Cameron Donahue - Partner, Hayden IR John Fieldly - Interim Chief Executive Officer and CFO Vanessa Walker - Executive Vice President, Sales and Marketing.

Drew Justman - Madison Asset Management.

Greetings. And welcome to the Celsius Holdings, Inc. Q1 2017 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr.

Cameron Donahue, Partner of Hayden IR. Thank you. You may begin..

Thank you, and good afternoon, everyone. We appreciate you joining us today for Celsius Holding's first quarter 2017 earnings conference call. Joining me on the call today are John Fieldly, Interim Chief Executive Officer and Chief Financial Officer; and Vanessa Walker, Executive Vice President of Sales and Marketing.

Following the prepared comments, we will open the call to your questions and instructions will be given at that time. We have filed the quarterly reports with the OTC Markets and issued a press release today. All materials are available on the company's website at celsius.com in the Investor Relations section.

As a reminder, before I turn the call over to Gerry, the audio replay will be available later today. Please also be aware this call may contain forward-looking statements which are based on forecast, expectations and other information available to management as of today May 11, 2017.

These statements involve numerous risks and uncertainties including many that are beyond the company's control. Except to the extent required by applicable law, Celsius Holdings undertakes no obligations and disclaims any duty to update any of these forward-looking statements.

We encourage you to review in full our Safe Harbor disclosures contained in today's press release and our quarterly filings with OTC Markets for additional information. With that, I'd like to turn the call over to John Fieldly for his prepared comments.

John?.

Thank you, Cameron, and good afternoon, everyone and thank you for joining us today. Our financial results reflected solid start to our ongoing business operations in 2017. Our revenue for the first quarter was $6 million, a 63% increase over the first quarter of last year, driven by both solid domestic and international growth.

Domestically revenues increased 81% to a record $4.8 million for the quarter, demonstrating strong demand for our products, where we saw continued strong reorders from existing accounts and positive acceptance of the launch of our second line in the product portfolio, CELSIUS HEAT.

This new trainer’s grade line launched in late March in vitamin shop and national fitness channel distributors, major club chains, and local studios. In addition, late in March we launched a naturally sweetened and caffeinated Celsius line expansion to broaden our reach in the natural channel.

We are very excited about these two new lines which are well-positioned and are being -- have received great acceptance by retailers and customers.

Internationally, we continue to maintain our market position as the number one fitness beverage and number two in energy according to Nielsen and Sweden and have continued our expansion into Finland and Singapore.

With this growth we continue our global expansion and are currently preparing for a Hong Kong launch in the third quarter of 2017 with our distribution partner A.S. Watson. Also during the quarter our rebranding and repositioning took hold with the addition of adding a global brand mark iconic C to our packaging and the tagline Celsius Live Fit.

This lifestyle rebranding is resonating well with consumers as we are pioneering our position as the leading global fitness drink designed for the active lifestyle. In addition, I am proud to report that Celsius has received 18 award.

Celsius was named Best Functional Drink at the recent 13th Innobev Global Beverage Congress organization by Zenith Global and held in Frankfurt, Germany last month. We are honored to have Celsius is selected as a winner among many products from around the world. This award further validates our vision and mission at Celsius.

All of this moment is laying a solid foundation for continued growth in 2017 and beyond. I am now going to turn the call over to Vanessa Walker, Executive Vice President of Sales and Marketing to provide an update on our key growth drivers and new product launches..

Thank you, John. We had a very exciting first quarter. Our rebranding efforts took hold and the brand experience to search a positive consumer and trade feedback has the new package debut on store shelves early January.

In mature retailers the year-over-year reorders appear to show double-digit growth and retailers stand data indicate the same momentum.

The most significant aspect of the rebrand is the move to solidify Celsius disposition as a fitness train and arm trend lifestyle brand with mass appeal for consumption at any time of day for those who wish to live an active healthy lifestyle versus a quick calorie burning diet drink.

The classification of diet or calorie burner or just healthy energy alone did not communicate the unique clinically proven attributes and brand benefits Celsius’ proprietary formula provides.

