CELH Q1 Earnings Call: Category Growth and Acquisition Integration Shape Outlook

Energy drink company Celsius (NASDAQ: CELH) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 7.4% year on year to $329.3 million. Its non-GAAP profit of $0.15 per share was 24.1% below analysts’ consensus estimates.

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StockStory’s Take

Celsius’s first quarter results were largely influenced by a combination of slower retail velocity, changes in promotional strategies, and challenging comparisons to the prior year’s product launches. Management cited that cycling last year’s major ESSENTIALS launch and a more balanced approach to promotions contributed to the sales decline. CEO John Fieldly noted, “We got off to a slow start and we have more of a balanced approach this year,” highlighting the company’s recalibration in response to shifting consumer trends and increased competition.

Looking ahead, management’s forward guidance centers on operational integration of the recently acquired Alani Nu brand and a focus on innovation to regain momentum. CFO Jarrod Langhans pointed out that gross margin improvements from sourcing efficiencies are expected to persist in the near-term, though he acknowledged uncertainties related to tariffs and inflation later in the year. The company plans to leverage its stronger retail presence and new marketing initiatives, anticipating that easier year-over-year comparisons and expanded shelf space will help drive recovery in subsequent quarters.

Key Insights from Management’s Remarks

Celsius’s management identified several key themes impacting the first quarter’s performance and outlined strategic updates for future growth.

• Distribution and innovation mix: The company attributed the revenue decline to slower retail velocity, changes in timing and structure of U.S. distributor incentives, and more balanced promotional programs versus last year’s heavy first-quarter activity.
• Acquisition of Alani Nu: The completed acquisition of Alani Nu adds a second $1 billion brand to Celsius’s portfolio. Management emphasized minimal cannibalization between the brands and sees opportunities to cross-leverage distribution and consumer segments, especially targeting female consumers.
• International market expansion: International revenues grew 41%, with gains in markets like the UK, Ireland, France, Australia, and New Zealand. Management intends to maintain a measured approach to further global expansion.
• Gross margin resilience: Despite revenue pressure, gross margin improved by 110 basis points to 52.3%, supported by sourcing and manufacturing efficiencies. Management expects near-term margin stability but flagged uncertainty from potential inflation or tariffs later in the year.
• Shelf space and product launches: Shelf resets and retail expansion, particularly for new flavors and multipack offerings, were highlighted as drivers for future quarters. The launch of CELSIUS HYDRATION and increased cold placement at checkout are expected to further support in-store presence.

Drivers of Future Performance

Management’s outlook for the next several quarters is shaped by integration of Alani Nu, ongoing product innovation, and navigating category pricing and promotional trends.

• Integration and portfolio leverage: The company aims to drive growth by cross-selling Celsius and Alani Nu across retail partners and foodservice channels, leveraging their distinct consumer bases.
• Innovation and shelf expansion: New product launches and expanded shelf space, especially secondary placements and checkout coolers, are expected to increase consumer awareness and purchase frequency in the coming quarters.
• Pricing strategy and cost headwinds: Management is maintaining flexibility on pricing, monitoring consumer sensitivity, and staying cautious about further promotional activity. Risks remain around input cost inflation and potential tariff changes, which could impact margins in the second half of the year.

Top Analyst Questions

• Kaumil Gajrawala (Jefferies): Asked about the drivers behind energy category growth and specific strategies to improve product velocity. Management discussed cycling last year’s innovation and adopting a more balanced promotional approach.
• Peter Grom (UBS): Sought clarification on the underlying causes of North American sales declines after adjusting for incentives and promotions. CFO Jarrod Langhans detailed the impact of promotional allowances and timing effects.
• Kevin Grundy (BNP Paribas): Inquired about pricing dynamics and how Celsius plans to approach pricing and promotions, given actions by competitors. CEO John Fieldly indicated a cautious stance, noting consumer shifts towards multipacks and value-seeking behavior.
• Andrea Teixeira (JPMorgan): Probed the extent and duration of promotional allowances and destocking impacts, particularly relating to Costco. Management explained the temporary nature of allowance pressures and minimal destocking effects this quarter.
• Michael Lavery (Piper Sandler): Focused on gross margin sustainability and potential risks from input costs like aluminum or tariffs. CFO Jarrod Langhans expressed confidence in near-term margin levels but acknowledged uncertainty later in the year.

Catalysts in Upcoming Quarters

Looking ahead, our analysts will monitor (1) the integration of Alani Nu and evidence of portfolio synergy without significant cannibalization, (2) the effectiveness of new product launches and expanded shelf presence on retail velocity, and (3) management’s ability to sustain gross margins despite evolving cost pressures and possible tariffs. We will also track international market contributions as expansion continues.

Celsius currently trades at a forward P/E ratio of 33.5×. In the wake of earnings, is it a buy or sell? The answer lies in our free research report.

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