Attached files
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| 8-K - FORM 8-K - Celsius Holdings, Inc. | f8k110609_celsius.htm |
| EX-99.1 - PRESS RELEASE DATED NOVEMBER 6, 2009 - Celsius Holdings, Inc. | f8k110609ex99i_celsius.htm |
Exhibit
99.2
Third
Quarter 2009 Investor Conference Call, November 10, 2009,4:30pm
(ET)
Good
afternoon and welcome to Celsius Holdings, Inc’s Third Quarter 2009 investor
conference call. Joining me on the call today is Steve Haley, the
company’s Chief Executive Officer and Jan Norelid, Chief Financial
Officer.
During
the course of this conference call we will make forward-looking statements
regarding future events and the future performance of the Company. We
caution you that such statements reflect our best judgment based on factors
currently known to us, and that you should not rely on such forward-looking
statements since our actual events or results could differ materially as a
result of a number of important factors. These factors include
general economic and business conditions, trends, the impact of competition,
technology and regulations and other risks and uncertainties discussed in the
reports we file from time to time with the Securities and Exchange
Commission. We assume no obligation to update any forward-looking
statements or other information provided during this conference
call.
In
adherence to Regulation Fair Disclosure, the Company has provided information in
its third quarter financial results press release and this publicly announced
financial results conference call. We will not provide any further
guidance or updates on our performance during the quarter unless we do so in a
public forum.
Operator
turns call over to Steve
Thanks
_____ and thank you for joining us for our Third Quarter 2009 investor
conference call.
Financial
results for this third quarter of 2009 were released to the public on November
6th through our press release distributed on that Friday
afternoon. You can view a copy of this document on our web-site at
www.celsius.com
in the investor section.
This is
our seventh quarterly call as a public company and with so much progress being
made; we will change the structure of the call a bit. I’m going to turn it over
to Jan, our Chief Financial Officer, for the financial details on the specific
numbers for the quarter earlier than usual. After Jan reviews the financials,
I’ll then provide more of a state of the company update on our progress. As
usual we will leave ample time for your questions.
On our
August 6th
earnings call for the 2nd
quarter, I explained that we felt we were moving from the foundation building
phase of the company to the more exciting growth phase. Our focus is on growing
our distribution and even though our quarter over quarter revenue showed only a
12% increase for this quarter, the number of new retailers that are agreeing to
put Celsius on their shelves is now increasing at a fast pace. This combined
with increasing same store sales rates for our established or mature retailers
gives us a high degree of optimism. Before I get into some of the examples, let
me turn it over to our CFO, Jan Norelid, for a run down on this quarter’s
financial details. Jan.
Good
afternoon and thank you for joining us today.
Our
revenue for the quarter was $1.3 million as compared to $435,000 for the same
quarter a year ago. The increase of 208.4 % was mainly due to increased sales in
all sales channels and many new customers. The larger new customers were 7-11,
Supervalu, A/P Pathmark, etc.
Our gross
profit for the quarter was 42.9% as compared to negative 4.8% for the same
quarter last year. The margin this year was in line with previous quarters of
this year. Last year we had a large write-down of inventory that affected the
margin negatively. Without the write down, gross profit for the same quarter
last year would have been 41.8%
Our
operating expenses have increased compared to the same quarter last
year. Our sales and marketing expenses were $2.6 million this year as
compared to $1.4 million for the same quarter last year. The main reason for the
increase is our investment in traditional advertising, i.e. radio, TV and some
print ads and also increased employee cost as we have beefed up our sales side.
We have also reduced our local marketing spend this year as compared to last
year due to our focus on marketing on a more national level. Our G&A
expenses increased by $26,000, from $434,000 to $624,000. This increase is
mainly due to increased cost for employee options this year as compared to the
same period last year.
Our net
interest expense increased from $33,000 in the third quarter of 2008 to $50,000
for the same period this year. The increase was mainly due to increase in
debt.
Our net
loss increased from $1.8 million for the third quarter last year to $2.7 million
for the third quarter in 2009, or two cents per share in 2009 vs. one cent per
share last year, both basic and diluted.
We show
at the end of September a stockholders’ deficit of $2.3 million.
Our cash
flow from operating activities for the nine months this year was a negative $5.8
million as compared to $3.8 million for the same period previous
year.