Just as tagline Live Fit cause consumers to take action to invest in themselves alternate copy delicious that delivers speak to the brand greatly taste profile and clinically proven ability to deliver the claims made on pack.

Our pioneering in the fitness trained category has a clear advantage of retail as the traders recognize in the consumers desires to move beyond traditional sugary or HSCS drinks in all categories. Retailers are seeking new ways to bring cutting edge function to their shelf.

Directionally year-over-year sales growth and mature direct ship retail chain, e-commerce and fitness channel drove the growth first quarter last year. However, in addition to the repositioning and repackaging, there were two exciting introductions in the first quarter.

The first, the natural line extension of our flagship brand, which is naturally caffeinated and naturally sweetened, and available in six flavors, three sparkling and three noncarbonated.

The natural line extension debut at tradeshow Show West Expo in Anaheim, California the first week of March, as well as the launch of the second product line in our portfolio 16 now CELSIUS HEAT.

Also a dietary supplement, HEAT include the Celsius proprietary thermogenic formula MetaPlus Blend, which when combined with exercise is proven to accelerate metabolism, burn body fat in calories and provide energy. HEAT, however, also offers added caffeine and L-Citruline which is a vaso-dialator.

The new HEAT line is available in three flavors in Inferno Punch, Blueberry Pomegranate and Cherry Lime. We are excited with the initial orders and customer response from our national fitness channel distribution partners, major club chains and local studios.

CELSIUS HEAT was developed for athletic trainer, body builders, military personnel and endurance athletes. It is sold outside of fitness channel in the vitamin shop retail locations and their website as well.

In preparation for the feeding and selling of the two new product introduction, the team expanded with two new hires, Director of the Fitness Channel, Bryan Alesiano formerly of Glanbia Performance Nutrition and a Director of the National Channel, Paula Burke formerly of the KIND Snack Company.

They will speed up the launches of the new products in their respective channel. On an international front, Celsius new C logo mark and updated can graphics have been adopted by Singapore and Hong Kong and will be seen in both markets this summer.

Plans are underway to work with our Swedish partner Func Foods on involving the can in the Nordic market to include the global brand market, other distinctive features and future packaging. These changes will bring together a cohesive branded appearance and positioning of a fitness strength staging Celsius as brand for global expansion.

I will now turn the call back to John to provide details on our financial results.

John?.

Thank you, Vanessa. Total revenues for the first quarter of 2017 were $6 million compared to $3.7 million for the corresponding period in 2016.

This 63% increase was driven primarily by an 81% growth in domestic sales, which was driven by blended growth rates of 47% growth in retailer accounts, 237% growth in health and fitness accounts where the product continues to resonate well. In addition we saw an 88% growth in internet retailer account.

In addition, our international sales grew at a healthy 80% year-over-year. Gross profit for the quarter was $2.4 million or 39.7% of revenue compared to $1.5 million or 41.3% of revenues for the corresponding period last year.

The increase in gross profit are in dollar basis is primarily due to increases in revenue and reduction in cost of raw materials. The decrease in gross profit as a percentage of revenue is the result of a one-time charge of $235,000 associated with the write-down the old packaging and fees associated with our new label changes.

Excluding this one-time charges, gross profit increased 230 basis points or 2.3 percentage points to 42% compared to the prior year period. Operating expenses in the first quarter of 2017 increased $1.6 million to $4.2 million, up from $2.7 million in the prior year period.

This increase was driven in part by an increase of 20% in sales and marketing and investment in human resources, warehousing costs and certain marketing programs.

The increase in operating expense was also driven by an increase in general and administrative expenses, which included extraordinary level of non-recurring items during the first quarter of 2017. G&A expense for the first quarter of 2017 were $2.1 million, compared to $875,000 in the first quarter of 2016.

The increase in the first quarter of 2017 was driven by an increase of options expense $200,000, investments in human resources, professional fees and increases in research and development costs compared to the first quarter 2017.

In addition, the first quarter included -- first quarter of 2017 included one-time charges of $490,000 for CEO retirement and transition costs and $328,000 stock-based compensation for directors. The increase in general and administrative expenses was partially offset by reduction in travel expense.

