That's when innovation expands demand. This same system guides how we think about flavors, formats and occasions. New offerings, deepen long-term engagement when they're done with discipline. It's about quality, not quantity. And this is reinforced through our energy captaincy, which allows us to execute innovation more effectively at shelf and across channels. You can see this playing out in areas like our Fizz Free concept. Hopefully, you guys got to try it here today. We have a ton of amazing refreshing flavors.

It's still early, but they're gaining excitement as consumers look for different formats throughout the day. Flavor led innovation continues to resonate strongly, unlocking incremental occasions rather than short-term spikes. Across the portfolio, innovation is built as a system. It doesn't live within a single brand. It shows up across the entire portfolio. It reinforces demand, strengthens loyalty and sustains growth over time. Let me bring this to life in a short video.

[Presentation]

And that's what makes our brand so exciting. So let's now talk about how our growth today is being accelerated through modern energy portfolio, not a single brand. Celsius, Alani Nu and Rockstar each play a distinct intentional role serving different occasions and consumers. Together, the portfolio reaches -- expand reach and increases frequency by meeting more needs across more occasions. This structure allows us to grow with greater durability and balance rather than relying on any one brand or one consumer. That clarity across the portfolio strengthens execution and reinforces long-term sustainable growth.

Now let's talk about where this portfolio creates the most opportunity. The energy category is expanding as consumption becomes part of daily lifestyle, not just impulse or situational use. Growth is increasingly driven by new consumers. And like I said before, many of these consumers were not in the energy category before. Usage is spreading across more occasions and dayparts, increasing total consumption and moving beyond a single channel or trip type. Modern energy is unlocking new entry points by aligning with evolving expectations around wellness, functionality and lifestyle fit. Our portfolio allows us to participate across multiple consumer needs and moments. Celsius has broad appeal across male and female consumers. This is so unique in the energy category. Alani Nu is a clear winner with female consumers. Rockstar resonates with core male and culture-driven energy users. That opportunity only works if each brand has clear intentional roles.

So let me briefly walk you through how each brand shows up. I'll start with Celsius. Celsius is the category to finding modern energy brand and the anchor of the portfolio. It has broad appeal across male and female consumers rooted in Zero Sugar, functional benefits and wellness. Celsius power's performance in modern energy were functions fitness and lever all come together. We're a leading Zero Sugar energy brand with gender neutral approach and deep strength across Gen Z and millennials. Function without compromise is core. Celsius is built around fitness and daily routine, driving higher repeat and frequency.

And from a functional standpoint, we deliver sustained energy and metabolism support with no trade-offs and no shortcut. Performance is in our DNA, built for workouts, daily movement and real active lifestyles. And flavor innovation matter, fruit forward, refreshing flavors that make Celsius a repeat choice, not just a functional one. This brand establishes credibility, scale and habitual consumption for the portfolio.

This brings me to Alani Nu. Alani Nu has built a strong authentic connection with female consumers rooted in both lifestyle relevance and functional benefits. It's a lifestyle forward brand with a clear point of view, which drives emotional connection as well as repeat purchase. Purchasing is fueled by brand equity, not reliance on limited time offering or short-term promotions. As a result, Alani Nu is expanding the category by bringing in new consumers and creating new usage occasions. And importantly, portfolio growth is not just about recruiting new consumers. It's about maintaining relevance across traditional energy moments.

And that brings me to Rockstar. Rockstar is a brand for the next-gen energy consumer with strong awareness and credibility in core energy occasions. Following our recent acquisition of Rockstar, we see a clear opportunity to modernize and rebuild the brand for today's energy consumer. Rockstar serves a distinct consumer and set of usage occasions, expanding the portfolio and allowing us to reach a broader set of energy users. And we're taking a disciplined and phased approach, focused first on stabilizing performance, improving execution and sharpening our positioning. As the brand is rebuilt thoughtfully, Rockstar adds incremental reach and long-term growth optionality to the portfolio.

When you step back and look at our 3 brands together, what's important is that they are not operating independently. Their distinct roles work because they're activated through a coordinated system. At Celsius, marketing operates as an extension of our innovation system, not as a series of one-off efforts. The same discipline that guides how we innovate, insight-led portfolio aware and repeatable guides how we go to market. Awareness drives trial, trial builds loyalty, and that loyalty reinforces the entire portfolio, not just a single brand.

While each brand targets different consumers and occasions, success in one helps grow the total category and creates more opportunity for the others because innovation and marketing are connected through the same system, demand can compound over time rather than resetting with every launch. That's how we sustain growth, improve efficiency and build long-term brand equity across the portfolio.

When you step back from the individual brands, innovation and systems, what's important is how this comes together. These are the core reasons that define why we're built to win in modern energy. Energy is becoming part of daily routines, and we're seeing accelerated adoption among women while maintaining a strong male consumer base. That shift plays directly into our strength because Celsius deeply understands our consumer, how they live, how they engage and what drives repeat behavior and long-term loyalty.

Importantly, this portfolio is intentionally designed with distinct brands and each brand playing a clear role. Celsius and Alani Nu leading modern energy. Rockstar serving an incremental audience. We built a disrupting powerhouse that's reshaping how energy is consumed and expanding the addressable market. Together, this structure allows us to grow with greater durability and balance. Of course, having the right brands and strategy only matters if you can execute consistently at scale, and that's where our partnership operating model and commercial strategy come to life.

And with that, I'll hand it over to Eric, who will walk through how strategy is being executed across channels and on shelf.

Great. Thank you, Kyle, and good afternoon, everyone. I guess I got through the slide. It's great to be here. And I just want to say before I jump in, I've joined Celsius about a year ago after nearly 30 years at PepsiCo, working with some of the best brands and operating teams in the business. And what drew me to Celsius was seeing a brand and a team with real momentum, a strong underlying business and a leadership role in a category that's rapidly growing. We have powerful brands. We have the right strategy, and we've got a team that's hungry to win. And that's why I'm so excited to be here talking with you guys today, and that's why I'm excited to be part of this team and where we're going.

As John shared, we have a proven growth strategy, and we'll continue to execute. We remain committed to reaching more people, more places, more often. We continue to recruit new consumers into the category, expand distribution and availability across our portfolio and increase the frequency in which consumers choose our brands by expanding the relevant occasions we offer. It must change, however, in the way we execute that strategy. Our business has evolved. So we're now executing in a more disciplined and deliberate way. The same growth engine, but with a more disciplined approach, scaling recruitment, accelerated availability and ensuring that we expand occasions across the portfolio.

So what does that mean? It means we're focused on building our organization capable of delivering the next phase of growth. We're doing that in 3 ways. First, our commercial strategy is now fully integrated across brands, channels, price pack architecture and routes to market, deliberately allocating resources to the highest return opportunities to accelerate profitable growth. Second, we're elevating our execution by building stronger capabilities at the buyer's desk, sharpening our selling in the field and leveraging our strategic partnerships, enhanced by our PepsiCo captaincy. And third, we're building our organization for a world that looks different from today. We're leveling our technology and data. We're bringing in experienced leadership. We're putting the right structure in place to scale the business for the long term. The structure and process will allow us to stay hungry and agile while also ensuring we're strategic and intentional.

This is how we'll build a sustainable growth engine while operating in an incredibly dynamic and ever-changing category. Over the past year, our business has scaled meaningfully with increasing complexity. Our strategy is proven, and we've elevated the way we operate to match that scale. With just one brand, our growth was driven primarily through volume and distribution, and that served us well.

Today with Celsius, Alani Nu and Rockstar, we are operating as a true modern energy portfolio, which gives us more levers to drive growth. That means planning and prioritization at the portfolio level while still executing in very brand and channel specific ways. It allows us to move beyond volume alone using price, mix and revenue growth management to improve the quality and sustainability of growth. The result is a business that can scale more efficiently with greater operating leverage and a system built to support long-term growth.

When we talk about moving from big brands to mega brands, we're really talking about the next chapter of value creation for the company. Big brands win moments, mega brands own occasions that show up across more parts of consumers' lives and more places more often. The foundation is big brands, brands with strong consumer resonance that drive real category momentum. That's where it starts, authentic connection and relevance.

From there, we build scale brands, expanding occasions, broadening distribution and leveraging the portfolio to unlock more doors and more consumption moments. This is where the operational rigor begins to amplify and strengthen the brand. Our ambition is to create mega brands, brands with multi-occasion relevance, powered by system-enabled execution, delivering strong profitable growth at scale. They show up across more parts of the consumers' lives with greater regularity because the operating model is built to scale relevance, expand reach, deepen distribution and reinforce the brand meaning. That's the future we're building toward, not just bigger brands, but enduring category-defining mega brands.

Our commercial priorities reflect where we're sharpening our focus as the business scales, concentrating resources where they drive the greatest impact. It starts with authentic brand-first marketing. We build brands that consumers actively seek out, great tasting, zero sugar, functional beverages that connect with them in their daily lives. We'll be adaptive with insights-led innovation. Data and consumer learning are guiding the pipeline, including high-impact LTOs like Spritz Vibe and Lime Slush that drive incrementality and keep the portfolio fresh.

We're leading with our highest performing SKUs while expanding assortment and space across all of our brands. We're leveraging the power of the portfolio to unlock more visibility, more availability and more points of distribution, prioritizing items that deliver velocity, productivity and strong retailer economics. Execution in retail remains critical, the right assortment, the right price, the right placement supported by disciplined merchandising and revenue growth strategies. And finally, we're leveraging our scale to expand into nontraditional channels by hospitality, food service and other away-from-home occasions. All with the goal of extending our reach beyond the core energy aisle. This is a focused execution-driven road map designed to deliver higher quality growth 2026 and beyond.

Our expanded brand portfolio also has opened up more opportunities for us with revenue growth management. Having spent many years leading RGM at PepsiCo. I know firsthand, the power that this can bring to Celsius to help deliver strong, sustainable top and bottom line growth. With a well-defined and aligned commercial strategy, RGM becomes a strong tool and when executed in a disciplined way. Our starting point is ensuring we deliver relevant consumer value through disciplined channel-based price pack architecture across our brands. Having multiple brands allows us greater flexibility and ability to manage architecture and promotional calendars more strategically.

It also provides us with more levers to manage mix across packs, brands and channels.

We're strengthening the ways in which we are able to analyze promotional effectiveness and trade efficiency, linking promotion and trade spend to execution that drives better return and sustainable growth. The investments that we're making in revenue growth management with data, tools and talent will have a long-lasting foundational impact on our ability to scale growth in a sustainable and profitable way.

John talked a little bit earlier about the PepsiCo partnership and the importance of our captaincy here. The real unlock for us is around focus. As PepsiCo's energy partner, their organization is now wholly aligned and focused on driving energy category growth through our portfolio. This partnership secures organizational focus and investment behind our brands within the modern energy category, one of the fastest-growing segments in the liquid refreshment beverage space. Our advantage is prioritization and urgency. The captaincy helps ensure our brands are executed in the right windows with the right focus across the entire system.

Aligned planning drives better outcomes through tighter commercial coordination, clear prioritization and stronger innovation for both organizations. Our execution improves because accountability is shared. PepsiCo's scale and capabilities, combined with our strategy and field sales support, translate into more consistent on-shelf execution. That is tangible value creation for us. Our partnership now delivers precision consistency and repeatability across retailers, not just presence but performance at scale.

So as we think about how we've aligned our commercial strategy, it starts with clear roles in a single operating plan. Celsius creates a strategy and provides PepsiCo with category and consumer insights, brand priorities and executable playbooks that help define how our brands win. We then fully align on joint commercial and executional strategy, and the partnership allows us to leverage PepsiCo's scale while preserving a distinct role of each brand within our portfolio. By integrating the entire portfolio into their DSD system, we gain faster, broader access to shelf and cold space as well as support from best-in-class execution they deliver. That alignment helps stabilize and scale brands like Rockstar, while also accelerating availability and sell-through for Celsius and Alani Nu.

Just as important, we are executing against a shared innovation and LTO playbook, supported by disciplined targets, technology and performance tracking. The advantage is speed, consistency and reach. The partnership is designed to deliver stronger in-market performance across the entire portfolio. It's clear that our business has grown significantly over the last few years and winning at the shelf has never been more important. And in this environment, precision and speed and intelligence win. That's why we've invested in a smarter system to power our CRM and leverage our front line to help drive it every day in partnership.

Let me show you a video of how this comes to life.

[Presentation]

So that's just one example of how we're investing in next-generation technology to build a more connected data-driven execution engine. In addition to the technology, as our portfolio has expanded, we've been very intentional about realigning the organization to match the needs of a multi-brand, multichannel and global business. That means ensuring the right capabilities in the right places, with field sales, shopper, category, commercial planning, all working in a more coordinated way. We've also strengthened the organization by bringing in talent with deep expertise in scaling brands, managing complexity and executing at the shelf. The result is broader coverage, faster decision-making and an organization designed to deliver consistent high-quality execution across the portfolio.

Finally, I'll talk briefly about how we view the opportunity internationally. We see international as a long-term growth opportunity. Currently, we're present in about 10 markets with a dedicated and growing international sales and marketing team, including our new Head of International, Garrett Quigley. Global consumer behavior is consistent with U.S. trends in fitness and wellness as consumers worldwide see better-for-you options that taste great and fit their lifestyles. Usage across the category is expanding around the globe, which means big runway for us in the future. While international remains a smaller portion of our business today, we see significant opportunity to deepen our presence by scaling our brands and focused distribution and execution. Our international approach is deliberate, select markets, intentional entry with resource launch plans that build our brands the right way. We will continue to be thoughtful and targeted in our approach to expansion outside the U.S.

Before I pass it to John to close it out, let me just land with a few key takeaways. One, we have a proven strategy to reach more people, more places more often. But we know we need to continue to scale in the way in which we execute that. Two, we have a multi-brand portfolio that provides new opportunities to sharpen our commercial strategy and leverage revenue management to accelerate growth in a sustainable and profitable way. Third, we're raising the bar with our PepsiCo partnership, a true differentiator for us and a partnership that is stronger and more aligned than ever before. The best of our respective capabilities is being leveraged to drive better execution day in and day out. Fourth, we're managing the business as a portfolio. And that means better holistic decisions, more disciplined resource allocation and investments aligned to the highest long-term return.

And finally, we're building an organization for the future. We've strengthened leadership, realigned how work gets done, put the right foundations in place to scale domestically and expand internationally in a disciplined way. This is an exciting growth story with a lot of runway ahead, and I hope you heard that loud and clear today.

And with that, I'll pass it back to John.

Thank you, Eric. And thank you, Kyle. As we close, I want to come back to where we started. Why Celsius Holdings is positioned to win? Today, you've heard directly from me as well as Eric and Kyle. And together, we've shown you how our energy strategy is coming to life across the business. You've seen how our approach shows up in retail and on the shelf with stronger execution, improved placements and greater consistency.

You've also seen how we're building brands and engaging consumers, driving relevance across more people, more occasions and more frequencies. And importantly, you've seen how this all is being supported by scaled connectivities, operating platforms and a disciplined financial model. We're operating in a large, structurally growing category with functional and better-for-use segments expanding to a broader market. We're capitalized on the evolving consumer behaviors as energy becomes more of a daily lifestyle and a daily routine. We have a leading total energy drink portfolio, 3 category-defining brands with clear roles, strong loyalty and everyday relevance. We're executing and evolving our operating models, strengthening by our PepsiCo partnership and built to support the scale and growth we see ahead.

And we're doing so from a position of financial strength. With strong cash generation and an operating leverage to fuel our continued investment and long-term value creation. This is the company built for scale, built to perform and built to win, and we could not be more excited about what's in store ahead.

With that, I'll turn it over to Andrew. Thank you, everyone.

We'll take questions over in the breakout. So we'll head over there now. Join me one more time in thanking Celsius for their generous sponsorship at the conference. Just some very quick housekeeping before we go. This is the last meeting of the day. The doors will be locked at 6, so make sure you take everything with you. And we'll be back here tomorrow morning at 8 a.m.

I think we're ready to get started. Good afternoon, everyone. I'm Eric Serotta from Morgan Stanley's Beverages Tobacco and Household Products team, and I'm very pleased to welcome Celsius back to our Global Consumer and Retail Conference.

Before we begin, please see the Morgan Stanley website at www.morganstanley.com/researchdisclosures for important disclosures. And if you have any questions, you could reach out to your Morgan Stanley sales rep.

Celsius is the #3 player in the U.S. energy drink category with a market share of more than 20% following the acquisition of Alani Nu earlier this year and the recent acquisition of Rockstar. And Celsius has been a leading driver of category growth.

So joining us today, we have Chief of Staff, Toby David; and CFO, Jarrod Langhans. Toby, Jarrod, thanks for joining us and for the product samples to keep us energized. All the cold here helps.

So Jarrod, to start out, I don't want to dwell too much on the past, but touching upon the third quarter, stock down sharply since then, obviously, very high and lofty expectations heading in. What happened in the third quarter in terms of the Celsius shipments versus cycling last year's inventory reductions? And what do you think the market has kind of misunderstood and anything you want to highlight here?

Yes, sure. And thanks for having us, Eric. Pleasure to be here. In terms of kind of Q3, it was a phenomenal quarter for us on the top line from a gross margin perspective, EBITDA margin perspective. There was a little bit of a disconnect in terms of brand Celsius as to the net sales that occurred. We were in line with kind of what the sell side was showing, the buy side had anticipated a little bit more.

From a volume perspective, if you go back to Q3 of 2023 and then work forward, there was some optimization in Q3 of 2024. And then really, the volumes more or less have come back over the first 9 months of the year. If you look at Q3 of 2023 versus Q3 of 2025, it's probably a 10% to 11% increase in volume. Where the real disconnect was, was the promotional activity. So as we looked at Celsius -- brand Celsius under pressure in Q1, we started to see that brand come back in Q2. Really June was where we started to really see that growth come back.

As we went into Q3, we really put additional investments behind it from a promotional perspective. And so as you looked at those cases coming back because of the promotional activity we did to really supercharge that brand, they came back at a slightly lower case rate, so net sales per case. And as they came back, that caused a disconnect. That was a primary disconnect within the numbers. There's some other nuances like timing of some load-ins with Amazon Prime and things like that, but that was really the primary issue.

Great. And then you pointed out on the third quarter call, fourth quarter would be noisy. I know kind of regretting that word, as we said earlier, but you have the Alani move into the Pepsi system 3 days ago, the Rockstar integration into Celsius and then potential year-end inventory management by Pepsi. So realizing, again, we're only 3 days in, but do you have any better visibility today in terms of the fourth quarter top line and margin?

Yes. I'd say for starters, getting 80% of the Alani DSD system in the U.S. into Pepsi as of 12/1 is spot on. We were hoping for that plus or minus. I do actually -- a couple of hours ago, I got a note saying it was actually -- as we got through this week, we were able to bring some more on. So it's probably high 80s as opposed to just kind of in excess of 80%. So we're really on track and doing a very good job. And what that means is the percentage of DSD that existed within the Alani system 80-plus percent or high 80s has now moved into the Pepsi system and Pepsi is delivering to that high 80% from a DSD perspective. We'll still see some more. You never get the full 100, but we're on track to get even more beyond that high 80s number. So really excited about that.

In terms of some of the things we talked about in Q4, there's going to be some timing and sequencing of different things, whether it be the Rockstar integration, where we're moving them into our orbit model. There's a piece of Rockstar that's a finished goods that people are used to that goes on the top line. There's a brand transition service piece that goes into other income. So the timing and sequencing of getting that all into our orbit and all up to the top line, we're in process with that.

From an Alani perspective, we're having kind of a more methodical step approach with the Celsius business. When we went into Pepsi, it was a time period that they were pulling one brand out and dropping our brand in. So there was a little bit of quicker movement because they had to fill all those slots. With Alani, it's going to be more incremental. In Q1, we'll see kind of what we'll call Tier 3 and Tier 4 accounts, which are the Pepsi-controlled accounts. So your thousands and thousands of independent convenience, which is a part of the captaincy we own those planograms. There's the food service at colleges and universities. Those will really ramp in Q1.

Across Q1 and Q2, you'll see the Tier 1 and Tier 2 accounts. So think of your Walmart and your Targets. Those really will reset according to their plans. So from an Alani perspective, it's not really just a big bang. It's more of a step approach, more of a methodical approach. And with the whole kind of portfolio setup, it makes really more sense. So it really is more intentional in working with Pepsi to make sure that we get everything set up the way we want to set up with the captaincy. So that caused some nuances. And then there's your typical cash management, nothing material or specific to call out, but that's just something additional that you'll see from a timing and sequencing perspective when you're looking at brands Celsius and Rockstar that's already sitting in the distribution centers of Pepsi.

And that just -- I know there's -- given the history here, there's fears, $100 million plus in third quarter '24. Just to frame it, a day is $5 million or so. So a couple of days. I'm not going to...

At the end of the year, if they shut it down for a week, there could be something like that. We're not talking about anything significant, and we would look for that to be more of a timing type issue as opposed to some kind of new program.

Okay. And do you have any communications or like visibility that, that's happening? Or you're just sort of leaving some cushion and preparing us that it's [indiscernible].

