Celsius Holdings, Inc. (CELH) Earnings

Management highlights

- Portfolio & Brand Strategy • The company holds ~20% dollar share of the U.S. energy drink market in track channels, with three differentiated brands targeting distinct consumer segments: Celsius for active, health-conscious consumers across all age groups; Alani New for younger female consumers focused on flavor and self-expression; Rockstar for male consumers interested in gaming, action sports, and music. • A deliberate SKU rationalization program was executed for Brand Celsius in 2026 to eliminate low-volume SKUs, create national portfolio consistency, and secure higher quality retail space (cold placements, end caps, permanent coolers). Innovation was paused during Alani and Rockstar integration to reduce distribution complexity. • Alani New surpassed $1 billion in cumulative first half 2026 retail sales in track channels, just over one year after acquisition. Its limited-time flavor innovation model is durable, with top-performing LTOs graduated to permanent core placements to build scale stability. • Rockstar integration was completed in June 2026, on the original 9-month timeline. Post-rationalization velocity gains have been significant across markets; the brand is refreshing its packaging and logo, and continues marketing activation aligned with its core motorsports, music, and lifestyle identity. - Innovation & Marketing • Q2 2026 innovations included Electric Vibe (timed to the North American global soccer tournament) and Alani's Purple Cotton Candy, which became the brand's top-selling new SKU in track channels. A summer LTO Spritz Vibe Sparkling Lemoncello Twist and full 100 Days of Summer programming with marketing and athlete partnerships has been activated. • 2027 is planned as a high-innovation year, with new product launches for Celsius' underperforming 16-ounce line expected in early 2027. - International Operations • International expansion is a long-term growth priority, with a target of more than 15% of total company revenue coming from non-U.S. markets within five years. A standardized playbook from mature markets like Sweden (which delivered a record 3.5 million units in four-week consumer sell-through this quarter) is being rolled out to new markets. • Alani New is planned for launch in select new international markets in 2027, supported by an international center of excellence based in Dublin. - Financial & Operational Progress • Q2 2026 gross margin was 48%, consistent with Q1 2026, as lower freight costs and acquisition integration gains offset ongoing aluminum commodity inflation. GAAP SG&A was $238 million (flat year-over-year), equal to 29% of revenue (down from 32% year-over-year). Adjusted EBITDA was $184 million (22.5% of revenue) in Q2, with first half 2026 adjusted EBITDA of $380 million, up 36% year-over-year. • The company repurchased $100 million of stock in Q2 2026 ($124 million in first half 2026) and intends to fully utilize the $300 million current repurchase authorization in 2026.

Guidance

- Brand Celsius is expected to perform very similarly in Q3 2026 as it did in Q2 2026, with continued slight pressure from ongoing inventory rebalancing and cycling of 2025 innovation, before returning to growth by the end of 2026. Q3 2026 gross margin is expected to remain consistent with Q2 in the high 40% range, with potential for improvement if aluminum or fuel prices moderate. - Q3 2026 sales and marketing spend is expected to be broadly consistent with Q2 2026, and general administrative costs are also expected to remain flat with Q2 levels. - Margin expansion will be driven by three core factors going forward: full supply chain integration benefits for Alani and Rockstar (flowing through H2 2026), structural cost savings from the new North Carolina manufacturing line (full benefit in 2027) and ongoing vertical integration, and revenue growth management initiatives that will deliver initial impact in H2 2026 with larger gains in 2027 and 2028. - Alani New's strong growth momentum is expected to continue through H2 2026, supported by a robust LTO launch calendar. Rockstar will remain focused on stabilizing core performance in H2 2026 to position for 2027 growth. - International revenue is targeted to grow to more than 15% of total company revenue within five years, with upside potential to exceed this target.

Segment performance

Total company Q2 2026 revenue was $818 million, up 11% year-over-year. 1. Brand Celsius: Net sales were down 12% year-over-year, while retail sales in track channels were down 2% year-over-year. The larger net sales decline stemmed from distributor inventory rebalancing, increased trade investment, and softness in the club channel. Core portfolio productivity remains strong: dollars per point of distribution are up 16% QoQ on 7% fewer distribution points, and Fizz Free line dollar sales grew over 20% QoQ. 2. Alani New: Net sales were $364 million, up 21% year-over-year. Track channel retail dollar growth was 56% year-over-year. The gap between retail and net growth reflects discontinued non-ready-to-drink products, higher DSD channel mix with larger trade allowances, inventory timing, and non-cash accounting entries. Excluding Canada and non-RTD business, gross revenue grew 39% year-over-year. 3. Rockstar: Net sales were approximately $66 million in Q2 2026. The full brand integration onto Celsius' platform was completed in Q2, and the brand is currently tracking in line with original acquisition sales expectations.

Risks & headwinds

- Commodity inflation, particularly for aluminum, and high fuel prices are putting ongoing pressure on gross margins, and have offset planned margin expansion in 2026 so far. • SKU rationalization for Brand Celsius was deeper than management planned entering 2026, resulting in larger than expected near-term top line pressure that will continue through Q3 2026. Securing desired new retail space (including fixtures and coolers) took longer than initially expected, due to required retailer investment and delayed reset timelines. • Higher DSD channel mix for Alani New creates downward pressure on reported net revenue due to higher trade allowances, and inventory pipeline filling comps will create tougher year-over-year comparisons for Alani in H2 2026. • All forward-looking statements are subject to inherent uncertainties, including factors beyond the company's control that could cause actual results to differ materially from expectations, as detailed in SEC filings.

Analyst Q&A

• Q: What gives management confidence that Brand Celsius can return to growth exiting 2026 and into 2027, after recent weak performance? /

  A: Management notes that SKU rationalization for Brand Celsius is complete, and integration of Alani and Rockstar (the reason for pausing Celsius innovation) is now finished. Core brand health metrics and repeat purchases remain strong, retailers support the brand, and robust 2027 innovation is planned, including a new offering for the underperforming 16-ounce line. The full multi-brand portfolio is well positioned to drive category incrementality that retailers demand.

• Q: Management acknowledged SKU rationalization was deeper than planned – was it the right decision, how much further pressure will there be on Q3 sales, and what is the visibility into performance? /

  A: Management confirms it would have done a lighter rationalization entering the year, but the process has created a more stable core portfolio, and the company has adapted with robust 2027 innovation plans. Q3 weekly run rates for Celsius are expected to be similar to Q2, with slight increases, but continued pressure from cycling 2025 innovation comps. The brand's consumer base remains healthy, with strong repeat purchases.

• Q: When can we expect a recovery for Celsius in Q4, will it be a quick snapback or gradual build, and what is the pacing for international growth? /

  A: Recovery will be a gradual build through Q4 2026, as space gains and rationalization impacts roll out slowly, with no immediate snapback in scan data. Easier year-over-year comps and expanded retail placements will support improvement. For international, the company has built out local teams this year, and expects the business to become a meaningful contributor over time, hitting at least 15% of total revenue within five years with upside potential.

• Q: What guardrails are in place to prevent future SKU overproliferation that would require another deep rationalization? /

  A: Management notes that ongoing SKU optimization will be a permanent part of commercial planning, with regular evaluation of portfolio performance to replace low-volume tail SKUs with incremental new innovation. The new strategy will focus on adding incrementality without unnecessary overproliferation, maximizing the value of existing shelf space.