Total other expense was $48,000 for the first quarter of 2017 compared to $57,000 for the quarter in 2016. This March decrease was a result of lower interest expense on a lower outstanding balance.

Net loss to common shareholders for the first quarter of 2017 was $2 million or a loss $0.05 per share compared to a net loss of $1.3 million or $0.03 per share basic and diluted for the corresponding period last year. Net loss attributable to common shareholders is inclusive of preferred dividends.

For the three months ending March 31, 2017 and 20116 the net losses include preferred dividend of $90,000 and $86,000, respectively. Operating expenses for the quarter included non-cash expense, include appreciation, amortization and stock-based compensation, totaling approximately $787,000 compared to $258,000 last year.

Adjusted EBITDA for the quarter excluding one-time charges was $322,000 compared to a negative adjusted EBITDA of $886,000 for the corresponding period in 2016. Adjusted EBITDA for the first quarter of 2017 excluded non-recurring items as discussed earlier.

The $490,000 for CEO retirement and transition costs and $235,000 for write-down of old packaging and fees associated with the new label changes. We believe information concerning adjusted EBITDA, a non-GAAP financial measure enhances over our understanding in our financial performance.

A reconciliation of our GAAP results to this non-GAAP measure was included in our earnings press release. Turning to the balance sheet, as of March 31, 2017, company had cash and cash equivalents of $20.9 million and working capital of $24.2 million.

At this time we believe our current cash balance will be sufficient to meet our anticipated cash need over the next 12 months. Cash used in operations for the first three months of 2017 totaled $867,000 compared to $887,000 in the first three months of 2016.

Before I turn the call over for questions, I would like thank Tim Leissner, one of our board members for his service to the board and company. Tim’s last day on the board was May 4th. On behalf of the board, management, shareholders, we thank Tim Leissner for his service over the last several years.

In the interim to our next Annual Shareholder Meeting I was appointed to his vacancy. On another note, we will be presented at the upcoming 18th Annual B. Riley & Co. Investor Conference in Santa Monica on Wednesday, May 24th. I encourage you all to attend. We look forward this meeting -- meeting many of you. That concludes our prepared remarks.

Operator, you may now open the call for questions. Thank you..

Thank you. [Operator Instructions] Our first question comes from the line of [ph] Paul Johnson (16:09), private investor. Please state your question. Paul, you may be on mute..

I am sorry, can you hear me now..

Yes. Hi, Paul. Good afternoon. Thank you..

Yeah.

So, maybe if you can just help investors understand why we've had fairly sudden departures lately of key people, first it was Gerry and now Tim Leissner already, these few were been with the company for long time, Tim, I think, he has invested a lot of money in the company and while I appreciate your thanking for his help, that the offset in the room is why were he suddenly so quickly and I think, you kind of need to answer those questions? The second question, maybe related or maybe not, it has to do with the expansion in China, I think, I had asked in the last call, why it’s going to take so incredibly long to go to Mainland China when you have Watson as a partner, because distribution is everything and we already have it.

And the third thing related to that is why do we need all this cash if we are not going to be expanding in the China and other areas. The sales are up big year-over-year, but sequentially they have been flat for the last three quarters, it’s been sort of $6 million, $6 million, $6 million.

So I -- anyway, yeah, I know those are unrelated questions, but if you want to take one at a time that would be great?.

Sure. Thank you, Paul. On the departures question, just starting off with Gerry, I think, Gerry, came to the company nearly on a 60th birthday. We all knew that this might be his last turnaround during that time. I am not sure his retirement. It was a surprise to some folks. Over the last five years he really built the first foundation for the company.

We do have a solid infrastructure in place and the company couldn’t be better positioned right now for the future. So that was a unfortunately it was felt like it was his time, that’s all I can really comment on that. Again for the recent Board of Director change with Tim. He stepped down for personal reasons.

We do have Chris Lai who is taking his Co-chair role from Horizons. So we still have a great Horizons presence on board as well. So and -- that his personal reasons unfortunately. So we will continue to move forward with that solid, with the management team that we have in place and our current of Board of Directors.