1
During
the quarter we received additional financing in form of $6.5 million of
convertible debt, of which at quarter end we had drawn $2 million and a note for
$1 million. As we have stated in our Form 10-Q for this quarter, we currently do
not have sufficient funds to continue our operations. We have said the same
thing in the past. We will have a need for additional financing. We hope to make
announcement about this in the near future. Any time there is more equity
financing, there will be some dilution. Today we have 153 million shares
outstanding and the diluted calculation at September 30 showed the additional
dilutive shares were 141 million shares for a total of 293 million
shares.
We have
received questions about the recently filed S-1 to register preferred shares and
convertible debt. The preferred shares were sold in December 08 and April 09,
the new convertible debt for $6.5 million is what is financing our marketing
efforts at present time. I don’t know of any intention of CDS to actually sell
these shares.
I direct
you to read our Form 10-Q for this quarter for further explanations as to the
9-month results and other important information about the company.
Now I
will turn the call back over to our CEO, Steve Haley
Thanks
Jan.
We spent
the first six or seven months of this year on our foundation. We added personnel
and restructured our organization. We enhanced our packaging and learned which
marketing vehicles and angles had the most impact. As we moved into the third
quarter of this year, we were ready to move into the growth phase.
A key
element to our plan of attack was to align ourselves with some of the top
brokers that handled the key accounts that we would be targeting. Of course, the
largest and most significant of these is the relationship with CrossMark and we
have others for some specific target accounts.
Another
key element is the national marketing campaign that we launched towards the end
of the quarter. In a minute or so I’ll describe where we are and what’s in the
works on the marketing front but first let me give you some examples of the
successes that we’ve had in growing our distribution. We’ve issued press
releases for some of these retailers as we began shipments or when the product
was hitting the shelves.
Remember,
many times there can be a significant lag in time from the initial
authorization, to actual purchase orders, to the shipments and deliveries to the
retailer’s own distribution centers to then being delivered to the stores and
finally actually on the planed store shelves. This complex supply chain gets
even more varied when the retail chain is made up of corporate stores and
franchise stores. Examples of this are GNC and 7-Eleven. I mention these
complexities because even though we announce that we are in a chain and Celsius
is on the shelves of the majority of stores within a chain, there can still be
locations that are not stocking Celsius yet.
By the
end of the fourth quarter of this year, we should be in 1800 SUPERVALU
locations. They are the number one Grocery wholesaler in North America and the
number three grocery chain within North America. Their banners or divisions
include Albertson’s in Southern California, Acme, Jewel/Osco, Cub Foods and
Shaws. By the way, for those of you that have a Jewel/Osco near you we are on
sale right now at 2 four-packs for $10. You may remember that we announced Shaws
in the beverage section earlier in the year through our distributor in New
England, Polar Beverages. With this new relationship with the SUPERVALU parent
company, we are now also going into the health and beauty area with four-packs.
In fact, we are in discussions with more retailers to have multiple locations
within their stores.
Celsius
is now in distribution at 220 Shoprite stores, which is the number one grocery
chain in metro New York/New Jersey. As press releases during the third quarter
relayed, we are in Pathmark, the number two chain in metro New York/New Jersey,
and the number four grocery chain, A&P. The other large one in that market
is Stop & Shop and we expect distribution there in December as
well. We plan a meaningful push in the New York metro area and most
metro retailers will feature Celsius four-packs in January at either 2 for $10
or $5.99 per four-pack. This should coincide with some extra marketing efforts
in New York City for the first part of the year.
Our first
shipment to Giant Carlisle will be in December. We will have four flavors going
into the 140 stores. They are the number one grocery retailer in central
Pennsylvania. Celsius will also be part of new item end cap program in January
and will be on sale towards the end of January at 2 four-packs for
$10.00
I
probably should save this one for last because of the significance to Celsius,
but we will be in 167 Costcos in late December 2009 or early January 2010.
Costco is the eighth largest retailer worldwide and the third largest in North
America. In March of next year, we hope to be in their 400+ stores nationwide.
We will offer aggressive pricing on 15 count packages of our Raspberry Acai
Green Tea and Sparkling Orange.
As those
of you in the Northeast may know, we are in about 800 CVS stores up there. Well,
in December 2009 we will begin our first shipments to almost 7000 stores
nationwide. CVS is the number two drug chain in the US and the seventh largest
retailer in North America. Celsius will be in the health and beauty or diet
section. We’re planning to have six strong merchandising events in 2010 along
with a major diet advertisement in February.
2
We are
already shipping to the third largest drug chain in the United States, Rite Aid.
They are the 13th
largest North American retailer and they will carry Celsius in 4,836 stores. Our
merchandising in January 2010 will include end caps in a major weight management
program.