I mean, we're looking at a $2-plus billion business. A couple of days here or there is -- I don't think there's a need to really draw a line in the sand over something like that. But I think, like I said, we're set up. We're in the middle of multiple integrations. We're set up for success. The implementations are going well. Alani's implementation and integration will be completed by Q1. Rockstar will be done in the first half of the year. So we're set up for a fantastic 2025. And the typical kind of cash management you see at the end of the year that you expect across CPG, nothing material beyond that to call out.

Great. So we could move on from those questions. So Toby, turning to the consumer, past few days, we've been hearing from really across the gamut of CPG companies about weak volume growth, weak demand growth. Energy seems to be the standout here from a category. You guys are a standout from a brand standpoint. Why do you think the category has been more resilient? And how do you plan to maintain the Celsius and Alani momentum, especially if the consumer environment weakens from here?

Yes, absolutely. I think you take a look at what occurred last year with the slowdown in the category, and we said at the time, all of CPG was struggling. And even at that moment, when energy was flat, we still felt like it was still outperforming the rest of our peers. You saw kind of the resiliency of the category this year with this substantial bounce back. Alani obviously has been a big driver of the growth. Monster has had an incredible year. Red Bull has had a solid year, and you've seen the turnaround of Celsius, where we were at the low single digits earlier in the year, negative. Now we're into the double digits and exceeding category in many of the most recent weeks, which is exactly where we wanted to be at this moment in time.

You look at the -- what consumers are looking for right now. It's being driven by better-for-you, healthier, sugar-free, females are entering the category. I feel really good about the positioning of Celsius Holdings with -- between Celsius and Alani Nu that we're right there in that sweet spot of what folks are looking for.

Great. So Jarrod, turning to pricing. Monster took another price increase this year or last month, much more targeted by channel, SKU, much more leaning into RGM. Red Bull's pricing, if you look at scanners, still moving up largely, I think, RGM, they took pricing a year ago. You've historically targeted kind of being between Red Bull and Monster on a price per ounce basis. So how are you thinking about the opportunity for Celsius to take pricing from here, whether it's lift, promo optimization, RGM?

Yes. I think we'd agree with Monster, Red Bull and that there is price elasticity there, and there is opportunity. With that said, I think our focus really is going to be a year ago, we were just brand Celsius. Today, we've got 3 brands in our portfolio. And so there's a real opportunity to look at price pack promotional activity across the portfolio, look at really revenue management and revenue growth management.

We are building out a revenue growth team as we moved from a single brand to a multi-brand portfolio. We brought Eric on in March of '25. And so he's got a number of years in really managing Pepsi's portfolio from an RGM perspective. So we're really building that team out to make sure that we're getting our ROI and that we're being really efficient and effective with that. So that will help from a pricing perspective. We do see pricing as an opportunity for us as well. We'll see how it goes with Monster, but that's definitely something that we see as something that we can add to the kind of the tool belt, but nothing specific to call out on pricing other than a big focus for us in '26 and beyond is the RGM.

Great. And then as a segue into margins, Jarrod, can you talk a bit about sort of the puts and takes for gross margins and OpEx for 2026? We could leave the fourth quarter and even the first quarter out of the picture for a little bit because I know there's going to be noise. You benefited from some forward purchases on aluminum last year, both the metal and the midwest premium have continued to rise. On other hand, you've got the Alani synergies coming in. You also have Rockstar coming in at low margin. Maybe more broadly, can you talk about the confidence of getting first back to the low 50s and then to the mid-50s on the gross margin?

Yes, absolutely. I'll start with Q4 anyway. But Q4, you'll probably see kind of, as we talked about, the most pressure because there's a number of things going on with the integration, with onetime charges. As we move into the Pepsi distribution system, you'll have some returns and some scrap and things like that. There is some tariff activity out there, too.

Rockstar is currently a lower margin business. As we move into Q1, we'll really look to get Alani fully into our orbit structure. And then if you go back to May and you look at the modeling call, we're right on track for that from the implementation and the integration to have them fully baked in. So as we move into kind of April, you'll kind of have the fully baked in synergies every month going forward.

As it looks at Rockstar, we'll have most of that in really by Q1. Canada is kind of lagging and that's intentional. So we want to get the U.S. done first and then Canada kind of a month or two behind. So that's kind of why we call out the first half. So once we get through the first half, we'll really have from a COGS, raw material freight perspective, all that stuff implemented. So as we look at the back half of the year, you'll see our margins get back to kind of that low 50s.

We also have big beverage second line coming in place that will be online on track for Q3. So we'll get that fully baked in, in Q4. So then you'll be able to see kind of margins continue to expand into Q4. And then as we go into 2027, assuming no other kind of specific macro factors exist out there, the business is set up to continue to expand margins into 2027. So think of it as if you were kind of rolling at each step of the way, Q4 to Q1 to Q2, each step getting better and better, you get to Q3 kind of getting back to that profile, you talked about Q4 getting even better and then going into 2027 with a full portfolio that's really locked and loaded.

Got it. So shifting gears, I want to talk about the individual brands. maybe this one is for Toby. Looking at brand Celsius, a lot of people, myself included, were skeptical last year and even early this year that you'd be able to return the brand to growth. And you've been growing since June, you're up low double digits in scanner recently. I think you said in convenience, you're up closer to 20%. How do you keep that momentum going in 2026 and then longer term?

Yes. We heard you every two weeks. I appreciate your enthusiasm. But yes, I mean, listen, we really leaned in earlier this year into this whole LIVE. FIT. GO. campaign. And what that campaign was all about wasn't changing the identity of who Celsius was. It was just speaking and messaging in a way that could broaden out the message and try to capture new consumers that we weren't necessarily tapping into previously. So we really feel like that campaign has been a massive success for us, and that's what's really brought us back to this [ right ] to category growth or exceeding category growth type of figure.

So we're going to continue to lean into that as we move forward. Every month that we continue with this broad media campaign, we're getting more efficient. We're figuring out which elements of the media campaign are more effective, delivering a better ROI. So I would anticipate that along with some other marketing tactics to really continue to build around the healthy halo of Celsius. On top of that, the captaincy program, which is really the key element of the transaction with Pepsi a few months ago, really are going to continue to lean into that. That's going to provide a big opportunity not only for Alani, but for Celsius as well. Celsius already has a pretty massive footprint around the country. But as we look at controlling that space that Pepsi used to control and making sure that maybe Rockstar isn't necessarily over-indexed, we're going to make sure we put the fast cars on the track, the highest performing SKUs and a lot of circumstances that's going to be more Celsius on the shelf. So really excited about what 2026 has in store.

Great. And then you used to speak in terms of brand Celsius in terms of the share in your most developed markets, whether it's South Florida, New York City, your share on Amazon as sort of indicators as a runway for the brand or blue sky scenario as to where it could go. So where are your market shares today in some of these highly developed markets? And what does your growth look like in Florida, New York versus the less mature markets?

Yes. I think it's different across the board. What I'd say is in South Florida, we continue to have a low 20 to mid-20s type of market share, high teens, close to 20% in New York City. We have other major markets around the country that in that 15% to 20% range. Amazon, you cited both Monster and us performed very, very well there. We've rotated over the past between 1 and 2. I think we're #2 energy brand on Amazon right now.

We have a number of other markets around the country where we're under-indexed at the moment. So we call it like upper single digits. I think across the board, there's room for improvement, and nothing has changed our perspective that some of these, call it, blue sky markets, there's no reason why we can't achieve with Celsius that mid-teens, upper teens type of figure. It's just going to maybe take a little bit longer than maybe we had anticipated 1.5 years ago. But if we can continue to grow at, let's call it, double-digit type of rate, you've got Alani Nu, which is growing at an exceptional rate right now. We've got a heck of a portfolio.

The plan is to stabilize Rockstar and then see what we can do. And as you mentioned at the outset, we're sitting at a 20% market share. And I think if you had spoken to folks 1.5 years ago and say that Celsius Holdings is sitting here at 20%, maybe not quite the way that people thought we would get here, but it's still a pretty impressive thing because you've got this duopoly at top with Red Bull and Monster have never been challenged before. Now you've got this third horse in the race that has an opportunity to create some more noise.

Yes. And then you did your first LTO for brand Celsius, Spritz Vibe. I think we still have some outside back in the fall. You said upfront, this is more kind of dipping your toe in the water. I don't expect this to be the next Witch's Brew, but it's kind of a test and learn. So today, what were the learnings from Spritz Vibe? What are the plans for brand Celsius LTOs in '26 and broader innovation for [ 2027 ]?

Yes. You kind of stole some of my talking points there with dipping the toe in the water. So I'll have to figure out what to say here. Listen, at the end of the day, we've seen quite a bit of success with Alani. Some of our peers out there, Monster and Red Bull have had great success with LTOs. This is something we had talked about internally for a while. We finally were able to achieve that with the Spritz Vibe. It was a high-velocity item for us. It was actually our top velocity item. We took a lot of key learnings from it.

In particular, we had never won an LTO before, in particular with Pepsi. So we wanted to understand what are the puts and takes? Where are the pros and cons, strengths and weaknesses so that when we integrate Alani into Pepsi and when we run our first LTO with Alani and with Pepsi, we want to make sure it's flawless. And I certainly think that given the learnings that we took, not that there was anything wrong that went wrong, but you learned quite a bit when you actually put it to action.

So given what we saw, given we just brought on a new Board member from Pepsi, Michael, who reports directly into [ Ramon ], I remember talking with him at our last Board meeting and explain, hey, listen, we need to make sure these LTOs are flawless. And when you have somebody right there at the top of the food chain that can understand what the dynamics are within the Pepsi system, it can help cut through the noise and make sure that you have these flawless integrations, feel really good about what 2026 looks for both Alani and then the LTO strategy for Celsius.

Great. And then shifting gears to Alani. Jarrod, you spoke earlier in terms of a little bit of cadence more of a stair step than a big bang. How are you thinking about what the ultimate distribution potential is for Alani relative to Celsius? Celsius is pretty much fully distributed, 95% ACV in Nielsen, close at 98% in Circana, TDPs or items per store, kind of high teens. How do you look at conceptually, I'm not going to hold you to a number a year from now, but how do you look at conceptually that -- what that gap, if any, there should be between the brands?

Yes. I mean start with ACV. I think we'll be on a path to get to a similar ACV, probably won't be kind of, like I said, that big bang, no pun intended for over 6 weeks, right? I think we'll see kind of a slower role but a more methodical role. I do see us getting to a similar ACV point between Celsius and Alani. Alani is a little bit farther along than we were when we went into the Pepsi system. So we do see a path to Alani working its way to similar metrics at Celsius. But ACV definitely would see kind of nearing the same percentages that Celsius did. That's one of the reasons why we want to be on the Pepsi truck.

They do have a bit stronger velocity in a number of areas, and they carry that off of a few less SKUs. So I don't know that the same average number of SKUs will kind of match up right away. But we do see them continuing to add SKUs, continuing to demand space. They'll pick up a significant amount of space in those Tier 1 and Tier 2 accounts this year. The ACV pickup will really be helpful when we move into kind of the Pepsi controlled accounts. So those independent convenience will really help drive their ACV to that, call it, mid-90 level. So very excited. We think that once we get, call it, to the end of Q2 when all of the resets are completed and you've got them fully baked on the Pepsi trucks and we're fully integrated that you'll have a really good view as to where that business is going, and we're really excited about 2026.

Great. And then more broadly, looking at the potential for Alani, growth has been terrific since you acquired it. Second quarter was clearly unreal or unsustainable given you had those fully incremental LTOs. Come down to earth a little bit, but still pretty strong even when you -- especially when you correct the scanner numbers for missing Winter Wonderland as I think most people are aware of now. But more broadly, with LTOs so central to the brand, I hear a lot of concern about sort of the hamster wheel or the treadmill of having to cycle last year's and sort of keep feeding the beast. So how are you thinking about long-term growth for Alani? What gives you confidence in the runway there?

Yes. I mean I think when you look at the LTO strategy, there's a few different things you're trying to accomplish. The first thing is you're trying to get trial from new consumers where you can create some buzz and maybe some flavor profiles that bring people into the brand or consumers in the brand that have never tried it before. The second thing, and you certainly see it with Alani, is creating that frequency of -- gain that frequency of consumption. You log on to TikTok you see some college girls going to Target and just wiping out full sections of these LTOs that are out there. So I'm not sure if there's necessarily anything wrong with driving both trial and frequency. And one of the data points that we've seen with Alani is when you take a look at where their market share is at the start or prior to an LTO, you see obviously a big bump up during the LTO. But by the end of the LTO when it's over, the entire brand is lifted up and you see a net gain by the end of that time period.

So not only that, but you see the core SKUs continue to perform, whether it's on or off of an LTO. So they've really done a phenomenal job. They carry a lot fewer SKUs than Celsius has historically. And those core SKUs really performed well, and then you can cycle in these LTOs. And then there's opportunities for the LTOs that perform very well that aren't necessarily seasonal to bring them into the rotation in the future if they're a potential power SKU.

Great. And then Rockstar -- the acquisition of Rockstar was a piece of the transaction you announced in August really strengthening your partnership with PepsiCo. So how does Rockstar fit into the Celsius Holdings portfolio going forward? And what are your plans to stabilize and grow the brand versus your willingness to cannibalize some space to have the fastest cars on the track as Toby and John like to say?

Yes. I mean if you just take a step back in all the transactions that happened at the end of August, not just Rockstar, it was about getting the captaincy, so it was about really owning the portfolio for energy for the Pepsi system, and so that was one of the pieces. It was getting Alani into the Pepsi DSD system, and then it was adding Rockstar as well. We look at Rockstar, there's a number of folks within our organization that participated in really building Rockstar, so they know what it takes to kind of get that -- where that business should be. I think, having an energy specific company that's focused on energy only where you need to have more frequency in terms of visiting, in terms of merchandising, I think those things will all help the brand, also really getting back to the basics with Rockstar.

There will be some SKU rationalization we talked about when we talked about kind of the $250 million run rate for '26. That is intentional. That does allow us to put some other things in that space as well where we can put some of the faster cars from Alani and Celsius on there. So from a portfolio perspective, we think it's advantageous to do that. And so we'll look to get Rockstar into stabilization. Rockstar also plays in some different categories, right? So Rockstar, we don't play in sugar right now. Now it's not quite 50%, but just under 50% of the category is still sugar. So that gives us the opportunity to kind of go in there and see what we can do from that perspective where there's really only been 2 primary players in that area. And then also looking at some other customers, some other drinking occasions that don't necessarily fit our modern energy profile for Rockstar that allows us to kind of work on those channels as well.

So we're bullish on what we think we can do with Rockstar. We know it's not going to happen overnight, but we think that the brand carries a lot more than kind of what the revenue say it is today. So we're excited about Rockstar, super excited about the captaincy that we have within the Pepsi system. Obviously, very excited about getting Alani Nu into that DSD system this week.

Great. So in terms of the competitive set, this one is for you, Toby. Competitors have really been coming at the sugar-free flavor segment that you guys owned for quite some time, really over the past 18 months or so since kind of summer 2024, when Red Bull really came in. Monster has been accelerating the innovation with the Ultra line, a lot of their other sugar-free offerings. So I guess what is Celsius doing to kind of protect your positioning and your moat in that sugar-free active lifestyle segment whether it's from both the big 2 or bloom or the other upstarts that are coming? And then, I guess, what are the differentiating factors for Celsius that you think keeps consumers loyal to the brand?

Yes. I mean you look at sugar free, there's a reason why everybody is going into that portion of the category. It's what's really driving the category right now, health and wellness, functional, fitness, lifestyle, these are all the elements that the folks and consumers are going into the sugar-free portion of the category are looking for. And obviously, there's always going to be competition. It's been a highly competitive category for years. We respect our competitors. We also feel like we're incredibly well positioned between both Celsius and Alani, who both have roots in fitness, in the gyms. I mean Alani was actually founded and started in GNC. Celsius, many know here, we're born in the gyms. I mean that's where we started.

So I think what's really important is having that authenticity that consumers can identify with. And you look at the trends, sugar free, female, I can't think of a better positioned portfolio to be able to capitalize on that. It's going to be a fight out there in the street. It's highly competitive, but we feel like we're as well positioned as anybody to capitalize on it.

Great. And then, Jarrod, turning to capital allocation. You announced a $300 million open-ended repurchase authorization after third quarter results. Have you been in the market since then? And then more broadly, can you talk about your capital allocation priorities from here? I think you said you were paying down some debt, but you still have an awfully clean balance sheet.

Yes. So we've had a lot of strong cash generation, had a significant amount of cash on the balance sheet as we ended Q3. We took about $200 million and paid down part of our debt. So we deployed some of that. Our #1 kind of deployment strategy is going to be investing behind the business. So that's going to be our main focus on what are we going to do with our cash flows is really driving the growth of our businesses and driving the growth of our portfolio. .

When it comes to other capital deployment things, obviously, we'll look at debt paydown. But with our strong balance sheet, we looked at it as an opportunity to go into the market and start repurchasing some stock when we felt that there was a value gap. And so yes, we have been in the market. We have been buying up some shares and supporting the business from that perspective.

Again, we have a sound balance sheet. We have a strong cash generation. So we feel it's a responsible deployment of our capital and the right thing to do at this time.

Great. And then you've made some pretty big hires over the past year, some sizable investments in people, Eric Hansen, President, COO; Rishi, on the CMO; Garrett on the international side. Can you talk a little bit about what they bring to the table? Any impact on your relationship with Pepsi, positive or negative, as some of these were Pepsi employees?

Yes. I mean in terms of relationship, I think, overall, it's going to be a very positive impact on the relationship. There's -- we have people within our current organization before we added those folks that had great relationships or that had been in the Pepsi system. So it gets us better connected. The experience that Eric brings to the table from a commercialization perspective and from a portfolio perspective, and we mentioned from a revenue growth management perspective, are all value-added to us and drive some additional competencies into our business, especially as we've built out now a 3-brand portfolio and then working within the DSD system within Pepsi is something that he's obviously done his entire career. So having him in place to help really drive that ship and take our portfolio to the next level around revenue management, around commercialization, around these primary periods is something that will be very valuable to us as we look out to '26, '27 and beyond.

Looking at Rishi, Rishi's been involved in global operations. He's been involved prior to some of the recent activities done, he was with Pepsi for, I think, 16 years. But he brings that mentality of being able to maintain kind of that brand voice by managing a number of brands and making sure that each of the brand is positioned for success and in working with portfolios as well. He's worked with kind of more tenured brands in the Pepsi system, but also newer brands that are up and coming in high growth. So really adding him helps to put structure in place. We do have brand teams across the board. So each of our brands has their own brand teams so that they maintain their brand voice. But he's kind of there to be the conductor and really drive the entire portfolio so that we're working together and we're being as efficient as effective as possible. And that's from a global perspective.

Then adding Garrett, who's been with us 2 or 3 weeks, so he owes me an international plan next week. Actually, he's -- he'll be super valuable. The countries that he's most familiar with are the ones that we've expanded into, and that are new for us. So bringing his experience into those will really help supercharge those. In addition, he's got a ton of relationships and experience across Europe and Asia with a variety of different strategies. So is it a concentrate model? Is it a licensing model? Is it a franchising model? Is it your typical finished goods model and then working with the various distribution systems across the world. So bringing him into the mix will allow us to really take the business and the team that we've built in Dublin, in particular, where we created a global HQ that's kind of fully built out at this point in time to really take that team and drive strategy and really start attacking really a lot of that white space internationally.

So more to come on that. We will give them more than 3 or 4 weeks to really drive the plan and the strategy and working with John and Eric, myself and really bringing his ideas to the table, but we see a huge opportunity by adding him to the team.

Great. So then shifting back, Toby, to you. You mentioned the success of LIVE. FIT. GO. Can you talk a bit about sort of the investment plans and strategies without giving away too much to Mark here on the front row. Could you talk a bit about sort of the investment plans you push more on LIVE. FIT. GO.? How do you think about balancing investments between your 2-star brands?

Yes, it's a good question. I mean LIVE. FIT. GO. is a Celsius phenomenon, right? It's separate from Alani and Rockstar. We're going to continue to invest in that in 2026. We just believe we'll be more efficient with it. We have a number of other programs. That's just going to be like one of the key media programs that we're running in 2026. We brought on Rishi. We've restructured our marketing department so that we're going to have brand teams that sit above or sit on both Celsius, Alani and Rockstar. They're going to be dedicated solely to those brands to make sure they all get the TLC that they all deserve and merit. Then you're going to have cross-functional teams that share in different -- we'll work with all 3 brands as well. So this is when Jarrod references bringing Rishi on, he's more of a conductor, we've really come up as this kind of entrepreneurial, almost like a start-up type company. And when you kind of grow into this multi-brand portfolio, large head count, you need to make sure that you have all the people sitting in the right spots, communicating effectively, tying all the programs together.