In regard to your comment in China, in regards to China we continue to as I have mentioned on prior calls we will continue to leverage the interest -- the networks of our investors. As we mentioned earlier we are preparing for a launch in Hong Kong with A.S. Watson as that is our starting point and we’ll look at extending at that point.

I not going to provide forward-looking information at this point as we continue to move forward but at this time we are focused on a successful launch in the third quarter in Hong Kong with A.S. Watson and then we'll take it from there at that point.

In regards to deploy private placement which took place, we are going to -- we are using that to fund our global expansion, as well as product innovation, as well as our working capital needs.

So partial portion of that -- those funds that are arranged to the private placement will be utilize for the expansion initiated in Singapore as well as Hong Kong and also allocated to some of the product innovation that we just most recently came out with CELSIUS HEAT at our national alliance and also future innovation. Does that answer….

Okay. Yeah. I know you did answer the questions. Thank you.

I guess, the only other question was just why does -- given how well things seem to be doing in all the various retail channels particularly domestically, why have the sales, I know there is some seasonality, but why are the sales been sort of flat for the last three quarters?.

Yeah. We continued to show great growth domestically. If you look at our domestic front and you look at the numbers we reported domestically we continue to show great results domestically, over double-digit growth rates.

And I might add that domestically when you look at some quarter-over-quarter growth which was mentioned last time on our prior call, domestically we grown our quarter-over-quarter basis 37% when you look at fourth quarter domestically first quarter results. So we are growing domestically.

What impacting the numbers is our -- is mainly our international revenues, which is coming mainly from our Swedish distribution partner over the last several quarters as we reported. They have had -- we have some contraction on their inventory levels. We are seeing good results there.

We -- and expect consistent working patterns going forward, but that has really impacted our over topline revenue number as we look at our quarterly growth over the last several quarters.

So, when you look at exclusively the domestic revenues, I think, you get a broader picture, a much better results on a quarter-to-quarter basis and year-over-year basis..

Good enough. Thank you.

Just one more question about any news on possible NASDAQ uplifting?.

Not at this time, except when we disclose before we continue to pursue, we have integral application as has been closed prior and we will continue to move through the process at this point in time. That’s all I have..

Very good. Thank you..

Thank you, Paul..

Thank you. [Operator Instructions] Our next question comes from the line of [ph] David Benson (22:21), private investor. Please state your question..

Hello, Vanessa and John. It’s David..

Hi, David..

Hi, David..

So you have taken some significant time to prepare the Hong Kong launch and I am assuming a portion of that has gone into a sales and marketing strategy, in particular digital strategy, do you feel like you have the digital piece and the advertising piece in place and is that different from the United States, could you describe that a little?.

Sure. I will fill that question..

Sure..

With regard to Hong Kong, I happen to be landing there on Saturday morning, 7:30 in the morning, wheels up on my way to Hong Kong.

We do have agencies in Hong Kong and we have people on the ground in Hong Kong who are looking after the launch as well we are partnering with on our connection of Horizon who are helping us with press -- public relation and other trade and marketing events on a localized level, but we speak more towards specifically the Hong Kong trade in press.

So we do have a plan placed. We have a Hong Kong launch plan. We have an agency in place. We are localizing those events and we are creating digital awareness.

Next week when I arrive will be confirming and solidifying some those plans which will be than play into motion as a key during the fact but the lunch itself should be forthcoming in the beginning of the third quarter. So we still have a better ways to go.

However, we have created plans and we do have excellent partners and we feel confident that we will have a nice lunch..

Great. And a follow-up question, assuming the launch in Hong Kong goes well, would you then launch in China in total or would you do something like launch in and I am going to mispronounce this, Guangdong which is just north of Hong Kong, which of course, is highly populated.

How -- have you laid any groundwork for how you would proceed in China proper based on what happens in Hong Kong?.

China as a whole is an interesting place in terms of launch, as you know, they got the business province by province..

Yeah..

However, we have not made plans of it, yet to discuss launch plans or timing for China. I will turn that over to John..