Not as
large as some of these, but just as important in the Southern California, is
Ralphs. They have 285 stores in Southern California and are the number one
grocery chain from a market share standpoint out there. Ralphs is the
largest supermarket division owned and operated by The Kroger
Company. The Kroger Company is the second largest retailer in
America.
Back to
the national front, we are pretty confident that in the next day or two we will
be authorized and planned into Walgreen’s. We believe we will be in 6800 stores,
shipping in December of this year with two flavors. We plan a very strong
in-store coupon program for January of next year.
With
Walgreens our total drug store distribution by January 2010 will be over 18,000
locations around the country.
It was to
drive demand for this larger national presence that caused us to start our
national advertising in late September of this year. You can see that the sales
team has been pretty successful at getting us into most of the largest national
accounts. This list does not include regional chains that we are expecting to
ship to this quarter. For example, just last week we received the initial orders
from Harris Teeter based out of Matthews, NC. The company is a very well
respected supermarket chain operating in 8 Southern States with over 190 stores.
Harris Teeter is regularly recognized as a progressive,
state-of-the-art food retailer. Supermarket News, places Harris Teeter, in
the top 40 food chains in the country. A nice benefit to us is they also have a
highly developed nutritional area in which Celsius will be placed. We feel the
chemistry is ideal between the Harris Teeter consumer and Celsius. Their
customers have come to expect the latest offering in the highest quality
nutritional products, and Celsius personifies those qualities.
Celsius
will be on shelf by December 1st,
and most stores will offer a variety of four-packs and some stores will
stock our Celsius On-the-Go packets. I don’t have time to list all the
regional chains here. We will announce some of the new ones through our press
release process when the marketing or competitive circumstances warrant it. So
be on the lookout for more announcements.
One last
one on the distribution front that I would like to mention is Core-Mark, one of
the leading distributors to the Convenience class of trade in the
US. We have previously announced our relationship with McLane who
services such customers as 7-Eleven and Gate for us. Core-mark gives us yet
another powerful avenue to get Celsius to more of the convenience
chains.
As our
distribution has grown from small regional areas to more of a national footprint
with large recognizable retailers, we have expanded our marketing from local
grass roots events to multiple marketing methods and more of a national
focus.
Our new
advertising campaign featuring a customized “Burn Baby Burn” song has been
launched and rolled-out nationally. In our television and radio advertising we
highlight the health benefits of Celsius such as calorie burning, healthy
energy, great taste and backed by science. Many of you will notice that we are
broadening the target audience with more mass appeal in an upbeat, positive
tone. To support our growing national distribution, our call to action includes
a coupon from burnbabyburn.com.
We are
currently running 15 and 30 second TV commercials on national cable stations
that appeal to adults 25-54. Cable channels MSNBC, Bravo, CNBC, Lifetime, TLC,
E!, HGTV and others such as the Food Network. Our radio campaign is currently in
over 25 top Celsius markets, featuring DJ endorsements raving about Celsius on
air and national satellite radio on the Oprah network. Our national print
campaign is currently in such publications as US Weekly, First for Women, Women’s
World and Women’s
Health.
We
continue to do some of the grass roots type events that helped us build the
initial brand awareness in areas that we have strong distribution as well as
newer areas as we launch an anchor retailer or new distributor. We also continue
to participate in some of the larger trade conventions such as NACS, NACDS,
IRHSA, the Arnold Show, Club Industry and the like. This year’s NACS convention
brought us over 150 leads for convenience store chains that the sales team is
now following up on.
Through
the years we have also won several awards and we continue to participate in
these contests because as we win, we gain even more exposure. Most recently we
were awarded the CSP Retailer Choice award for Best New Product with our Celsius
Green Tea Raspberry/ACAI. This was presented at the large National Association
of Convenience Stores convention by CSP Magazine.
Internationally, we were a finalist in the Beverage Innovation Award for 2009
Best Health Initiative with our Celsius On-the-Go packets.
In
addition to the print, radio and television advertizing, we are launching our
mobile, internet and social marketing campaign this December. We will be
formally announcing this in a few weeks but I wanted to take this opportunity
now to mention it as it is really cool technology that should help us increase
awareness around the world. Our technology and mobile campaign will include our
Social Networking Widget which is cutting edge technology that interacts with
customers across all social media platforms. It is a fully functional nanosite
or tool for consumers to get the most up to date information about Celsius,
coupons and local store locations or product information as well as member only
offers. The widget can be shared virally over the internet on social networking
sites such as Twitter or Facebook pages, embedded on a web site or viewed on a
mobile phone. It adjusts to the formatting for each type of cell
phone.