And this restructuring that we've really underwent over the last 5 or 6 months is key to our success moving forward because we need to make sure that each brand has their own voice. We want to make sure that Alani in particular, that we don't get in the way of what that voice has been. And I think that's one of the mistakes that companies make way too often as they acquire a brand, they want to put their own touches on it. We brought on that entire Alani marketing team. We still work closely with Max and Trey to the cofounders who understand what that voice sounds like. And we're going to continue to allow them to drive that voice.

Now we'll work closely with them to give them the resources they need. But each team is going to have their own assets and headcount to make sure that we're able to drive for success next year.

Great. And then look, the energy category in the U.S. has always been competitive, but Monster and Red Bull have kind of consistently held on to ballpark 70 share combined. So how do you see that category structure developing over time as you guys get a bigger piece of it? And kind of what differentiates Celsius today from all the challengers that have kind of come before?

Yes. Well, we're going to be careful. I got some of our friends in the front row over here. Listen, what Red Bull and Monster have done has been really incredible, right? You just talked 70% market share. We feel really good about where we're positioned today with that close to 20% market share between our portfolio. I think what's important is you've got to be able to capitalize on where the trends are going. And you're seeing both Red Bull and Monster move there with the sugar-free, leaning in on females. We feel really good about our positioning within both of those.

It's not just capitalizing on females and sugar-free, it's also Gen Z as well and the people that are coming into the category for the first time. And you look at both Celsius and Alani, we certainly over-indexed with that younger generation. So this is a marathon, not a sprint. We don't expect to catch anybody in 2026. It's about continuing to climb in market share and be competitive.

And listen, this is a great category. You're seeing success right now across the board within the category. And we fully anticipate that we're going to be able to be hopefully the biggest beneficiaries of the next year.

Great. Well, that puts us right at time here. I think you guys were the last fireside of our conference. So thanks for anchoring this. Thank you for attending as usual and until next year.

Great to be here. Thank you.

Thanks, Eric.

Okay. Let's restart our sessions. I'm Andrea Teixeira. I cover -- I'm the senior analyst covering beverages, household and personal care. It's our pleasure to welcome Celsius Holdings to our conference. And here representing Celsius is Toby David. He's the Chief of Staff. And also for -- appreciate the support also for those who are listening to us on the webcast.

Toby, I think one of the things we want to probably hear from you post third quarter is like an overview of what happened. And obviously, there was a lot of volatility based on that and see how we should be thinking of the adjustments. And now in retrospect, how you felt the buy side and the sell-side expectations and then how to think about the fourth quarter?

Sure. So that's going to be a lengthy answer. So we'll start with -- first of all, thanks for having us today. First of all, we thought we had a very strong Q3. We kicked off $200 million in EBITDA. Celsius had some really strong growth rates. Alani continued with their meteoric rise. Clearly, there were some different perspectives on the buy and sell side. I think when you take a look at what's occurred over the last 52 weeks, first of all, it was a complete anomaly when you look at what happened in Q3 last year. And as people were modeling what the quarter should look like. And over 52 weeks, things, different dynamics occur. We really leaned into the LIVE. FIT. GO. campaign, marketing campaign that we've been pushing since June. So we leaned into that from a promotional aspect quite a bit.

You also look at some of the promotional timings throughout the quarter. I'll give you a couple of examples. Amazon Prime Day, that's early July. Well, we shipped that product to Amazon in late in Q2, right? And that's when we recognize the revenue, whereas the build-outs, the promotional allowances actually come back in Q3. We also ran a couple of different club promotions at Costco throughout the quarter. So you had a number of different puts and takes throughout the quarter that eventually, I guess, that's where the delta came between the buy and the sell side. Again, this is an anomaly that we don't foresee happening in the future.

I'd like to take a step back also because I think it's really important to look at where Celsius has come from. If you go back to CAGNY earlier this year, right, when we announced the Alani Nu transaction, Celsius was sitting at negative growth rates year-over-year. And if I told you that at the end of Q3, Celsius would be growing at 13% growth rate on Circana. And that Alani Nu, this brand that a lot of people had unfamiliarity with at the time of CAGNY would be on a $1.2 billion plus run rate at the end of Q3 prior to even going into the Pepsi system. 20% plus share within the category as a portfolio. Pepsi comes in with an additional investment.

And now also the category captain within Pepsi and controlling the planograms in their energy space, we feel really good about where our business is, understand that there are some puts and takes that happened in Q3. And listen, we all felt it last week. But I couldn't be more excited about as we head into Q4 and what 2026 looks like, you also mentioned Q4 because I know that was some of the commentary we've heard from folks. I think there's been -- maybe some people misconstruing what we tried to communicate last week. So I'll try to clear that up. First of all, we are really excited about the transition into Pepsi with Alani Nu. That's already underway. We -- from a commercial standpoint, we are excited. We were -- we expect for it to be -- I'm not going to say flawless, but it's going to be a great transition. And we expect for very positive things to occur in Q4 and into Q1.

I think what management was trying to convey, it was simply that large CPG companies, i.e., our largest partner and others typically practice cash management at the end of quarter -- excuse me, at the end of the year. So with Alani Nu new transition occurring on December 1, I wanted people to try to understand that they're not going to see that normal big pipe fill that you would see filling out that vast Pepsi network and instead, it might be more of a stair-step approach.

So now we don't see that -- that's not going to impact the commercial component. You'll probably see more of a 1:1 ratio. You won't see a big inflated number coming in because of the pipe fill will probably more similar to what their Circana and Nielsen data is actually indicating. And then you'll probably see that stair-step earlier in Q1 from a revenue standpoint and from a pipe fill standpoint.

Also just from a Celsius consideration, because of this cash management, there's a possibility that there's a few days of inventory could be pulled back. I understand there's a lot of people that -- because of some of the history in Q3 last year, there was a lot of concern potentially that it could be something of that magnitude. That's not at all what we're trying to. We feel like there is a very -- there's an overreaction from folks thinking the worst, and that's not where we're implying at all. We are very positive about the transition, about Q4 for the total company and really excited about 2026.

And also, like you mentioned in some of the prior meetings that in the last 4 weeks, you're seeing an acceleration and also when we spoke back last week when we had the call back I mean, Jarrod is on, I mean, we're all saying that. In last -- and most recent, the exit rate was even better than the 13% for the sales-source brand, even though like just yesterday, we got like a deceleration on the track channel data. So how should we be thinking that's for the total company, right? But can you talk about Brent Celsius as you exit the quarter? -- and most recently and then talk about the total company.

Yes, sure. I referenced the 13% growth rate. That was Q3. If you take a look at what we've seen thus far post Q3, we're actually exceeding category growth rates right now. So there has been some noise within the category as some other players have slipped a little bit. We feel really good about where brand Celsius is exceeding the category growth rate. Alani is still in a great position. They're going to have their LTO just started rolling out last week, the Winter Wonderland would think that, that's probably going to impact the data as we've always talked about the LTOs, typically create spikes in the weekly data, if that's your sort of thing to look at the weekly data, which I know a lot of folks like to.

So I feel really good about where both brands are today. And then we've got Rockstar as well, which -- that's a work in progress. But we have a lot of -- there's a lot of believers within the walls of Celsius that we can stem the bleeding first and get this thing potentially back to growth at some point.

And I've got questions this morning. Like the Winter Wonderland, we haven't really seen it like in the data and should be reflected in a couple of weeks, right?

Yes, I believe it will either be in this coming week or the following week, but I think it's going to be in next week since it began rolling out last week. So I think probably the next -- depending on who's paying for it, if they get in a Sunday night, Monday or Tuesday of next week, they'll probably start to see the Winter Wonderland rolling out there.

Great. Perfect. And then when you think about the category, you're saying like you're now growing ahead of the category. And can you give us like a little bit of the state of the union of the category because it has been so volatile, and particularly super strong. And then in the context of what you're seeing like in the quarter and then as we look ahead into next year?

Yes. We believe that 2024 was transitory. That was an extreme outlier. I mean, I think you look at most of CPG and there was quite a bit of struggles. And energy certainly felt that, I would say that energy still performed better than most other categories within CPG. You've seen a major bounce back here upwards of mid-teens growth at times for the category. That's not going to -- I think it's unlikely that's going to last forever. And that's not necessarily a bad thing. We'll ride that wave while we can. But this is a category that's been healthy for a long period of time.

You've got brands like Celsius and Alani Nu and some others that are bringing a lot of new consumers into the category, whether it's -- in particular, the female consumer, but also people driven by sugar free, you got people moving out of coffee into the energy category. We feel that this is a category that is extremely healthy. We anticipate growth for the foreseeable future, maybe not this mid-teens double-digit growth, but certainly healthy growth for the foreseeable future.

Great. So then can you talk about like from that perspective, how you're seeing the consumer evolving, right? So traditionally, the category was obviously dominated by the male gender. And then now moving into like female forward, like more open. So how you see that runaway for -- in particular now that you have 3 different brands that you can kind of build upon? Like how are you seeing that transition? And how do you, in your own research, see ACVs, if you will, or even in its household penetration for female?

Yes, absolutely. So I mean, I think if you look at gen Z and the female consumer, I think their appetite for energy drinks is quite a bit different than what we were seeing 15-plus years ago. If you look at the biggest drivers within the category right now, it's both sugar-free and female, I feel that clearly, Celsius and Alani are well positioned with that regard. So you look at other trends within the category. And one area we haven't been able to play in historically is even in full sugar. I mean we've been playing in 50% of the category. Meanwhile, it is the fastest-growing portion of the category now with Rockstar and having a full portfolio approach. We're going to be able to go compete against Red Bull and Monster there. And these are 2 brands. They've owned that because nobody else -- I can't even think of the last brand in the last 10 years that came in with a full sugar opportunity. Now that being said, Alani and Celsius are clearly where our focus is. And when you look at what the drivers are within this category, we are well positioned to win, not only to take part in the energy category growth, but also to lead it.

And then when you think about the campaign, right, the lift and go and you said -- just said that you're going to lean into even more there. And your LTO strategy, you just launched your first Spritz LTO strategy for Celsius. Can you talk about how to think that in the context of your retail partners or with even potentially your on-premise execution, which is still an opportunity for both brands, right, or potentially the 3 brands?

Yes. Well, so one of the areas that we've seen quite a bit of success with, and I think the category has over the last 18 to 24 months is an LTO strategy.

Alani has really done a fabulous job with theirs. It's been able to lift their entire portfolio, bring new consumers in, while driving increased frequency of consumption within their consumers. You've seen both Red Bull and Monster lean into that as well over the last, call it, year plus. Celsius, we just launched the Spritz Vibe that's still out on the shelves. We're very happy and content with what we've seen thus far. That was us really sticking kind of our toe in the water to make sure that we were well situated for 2026, not only for Celsius, but that was the first time that we've done Pepsi.

So therefore, it really gives us a lot of tangible things to look at as far as when Alani now moves into the Pepsi system, what's that going to look like? How are we going to if there's any gaps for Spritz, make sure we plug those so that in '26, we're going to be ready to go. So really excited about that. Retailers -- I mean, they've been leaning in on these LTOs. And they've been excited with Alani's growth. Alani much the same that Celsius did a couple of years ago, brings some female consumers into their stores. Now we've got Alani, which is really dedicated to that female consumer. And it's differentiated. It's incremental. It's not just trading out one energy drink consumer for another, which you've seen with traditional energy. So we've got a lot of retailers leaning in and excited about this, 20% share portfolio that we're going to be driving moving forward.

Yes. And that takes me to another question regarding like the relationship with Pepsi, right? Because Pepsi has a captaincy, I think, in 100,000 different convenience stores. And how we should be thinking of like the depth and -- the depth of your shelf and the ACVs you can -- I understand, obviously, that the ACV opportunity is lower for Alani than it was back at Celsius when Celsius transitioned. But perhaps you can comment on the ACV improvement and how to expect that to phase into next year.

Yes, sure. The captaincy, I mean, that's going to give us another opportunity to expand both Celsius as well as Alani's footprint nationally. You referenced it. Pepsi Control is well over 100,000 independent convenience stores around the country. But not only that, just whether you're talking about the Pepsi energy coolers at a Walmart or a number of other retail locations, being the captain really puts us in control of what that planogram looks like, what the promotional timing looks like. And really what SKUs are going on the shelf, the top performers. So that's better for everybody. It's better for Celsius, Pepsi and the retailer, if you can hit the fastest performing SKUs on the shelf. So we're really excited about that.

Now as far as Alani Nu, their big opportunity is across the board, but I'd start with convenience stores. They're situated in the upper 60s as far as an ACV standpoint. And really, even within that footprint, the number of SKUs per location is rather limited. So as we transition into Pepsi, there's all those independent convenience stores we just referenced. But also as the planogram resets start to begin in January, February, March, April, May, there's going to be a really good opportunity for Alani Nu to increase their footprint within those convenience stores where -- by the way, they've got outstanding velocity. And I think that surprised a lot of folks when they hear that and then they look at the data and they see that Alani is really performing very well within convenience.

On top of that, you've got foodservice, which is negligible for them for Alani right now as it was for Celsius previously. Foodservice typically falls between 10% and 13% of our revenue with Pepsi. So that's going to be a big opportunity. College and University falls within what we quantify as foodservice. So that's an opportunity.

And then there's a number of other ones. I guess the last opportunity that I talked about is IOD and NOD inventory on display and a number of displays. This is an area where Celsius is traditionally over-indexed and really competed well with Monster and Red Bull. It's our sales organization in conjunction working closely with Pepsi, getting those incremental displays on the floor, especially within MULO. And that's going to be a big opportunity for Alani to either partner and get large build displays with Celsius or separately from Celsius. So really excited about all these different opportunities.

Great. And then from that perspective, of course, like the competitive environment for 0 sugar just got more difficult. Can you talk about like how you view -- obviously, you have like your biggest competitor launching a female forward one. Like how to think about competitive environment going forward?

Yes. Listen, I mean, you're referencing Monster and listen, I have a lot of respect for those folks over there and understand they're launching a female-forward beverage. I just think that it takes a lot in energy to build a community and to where it gets people excited about your brand. What you're walking around with and carrying in your hand when it comes to energy speaks to who you are. And it takes years for you to build that. It took Alani. I mean they've been around 6 or 7 years now. They just aren't -- they didn't come overnight.

Celsius, I mean, we've been around forever. So I mean, this is something that takes time. And we feel like we're clearly the leaders within the category, especially when it comes to female and sugar-free. So while we anticipate there's going to be other players that come into the fold and there always will be, we've got a head start. It's a difficult category to play in. We've got the muscle of Pepsi, and we feel really good about how we're positioned versus our peers.

Great. And then how -- like when you think about how Pepsi and you really touched on that, but then kind of digging in into how the learnings of the transition from Celsius into Pepsi and now how you apply that same because, I think that's got me, obviously, in terms of how that $100,000, $120 million that would be shifting through and becoming an easy comp. But how to think about the transition when it comes to Alani itself?

Yes, absolutely. I'd like to think that over the years, we've taken a lot of key learnings on both sides. our communication is fantastic. We just -- they increased their investment in us recently. I have another Board member coming from Pepsi. We brought on Eric Hanson as our President about 7 months ago with 27 years' experience at Pepsi and we have numerous other Pepsi folks in our organization.

I'd also say that our organization as a whole is probably 2 to 3x larger than it was 3, 4 years ago. So just from a capability standpoint, I'd like to think that we're a lot better prepared on both sides of the equation to tackle all different components of a relationship of this magnitude when you're entering a $1 billion business into a new one into a distribution partner. So we feel really good about it. I mean we've been planning this out for a few months with the Pepsi folks, and we are really excited about what 2026 has in store.

And I think just to handicap like the opportunity, you're now running $330 per quarter. So you're talking about like $1.2 billion to $1.3 billion in Alani's retail revenues. And at the time when you switched over, Celsius was like, call it, how much like at the time, that's why it's important to -- it's way more important to Pepsi now to get it right.

I believe we were in the -- if I remember correctly, it feels like long term, it was $600 million to $700 million. I feel like was our net revenue. And I mean if you look Alani, I mean, I think the $1.2 billion, that's their revenue run rate based on just the last quarter. So I'd -- again, I'd like to think that both sides have learned quite a bit. You've got Pepsi really leaning in. We just were at a town hall and purchased New York 2 weeks ago, both Ramon and Ram were there along with John Fieldly, our CEO.

I think we had a marching band cheerleading squad and broadcast out to about 30,000 Pepsi employees, and they're excited. They feel like they can play in the most attractive category in CPG right now, which is energy. You've got a 20%-plus share and I know you keep reiterating that, but that puts you in the conversation with the 2 big players in the category, and we don't feel like we're slowing down either. There's a lot of runway for further share.

And that takes us to Rockstar. Clearly, a different consumer to you, like you're learning that other half of the market which, as I said, like, it doesn't grow as much, but it's still with half of the market. So what is the -- the dream is obviously go back to that 7% share, but it's like -- it's a different market altogether. So it's a really, really difficult thing to come in for a good reason, for the right reason because you grew -- outgrew this category. How should we be thinking of the opportunity against your existing?

Well, conservatism is always a good place to start. So what we've been saying is we need to stop the bleeding and get them back to -- from losing year-over-year dollars. And once that happens, hopefully, we can turn this thing around. Now what does that look like? We'll see. What I will say is this, we have a lot of X Rockstar folks in our organization that were there in the early days and executive level have a pretty good idea of what made that brand, what it became. I think there are some different things we can do from a marketing standpoint to kind of go back to their roots, but also be more timely for today's day and age.

So we're excited about what they bring to the table. And what's funny is we bring up that Rockstar as far as sugar. They're still -- they have some great sugar-free options as well in a 16-ounce can. They're a little bit different than what we have to offer today. So it gives us really an entire portfolio approach. You look at Celsius traditionally on a per ounce basis, we're priced somewhere in between Red Bull and Monster. You've got kind of a premium pricing. You've got a lane that's priced at a slightly higher premium than where Celsius is. And then you've got Rockstar, which I think we're calling these days premium value. So it gives us an opportunity to play across the board from a pricing architecture standpoint.

And always beyond where there's consistently going to be promos in this promotionally driven category throughout the year with one of these 3 brands while limiting the overlap between them while they're on promotion.

So what success would mean for Rockstar?

Well, I don't want to hamstring what the capabilities of the company are. Again, step one is let's stop the bleeding and see where we can go from there. I think a lot of people would probably be on the outside would probably be -- listen, if you can stop the bleeding, that's probably "good enough." I think internally, we're highly competitive. We've got some people that believe in that brand and then others who say, yes, well, whether you believe it or not, you're going to go out there and you're going to make sure you win. You look back John Fieldly, our CEO. He was part of the turnaround 13, 14 years ago with Celsius. We brought this brand back from the dead, even earlier this year when the kind of a mini turnaround where Celsius was at that point in time.

So we'd like to think that if there was a team that could turn around Rockstar, it would be this organization. But at the same time, we're trying to be conservative about the way we speak that brand. But we do certainly think there's some upside.

And then you talked -- and it's good that you mentioned how the organization has evolved because clearly, there are some growing pains, right, because you were growing at a faster pace and you probably didn't have enough infrastructure there. And you mentioned, Eric, you mentioned a couple of other people, new CMO, just joined. Can you talk to that like being able to build team and how to think going forward?

Yes, absolutely. I mean number one, we still have the same organization that got us here, whether it's John, who's been here 14 years. I've been here 13 years. You've got Jarrod, our CFO, who's been here along the last 4 years, Tony Guilfoile, our Chief Commercial Officer, is 5 years. Paul Storey, our Chief Supply Chain Officer, is 5 years. And Kyle Watson, our former Head of Marketing, is now our Chief Brand Officer. She's been there 6, 7 years. So we still have that structure.

And then what we've done is we brought in some folks that we feel can really help take us to the next level and maybe bring some different skill sets and different strengths than this entrepreneurial group that we've had over the last, call it, 5-plus years.

So we brought on Eric Hanson as our President, brought on Rishi as our new CMO. We just announced Garrett Quigley as our President of international. That's an area of opportunity and white space for us. Just brought on Giri, who's our new Chief -- I don't want to butcher his title, he's Chief of HR, something like that. So -- and we brought on a while host of executives, but not only is it executives, you really have to build out that infrastructure. We brought on a ton of talent within the sales and marketing organization down below them as well as on the category management side and insights, revenue management. So we're really building out this organization to really take advantage of this new portfolio we have. We still have that entrepreneurial mindset that starts at the top with John but also have some different viewpoints that can really help strengthen us as we grow.

Great. And then one the things like margins, and obviously, we want to make sure that we are not ahead of our skis because you did say margins are obviously a bright spot that you hit like 51%. But then in the fourth quarter, you have some puts and takes on those promotions. And you have Rockstar is going to be headwind for your margins. But how to think as we build our models into 2026 and going forward. I understand the dream, of course, like you're going to have that projection because Alani is going to bring some synergies there. So how to think both lock short term, like all the puts and takes in the fourth quarter and then as we think long term?

Yes. I mean -- so if you go back a couple of quarters when we did our modeling called post the line of new integration, I think we were initially modeling back half of the year in upper 40s gross profit margin. Now obviously, Q2, we came in really hot with a really strong gross profit margin that I think surprised some folks. But we also caution that due to tariffs and a number of other impacts we're going to see in Q3 and Q4. We are talking more about low 50s type of margin now.