Yeah. Thank you. And thank you David for your question. At this point in time we are really just focused on executing Hong Kong at this point. We have to pace ourselves as we continue to move forward.

We are looking forward to following as I mentioned before our investors networks but at this point in time the team is extremely focused on this Hong Kong launch which we are very excited about..

Great. Thank you..

Thank you. [Operator Instructions] Our next question comes from the line of Drew Justman with Madison Asset Management. Please state your question..

Hello. Thanks for taking my call. I guess I would like to follow-up on some of the China questions.

I haven’t heard much of an update about Madam Wang and her distribution within China over the past of conference calls, is there an update there or has something changed?.

Yeah. No. We continue as I mentioned before on the last call, I mean, we are really focusing on Hong Kong at this point and we are going to continue to move through the networks as we move forward.

Our main focus at this point is really focusing on our net loss and Hong Kong with our launch we are still working on, continue to move forward with Singapore as well.

So at this point in time, we don’t -- I am not going to provide any forward looking information at this point in time, as information comes readily available we will put that up to the public, but at this point in time we are really focusing on Hong Kong..

Okay.

I guess, I am confused why it was mentioned on prior conference calls then or in the Wall Street transcript Madam Wang and the huge distribution opportunity in China was highlighted, so but now the company is not going to, doesn’t want to discuss that?.

We have to double check those transcripts. We are working. We have talks with Madam Wang and we still continue to move forward, but I don’t have any tangible information to disclose at this time. We continue to leverage the networks but there is -- I don’t have an update at this time..

Okay. Understood. The placement in the 7/11 really did a nice job of kind of taking sales to another level higher and without getting into specifics, is there expectation on the part of management that the Hong Kong launch can do another similar Wang hire..

I think, with regard to Hong Kong, I believe that we will have a fantastic positive effect for the overall region and the sales of the company and the international sales of the company. And I believe with our contacts, as John mentioned, your distribution partner A.S.

Watson will be able to access the many key retail chains through their relationship. So we are anticipating that we will have a successful and but the product will -- I believe your question was, are we anticipating that it will sees us with 7/11 [inaudible] (28:28) in United States. We don’t know the answer of that but we are planning for success..

Understood. I just have a few more questions, if you don’t mind..

Okay..

I am a little surprise to hear Sweden mentioned being a little bit weak again, I thought maybe that was in the review here, but sounds they have kind of brought down some of their inventories, are their plans to put under restock or are this kind of they are going run rate now for Sweden?.

Thank you. It’s really a timing of orders. We continue to maintain a number two position in energy and number one in fitness, [inaudible] (29:08) they actually -- they -- based on the last report they increase their market share and continue to perform very well in the region. So we expect them to continue to move towards normalized ordering pattern.

They have -- they came a little bit below our expectations in Q1, but we anticipate that to continue on as it has in prior years..

Okay.

Two quick questions for me, any update on Whole Foods and I think the product was changed so to get placed in there, is that still on track?.

Whole Foods has been a target retail account for us and obviously it’s wholly grill of the natural channel being a key anchor. As we said, our sites in creating a natural line extension, we hope that we will deliver the ability to access new consumers, future consumers through the national channel and anchor the Whole Foods chain nation.

Why that we are teaching them and we will continue to set our sites on the buyer and the selling cycle and try to sell that in. As part of our overall strategy to tackle the national channel with the new natural expansion..

Okay. Thank you.

Last question for me, you -- any general timeline on when permanent CEO might be named?.

Thank you, Drew. Just to give an update on that, the Board is currently reviewing the candidates. They are coming towards the more the late rounds. I don’t have exact timing on that, but I know it's most likely be in the near future..

Okay. Great. Thank you for taking my questions. I appreciate it. Have a nice day..

Okay. Thank you, Drew..

Thank you..

Thank you. There are no further questions. That does conclude our question-and-answer session. At this time, I will now turn it back to Mr. John Fieldly for closing comments..

Thank you. We are very encouraged by the first quarter 2017 results. We continue to build the firm foundation for our future. We will continue to build upon our core business and leverage opportunities both domestically and abroad. Thank you everyone for your interest in Celsius and have a good day..

This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time..