3
During
the third quarter of this year we launched our first sports venue marketing
partnership with BankAtlantic Center and the Florida Panthers. This gave us
In-arena presence with pretty extensive signage, product distribution in all
food courts and extra sampling opportunities. Being the official calorie burner
of the Florida Panthers raises brand awareness here in the South Florida market.
Featured in this fully integrated program is the Panthers in-arena host Randi
Ross as the Celsius Girl supporting in-arena Celsius promotions. We are doing
several promotions with the Panthers over the next few months. For example: this
weekend we kick-off a big promotion called Celsius Hockey N Heels, where ladies
are treated to an inside tour of the facility, meet and greet with the players’
wives and a little Hockey 101 and of course the game to follow.
You can
see that we have a lot happening now on the marketing front. Because of all the
commercials, publicity and new distribution, another key milestone for the
Company that did not receive as much attention as it might deserve but is
significant for us is our 5th
scientific study. This study was presented at the American College of Nutrition
last month. This study looked at an “at risk” population of women.
This means sedentary and obese or overweight. The findings
show that for this group Celsius combined with exercise improves body
composition with 46% greater fat loss and 27% greater muscle mass as
well as delivering 35% greater endurance performance. Also a new finding is that
drinking Celsius with or without exercise resulted in a significant drop in
total cholesterol by 5% to13% and bad LDL cholesterol dropped from 12%
to18%. Exercise alone had no effect on blood lipid
levels.
As the
calorie burning category grows, we strive to maintain our leadership position
and our continued dedication to the science is a cornerstone of our foundation
for success. We also believe having the science to back up our claims is one of
the things that separates us from potential competitors and contributes to the
overall value of the company and brand.
Finally
and most significantly on the marketing and brand awareness front is our most
recent announcement of our new national spokesperson, Mario Lopez. We’re so
excited to be partnering with Mario. As our national brand spokesperson, he will
be prominently featured in a new marketing campaign the Company is planning for
2010. We will be conducting additional activities with Mario as time goes on but
all details are only in the planning stages and I can’t get into many details
yet.
He is
such an enthusiastic spokesperson, it is only fitting that he has joined the
Celsius team to help us promote this innovative drink in innovative and new
ways.
We’ve
grown over the past four years and we feel we’re at time in the continued growth
and expansion of the brand that it made sense to bring on a national brand
spokesperson to help increase wide-spread awareness for Celsius. Mario was a
natural choice once we found out what a fan he was of the drink and how much he
loves to use the product in his daily life. Mario Lopez, a multi-talented
celebrity who danced his way into America’s heart on “Dancing with the Stars” is
the sole host of the long-running daily syndicated entertainment program
“Extra”. A highly engaging, likeable, sought-after, personality, Mario
likes to stay busy. In addition, he is the host of the hit
reality-competition series "America's Best Dance Crew." He recently
starred on Broadway and is a popular guest host on popular daytime talk shows.
This past spring, People named Lopez 2008's Hottest Bachelor.
Born in
San Diego, Lopez has become well known to television audiences through his role
on NBC's "Saved by the Bell".
In the
midst of all his television and stage work, Mario can now add author and fitness
expert to his resume. His first book, Mario Lopez's Knockout
Fitness, was released in stores May 2008 and his new children's book
Mud Taco was
released just last month or October 2009. Mario is the perfect fit for the
demographics of Celsius, because he is highly appealing to both genders, male
and female, across ages 25-54. We couldn’t be more thrilled to be working with
such a multi-talented individual.
Hopefully
you can tell that our increasing excitement and enthusiasm is warranted and
based on attaining real results. While we grew last quarter and plan on doing it
again this quarter, our sights are set much higher. We have a lot of work to do
and don’t take our responsibilities lightly. We’ve assembled a strong team and
we look forward to growing the company, brand and the calorie burning category.
We consider part of our responsibilities to be as open as possible with our
shareholder base. In this vein comes the topic of guidance.
Earlier I
mentioned the complexities of the demand side of the supply chain. The buyer may
commit to us and then there may be factors out of their control that delays the
actual plan-o-grams that the purchase orders are built from. Also, when we ship
to a new retailer early in the quarter there is a chance to get reorders in that
period. If delayed then it is rare to benefit from a second round of orders in
the current quarter. Once on the shelves, much of the variability is removed and
as we progress we plan on our revenue to become more predictable. We could still
have material swings in our revenue based on factors that we do not control. At
the same time we hope to provide you with guidance in the future.
Jan and I
will now open it up for your questions. Operator.
4