Fast forward to Q3, we had one month of Rockstar, which is more of a lower-margin item that did have a little bit of impact on the quarter along with those tariffs. And then heading into Q4, you've got a number of different puts and takes going on. You've got the full impact of the tariffs we had talked about earlier in the year. You've got a full quarter of Rockstar. You're going to have a little bit of contra revenue transition because you have to go pick up product from all these old distributors, which we did before. So I'd like not to set the sound alarm because it is not one. We did this back in 2022 as well. There's just going to be some pressure.

So I still think maybe that 50-ish to that low 50s type number is where we aspire to be in Q4. But then as we move forward, traditionally, I'll leave that to John and Jarrod to talk to about what 2026 would -- what we're looking at. But I think we'd all be very disappointed. If you look at full year '25 versus full year '26 and don't see improvements for the full years in gross margin and EBITDA. So I think that's probably the most I can speak to it. But we certainly think as we move into Q1, you'll start to see all the margins improve. You'll see -- hopefully, by the end of Q1, by the latest Q2, I think Rockstar should be fully integrated into our supply chain. That's going to help aligning new further integrated into our business. supply chain. In Q1, it's going to help quite a bit. And then it's -- I mean, it's going to be really interesting as the year unfolds. We're really excited about it.

And then going back to the fourth quarter also, one thing that I think it's important to mention on the SG&A side is going to be a little bit heavier in the fourth quarter just from a timing perspective, correct? I mean you called out in the call, but just to make sure that...

Yes, especially I think the sales and marketing line, in particular. We're going to continue to invest within the LIVE. FIT. GO. campaign. We've seen it been very effective. There's no reason to step off the gas right now. So I think the figure that was kind of talked about is maybe like a 23% to 25% of revenue within the sales and marketing line for Q4. That's going to get reevaluated for 2026.

What's exciting about the LIVE. FIT. GO. campaign is each month, we get a ton of new data that comes in. We know it's effective, but we're going to continue to refine it and be more efficient in 2016 as we which channels that we're pushing it through are the most effective and deliver the most ROI. So again, you saw where we were earlier in the year. We've really turned things around for core brand Celsius. And that's expectation moving forward.

Great. Perfect. So then like looking now at capital allocation priorities, obviously, you did announce the buybacks, which apparently ruined your weekend trying to...

No, I like spending my time in the weekend working with the team.

So then how to think about your M&A besides buybacks, like how to think about your priorities from a capital allocation perspective? Obviously, M&A probably you're going to keep it like for now, integrate Alani, but thinking about long term, how to think of capital allocation?

Yes. I would just say this is that the buyback announcement was just one other element that we've decided to integrate into delivering for our shareholders. We clearly felt like there was a disconnect where our share value was and what -- where we think the structurally this company is and where we're headed. So that was the thesis behind the buyback.

What I would say is we're always looking at different opportunities, whether it's M&A, vertical integration. We're -- if you had asked me 24 months ago, I don't know if I would have said, "Okay, we're going to buy a manufacturing facility in North Carolina, acquire a line of new, acquire Rockstar." But this is having the ability to pivot quickly and understand the market dynamics. And when aligning new becomes available at a price that I think was outstanding for us to acquire that, we moved on it.

So we're going to continue to try to be advantageous for our shareholders. And M&A, vertical integration potentially, we'll see what that looks like moving forward. We're going to -- we're in the process of putting a second line into our manufacturing facility in North Carolina to even drive more efficiencies through that plant. So we're looking to drive margins down and drive profitability.

And you also have the opportunity from the protein side, right, because Alani in the midst of the integration wasn't like your first priority. Can you talk about the opportunity for protein?

Yes. I mean when we acquired Alani, it was solely for the Energy RTD element. Now that came along with a number of other products that they have in their portfolio. Clearly, protein is a hot category right now. And I think protein is going to be a hot category for the foreseeable future. They have -- I'd say that we have a great tasting protein at Alani. And we'll see what we can do there. We need to work on some of the costs that are associated with that product right now before we start pushing it. But if we can get the costs in line, then I certainly think that's something that could be 100% incremental to what we're doing today from a revenue generation and profitability standpoint.

But that wouldn't be a 2026 execution?

I'm not ready to announce any big pushes on protein today.

But when we think about like what are the challenges besides distribution would be distributed by Pepsi or that's not a part of the agreement?

Well, that's not part of our current agreement with Pepsi. I think that we'd have to -- that's not part of our current agreement with Pepsi, and I'm just going to leave it at that.

Okay. All right. So -- and then when we think about like long term in terms of the energy drink category for, let's say, the next 5 years, how do you think Celsius -- and you got this question earlier, like Celsius will be, let's say, in a 5-year horizon in terms of the 3 brands. How do you see that? Because it kind of like responds in the way you're thinking about the category evolution and maybe international? How -- what are the low-hanging fruits besides taking Alani to the same ACV, about on-premise, about that type of growth. Of course, they're not going to go triple digits. It will decelerate. But then how to think about the international. We're just discussing Brazil. We're just discussing a lot different areas where energy drinks are very prevalent. And of course, Europe is even bigger. What is going to be the dream and how to execute that?

Yes. I mean, I think, John said the dream for -- John Fieldly, our CEO, has said for a long time, the dream is to be #1, right? And I think when he first started saying that, people started looking at him like he was drinking too much Celsius 7 or 8 years ago. But as you look at it today, they have a 20% plus portfolio. If Celsius can continue to exceed the category and start to pick up share, if Alani can continue as a growth engine, and let's see how high is with them. We'll see what happens with Rockstar.

I think domestically, innovation will be interesting, especially within the energy portion of the category because there's still a lot of different things we can do from an innovation standpoint. So our goal is to compete with Red Bull and Monster in a meaningful way. It's part of the reason why we did the captaincy with Pepsi because you really need to have a partner like a Pepsi or a Coke or your own distribution the way Red Bull does in order to be able to have -- be a meaningful competitor. So I'd say domestically, that's our goal is to compete with Red Bull and Monster. And ultimately, let's see if we can overtake those guys. I'd say internationally, it's going to -- that's going to be probably that 5- to 10-year horizon, where I think most of the people in this room that are listening know me and Monster has done quite -- they've done a great job internationally. I think they're split 60-40 domestic, international. And right now, I think ours is about 5% international, if that.

So a ton of white space there, the same health and wellness trends that have really taken over the U.S. They are starting to be a global phenomenon. You see it in Scandinavia. I mean that's a very forward-looking health and wellness market. And Celsius has been really one of the top share brands there for a long period of time. I think that exemplifies that -- that's something that we can do globally. It's going to take time, though. And we're judged -- it feels like on a weekly basis sometimes, but we're judged quarterly, and we're not going to get out ahead of our skis.

As we've always said, we're going to be methodical with our. But with our partners, whether it's Pepsi or Centauri or whomever it is internationally, ultimately, we want to have a much bigger footprint. And it's one of the reasons why we brought on Garrett as our new President of International. We've really -- we stepped up and built out a pretty robust team over in Dublin to run our international operations. Rishi who came in as our CMO. It has kind of that global perspective, not just a domestic market here. So what you're seeing now is you kind of mentioned it earlier, bring in reinforcements that cannot only help us domestically, but internationally as well.

And that, as you said, you're going to be very purposeful and methodical. So that would mean more of like probably we shouldn't expect anything like really big into 2026, but more '27, '28.

Yes. I would just say there's opportunities, but we're going to focus on the markets. For the time being, we're going to focus on the markets that we've already launched in. There could be some opportunities to go into some new markets. Next year, we'll see. But especially with this new organization that was most recently built on with Garrett coming on as the President of International, let's give him some time to take a look and evaluate the landscape and see what makes the most sense for us internationally.

But yes, we certainly view it as a growth driver. Now how quickly can it become a significant part of our revenue? We'll see. But that's why in the U.S., it's really more of a 3- to 5-year play right now, I'd say. Although I mean, we're clearly a significant player at a 20% share, but in order to overtake a Monster or a Red Bull and lead the category, that's probably more of a 3- to 5-year play, where I think international is probably a little bit beyond that. Great.

And then as we -- a few minutes we have left, when we think about like last year -- not last year was like CAGNY, right? So 9 months ago. As you're buying Alani and then thinking of how investors were thinking about the category, how the category was and then all of a sudden, we saw the category really vibrant led by, obviously, your competitors as well. Like how to think like how your organization thinks about where you were there at that point and how you executed and how -- what was the positive and the negative surprises would you say? What are the learnings...

I mean, if you look at the meteoric rise of Celsius from 2020 up until May of 2024. And sometimes you don't know what you don't know, right? And you feel like you've overcome so much to even get to that point. And then I think what we've experienced from middle of last year up until early part of this year and into maybe the middle part of this year for about 12 months. That wasn't easy, but you have to look in the mirror and you have to recognize, okay, what are we going to have to do to turn this thing around or get us going in the right direction? And fortunately, we've got some really strong leadership and we identified where the weaknesses were. We launched the LIVE. FIT. GO. campaign, and that really helped us get things going in a more meaningful way for Celsius.

At the same time, you have to be opportunistic. That's why I kind of referenced it before. I don't think we were -- when we were on that meteoric rise, I mean, we're worried about Celsius, right, because we're going to take over the world. But you also have to be able to pivot. And if there's an opportunity that presents itself, which Alani was available we were very fortunate that we were able to grab them. And I think -- I remember at CAGNY, there was a lot of people like asking, couldn't even pronounce Alani. They thought you kind of mumbled something the wrong way. And now I think a lot of people are seeing this brand as more than a niche. I think that was the question for the next 4 or 5 months.

Is it just a niche brand? And is it cannibalizing Celsius? And that's another thing. A lot of -- you look at Celsius going from negative to double-digit exceeding category growth. Meanwhile, Alani has been on this meteoric rise themselves. And I think that, that exemplifies that it's not necessarily cannibalizing each other, and we can work synergistically with one another. So as we move forward, we're going to continue to grow these 2 brands. We'll see what we can do with Rockstar, and we're going to keep our eyes open for any other opportunities.

Anything you want to leave us with that we haven't discussed or how the stock price? Like how do you think like in the learnings from last week...

Yes, absolutely. Listen, we -- again, we're -- we've spoken to a lot of folks from the investment community over the last 6 days. We're going to make sure that we can communicate as effectively as possible. Obviously, it was pretty painful for everyone involved last week. But moving forward, like this company is -- and that's why I try to say it from the outset, we're really structurally set up for success.

I mean most of the people that are listening or in the room are better at modeling and math than me. But you can kind of take a look at the growth rates of Celsius and Alani and start plugging in some of what you think the margins and EBITDA could look like. And you've got a heck of a company right here. And we're excited about Q4. We're even more excited about 2026 and seeing what the capabilities are for Celsius Holdings.

Yes. And then I think what we discussed before, like it was not about the third quarter itself is more like, well, what are the adjustments? What they're trying to tell us about the fourth quarter that is scary. And I think that's what -- why we were talking on the earnings call, like the stock took another dip. And I think that's what you explained. It's not like you're seeing a huge issue with Alani or the integration of Alani. But it's a function of having your Pepsi kind of like trying to manage their cash in a way, right, and not the feel that you want to make people understand that you're not going to have the piped fuel that the lifetime around.

Yes. I think we were probably trying to be overly cautious with The Street, and we could have communicated it in a better way because clearly, we felt we said something and everybody else heard something else. So it's part of why we're out here this week, next week, the following weeks talking to folks. I mean we're not scared to tell the story about what's going on. We're very confident in the ongoing transition with Pepsi. That's going great. Just talking about a little bit of fiscal management at the end of the year. And I think there was -- some folks might have overreacted, totally understand.

And -- but at the end of the day, we feel like this is a great opportunity for Celsius and for anybody who feels like this might be a good entry point.

And then consumption, as I said, it's going to rover between 60, 80 for total company, but consumption at some point, shipments will converge into consumption.

Yes. Well, I think that I don't even think it's going to be too much variability, and we'll see what happens in Q4, but it should be strong for Alani. It could be a little bit for Celsius. But I think, overall, I think just using the data is probably the best starting point and then just err a little bit on the side of conservatism.

Okay. With that, thank you very much, Toby, and Celsius for representing our conference. And thank you all for coming to the room and also on the webcast.

Thank you.

Thank you.

Good morning, and welcome to the Celsius Holdings Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. I will now hand the call over to Paul Wiseman, Investor Relations. Please go ahead.

Good morning, and thank you for joining Celsius Holdings Third Quarter 2025 Earnings Webcast. With me today are John Fieldly, Chairman and CEO; Jarrod Langhans, Chief Financial Officer; and Toby David, Chief of Staff. We'll take questions following the prepared remarks.

Our third 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, meaning 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 Q3 earnings release and 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. The third quarter of 2025 was another pivotal period in what continues to be a transformational year for Celsius Holdings, setting the stage for our next phase of growth. Building on the alanine acquisition in April and our ongoing international expansion. We've deepened our partnership with PepsiCo, added Rockstar Energy to create a total energy portfolio and strengthen our leadership team to lead the next era of modern energy.

Before getting into the highlights of our business, I want to thank our employees, our retail and distribution partners and are loyal consumers for their commitment and belief in what we're building. Their energy continues to drive ours. In August, we announced an important expansion of our long-term partnership with PepsiCo, a milestone that deepens our collaboration and establishes Celsius Holdings as PepsiCo's U.S. strategic energy drink captain. This new role gives Celsius a leadership position within PepsiCo's energy portfolio and greater control over the distribution of our leading portfolio of brands, including Celsius, Alani Nu and now Rockstar Energy.

With the expanded partnership, we're further increasing our ability to shape planograms, prioritize SKUs, align promotional periods and bring a unified commercial strategy to life for cross channels. In short, we're helping lead how energy shows up in retail for the consumer from the aisle to the checkout cooler and everywhere in between. As part of the same transaction, A large portion of the U.S. alone new based DSD network is joining the PepsiCo distribution network starting December 1, 2025.

A move that over time is expected to expand Alani Nu reach and accelerate its growth trajectory. For Celsius Holdings, this is a meaningful near-term catalyst. And we intend to execute the transition with the same efficiency that made our original Celsius integration into Pepsico's leading distribution system a success.

We also acquired the Rockstar Energy brand in the U.S. and Canada at the end of August, adding one of the most recognizable brands and energy to our total energy portfolio. Rockstar extends our reach into new consumer segments and strengthens our ability to serve a broader spectrum of energy consumers from fitness to lifestyle to culture and music.

Together, we believe that these steps, category Alani Nu News expanded distribution and the Rockstar acquisition represent a meaningful advancement for our company. It gives us greater scale, control and the platform to compete from a position of strength. Importantly, this also comes with an endorsement of PepsiCo's increased ownership stake in a holding and an additional Board representation, a vote of confidence in our shared long-term trajectory. In the third quarter of 2025, our combined portfolio represented more than 20% share of the U.S. energy drink market in tracked channels and grew 31% year-over-year according to Scana. Nearly twice as fast as the overall energy drink category.

Only 2 years ago, Celsius Holdings was celebrating after surpassing a 10% share with the CELSIUS brand alone. Now through both organic growth and strategic expansion, we've doubled the share position with our total energy portfolio. It's a remarkable achievement that validates the power of our brands and our disciplined execution.

Over the last 52 weeks, our portfolio generated more than $5 billion in retail sales in U.S. tracked channels according to Scana. That success is supported by strong retailer partnerships and consistent consumer demand for functional great tasting, modern energy innovation. Across major retail and convenience partners, we continue to expand our space and distribution.

Winning new displays at Target and caps at Walgreens and CVS and achieving double-digit growth in unit sales across Walmart, Circle K and Dollar General, just to name a few. And Walmart alone, Celsius Holdings portfolio gained more than 2 share points year-over-year, and Alani recorded its best ever sales week in August, led by which is Brew.

The Celsius brand achieved double-digit retail sales growth in the third quarter of 2025 at a 13% year-over-year. Alani Nu grew triple digits at 115% year-over-year and Rockstar began selling under our ownership. Together, these brands are defining what a modern energy company looks like, inclusive, functional, culturally relevant and growing.

Marketing culture continue to drive how we win. Seasonal flavor offerings once again delivered strong results. With Alani Nu, which is brew, notching record sales, reinforcing the power of flavor, innovation to excite consumers and drive velocity. In October, we launched our first Celsius limited time offering Spritz 5, and we are seeing strong consumer response from U.S. and Canada retailers.

Our Celsius LiveFit Go campaign continues to strengthen awareness, trial and repeat purchase for our core brand. connecting performance energy through an inspirational lifestyle, and we're extending the same storytelling across the entire portfolio, ensuring each brand stands for something clear and inspirational. Celsius, fitness and lifestyle performance; Celsius Essentials, high-performance energy, Alani Nu female-focused lifestyle energy and Rockstar Energy, culture, music, next-generation energy.

Last week, I and along with several of our leaders had the opportunity to speak directly to 30,000 PepsiCo employees at one of their national town halls. We showcased our total portfolio approach and shared how Celsius Holdings has become the energy partner capable of powering every consumer occasion. Our goal in the conversation was simple. To inspire 30,000 teammates across PepsiCo to rally behind our portfolio and help us win in the category together.

At the National Association of Convenience Stores trade show in mid-October, we spent time on the floor meeting with retailers. The excitement around our new portfolio was incredible. You could feel the confidence building for our growth in 2026. We believe that the message from consumers was clear.

Celsius Holdings continues to be the growth engine of the energy category and retailers want to partner with us to share in the opportunities that lie ahead. We're also proud of how we continue to invest in our people and culture. Our annual Celsius University Summit brought together more than 200 of our student marketing ambassadors from across the U.S. and Canada.

The next generation of marketers who are helping us stay culturally connected to our consumers. It's one of the many ways we build brand advocacy from the inside out. As our business grows, so does the depth of our leadership team, we've recently welcomed Rishi Dang as Chief Marketing Officer, who brings more than 2 decades of global marketing and commercial leadership experience, including senior roles at Pepsico and Marc Anthony Brands.

We also had two other important leadership appointments, including Gary Quigley as President, Celsius International; and Gary Schubert as Chief Human Resource Officer. Each brings valuable experience that complements the strong bench already leading the company. Our approach remains team first, execution driven, focused on empowering our people and integrating new expertise, while at the same time, maintaining the entrepreneurial energy that defines Celsius.

Across the organization, we're executing with focus, advancing Alani Nu's integration, capturing early synergies, onboarding Rockstar and preparing for what we believe will be an even stronger 2026. The third quarter was another step in a series of transformational moves for our global functional beverage portfolio future. We're now operating a true scale in the U.S., and we're currently beginning to build that same foundation internationally.

In markets like Australia, performance has continued to exceed our expectations. In the U.K., we've learned valuable lessons make us even stronger as we enter 2026. We're refreshing the Celsius Biz free line and incorporating new limited time offers into Celsius brand portfolio, starting with Spritz Buy, which has now launched in the U.S., Canada and the Nordics. Among these highly successful Witches brew approved again in the third quarter that limited time offers that create consumer excitement also can lift the whole trademark around them.

This week, another Alani fan favorite Winter Wonderland, returns for the holidays, and we have more great innovation in store for 2026 that I'm excited to share with you soon. We're optimizing our Rockstar Energy portfolio. with a medium-term goal of stabilizing the brand and recapturing the magic that makes Rockstar an iconic and powerful force to grow the next generation of energy drink consumers.

We've entered a new area for Celsius Holdings in 2025 and one defined by scale, partnership and purposeful growth. We're building a portfolio that reaches more consumers during more occasions, and we're doing it with discipline, collaboration and a commitment to organizational excellence. I look forward to what's ahead in 2026 and beyond.

I'll now turn the call over to Jarrod to discuss third quarter financial results. Jarrod?

Thank you, John, and good morning, everyone. Turning to the financials. For the quarter ended September 30, 2025, consolidated revenue was approximately $725 million, up 173% from a year ago. The Celsius Brands third quarter 2025 U.S. scanner growth rate was 13%, driven by favorable product mix and increases in total distribution points. A number of factors can cause the scanner data to vary from reported results such as promotions and incentives and the success of such programs timing of acquisitions and timing of customer orders, which can vary from time to time based on various inventory builds for promotions, cash management programs, limited time offering programs as well as a number of other factors.

The difference between the 44% revenue growth rate at the Celsius brand versus the U.S. scanner growth rate of 13% was primarily driven by year-over-year inventory movements across the company's customer base including a net benefit relative to the inventory optimization program with our largest distributor in the prior year quarter as well as increased promotional activity in our international expansion. Alani Nu revenue nearly doubled, up 99% and driven by strong limited time offerings, particularly which is Brew, which delivered record sell-through as well as organic core SKU growth.

Rockstar Energy contributed roughly $11 million in revenue in its first month under Celsius ownership. An additional portion of Rockstar sales roughly $7 million was recorded in other income due to GAAP accounting. Combined, the total impact from Rockstar Energy was about $18 million in Q3. We expect this accounting treatment to continue through Q4 before normalizing in 2026.

Year-to-date, consolidated sales are up roughly 75% or $770 million with Alani Nu accounting for the majority of that growth and Celsius up 12% through the first 9 months of the year. Gross margin for the quarter was 51.3% compared with 46% a year ago. Year-to-date gross margin was 51.6%, up from 50.2% last year. The improvement reflects the lapping benefits of the prior year inventory optimization, lower net portfolio promotional spend pack mix, favorable channel mix and scale benefits on raw materials from higher volume, partially offset by tariffs and the impact of Alani Nu and Rockstar Energy's lower margin profiles.

We expect to improve Rockstar Energy margins over time, starting in the first half of 2026 as we integrate sourcing and production, much like the progress we've seen with Alani Nu since its acquisition. Sales and marketing expenses were elevated, reflecting continued investment behind brand building, including the Celsius Liv Fit Go campaign.

Sales and marketing represented about 20% of sales, consistent with our reinvestment strategy. In connection with the Alani Nu News transition into Pepsi's DSD network, we recorded approximately $247 million in distributor termination expenses during the quarter. These costs are fully funded by PepsiCo under our long-term agreement. And while they are recognized in our P&L under GAAP, the reimbursements are deferred on the balance sheet and amortized into gross sales over the life of the distribution agreement, making the transactions cash neutral to Celsius Holdings.

General and administrative expenses remained well controlled at approximately 6% of sales, excluding acquisition costs, down from 9% last year, reflecting efficiency initiatives and cost discipline. Operating income benefited from higher margins and overhead efficiency, partially offset by marketing and integration investments. We ended the quarter with a strong balance sheet and cash position giving us flexibility to fund future growth and integration initiatives.

Shortly after quarter end, we reduced debt by $200 million and reduced our term note by 75 basis points bringing total debt to roughly $700 million and reducing our annual interest rate expense by approximately $20 million beginning in 2026. Our near-term priorities remain unchanged. Continue investing in brand growth, capture synergies from our acquisitions and further strengthen the balance sheet through debt reduction and disciplined capital allocation.

As Alani begins distribution in the U.S. Pepsi system in December, most of the financial benefit is expected to be realized in Q1 2026 due to a phase load-in approach ramping from Q4 into Q1 as retailers reset and inventory builds across the Pepsi network. Looking ahead, we expect continued growth in both Celsius and Alani Nu New with a focus on stabilizing Rockstar Energy as we optimize the product assortment and reestablish the identity that makes that brand so relatable to consumers.

We anticipate Q4 will be a noisy quarter, reflecting year-end timing effects from promotions, integration activities and cash management from our larger customers, along with some incremental freight and tariff pressure. We are looking at the potential for more pressure on our gross margins in Q4 2025 relative to the prior 3 quarters due to promotions, higher scrap and freight from the integration of Alani into the Pepsi system, and tariff pressure before re-expanding in Q1 2026.

We also expect sales and marketing to represent 23% to 25% of sales in Q4 as we continue investing in our Celsius campaign and complete the Alani Nu transition.

In summary, we delivered strong top line growth, maintained margins above 50% and continued investing for the future. Celsius is once again growing ahead of the category Alani Nu continues to outperform expectations, and Rockstar Energy strengthens our total energy portfolio by expanding our reach to new energy consumers. We remain focused on balancing investment with profitability, maintaining a strong balance sheet and creating sustainable long-term value for shareholders.

With that, I'll turn the call back to the operator for Q&A.

[Operator Instructions]

Our first question comes from the line of Gerald Pascarelli with Needham.

Great I just wanted to go back to core Celsius here. The 44% growth in core Celsius off of that depressed year-ago base period. implies a meaningful negative delta between the 13% growth that we saw in measured channels when you add back the $110 million to $120 million to the base.

So I'm just curious on some of the mechanics on what's driving that negative delta. It would seem that the add back to the base period should have been maybe much lower than the $110 million to $120 million -- so I'm just curious if that's part of what happened in the quarter? And then if that's not the case, how do you explain just the wide variance between what you reported versus what we saw in the measured channel.

Yes. Gerald, thank you for the question. In our prepared remarks, Jarrod touched on that and some of the deltas that we're seeing in regards to the variety of numerous factors that are really impacting that difference from the 44% to the 13%.

But I'll turn it over to Jarrod, just to further reiterate some of his remarks again.

Yes, Gerald. The short answer is yes. But there were a bunch of puts and takes. It's not a perfect apples-to-apples comparison over the 52 weeks, mix can change, promos can change. timing can change. For instance, Q2, we had some benefit from the Prime Day buildup, which happened in early Q3. And so there's a number of factors built into that, but it was a lower number. It wasn't a perfect one-to-one comparison year-over-year when you're talking about the inventory optimization. With that said...

[indiscernible]

Yes. With the said, we're 13% on the scanner growth. We believe the scanner is a good barometer of the health of the business. If you look at October, we're up ahead of the category growth from an energy perspective. So definitely a lot of noise in the quarter with timing and sequencing of various things, and Q4 will be a bit noisy as well.

Understood. So lower base and then maybe just a little bit more of a variance than we saw over the past couple of quarters given multiple factors.

Yes, that's correct. And I think when you look at the 13% growth rate at the register, as Jared mentioned, reiterated, it was great to see really the rally come behind the brand. We started off slow in the first quarter and second quarter. not keeping up with the category growth rates and heading into the back especially the end of the quarter. Our Lifeco campaign that we kicked off really is adding more excitement around the brand, gaining more trial, more repeat purchase, which sets us up really nicely heading into resets in 2026 for the Celsius portfolio.

Your next question comes from the line of Kaumil Gajrawala with Jefferies.

A lot of conversations these days about pricing. Monster has announced some pricing sounds like it might be even higher than the 5% they have announced despite some promotions back. Curious how you're thinking about the price point, not just of Celsius but also Alani and Rockstar?

Yes. Kaumil, it's something that is an extremely hot topic with a lot of the headwinds even on the last earnings call, that we had. We talked about some of the headwinds we're seeing, especially with tariff impacts, higher cost of commodities.

And then the investments behind these brands. So it's something we are contemplating and looking at. There's a variety of ways and additional taking frontline price, promotional strategies we're evaluating. We're really -- we're also building out a revenue management team as well to further enhance our capabilities around that. So we can be more precise building out further our key accounts team. But there is -- I think there's opportunities there. We're tracking it very closely, but we're not going to make any formal announcements today.

Okay. Got it. And then on some of this timing and integration stuff for Q4, if you could just go over maybe in a little bit more detail. It sounds like there's some additional integration stuff and timing that moved into Q4 or is Q4 messy and then it's back to sort of ordinary course of business by the time I get to 1Q.

Yes, I'll turn it over to Jarrod further enhance some of his prepared remarks.

Yes. So it's -- I mean, it's Q4, it's December when the activity is happening. If you go back to when Celsius went into the Pepsi system, it was October 1. We're going in on December 1.

So obviously, a lot of CPG companies, there's not a lot of activity at the very end of December. Also, if you recall, when we went in, we were replacing bank. So where it was a one-for-one swap out. So there was a ton of space that needed to be filled immediately. So it was a bit quicker of a push. So it's going to be more of a phased approach. And because we're so close to kind of the timing of resets and when the OTS, the kind of up and down the street programs are reloaded we're going to kind of phase it in as opposed to have all this open space that will get shoved into.

So I think it won't be quite as quick as you saw back in '22. But across kind of December in Q1, you'll see us really ramp up from a Alani perspective. But there will be some crossover in the quarter as we build that inventory and as we roll it out across really Q1.

I'll just add additional color around the strategic energy drink within the Pepsi partnership further enhances those capabilities. So it's not a one-for-one replacement. But as Alani rolls through the network, we're able to really have control over the planograms. And we have over 30,000 PepsiCo team members and our dedicated team really working to further penetrate, gain ACV distribution and really maximize the sets for the highest-quality offerings for the specific channels and regions that will see the expansion.

Your next question comes from the line of Michael Lavery with Piper Sandler.

You cited that this transition could lead to optimized warehouse and distribution that may affect inventory levels. Can you be more specific what exactly are you expecting? And how much does the intra-quarter transition mitigate disruptions that might be puts and takes within 4Q? Any just more detail on 4Q and into next year, what your comments there pointing to would be great.

Yes, I think we're just trying to be transparent and lay out what some of the puts and takes you could see in the quarter. So Typically, if you look at most large CPG companies, they do have some cash management activity in Q4. You'll also -- if we're going into a system and a warehouse and we're starting to build some inventory last time we didn't have any inventory in that system. So when we went in, it was just us going in as opposed to us being a part of that process.

So I think there's just going to be some movement as we build the Alani as we roll it out across really kind of December and Q1. And so we just wanted to list out some things that could cause some noise and really just let everybody know that there's going to be a lot of puts and takes in the quarter, and it's going to be a really noisy quarter. So expect it to be noisy and not to be perfect.

Can you just maybe unpack noise a little more? I mean, you've cited puts and takes. Where does it net out?

Well, again, it's going to depend on how quickly we roll things out. So there's a lot that could happen over the course of the next 6 weeks. So instead of kind of put my foot in my mouth and throw a bunch of numbers out of you, I'm going to say it's going to be really noisy. I'd look at the scanner data that's going to tell you about the health of the business, and that's what all we're going to give you right now.

Yes.I'l just -- Michael, I'll jump in, in regards to some of the additional variances, as an example, we'll be picking up inventory on returns from the prior distribution network. So you've got increased cost there on logistical movements, also secondary warehousing, right? -- that you wouldn't have under a normal course of business.

Also, as our really supply chain is not optimized and fully integrated as now we are strategically tied in with the routes servicing the warehouse through the PepsiCo network, and we're going to need to optimize that. We need to optimize the co-packing facilities procurement logistics. We want to make sure we're running 1 day halls to optimize the freight lanes and making sure we have the right inventory in the right locations around the U.S.

So there will be some pressure on margins as well and then also the puts and takes on inventory levels and returns.

And just a quick clarification. So I appreciate some of the cost headwinds or the margin drag as you get these returns, that's a reduction of sales, correct? And if so, would we hear you correctly that directionally, you think that coming in could come more quickly than you refill pipeline going out that maybe directionally that you at least trying to make us aware of the possibility of a net drag as opposed to kind of all else equal?

Yes, I think we're not -- I mean, we need to be conservative on that, and that could be a scenario that plays out. We're just -- it's too early for us. We're not -- we don't have year-end orders in yet. So we got several weeks orders in initially, but we got to see how the rest of the quarter plays out in Q4. And really, the return pickup is unknown right now. So we're evaluating that, but we'll have to see as we get closer. So making any firm predictions at this point is not really plausible.

I would say, if you go back to '22, we did -- the team did a great job managing that process so that there wasn't a significant impact. But -- with that said, it is a different time of year, there is different timing and sequencing that's going on. So we will manage that to the best we can, and we'll look to manage it as efficiently as we did before. and that's the plan.

But we'll see what -- where things kind of pan out when you're talking about 250-plus distributors that you're working to drive down their inventory build up another set of inventory and take returns at the same time.

Your next question comes from the line of Eric Serotta with Morgan Stanley.

Great. Just a housekeeping item not try not to beat a dead horse on the inventory and situation with respect to the third quarter. But did your inventories with Pepsi decline sequentially. I know you referred to the year-on-year variances, Jarrod, but was there any change sequentially? And then bigger picture, in terms of Alani growth, we have seen it flow in scanner over really since the second quarter.

You obviously had 2 totally incremental LTOs in the second quarter. One, large but not fully incremental LTO in the third quarter. So how are you thinking about the Alani growth rate on a going-forward basis for sort of the core brand and then whatever sort of incremental contribution from LTOs that you expect over time realizing the LTO timing is going to always vary a bit.

Yes. Thank you, Eric. I'll take the second part of that question in regards to Alani. We're really excited about the portfolio. And we've talked about in prior, there will be some lumpiness in regards to the timing of these LTOs and then the phase out -- and we're seeing that right now with Celsius with price 5, that's now rolling out.

But in the quarter, you had which, which was phenomenal, great success, amazing flavor. It was its fifth year. more than doubled prior year sales results and got everyone really excited. It was the talk of tax with a lot of retailers as well. When you're looking at the growth rates, and you look at the ACV where Alani is to where Celsius is in the PepsiCo system, I think there's a lot of underlying distribution and TDP gains that we're going to be able to capture as we move through 2026 and really leverage the benefit of the PepsiCo distribution network as well as the excitement behind the brand and all the work our key accounts team has been working on.

When you look at large format, especially within food and mass and you look at Celsius and Alani, it is a large percentage of the overall energy drink category sales. So -- that really gives us a great leverage and to really further optimize and really create some unique programs for that channel. And as I mentioned in the prepared remarks, coming out of -- retailers are really excited about what Alani is doing in the category, it's incremental really driving increased female consumption rates and they really like the uniqueness of what Alani brings to the table within the category, some of its flavor profiles, Server Swirl and so on.

And right now, we have winter wonderland launching, which is rolling out retailers. So we do anticipate that will not be as large as which is brew historically has been 1 of the larger LTOs and also winter 1 and amazing flavor profile, check out the social media activations and in-store execution. It's been phenomenal, but it is crossing over through a transitional period with alone moving from the prior distribution network in the Pepsi December 1 in North America or in the U.S.

So that likely will not be to its full potential as we're hoping to see next year there. So those are some of the puts and takes. The good news is and which we're really excited about as these LTOs bring up are growing the core SKU offering, which is great to see as well. So adding excitement, bringing incrementality and growing the base within velocity.

Yes. And the first part of the question back onto the LTOs John has talked about it, the Spritz was great for brand Celsius. I think we've got a great lineup for next year as well across the entire portfolio. in particular, Alani and Celsius. So I think that we are setting ourselves up well for 2026 from -- in terms of the inventory rollover, it's not perfect. It's always a point in time. There was some noise in there, pack size a little bit change, mix will change over the last 52 weeks, the promos have changed.

So there's a lot of puts and takes that went into it as well as timing of the inventory movements. And so that's where you got a little bit of a lower number that came through than maybe you had expected if it was a perfect one-to-one rollover.

Okay. And any comment sequentially? I know the year-on-year is tougher, but given all those noise factors you mentioned, but any change in the inventory sequentially. I realize there's probably some seasonality to it. But going back a year or so, you would talk inventory impact sequentially.

Yes, I think what we've said thus far, that's really all we're going to go with.

Your next question comes from the line of Bonnie Herzog with Goldman Sachs.

All right. I had a question on gross margins in the quarter. I guess I'm hoping for some more color on the puts and takes and how we should think about gross margins moving forward? Maybe remind us of the impact, if any, from tariffs and then how big of an impact was the inflation we're seeing in the Midwest premium and then your hedging strategy on that.

Thank you for the question. And that's an area of opportunity for us within the gross profit line, especially as we further integrate Alani and Rockstar into the network we've built. And there's a lot of efficiencies in the areas we're focusing on. Midwest premium is impacted.

We don't do hedging, but it is we do some forward buys that -- but long-term hedging is something we haven't implemented and it's an opportunity and something we continue to evaluate. And as we have a larger purchasing power and a greater number of capacity, that's something that's on our radar. So more to come on that.

In regards to tariff, we're seeing greater tariff impacts. You started to see it slightly in Q2, a little bit more in Q3 we anticipate even larger in Q4. Now we're trying to offset some of that with the scale and the synergies we're seeing as we're bringing and starting to really kick off the production of Alani.

So also leveraging the vertical integration of our co-packer we acquired back in November. There's opportunities there. As we look to '26, we'll be adding a second line to further enhance the capabilities of that and drive more efficiencies but I'll turn it over to Jarrod, do you got any additional color in regards to in addition to your prepared remarks.

Yes. So I mean, John kind of covered the tariffs. We talked about last quarter that we'd see a little bit -- it would increase a bit in Q4. At the same time, as we were integrating Alani, we were driving improved margin as an offset. Also with our scale. We're seeing the opportunity -- and you've seen that across the last year from a raw material perspective, even with the tariffs, there's still opportunity to take some of that pricing down -- we've seen some movement internationally with the U.S. and other countries where we may actually see some benefit from tariffs.

And then there's a variety of other tactics and other programs that we're putting in to further drive raw material savings across the Board as we scale up. Like John said, we've got a new line coming in our plant next year that will help drive some savings as well. We're looking to continue to save freight as we bring all 3 brands together. If you look at brand Celsius, it's roughly kind of 3% of sales. Alani is a bit ahead of that as is Rockstar. So we'll be able to bring that down as an offset -- but that will take some time. We talked about Rockstar, really, you'll start to see the margin from that business improve in the really first half of '26. Alani, we're on track to capture most of that by I believe in the modeling call we did in May, we'd look to capture it by the end of Q1.

So there's a number of good guys coming through. They're just not coming through necessarily as quickly as some of the pressures. So that's what we called out, there's probably going to be a little bit of pressure in Q4. We'll have some scrap and some returns and things like that, that will drive some pressure on the margin, like you saw back in '22 when we transition Celsius into the Pepsi system, and you saw kind of some of those onetime impacts that came through. And then we were able to then leverage the business from there on.

So you'll see a similar thing happen in Q4 before we start to see a lot of those benefits come through in the first half of '26.

Your next question comes from the line of Sean McGowan with Roth Capital Partners.

Questions about international. Now that we're deeper into the ownership of Alani and you've had some time to think about what to do with Rockstar. What are the plans there internationally? And then more broadly, how do you feel about how the performance has gone internationally?

Yes. No, great question. Thank you, Sean. Lots of opportunity in international. We just hired our first President of our international expansion. We've been really building a foundation over the last several years. As you know, we've started off in Sweden and Finland, great markets for us for a long time and really just expanded into Australia, the U.K., Ireland, New Zealand, France and Benelux markets and just getting started there.

We started -- we built out small but yet impactful sales organizations and marketing originations really building that first foundation. And I think as you look for '26, we're going to lean in further. Those same opportunities we see in the health and wellness trends in the U.S., they're global trends. We're getting a lot of excitement from retailers and consumers as the world is just one click away. So as we look for '26, we're making further strategic investments in given markets. We've had a lot of key learnings as well, taking those key learnings and we're going to continue to build upon them. Our biggest successful market in the last from last year and into this year and an early expansion market has been Australia, really 711 leaned in, and we're seeing some great expansion opportunities which will position us really well as we're entering '26.

And then when you look at the other markets in Europe, they're really foundational and working really closely with retailers and some of our key partners, we kicked off or university, ambassador programs, leaning into fitness, health and wellness we're really well positioned.

Celsius is our first push leaning in, and then we see opportunities with Alani as well. So more to come on that, but definitely a growth driver for years to come.

The next question comes from the line of Jon Anderson with William Blair.

And Jarrod, Quick question on alanine comment partner. -- currently well below the Celsius on ACV and TEPs in particular. How do you see the distribution kind of ramp for aligning now kind of playing out? And do you think it has the -- ultimately has the potential the appeal to kind of reach the kind of level that Celsius is in the market today?

And then the second part is, I know the '23 was a really strong distribution build with Pepsi for Celsius. It did seem to result in quite a bit of inventory optimization in 2024. How do you kind of work with PepsiCo, are you collaborating with them this time to avoid that kind of experience as you look to take aligning new levels?

Yes. Let me take the second one, and then John can jump on the first one. So from an inventory perspective, I think together, we've learned a lot. We've already gone through the process of putting a fast triple-digit growing business into their system. So we've got a lot of learnings. I think our teams are much more tightly connected today than they were in the past. We also have the captaincy, which gives us more control and more say in terms of what products we're putting in the coolers and how we're going to set that up within the Pepsi system, but also within our key accounts across the board.

So I think overall, there's a lot more communication. And we also have brought Eric on, who was a longtime Pepsi person who is coordinating pretty tightly with them. So we're very confident that -- when it comes to kind of inventory movements, we've got a lot of learnings that we'll be utilizing so that we can make sure it flows efficiently and smoothly on a go-forward basis with the Alani business. And then I'll throw the other one over to John.

Yes. In regards to the ACV and GDP and the opportunity and the appeal. I think specifically looking at Alani, and we're really attracted to it. And what we hear is there's a lot of appeal for it. It's done extremely well in convenience. We look at the latest convenience numbers. It's performing well. Huge opportunity there, especially as I mentioned before, coming out of NAC. I think the one-for-one swap out with Celsius moving into the bang really and a lot of the AOM accounts and broader distribution within Pepsi.

I think that happened very rapidly versus the Alani with the company, we're able to control those planograms. So the opportunity still lies there but it could be more of a quarterly transition over the next 3 to 6 months as we continue to really reset those and work our way through 2026 and the resets. Eventually, but the same opportunity on ACV and TDPs lies within Alani, and it's -- we have a bigger key accounts team. We have bigger distributor management team and the excitement just last week when we were up at the Pepsi Town Hall meeting really excited about that. And then in foodservice is a big opportunity. Now as the really the category energy captain, we're able to get further enhancements and placements within the food service opportunities throughout PepsiCo. So I think the same opportunity within ACV and TDPs lives with all of our portfolio.

And that is it for our question-and-answer session. I will now turn the call over to John Fieldly for closing remarks.

Thanks again for joining us today. Q3 was another strong quarter and a transformational year, marked by strength, partnerships, portfolio expansion and our commitment to organizational Functional better-for-you modern energy offerings. We believe that we're very well positioned to continue to benefit from and lead the execution of this revolution that's taking place in the energy category.

Thank you to all of our employees and partners for all their hard work, dedication that enables our success. Until next time, Grab a Celsius and Live fit.

This concludes today's conference call. We thank you for your participation. You may now disconnect your lines. Have a pleasant day.

All right. Well, thanks, everybody. Welcome back. It's our pleasure today to have Celsius with us. We've got Toby David, Chief of Staff.

Could you maybe just start with -- you've had some news recently with the expanded deal with Pepsi. Maybe just explain a little bit about how it impacts your portfolio and where you're most excited about it.

Sure. Yes. So we announced about 1.5 weeks, 2 weeks ago, transaction with Pepsi. It was a multifaceted deal for roughly $585 million. Really, when I talk about it, it's really in 4 different elements that were key to it. The first element was what we call the captaincy. So really, it gives us the ability to be the energy lead within the Pepsi Energy portfolio. That was really critical for us to make sure that we had the full mental focus of their team for over the last, call it, 3 years now since Celsius, the brand moved into the Pepsi system. It's been a great relationship. We've seen massive gains since October of 2022.

But at the same time, we are an allied brand, and Rockstar was an own brand within their portfolio. So there was always wanting to get that full share of mind within Pepsi. So this captaincy deal is really an incentive deal. And it's -- we've built a lot of parameters within that element where we get a lot of prioritization within their portfolio, ton of space within the Pepsi control planograms. We lead now that space that they've allocated towards us and we get to make the decisions of how much Celsius, how much Alani and how much Rockstar and which SKUs go there.

So John, our CEO, often likes to say, I like to put -- we want to put the fast cars on the track. So the SKUs that drive the best velocity and the best performance, we're going to be able to do that in all the planograms that Pepsi controls around the country. So that's critical for us. So that was the first element of the deal that was most important. But 1A and 1B. 1B would be getting Alani Nu into the Pepsi distribution system. Really, the AB network that fragmented network of independent beer distributors around the country. They helped build Celsius, they helped build Alani, really a fabulous network. I can't speak highly enough about the folks in that network. That being said, Pepsi is a Tier 1 distributor slamming Coke, right?

Massive opportunities really excited about the distribution opportunities for Alani Nu. If you look at them today, I think the biggest opportunity is probably within convenience, not only within tracked channels, but also within independent convenience stores. They're situated around -- Alani Nu is situated around a 65% ACV right now in convenience. And if you look at them versus Celsius right before we enter the Pepsi network very similar ACV within convenience, very similar number of SKUs per convenience store.

I think that really is a massive opportunity. A lot of people have asked over the years, really for Celsius first, and now with Alani Nu, can Alani perform within convenience because of the female demo that consumes Alani and I guess the perception that convenience is predominantly male driven. And if you look at the data right now, their scanner within convenience is really strong from a Velocity standpoint. So hopefully, that can maintain as they get broader distribution within the Pepsi network. So really excited about that opportunity. Food service as well is going to be a big opportunity for them. So that was 1A, 1B of the deal.

I think the other 2 elements that were critical which just further alignment and partnership with Pepsi. We recently brought on Eric Hanson as our President and COO, after strengthened the partnership, but through this transaction, they're getting another board seat. So I just think it further aligns us with the Pepsi team. And then the fourth element would be the Rockstar piece of the transaction. Rockstar, listen, they've had their declines over the years. We think there's some opportunity there. We have a lot of folks at Celsius that were some of the founding senior level people at Rockstar years ago.

So we'd like to think we have a pretty good intimate knowledge of that brand and maybe what their strengths are, what their weaknesses are and where the opportunities are. So step one for Rockstar to get them back to where they're not losing share, flatten things out and then we'll see where we go with them. But that was really the 4 elements of the deal that we're excited about.

So then you touched on the strong performance Alani Nu already has in C-store. You touched on the measured channels and the unmeasured channels as big C-store opportunities. Maybe 2 parts. One is C-store really the focus for where you see the distribution upside. And then second, we go through each of the 3 brands that you now have, and give us a sense of how each one might change and what comes next?

Yes, sure. I think if you look at the total landscape of retail, Alani Nu is a little bit further than we were at Celsius when we went into the Pepsi system, primarily within the MULO, so like grocery or big box like a Walmart, Target. They're a little bit further along as far -- in their distribution than we were. Convenience, as I mentioned earlier, is really where their last area that they really haven't expanded into. So I do think the convenience is the biggest opportunity for Alani Nu when they go and they're both tracked and independent. We've talked in the past that Pepsi has -- they service over 100,000 independent convenience stores around the country where they maintain their own planograms within those stores, they call their metals program.

That is a big opportunity now because we control the energy portion as a lead within those planograms. So that's going to be a really big opportunity for Alani, both the traction convenience stores as well as independent, then foodservice. Celsius has seen quite a bit of success within foodservice. It's been roughly 11%, 12% of our revenue has gone through -- with Pepsi has been foodservice, that's really untapped with Alani Nu. College and University falls within food and service. And if you think about who the demo is for Alani a lot of colleges think that's a big opportunity as well. As far as the total portfolio, I can't remember what were you asking about Rockstar, Alani...

Yes. Like if you look at each brand separately, what might change? Like how do we think about now versus what they had?

Yes. I think when you look at the 3 brands and the ability to control how many SKUs have each go into all these planograms around the country that Pepsi owns. We want to put the fast cars on the track, as I mentioned earlier. So we are getting a lot more space. We haven't identified what that is through this captaincy. And it just depends on the market. So there are certain regions where Celsius is stronger than Alani and vice versa. I think on the coast, you'll find that Celsius really is stronger. And then down in Central, Alani is very strong, although I think they have a lot of opportunity with this new distribution on the coast as well. But then you look at the Pacific Northwest and Rockstar still has a very strong presence up there.

So if you go into the -- as we've said in the planograms up in that region, you're going to see a little bit more Rockstar than you would in South Florida, for example. So I think at the end of the day, for us, when it comes to the Pepsi planograms, we control that. Now when we're going into the retail buying season over the next couple of months, we control those call points. So if you're calling on a mart or a 7-Eleven, we're going to be able to sell in a total portfolio that you're looking at a 20% plus market share, which I think a couple of years ago, people would have kind of looked at your cross side and you saw that Celsius Holdings portfolio would be at 20% share.

I mean nobody has even gotten close to that number before other than Red Bull and Monster. So I think closer to -- a lot closer to Monster now than the next closest brand is to us, which would be like a 3% share brand. You see Monster sitting at about a 28% in terms of dollar share. So we really like where we're situated today. We have a great position to go into retail. We have different brands, especially with Rockstar coming into the portfolio. Yes, a lot of -- they're a full sugar brand and then there's free as well. At the end of the day, that's still half of the category. So that now gives us an opportunity to compete against Red Bull and Monster in their full sugar brands. It also gives us an opportunity to promotionally toggle and make sure that we're on promotion throughout the year with one of the brands at all times. You see that Monster does a great job of that with all their different brands to make sure that we're in a very heavily promoted category to begin with, and also to make sure that we're not promoting against each other as well now that we have this portfolio approach.

And so you touched on the quantity of distribution increasing. You also touched on some of the assortment improving. Red Bull and Monster are quite a bit different where their sort of core to, I think, SKUs are maybe 60% even 65%, 70% of their sales, yours are quite a bit more fragmented. How much tougher has it been to get the right assortment and how much improvement do you think you can now get both with a little bit more space to play with and maybe it seems like there might be a little more thoughtful approach. How excited are you about getting that...

No, that's a good question. If you look at -- they have their super SKUs, the power SKUs, however you want to phrase it. I think when you're a legacy brand like that, they've been able -- that was really the foundation of the category, and they were able to do that. You look at every other brand that's come in, in the last 10 years, and you really need to have an assortment of labor. I think that's what consumers are looking for these days. So I think there certainly is an opportunity for us to SKU rationalize and it's going to be the third time I've used this phrase, so I need to slow it down, but put the fast cars on the track, right?

And we're going to -- I think in a selling season with these retailers, making sure that we have our more prolific, higher velocity SKUs getting greater ACV. Eric Hanson, our new President. He's kind of referenced this before publicly is if you've got our orange flavor, for example, which is a top SKU it might be at 80% ACV, we'll probably should be at 95 plus ACV.

It should be really in every store that a Celsius is being sold. Then you have a lot of SKUs that are really good performers sitting at, call it, 55% ACV. Let's get those up to 80% plus. And just by rationalizing and make sure you have your higher performers on the shelf, you inherently are going to get greater velocity. So I think that's really an exercise we're going through right now for core brand Celsius. A lot of these doesn't have as many SKUs, not nearly as many SKUs as Celsius. They're going to have their foundation SKUs that's a fewer amount, but then they're going to rotate their LTOs throughout the year, and they see a lot of success with that program as well. So as we head into 2026, really excited about the commercialization approach that we're taking heading into the year. I think there's a lot of opportunity to be able to capitalize on that.

And as far as timing goes, if you've got upside and assortment -- upside to the distribution levels and kind of rearranging the mix within it, are there shelf resets you need to wait for at certain retailers or if this is primarily C-store focused? Is there more of your own control in terms of when you execute that? How should we think about how it unfolds?

Yes. I think within the independent convenience stores, there might be some opportunities in December potentially. So Alani Nu and is rolling into the Pepsi distribution network 12/1. So that will probably move over roughly about 80% of their distribution from the previous network into Pepsi on 12/1. So independents may be, but you really are looking at similar timing as you typically see where starting in January and through April, May, you go through the resets, the planogram resets at all these major retailers. So I think you'll see the same cadence that you historically see when these resets go out.

And I think it's going to take a little bit of time to get Alani fully executed within the Pepsi system as well on the independent side. But I think you'll start to see it maybe flow through a little bit in December, but more so Q1, Q2 when the full planogram resets take hold. Something I haven't even mentioned when I talked about the opportunities for Alani, mentioned the convenience stores. I also mentioned foodservice. But one of the strengths of Pepsi is their IOD and NOD, so inventory on display in a number of cases on display.

They're able to build out these large displays within grocery and within the big box Walmarts of the world. That's going to be a great opportunity for Alani as well. I think a lot of people have seen Celsius historically have these big displays set up. That's something that I think we'll hopefully see with Alani as well. That will probably start rolling out in Q1, Q2.

And then back to Rockstar, you've given a pretty good idea of how to manage it a little more thoughtfully, get it to stabilize. Let's walk before we run, of course, but looking maybe a little further ahead, what is your sense of -- it sounds like it plays a role that you weren't looking for this brand as a growth driver, but could it get back to growth? Would it have any innovation focus? How do you think about what's next? And is it maybe a little bit TBD? Or what's in store for Rockstar?

Yes. I think we have more of a conservative approach right now, undersell and overdeliver, right? So you mentioned the word stabilize. That's the key, right? We need to stabilize this brand first and then see where we can go after that. Definitely think there's opportunity. They have a lot of SKUs right now. We need to make sure that we probably consolidate those number of SKUs in their top performers and really focus on those and the DNA of the brand and what got them to be a 10-plus share brand at one point. So that's the focus right now. We kind of mentioned this $250 million kind of run rate as far as revenue for the Rockstar portfolio.

When Jared, our CFO, mentioned that, I think that was a post-rationalization number. So when we're going to bring in the number of SKUs, focus on the ones that are really the ones that are most effective, then we'll see where we go. I don't want to make any promises today. But I mean, listen, I think they've got -- they're a legacy brand. I think there's some opportunities there, but we need to stabilize it first, and then we'll see where we go.

And then as you look at the -- thinking on innovation just broadly, obviously, there's a lot of opportunity just with the portfolio you have and driving the distribution upside. But how do you -- where does innovation sit 1.5 years or so ago, you came out with Essentials and a whole new package size and extension. Anything like that kind of in the works? Or what's the role innovation plays looking ahead?

Yes, innovation is really important. That falls under Eric Hanson, our new President and our full commercialization approach. Now we're going to be innovating for 3 brands, right? So with Celsius, that's one that's been more intimate for me and more involved with. We look at a lot of different opportunities there. So I mean, I'm not going to speak about anything specific. There will be LTOs. We've talked about a limited time offering that's going to be coming out in Q4 for Celsius. You've seen a lot of other brands, including Alani having success with those. So that's going to be our first foray into the LTOs.

And we do look at other opportunities, whether it's within energy or maybe in some other categories that we evaluate, and then we have our powdered dehydration sticks right now that we just kicked off this year as well. So again, I'm not going to name anything specific, but we do have a pretty deep amount of things we're looking at. Alani, they've got some interesting things as well. Even within our current assortment, they've got their protein shakes, which I think all of us are seeing protein is having another moment, and I think it's going to continue to hold.

They have their protein shakes. We didn't purchase or acquire Alani for anything other than their energy. So if we're able to capitalize on their protein shakes or some other areas like that, then I think that could be really exciting. But as far as innovation, yes, we've got a pretty deep robust number of things we're looking at right now. We'll see what comes out in '26.

And just looking at the U.S. total category, it had a little bit of a slump a year ago. No one seems to pinpoint exactly why that even was mentioned on a competitor's call by them, they admitted that themselves. But now we're seeing some improvement. Obviously, there's a little bit of help from easy comps. Any sense of what's driving the rebound? Is it just a return to form? How do you think about maybe the category and the last couple of years maybe combined in terms of normalized trajectory and what's driving it?

Yes. I mean the category is really performing exceptional right now. Really, most brands within the category are growing at double digits right now, Monster and Red Bull included. Obviously, there are some easier comps versus last year. I think some of the LTO strategies both Monster and Red Bull are implementing, are working well for them. Alani is obviously helping to drive the category quite a bit as well. You're seeing -- I think you're seeing people move a little bit out of coffee. I think you're seeing some of that.

The price points for -- if you go to some of your favorite coffee shops around the country, it might be $6 or $7 for a coffee, you have an opportunity to grab a Celsius for $3. It could -- it's a very attractive thing. I think it's also interesting that the Starbucks of the world have conditioned their consumers to drink cold coffees and teas from their establishments, which we view that very favorably and I think that's an opportunity to get people to transition out to maybe a cold coffee into fruit-forward orange Celsius in the morning. So I think you're seeing some of that as well. I think you're just seeing the category rebound. I mean last year was really an anomaly, and I agree. A lot of people have been trying to pinpoint or diagnose.

But I mean, I think every category was down last year. And it's just -- I think people were just surprised with energy because they've never seen it before. But I think everybody was afflicted with it, and you've seen the category really bounce back, and that's good for everybody.

No, that makes sense. That's great color. Just touching on margins as well. You've called out some things like tariff pressure hitting in the second half. Your second quarter margins were extremely strong. So maybe give a sense both near term, if there's any watchouts and longer term, how to think about what maybe the headroom might be? Obviously, you can see somebody like a Monster as a benchmark, but there's some kind of puts and takes, differences there. And maybe how should we think about any potential changes to incentive costs or distribution costs with the updated Pepsi agreement?

Yes. So after Q2, we mentioned that we had really strong margins that quarter that there would be some pressures due to aluminum and tariffs that we were not impacted by in Q2 because we operate FIFO first in, first out. So a lot of the product we're pushing out were not affected by the tariffs for aluminum. So we called out maybe, call it, a low 50s type of number to maybe think about like a 51-ish kind of number just as a starting point for the back half of the year.

I think Q3, you'll see that, Q4 will have a little bit of pressure just because you'll be fully ramping -- pushing through those affected cans. There's going to be some noise in -- especially in Q4 -- really in Q3 and Q4 due to the transaction with Pepsi taking on Rockstar. There'll be a little bit of noise. I think people understand that. But as far as margins, we've kind of talked about that, call it, low 50s number. We haven't really talked about 2026 yet. We'll see what unfolds over the next quarter or so. But what we've historically said is in the Pepsi agreement, there are some incentives around performance with them that they get a little bit of enhanced margin there. But what we've called out is listen, we don't -- we have not changed what our expectations are for the long-term margin profile of Celsius.

We've long said we look at Monster as a benchmark. When we first started talking about that, Monster was in the upper 50s from a gross margin standpoint. There's some puts and takes there. They include outbound freight or they do not include outbound freight in their gross margin, we do. So if you were to make it apples-to-apples, it would be us in the mid-50s. So that's where we still aspire to get to, and this agreement does not change that. From an EBITDA standpoint, we've kind of talked about roughly a 30% that we'd like to aspire to get to as well. We've gotten closer to that over the years.

That's -- we don't put any time line on when we think we're going to achieve it, but we certainly think we're closer now than we were a couple of years ago.

And then just a quick maybe walk around the world. You've got several new markets now, Canada kind of the further kind of almost close to 2 years now. Benelux more recently, France, Australia, New Zealand, Ireland, U.K. in between. I think you've been clear that we should be patient there. I think you want to take your time building the brand properly. I think some of that includes using the fitness channel, the way you've started in the U.S. But any update on how that's progressing? Is that the right way to think about it? And what -- or any highlights you've seen so far from your time in those markets?

Yes. I think you always want to be careful how you characterize things. You never want to say you're happy with. We always want to strive for like excellent performance. But some of those markets like Australia, we jumped out to a great market share there. Canada jumped out to a great market share there as well. I think sometimes it's about your distribution capabilities along with maybe partnering with the right retailer like we did with 7-Eleven in Australia that really helped us in Suntory, who's our distribution partner. They have a really good track record with energy in Australia. The V, which is the market leader there as well. I think that we've probably met our expectations in most or all of the markets at this point. We do have more of a conservative approach internationally. Listen, we're judged every quarter by our bottom line. We're not going to just spend tens of millions of dollars and hope that we can get the right velocity. We're going to build this thing out methodically.

We feel like we have the right partner right now in those markets with Suntory. Suntory does have strong distribution within fitness. So while fitness isn't going to drive the revenue for you, it drives that brand equity of this health and wellness beverage. So that's been critical for us as well. So I think up to this point, we've been felt satisfied with where we're at. Long term, you look at Monster, 40% of the -- roughly 40% of the revenue is international. For us, it's well, especially with Alani now coming into our system, I mean, it was 5% previous. It's going to be even less now.

But Alani is another one. I think there's going to be some opportunity with them internationally. Again, we're going to slow walk it. We need to make sure we integrate them fully in the U.S., first. But down the road, this is more of a 3- to 5-year play internationally. And you have the same health and wellness trends globally that are percolating. I mean that's one of the reasons why you look at Scandinavia. That's a really health and wellness region of the world. Celsius has great share in Sweden, does very well in Finland. So we'd like to think that there's those opportunities to start spilling over into other markets as well. It's just going to take a little bit of time.

No, that's great. That makes sense. Maybe just in the last few seconds, any closing thoughts on what investors might be missing or just how to think about anything else we should have touched on?

Listen, I think that it's a little bit of a turnaround story with Celsius in the last year or so. Obviously, we had some high peaks from, call it, 2020 up until midway through the last year, ran into some difficulties last year. And you've seen the brand Celsius really kind of turn things around, stabilize the business first and then get back to growth. We want to see this brand Celsius exceed category growth. So we feel like, listen, we've made a lot of headway there. We think there's a ton of opportunity, especially with the plans we've made for 2026. So we feel good about the brand Celsius and where we've come from over the last 12 months.

Alani Nu -- I mean they're questioning it right now. They're triple-digit growth, really excited about their future, getting them into the Pepsi system. Then Rockstar is now this third brand that we've rounded out in our portfolio. So we've really kind of reconstructed, gotten underneath the hood, restructured and retooled our marketing and sales organizations to make sure we're now a portfolio-driven company. We're really excited about the future.

That's great. Thanks so much for being here, and I appreciate the time.

Appreciate it.

Okay. We're going to get started. So it's wonderful to once again be joined by Celsius CEO, John Fieldly; and Chief of Staff, Toby David, at the conference. There's always plenty to talk about with all of you. And this year, there is no exception, but a bit different than last year, which is awesome. The new Friday is really positive announcement with the transaction with PepsiCo. So I thought maybe I'd just start by opening the floor to give you guys a couple of minutes, and just things you want to share directly on that topic before we get into questions.

Yes. No, absolutely. Thank you for having us. Glad to be back. It's really exciting not only what's going on with Celsius, but the energy category as a whole. We've seen great fundamentals within the category. When you look back where we were at this conference last year, category was in a negative growth rate. It's really -- it stabilized in Q4. We start to see the category come back in Q1 and Q2, it's growing double-digit growth rates and even today. So really good to see. Celsius portfolio, we've seen great growth within the Celsius portfolio, roughly around a 10%, 11% share as we sit today.

We're investing behind a LIVE. FIT. GO. campaign we kicked off this year, which we're really excited about, especially heading into the back half of this year. We have a lot of programming and some advertising that will be taking place around the NFL for the first time. There is some media buys we're doing to enhance and really own Live Fit, Celsius Live Fit, inspires you inside and outside the gym.

We have the exciting acquisition that happened this year. It's been a busy year for us so far. So we announced the acquisition of Alani Nu. If you're not familiar with it. We do have samples outside, is a female-focused brand. It's inviting, it's approachable and fun flavors, a very inspiring -- and they have some unique flavor profiles. One is Witch's Brew, which is a Halloween theme flavor that's out there. We have some samples to try. It's been doing extremely well and growing first to kick off the integration was April 1. So fully started that integration process in the second quarter.

We did put up record revenues and profits, gross profits and EBITDA in the second quarter. And now we just announced a transaction with our North America and Canada distribution partner, Pepsi. So that was on Friday. The company will be a category captain of the energy drink category for Pepsi. We're bringing on Alani Nu into the PepsiCo distribution system. We are acquiring Rockstar Energy within that transaction. And Pepsi has further increased their ownership stake within the company and added a Board seat, which further ties in our strategic position with them, not only from a commercial standpoint, but also at the highest level from an investor stakeholder standpoint.

So really exciting times where we sit, and we're going to talk more about that in different areas. But yes, we're glad to be here.

Great. So just focusing on the agreement with Pepsi, I mean, how would you -- what does that really mean though for Celsius' long-term strategy?

Yes. I think when you look at the long-term strategy, really tying into strategic partner is really critical, especially distribution. The name of this game and consumer products. I mean the consumer conference. It's one thing getting a retailer and getting a consumer. It's the whole other thing on getting it to shelf, getting it to -- being able to get it to shelf is so important, especially in the energy category, which is extremely highly competitive. Impulse purchases drive over 50%. So it's all about product placement, cold placement and maintaining stock availability.

So when you look at some of the largest brands that are out there that are really successful, like Red Bull and Monster, Red Bull has a dedicated network. You look at Monster with a dedicated network through Coca-Cola. And now with Celsius Holdings with this partnership, we're tied in at a strategic level with 3 great brands that allows us to compete within the energy category, targeting different unique consumer segments within that. We're seeing more females come to the category than ever before. Health and wellness is driving the category and sugar-free is thriving, which is over 50% of the share of the category and growing really is the growth driver. But the route to market is so critical.

So this really allows us to really dial in with our strategic partner at the highest level for commercial planning. Priority periods, planograms. I don't know, Toby, you want to talk about some of the planograms that this has. This really opens us up, which is something we -- unique we didn't have access to before, which allows us to really control some of our destiny.

Quite a bit more space within the planograms are going to be allocated towards our entire portfolio. So that means more space for Celsius. A lot of space for Alani and then space for Rockstar as well. And we're going to be able to pick the SKUs that we want in every location in the country. So as John likes to say, we want to put the fast cars on the track. So we want to make sure to put the most efficient flavors on every shelf around the country. So being the captain is going to put us in charge of what flavors are going where within the Pepsi Energy portfolio. And we really think that's going to help drive efficiencies and revenue for the brand.

Okay. So what's changing in terms of your visibility? So being captain, it's a good title. But what changed in terms of your visibility? You told me about the decision-making and the execution, but is it an element of your visibility into like the full data, the full picture? And how does your role with retailers change?

Yes. So I think 1 thing within the distribution, I think, really 2 steps, let's talk about the captaincy, what that means within Pepsi and one piece is the planograms. The other piece is within the retail segment. So we are still -- we're maintaining the call points. We're building on our key accounts team. So historically, we called Tier 1 and Tier 2 accounts. But now being able to control the planograms, there's a lot of independents at Pepsi Services, food service, colleges, universities, restaurants, fast casual.

So that really opens that up for us now to have a part of the decision-making process on what products will perform best and where. It's 1 thing to have the Tier 1 and Tier 2 call points, but really being able to control that on a national basis, like Rockstar does really well in the Pac Northwest, but and that planogram would look different versus, say, South Florida or Boston or other markets. So when Toby is talking about really making sure we have the best SKUs, it's really about that optimization on a local level. So we can maximize value, maximize the opportunity there to drive additional sales.

As an example, we were talking about earlier in some of the investor meetings is like, as an example, it could be a Marriott. When you go to the Marriott, I know I've been in some Marriotts in like LA, and you see maybe 9 or 8 SKUs of Rockstar and only 2 of Celsius. So is that the right location and the right planogram, we'll have control over that, and we'll be able to really work with our partners to make sure we're maximizing that shelf space. So shelf space is so limited. So we need to make sure every SKU is being maximized to the fullest based on the demographics.

Okay. Great. Sticking with demographics. I was just curious now that you've got Celsius, Alani Nu and Rockstar, all under 1 roof. Like how does this change your ability to service the full spectrum of energy consumers.

Yes, I think this gives us really a total energy -- modern energy approach. I'm really excited about it. It's -- when you look at Celsius, it's that fitness lifestyle brand for you inside and outside the gym, to help you accomplish your goals. You have Alani, I mentioned, the female-focused brands, it's approachable and inviting, comes with great flavors and flavor profiles and inspiring. Being the best, very female focused. And then you have Rockstar going after that traditional energy segment, which still represents right around 50% of the sales is 25 to 35, mainly dominated by male. There is a -- we don't have more of an aggressive tone. If you look at the Celsius and the Alani, and each one of these brands are really living, breathing things, and they have their own personalities.

They have their own their own look, their own field, and it's very important you don't stray too far from the brand lines and what these brands stand for. And Rockstar brings is not only incremental in revenue, but based on the consumer segment. So we're really excited and also a lot of the team members I have over -- probably about 30 team members that actually are from the founding team members within Rockstar. So they're really excited, bringing out their old Rockstar hats and the opportunities. We have about 17 employees coming over from Rockstar, and they're really excited about what they're able to do. They've got some great stories, a lot of great heritage. We're going to go back to its core. It's going to -- and we're going to optimize the SKUs.

So we do anticipate -- we will optimize the -- there's quite a lot of -- there's a lot of SKUs within the portfolio for its size. So we're going to optimize that. And then we're going to stabilize it and build the base and grow on it. It definitely has a home and allows us to compete now in a total energy approach.

Okay. Great. While we're just on the topic of consumers, I'm just going off topic a little bit, but it's a logical lead-in, which is -- just want to get your read on the consumer backdrop in the U.S. kind of lately what you're seeing or I want to ask everybody this week.

You want to take that Toby?

Yes. Sure. Well, I mean, if you look at the energy category and the energy category remains pretty robust. We're fortunate to be there. I think the category in the last 4 weeks is up 17%, 18% still year-over-year. I think a lot of other categories seem to be a little bit more challenged right now. It's tough for us to really kind of judge some of those other categories because I wouldn't say we're experts within those. We look at the energy category. Red Bull, Monster continue to be on fire. Alani is absolutely on fire and Celsius is back to growth, and we've continued to grow and really, the entire category has been growing for the most part, so -- on a brand-by-brand basis. So we think our category continues to be healthy.

You're seeing people maybe if there's some folks challenged right now economically, maybe they're pivoting out of cold coffee and some of these other coffee beverages and into energy, and we're seeing a lot of that right now. So as far as the health of our category, we feel really good about it.

Yes. I think when you -- also we've heard a lot of stories about the restaurant industry having some trouble. And I think to Toby's point, I think, consumers -- if they're looking to cut back, they're going to cut back in other areas before you cut back on maybe an energy product in certain other segments within the consumer segment space. But the category has been strong. The value is there. I think the value when you look at other categories, a lot of pricing has been taking, especially in the beverage category overall.

One thing we're seeing, which is maybe some shopping habits, looking from consumers and you look at the over consumer indexes, we're seeing large format playing a larger role than it historically has. So historically, energy drinks have mainly -- over 60% of sales are impulse purchases, right? I need an energy drink right now for the specific need state or usage occasion. But now we're seeing large format play a larger role. Impulse purchases and convenience still drives the category. But you're seeing 12 packs and variety packs becoming more of the mix. And I think that's really good because it's broadening the consumer base.

Consumers are buying larger quantities of products, and they're bringing them home and they're part of the pantry, you're part of a lifestyle, you're part of a daily routine. So I think that's a really good sign for the category as it continues to broaden, bringing more consumers in and being part of that daily lifestyle to help you achieve your goals and do all you can do throughout the day.

Okay. And what -- when you mentioned cold coffee, I'm guessing you meant like coffee shop expenses, coffee. So there's a relative value proposition when people are opting for energy?

Yes. Yes. I mean you're -- I don't want to name any specific retailers or anything like that. But just from the data points we've seen -- you're seeing a transition from coffee drinkers and to energy. We've seen that over the last few years. It just seems to be really an area that's driving that transition back into energy.

And I think what makes it actually an easier transition because a lot of these copy houses as well, it's not hot anymore. A lot of it is cold, which even potentially could also further help the can energy drink business continue to grow as people will look for value.

Yes. Hopefully. Okay. Let's talk about Alani Nu for a second. So talk a little bit about the opportunities you see for the brand as you transition into Pepsi's U.S. and Canadian distribution. Maybe any comparisons you want to make into how the transition was for the Celsius brand as well?

Yes. I mean we're really excited. It's going to bring Alani to more places, greater distribution, broader distribution. The Pepsi distribution network is phenomenal. It's a phenomenal group. It's a phenomenal organization. It's 1 customer. They have over 20,000, 30,000 sales reps, merchandisers just all the way through the organization, the data and insights, the capabilities of the system. So it's going to definitely broaden where we are. The biggest opportunities is convenience, small format, restaurants, food service, hospitals, universities.

Which you really can't, we couldn't get to that prior even with Celsius within the existing network. There's wholesalers. There's a variety of different other routes, you can go to market, but you're not going to get that high touch and the beverage category and the importance of having cold placements and the high-touch, you really need a sophisticated network like Pepsi that is world-class in their execution oversight and really keep you in stock. Some of the biggest wins, you want to add?

Yes, I would just add to what John said. You look at where Celsius was prior to our Pepsi distribution, very similar ACV and number of SKUs per location within convenience as where Alani is today. They're a little bit further along than where we were in MULO within the big box in traditional grocery. They're really right where we were in the convenience channel. And that's really Pepsi's strength. I mean, they're strong across the board, but convenience, they're going to drive within the track channel, but also the independents. They service over 100,000 independent convenience stores around the country.

I think a lot of people have been, maybe not skeptical, but asked, okay, can Alani win within convenience? And I'll just challenge those folks, go look at the data within either Circana or Nielsen, and their velocity is really on par with just about anybody when it comes to convenience right now. So I really think that's a huge opportunity. And John referenced food service. College and university falls within that bucket and certainly I think that's a great opportunity for Alani as well.

And I think the convenience opportunity when you look at it as well, because the latest data we're seeing is showing that actually the female consumer is driving a lot of the energy drink category growth and new to category and increasing consumption rates as well. And I think 1 big thing that when we acquired Alani was that we were going to cannibalize sales. That was a big concern because the Celsius portfolio is 50-50 male female, very gender neutral, really focused. So -- but what we're seeing it's not. The Alani portfolio is growing. Celsius portfolio is growing. And these are really truly fitting 2 different need states within the consumer segment.

Convenience is really exciting. We're gearing up in just a few months, we'll be going to Max. So it's the largest convenience store show in the country and where a lot of retailers and buyers are setting their planograms for next year. And when you look at the overarching trends in the category of female consumers coming and increasing consumption occasions, the importance of food pairing.

Last year at the conference, all retailers were talking about how do we increase basket ring and with warm foods and hot foods and pairing specials. And that's something we've done with the Celsius portfolio, it's worked really well in some of these pairing offerings. And I think that's going to continue to be some of the trends heading into Max. And when you look at all that with the strength of health and wellness, the flavor profiles and the differentiation, the Celsius and Alani portfolio is really well positioned for next year as we're heading into resets. And with some of the results that we're driving as well, most recently in Q2. And where we stand right now in the quarter, the numbers are looking really well and expect a lot of opportunities ahead.

What pairs best with Alani Nu, what's the food pairing?

Well, I guess it depends what is your flavor. I don't know I guess they've got some -- I was actually, while he was speaking, I was trying to think about which of the Alani flavors pair well with food because they have some more cotton candy type flavor that you wouldn't typically ascribe to that. But then they have a peach flavor that's really good.

Cherry slush is really good.

The cherry slush that's where we're at. Okay. So John is a cherry slush guy. I've been all over the Witch's Brew. I feel like Celsius is probably more apt to be paired with food just because we have that traditional soda, close to soda type taste with the fruit flavors, whether it's an orange or like I am drinking the Cherry Cola right now, which is amazing. I recommend it to everybody.

So I think our flavors probably pair a little bit, maybe better across the board. There are still some SKUs that they've got over at Alani or that we've got at Alani that we're still working that will pair well with food.

Okay. Great. So you mentioned stabilized Rockstar, right? So just want to hear a little bit more about plans for stabilization and modernizing perhaps Rockstar? And how should we think about the role in the portfolio going forward? Sort of you suggest it's almost like a one step back before we get presumably one step forward.

I think we're looking to maximize the value of the -- of Rockstar. There's no question about it. We're going to -- we need to optimize the portfolio. That's Phase 1. We're going to focus on the true core we're bringing over a lot of great talented people, and we're going to be [indiscernible] the approach. We're going to market with the laser. It's the same approach we've taken with Celsius, the same approach that Alani has taken. We're going to continue to work collectively together. We have built a great organization inside the organization. We've recently restructured the company to really be able to effectively manage a portfolio of brands. That's something unique for us.

We've restructured the business multiple times throughout the journey here at Celsius Holdings. And the last 3 months and 6 months is no different. We're going to continue to evolve. There's going to be key learnings that we need to do. So for Rockstar. We don't have a blueprint that says this is going to be X, Y and Z brand over the time. But what we need to do is we need to continue to innovate. We need to continue to execute, out maneuver. We need to understand who the consumer is, how do you become that daily lifestyle. You need to get into a daily routine.

So those are things that we're going to really be working on with the teams. Going back to its core, like focusing on -- we're going to be focusing on music and extreme sports and really resonating with that consumer target that loves Rockstar. Rockstar has a great DNA within the brand, and we're going to continue to focus on it. But I don't have a blueprint that we're going to kind of map out, but it definitely has a place within the energy category. If you look at where consumers are and where it's positioned, it was back in its day was the #3 energy drink. And there's a lot of good retro vibes coming from it as well. That is really exciting when you talk to a lot of the marketing team folks within the organization. So there's definitely potential there.

So it's really interesting when you think about what you guys have done as a management team as you build the brand or you build a brand that can scratch with Alani. It's only been a few months, right, but you're acquiring and adding a rocket ship, another rocket ship to the portfolio. But this is a turnaround. And that's very different. So when you think about your capabilities as a management team and the people who are coming in, do you think you've got the -- I mean, marketing talent is 1 thing, but like that turnaround mentality is something very new for the company.

Yes. I mean when I was started with Celsius, we're getting a turnaround company to a -- we were getting kicked out of every retailer in the country. So -- and it was never to come back. So -- and here we stand at a 20 share organization. Our portfolio right now is 20 share in the energy category. It positions us extremely well. I think we have greater capabilities today than we did 13 years ago, and 5 years ago, even 3 years ago. Really talented folks. We're very disciplined on our approach, but it is very difficult to revitalizing brands, but can we make Rockstar bring it back to where it was years ago. Let's be optimistic about it. It definitely has a home. And with us taking a portfolio approach that gives us additional holding power. There's pricing promotional levers now. We get to further enhance.

Now Alani opened that up as well, having multiple brands being able to compete. But if you look at the convenience channel and other channels that they are highly promoted -- highly promotional. So when you're off promo and other brands on, there is a segment of the population within the consumers that move to promos from what's on sale. And this allows us to have a multitude of portfolio and pricing strategies and be highly competitive, which this category is and where we've enhanced our revenue management or we're building on a revenue management team. We've further enhanced our category management team to really be able to well position this organization for 2026 when we're going to be going to market with 3 brands, really 4 brands, when you think about it because Celsius or core Celsius offerings. But then we also have CELSIUS Essentials, which is a 16-ounce offering going within the performance energy category with the Bang and C4 and Ghost.

So we really have a 4-brand portfolio go-to-market strategy. And I think that allows us and unlocks a lot of additional levers and capabilities. And also when you look at large format with this portfolio, you're upwards to 25% share in a lot of these retailers and some even higher. So really coming at it in a much different position where we'll be able to give Rockstar additional opportunities because of the portfolio approach and owning a lot of these call points.

Okay. Great. And you mentioned the Pacific Northwest as being 1 area where Rockstar has been pretty strong and you get to leverage off of that. Are there any -- is that the key markets to focus on where sort of like their share is bringing something more to yours?

Yes, the Pac Northwest is the biggest market for Rockstar. That's where -- we need to learn more about that. We're bringing on the team that knows a lot about that, but let's leverage the resources we have within Celsius as well. It's learned, and then let's see how we can scale from there and how broad can we bring it. And what markets is more adept or maybe easier to activate and create daily consumption. The name of the game is daily consumption. We need daily users.

You don't want to continue to be chasing that next sale. That's highly expensive. But how do we create that daily loyalty that daily consumption and that's all about the brand DNA and how you connect with consumers in a meaningful way.

PepsiCo, along with this additional $585 million equity investment gets the second Board seat. So mean how should we think about that in terms of their confidence in Celsius and the path forward?

I think the transaction overall and the investment shows that they're highly confident in the capabilities of Celsius and just the partnership with Pepsi since we started back in 2022. We've really structured this organization to be an enhancement to their capabilities, which are already superior. We've built out the field marketing team, a merchandising team. The addition of Alani allowed us to further invest in our team. So actually, we're building specialized teams now.

Historically, we've built the teams more on a regional basis. Now we're able to enhance it because the additional resources, we will have a team focused on convenience, food service and mass to make us even that more capable within these retailers and really be able to improve the execution. And when you look at the overall collaboration where we are within Celsius and the Pepsi system, it just positions us extremely well to compete at the highest level.

Can you walk through the expected financial impact of the deal? Just sort of how is the earnings accretion and top line growth and margin implications?

On our last call, we announced the transaction. Rockstar is about $250 million of incremental revenue. This -- our prior arrangement with Pepsi -- we had an incentive program. So that incentive program has been enhanced and the captaincy, we have additional levers and additional strategic initiatives, which further enhances that.

And we've said on our prior calls, we're not changing any future outlook. This doesn't drastically change any of our future outlook on where the organization has been on a margin basis or EBITDA or those lines. I think when you look at it, it's bringing on Alani Nu within their system, being able to really -- the captaincy in controlling those planograms, which allows for better opportunities and optimization and then taking a holistic approach with a portfolio of 4 brands now and driving additional efficiencies at retail and being able to leverage additional sales promotion and pricing strategies.

Okay. But why wouldn't it be an accelerator? I mean it's like on 1 hand, you say, well, it's an enabler of what you wanted to do, but you were...

Yes. From a top line perspective, we certainly would expect that this deal will help accelerate growth. We're not going to ascribe a number to that. But clearly, bringing Alani into the Pepsi system is going to accelerate, ramp up their opportunity to grow faster. We think the captaincy provides an opportunity for Celsius to grow at a faster rate than we otherwise would have without. And that's why it's really a new incentive program to help drive the Celsius sales. And then if we had kept this in 2 different systems, then from an operational standpoint, there would have been quite a bit of expense to try to manage 2 separate systems.

So bring it into 1 is very efficient way to do so. I would think that this is going to provide us with the opportunity to reach the margin profiles that we've talked about historically from a gross margin and from an EBITDA standpoint that we have always looked to achieve. This is the deal that is going to help us achieve that.

Yes. And I think when you look at where we are with Alani, we're still integrating Alani, right? So we're only -- 1 quarter is behind us. We're further integrating supply chain. We're going to bring Rockstar in and further optimize the Rockstar. And it's going to -- having 1 system, to Toby's point, it allows us to be extremely strategic. We always talk about orbits. We built the orbit model, you procure, you produce and you sell within an orbit to really optimize your supply chain. And that will further enhance us from shipping and logistics. And it's sort of talking about like EPS and the accretiveness of the transaction, it provides all of that.

Okay. Okay. Transition of Alani Nu away from ABI distributors and to PepsiCo. Just what can you tell us about how you're managing that? And kind of what steps are being taken to minimize disruption?

Yes. So it's going to take place. It's anticipated to take place first of December. We've done it before with Celsius. So we have a team, we have a variety of different processes and checkpoints and strategies in place to mitigate that. It is very difficult, switching any network. There's lots of challenges, not only from the distributor standpoint, but also at the retailer, but we've done this before. So we're big on processes. We're big on management and oversight, just the same thing we have with Alani. We have continual communication, continual checkpoints. Everything is timed out from a weekly stakeholder basis all the way through.

So we take -- we have a project manager and we just got to keep -- we continually keep everyone informed. Communications is the most important thing in the distribution shift over. About 80% of the distribution will move over. And most of it is around the same time line, which makes it easier. And then the challenge you have is like vendor of record and those type of things working with retailers on. And that's where our key accounts team comes in. So we have a -- if you look at where our key accounts team is today versus where it was with Celsius, when we moved in, in 2022, it's about 3x larger than it is. So we have more touch points with retailers. So that should allow some enhancement within the communication and hopefully, the efficiency.

Now we had challenges with Celsius, but we were also told when we moved Celsius into the Pepsi distribution network, it was 1 of the seamless transitions that folks have seen. I will say internally, you're always going to have issues. You are going to have -- we're going to work through them. We had product that wouldn't scan it in the back door or certain retailers. So you're just going to have to work through those, but communication, the openness and really project management and oversight is really critical. So same thing with Alani. We have -- every week we meet. We have the team meets together where we are on task, where we are in approach, where are we on the time line, what's open, what's being held up? We have a whole stop light kind of green, yellow, red process that we work towards, and it works. So...

Anything you'd highlight from prior -- the path change or even 12-ish months ago when we had some -- a little bit of noise in the route to market, like learnings from those times that you're bringing into these transitions?

Well, I think we did really well with Celsius. We didn't -- there wasn't a large impact going in, in 2022. We had a lot of the ABI distributors, which are phenomenal. They're great organization. They've done really -- done extremely well. They've built great brands. They were very supportive. We expect that to continue. We are very upfront open.

There's buyouts associated with these transactions and moving, and we've been very open and transparent with that. And they've had -- some folks have had challenges on the reconciliations and those type of things. And I think at the end of the day, it's business, it's a transaction, and we're trying to do what's right for everyone, and they know that. And we're very appreciative of what they've done. And hopefully, everyone will get a big buyout and it should be good.

Okay. Okay. And then just final question is -- now with Celsius as Pepsico's energy captain, what does success look like over the next 2 to 3 years?

I think when you look at where we are, this is really a step change for the organization, tying into a strategic. If you look at the success, it's already a proven model, when you look at Monster and Coke and Celsius is taking that same path. When you look out 2 to 3 years out, we're going to have an amazing portfolio that has a meaningful position in the energy category. We're 20 share today. We're looking to continue to build Celsius and Alani and Rockstar and our Celsius Essentials.

We have a total portfolio approach. We have a modern energy portfolio. We're aligned with today's health-minded consumer that's growing the category. And this allows us to maximize the opportunity these brands have. And if you look at where we were prior, huge opportunity, but now we're really to maximize it to the fullest and leverage PepsiCo distribution network, do all it can perform and all of its capabilities and being aligned strategically at the highest level.

Okay. Great. Well, thank you very much for being here. Please join me in thanking Celsius for joining us.

Thank you guys.

Good morning, and welcome to the Celsius Holdings Transaction Investor Conference Call. [Operator Instructions] I will now hand the call over to Paul Wiseman, Investor Relations. Please go ahead.

Good morning, and thank you for joining today's webcast. With me today are John Fieldly, Chairman and CEO; Jarrod Langhans, Chief Financial Officer; and Toby David, Chief of Staff.

We'll take questions following the prepared remarks. A press release related to today's conference call was issued this morning and is also available on our website, ir.celsiusholdingsinc.com. 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.

With that, I'll turn the call over to John.

Thank you, Paul. Good morning, everyone, and thank you for joining us. Today marks an important milestone for Celsius Holdings. We've announced a significant expansion of our long-term strategic partnership with PepsiCo, an agreement that strengthens our alignment, broadens our portfolio and positions us to create value for shareholders, customers and consumers over the long term.

Under the terms announced today, Celsius Holdings has been named PepsiCo's Strategic Energy Drink Captain in the U.S. This role deepens our partnership, fully aligns incentives and unifies the go-to-market strategies across our Energy portfolio.

Our Alani Nu brand will transition into PepsiCo's leading U.S. and Canada distribution system. This shift is expected to expand Alani Nu's geographic reach, increasing its availability across retail, and opens the brand up into new channels, particularly food service and convenience.

Celsius Holdings also agreed to acquire Rockstar Energy brand in the U.S. and Canada from PepsiCo. Rockstar brings classic energy flavors and format that is complementary to our performance forward Celsius; and modern lifestyle, Alani Nu brand. As consideration for the agreements, PepsiCo has received 585 million in newly issued convertible preferred stock, raising its ownership stake in Celsius Holdings to approximately 11% on an as-converted basis and gaining an additional Board seat.

The steps create near- and long-term opportunities for Celsius Holdings. First, Captaincy provides Celsius Holdings with strategic control over the allocations of the Celsius Holdings portfolio of Celsius, Alani Nu and Rockstar Energy brands and over their energy platforms, planograms, SKU prioritizations and promotional strategies, including certain priority periods.

Becoming PepsiCo's U.S. strategic energy drink captain is a pivotal milestone. It strengthens our relationships, brings greater alignment and allows us to lead with a unified commercial strategy across the Celsius Holdings portfolio. We believe this role will enhance category productivity for retail customers and deepens Celsius position as a leader in modern energy.

Second, Alani Nu has quickly become the fastest-growing brand in modern energy. By moving into the PepsiCo's distribution system, Alani Nu is positioned to achieve meaningful ACV expansion and accelerate its food service presence. We expect this transition will broaden Alani Nu's availability and further its appeal to young female and wellness-focused consumers.

Third, adding Rockstar strengthens our portfolio and expands our consumer reach. With Celsius and Alani Nu as the growth engines and Alani Nu extending into lifestyle and wellness, Rockstar allows us to serve the large traditional segment of the energy drink category. Our approach will be disciplined: stabilizing the brand, rationalizing SKUs and building on the brand's rich heritage.

Certain Pepsico employees who work on the Rockstar Energy brand will transition to Celsius Holdings, giving us unity and brand experience. Fourth, PepsiCo's alignment with the additional investment of $585 million in equity and the additional Board seat demonstrates their long commitment to Celsius. It's expanded alignment strengthens our governance and further aligns our strategies.

I'll now hand it over to Jarrod to deliver remarks on the financial elements of the transaction. Jarrod?

Thanks, John. Good morning, everyone, and thank you for joining us with such short notice. Before John closes out our prepared remarks, I wanted to walk through some of the timing components of the transaction.

We signed and closed all agreements. In addition to the Alani distribution agreement, the Captaincy agreement, the preferred share issuance and the Rockstar acquisition, we've entered into a transition services agreement as well as a manufacturing agreement at the Pepsi-owned manufacturing facilities that manufacture Rockstar product.

These agreements will have different components that will be in place from 1 to 7 months. The accounting for the transition services will be like what we did with Alani and that we will pay a monthly rate while utilizing the transition services until we effectively transition off of the services being provided. Examples of such services would be working with our teams to transition key account calls, managing e-commerce and assisting with backshop support.

As it relates to the manufacturing agreements, we will utilize a variety of models as we transition Rockstar into our orbit structure, so there will be some noise in the system over the next 3 to 4 months. As we are likely to get modeling questions, I'd like to note that our intention is to transition a majority of the Alani Nu DSD to the Pepsi distribution system as of December 1. As a result, we would only have 1 month of activity with Alani in the Pepsi system prior to year-end.

So if we were to just look at Celsius and Alani, we wouldn't expect to see much change in Q3 relative to what we discussed on our call earlier in the month. As it relates to Q4, we will continue to have tariff pressure, as previously discussed, and I would expect to see some inventory write-offs in scrap as we do the transition into the Pepsi system resulting in some additional pressure on margins.

If you look back to our comments when we moved into the Pepsi system with Celsius, you'll see that we had a similar outcome in which we increased some of our inventory reserves and write-offs as a result of the transition.

Moving to Rockstar. We will only have 1 month of activity in Q3. And looking at the business as a brand separated from PepsiCo, we are looking at something like $250-plus million in annual sales to add to our portfolio, and therefore, we wouldn't recommend any significant changes to models for Q3. We will provide additional color on our Q3 earnings call in relation to Q4.

Let me provide a bit more detail on the financial impact. PepsiCo's $585 million preferred stock investment increases their stake in Celsius to about 11% on an as-converted basis and allows them to nominate a representative for a second Board seat. This is a strong endorsement of our long-term strategy.

The new preferred stock carries a 5% dividend consistent with their prior investment. Importantly, the structure is designed to maintain our flexibility while aligning PepsiCo's interest with our performance. From a financial standpoint, we expect this transaction to be accretive to cash EPS in the first full year. We also expect distribution to expand meaningfully as Alani Nu transitions into PepsiCo system and Rockstar Energy is integrated into our portfolio.

Our balance sheet remains strong with the liquidity to support integration and continued investment in growth as well as debt reduction.

Let me now turn it over to John for some closing remarks.

Thank you, Jarrod. This is an exciting next step for Celsius Holdings and PepsiCo. We step into the role of PepsiCo's U.S. energy captain, bringing new influence and alignment across the portfolio. Alani Nu will enter PepsiCo's distribution system, unlocking its next phase of growth.

Rockstar broadens our consumer reach, while Celsius and Alani Nu remain the engines of modern energy growth. And PepsiCo increased investment and the second Board seat strengthens our strategic alignment for the long term. Together, this agreement currently creates a 20% share portfolio in the U.S. energy drink category, expands our reach to more consumers in more places more often and positions Celsius Holdings for sustained growth in years ahead.

I want to thank our employees, our partners at PepsiCo and our shareholders for their continued support. We are excited what lies ahead. With that, Jarrod and I will take questions. Turn it back to the operator.

[Operator Instructions] Your first question comes from the line of Peter Grom with UBS.

Congrats on the news this morning. One thing I was want to get some perspective on as it relates to the transaction. Just on what being the energy drink captain for Pepsi means and what this may unlock as you look ahead? So just any broad thoughts in terms of whether having control of the entire portfolio may do in terms of improving execution, shelf space, just relative to what we've seen, I guess, over the last several years?

Yes, absolutely, Peter. Thank you. The Captaincy really allows us to have an industry strategic control over the [ play ] portfolio and planograms and the go-to-market strategies. So it really aligns the synergies that Celsius and PepsiCo have on our go-to-market strategies. And when you look at kind of within different markets, within different channels, we're able to make sure we have the best planogram and the best flavors and SKUs within those locations to drive the optimal sales performance.

So really a strategically aligned SKU prioritization, promotional strategies and then priority periods as well throughout the year. So really just truly deepens the overall long-term partnership that we have within PepsiCo. And I think it really positions us for continued growth, especially with the incorporation of the Alani portfolio and then the opportunities we have with Rockstar.

Your next question comes from the line of Kevin Grundy with BNP Paribas.

Great. Congratulations on the deal. Could you maybe comment on the deal structure, which I think, in some ways, maybe to many is a bit reminiscent of the Coke and Monster deal from over a decade ago. So maybe just comment on why this was the right structure? Comment why perhaps just a distribution deal more similar to what you have currently with Celsius and the Pepsi system, why taking on the Rockstar brand, which has struggled for a very long time, as you guys know, as part of the consideration, why that was appropriate?

Yes. No, absolutely. I think what this does is really lands on a few things. And when you look at the overall thesis and the agreements and I talked about the Captaincy before is an important aspect. The additional investment within the organization and the additional enhancement of the Board seat just further [indiscernible] aligned Celsius strategically with PepsiCo, provides us a unified front and better collaboration as we continue to move forward.

Now I think it's a really good model. Somewhat similar, you could say, to Monster and Coke, and it seems to be a proven model for them as well. And we're really excited about the future together. The more we can further collaborate, better execution, better prioritization. The category continues to grow and scale.

We see great opportunities that this category will not -- is not planned to slow down at all. And with our modern portfolio and the enhancements of it with Rockstar coming on the portfolio, we're able to offer it to a much broader consumer base and really optimize our planograms going forward to capture the greatest share and dollars in revenue.

I'll jump in on kind of the structure. From a -- the way it was structured is we will be moving a lot into the Pepsi distribution system to join Celsius and Rockstar for a full portfolio. As a part of that, Pepsi will fund the termination fees of the -- moving out of the current distribution system and into their distribution system.

We will be acquiring the Rockstar brand in the U.S. and Canada. We've already talked about kind of the captains concept. And then we also have some other ancillary things like transition service agreements and things like that.

In terms of that, what Pepsi is getting is that we are going to extend the preferred As to mirror what we call in the preferred Bs. So the preferred Bs will be $585 million of value through preferred convertible shares. And then the preferred As remain what they were. So you'll have a strike price on the preferred as at $25, a strike price on the preferred Bs at $51.75, and they'll have the same features that the preferred As had back when we set them up in '22 with the 6-year automatic convert and then the 7-year conversion feature as well.

Your next question comes from the line of Robert Moskow with TD Cowen.

Congratulations. I wanted to know the retail data for Rockstar indicates $600 million in retail sales. You described $250 million to your P&L. Can you help us explain the difference between those 2? Is there going to be some rationalization for Rockstar?

Yes. We will -- absolutely, a great question, Robert. We do anticipate some rationalization within the portfolio. There's a big opportunity there. We're going to continue to optimize. And so we anticipated that into our numbers as we're anticipating that SKU rationalization to take place as we're entering in and going through resets for 2026.

Yes. So it's -- there's -- you got to remember where we are on the cycle. So there's the retailer, there's the distributor and then there's the brand. And just like if you look at Celsius last year, I think the scanner data was something like $2.7 billion, and we were around $1.4 billion. So there is going to be somewhat of a delta. The $250-plus million is kind of a pro forma number that we came up with.

It's not exact because it's pulling the number out of the Pepsi system and then saying roughly what do we think we'll get net of promos and contra revenue and things like that. So it was a ballpark number. That's why we kind of just called out roughly $250-plus million.

Okay. And just one quick follow-up. What can you do to mitigate any kind of friction or noise during this transition away from the current distribution network and into yours? Normally, there's some -- either risk of inventory loading or loss of sales.

Yes. I mean, Robert, we worked with our partners, mainly the ABI distributors, they're great partners, great executors and we have a good working relationships with all of our customers and distribution partners, and they supported the transition of Celsius into the network, and we expect the same.

And we have our SOPs, our processes and our oversight with all of our team members that have experience doing this. And we're going to continue to work through this extremely diligently to mitigate any impact on that, and we have controls in place and oversight to try to limit that as much as possible.

Your next question comes from the line of Kaumil Gajrawala with Jefferies.

Congratulations. Just the first question is making sure I understand what sort of captaincy means. Does that also mean exclusivity?

The captaincy piece is an incentive program that would align strategic initiatives and really revolves around really the strategic alignment within being the energy captain lead over planograms within energy of the Celsius Holdings portfolio as well as enhanced priority periods and further collaboration strategically within the PepsiCo organization.

Okay. Got it. So -- all right, we'll figure that out. The -- on the sort of the decision to go this route versus leaving the brands where they were, can you maybe just walk through all the things that you guys were working through and where sort of like the real background of the decision-making process?

Yes. I'll touch highly on that. I mean the strategic decision is really around not only when you look at synergies, the opportunities of running and really collaborating and working with one network just the opportunities of additional adjacent categories with expanding Alani distribution, not only to all of the independent channels but also food service, the breadth and depth of distribution and the support within the world-class PepsiCo distribution network.

So we are -- have a lot of capabilities and alignment within our sales organizations. We really have tied into a Pepsi, not only from a sales and organizational standpoint, but also from a supply chain standpoint as well as we continue to drive efficiencies, which you started to see that in our gross profit margins over the last several quarters as well.

So it has a variety, not only from an operational go-to-market commercial reasonings, but also from a financial reasonings as we continue to optimize driving greater shareholder value.

Your next question comes from the line of Jim Salera with Stephens.

To dig into how you guys are thinking about what Rockstar adds to the portfolio? Obviously, around the Alani acquisition, you guys really emphasized female focus and that opens up kind of the new consumer cohort. Did the Rockstar brand bring anything that you've been unable to access with the Celsius and the Alani brands? Or is it going to kind of fit more of a niche consumer appeal?

And then, Jarrod, I appreciate all the thoughts around the transition service agreements. Once we move past that, just any thoughts around long-term margin profile for Rockstar relative to Alani and the core Celsius brand?

Yes, I'll take the first part of that, Jim. I mean, when you look at the Rockstar portfolio, it does really well in the Pac Northwest that has historically been more of a weaker area for our portfolio. So that does open that up as opportunities to leverage our total portfolio continue to build in the Pac Northwest.

Also, if you look at Rockstar, it's more of a traditional energy drink offering with traditional flavors, that is an area that between Celsius and Alani, that is not our core consumer base. So it does broaden our portfolio. It broadens our breadth and opens us up for a total portfolio approach as we continue to execute within these divisions of Pepsi in particular markets, we were able to customize our portfolio to drive the greatest velocities, the greatest revenues for the consumer base that is in those particular markets. So really gives us additional levers to pull and strategic opportunities for our commercial teams. Jarrod?

Yes. I guess in terms of kind of a margin profile, as we're going through the TSA, we're not going to be able to see some of the benefits that we'll see once we get it fully integrated into our sales infrastructure, our commercial infrastructure and our operations infrastructure within our 6 orbit model.

So you're probably looking more like a margin profile back in kind of 2020, 2021, 2022 with Celsius, that will then migrate to the 2023, 2024, 2025 over a period of time somewhere in the 12- to 18-month time frame.

Your next question comes from the line of Michael Lavery with Piper Sandler.

Just was wondering if you could give us any update on what Alani transitioning into Pepsi might mean for an update to the synergy figure you've been giving around the deal previously and if there's any incentive changes or updates that come with the new arrangement compared to where you were previously?

Yes. We're not going to make any forward comments today, but we're excited about the opportunity. When you look at where Celsius was entering the PepsiCo distribution system and you look at where Alani is, it's a little bit further developed than when Celsius went into the PepsiCo distribution network.

But there's a lot of opportunities within additional channels, small format, convenience and the food service opportunities. So we're not going to provide any forward information, but we're going to maximize the value we can with our total portfolio approach, working closely with PepsiCo.

And is the -- are the incentive terms the same as they were with just brand Celsius or is there any change when you bring Alani in now?

It's restructured from a -- the incentive. So it is more around -- tied around the captaincy and the unified strategy, commercial strategy going forward and really expanding and tightening the partnership. .

Restructured to be more favorable?

Well, you've got 3 brands into it now.

Your next question comes from the line of Andrea Teixeira with JPMorgan.

Congrats again. Just as you mentioned broadly now that you revised the terms of the distribution now, obviously, 3 brands over 1 brand before. So I was hoping if you can give us comfort on how this distribution transition will be less disruptive than before?

And then going back to, in the beginning of the call, you said that there would be some inventory reserves and write-offs that are obviously part of the deal into the fourth quarter. So how can we think about those impacts? And any pull forward as the ABI distributors had -- I mean, anything that we're seeing here? Obviously, the numbers for Alani are fantastic in the track channel data, but just thinking if there were any shipment dynamics we should be aware of ahead of the transition or anything to note?

And then just as we think about valuation for the deal, the $585 million, just thinking of the synergies and all of that, how can we think about like the increase in stake and what it means in terms of valuation against -- all being said and done against post synergies this deal came out at? We can do, obviously, EBIT to sales, but in terms of EBITDA or profitability, it's hard to gauge the valuation metrics.

Yes. Just one -- I'll start off with the first one, the disruption that you mentioned with the Celsius distribution moving into and integrating into PepsiCo. We were actually we're told the opposite. It's one of the best transitions that they've seen. And quite frankly, we've received a lot of positive feedback from our distributors on how professional we handle that transition.

So I would expect this Alani transition to be held and transferred in the same manner with great commercial oversight business acumen and execution. So we feel confident in that within -- as I talked about, we have processes and procedures, and we're excited about the opportunity. And we really appreciate all of the ABI distributors out there for all their support and what they've done.

When Jarrod mentions write-offs, we did see some write-offs when we entered into the PepsiCo system, and you will have some. There's different pack sizes, there's some residual products. as you continue -- as you're transitioning. So we do expect that, and it'd probably be somewhere similar to what we saw within the Celsius portfolio on the transition.

But it's -- it won't be material -- not extremely material, but there will be some write-downs that take place.

In regards to Alani, it has done phenomenal extremely well. that just launched most recently within the quarter as a limited time offering has just extremely performed. The flavor profile is great. The social media, the look and feel, the excitement that's taken place within the product has really done phenomenal.

And we have more LTOs coming for the back half, not only on Alani, but also within the Celsius portfolio or we'll be launching our first LTO for the first time. And so I think when you're looking at pipe fills, looking at what you should experience, once again, we don't provide forward-looking information, but I would go back to 2022, you can kind of see some of the pipe fills we experienced within the Celsius portfolio. We would expect something similar, but we'll know more as we continue to progress. So thank you for all your questions.

That concludes our question-and-answer session. I will now turn the call back over to John Fieldly for closing remarks.

Thank you, everyone, for joining the call in such short notice. We're excited and thank you for joining us today for the continued support in Celsius Holdings. We're proud of the progress we've made, energized by the next chapter with PepsiCo and we're confident in our ability to drive long-term growth and value. We look forward to updating you on the momentum in the quarters ahead. Go grab a Celsius and live fit and enjoy the long weekend.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.