Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Report. This Report contains forward-looking statements within the meaning of the PSLRA Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, about our expectations, beliefs, plans and intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects. Readers can identify forward-looking statements by the fact that these statements do not relate to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied through forward-looking statements. Please refer to Item 1A. Risk Factors for a detailed discussion of these uncertainties and risks. Forward-looking statements reflect our views as of the date they are made. Except as required by law, we are not obligated to revise or publicly release any updates to these forward-looking statements. This includes not updating the statements to reflect events or circumstances occurring after they were made, or to address any differences between anticipated and actual results. We intend for all forward-looking statements to be subject to the safe harbor provisions of PSLRA.
The Management's Discussion and Analysis section aims to help the reader understand the Company's financial status and operational performance, guiding readers through our current business landscape and operational environment. Our analysis includes our results of operations and financial condition for the years ended December 31, 2024 and 2023 and year-over-year comparisons between 2024 and 2023. For a detailed discussion of our results of operations and financial condition for the year ended December 31, 2023 and year-over-year comparisons between 2023 and 2022, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2023.
Our Business
Executive-Level Overview
Celsius is a functional energy drink company operating in the United States and internationally. This product is available in two convenient forms: ready-to-drink and an on-the-go portable powder form. Additionally, we offer our Celsius Essentials line, featuring 16-ounce cans enriched with aminos. In 2025, we introduced CELSIUS® Hydration, a line of zero-sugar hydration powders featuring electrolytes in a variety of fruit-forward flavors. Our product range is widely available across the U.S. and Canada in various retail outlets, including grocery stores, natural product stores, convenience stores, fitness centers, mass retailers, vitamin specialty stores, and through online e-commerce platforms. Moreover, our products are offered in select markets in Europe, the Middle East and the Asia-Pacific region as we continue to expand our global presence.
We engage in various aspects of developing, manufacturing, processing, marketing, selling, and distributing Celsius, Celsius Essentials, and Celsius On-The-Go Powder, with products available to customers and consumers across the U.S. and in select territories in Canada, Europe, the Middle East, and Asia-Pacific. Our operational model strategically relies primarily on co-packers for the manufacture and supply of our products, leveraging their specialized expertise and scalable production capabilities. Additionally, we utilize our in-house manufacturing facility to complement our strategic use of co-packers. This approach allows us to maintain flexibility in responding to market demands and to focus our resources on innovation, marketing, and expanding our distribution channels. We continually assess and work to optimize our supply chain to ensure quality, consistency and timely delivery to our customers.
On August 1, 2022, we entered into a long-term Distribution Agreement with Pepsi, making them our primary distributor in the U.S. and leveraging the right of first offer to facilitate our expansion into Canada. This agreement also helps to enable potential future international markets and new distribution channels with Pepsi. In connection with our relationship with Pepsi, we terminated certain previous distributor agreements and shifted certain distribution rights to Pepsi. Through our Transition Agreement with Pepsi, we received specific payments for transferring certain existing distribution rights to them.
Pending Acquisition of Alani Nutrition LLC
On February 20, 2025, we announced that we had entered into a membership interest purchase agreement to acquire Alani Nu for a total consideration comprising (i) $1,275.0 million in cash, subject to adjustment as set forth in the purchase agreement, (ii) an aggregate of 22,451,224 shares of our common stock and (iii) up to $25.0 million in additional cash consideration, payable only if net sales of Alani Nu’s products meet or exceed an agreed target for 2025. The closing of our pending acquisition of Alani Nu is currently expected to occur in the second quarter of 2025, subject to the satisfaction of certain customary closing conditions, including the expiration of the waiting period applicable to the transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
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Company and Industry-Wide Factors
Energy Drink Market Trends - The energy drink industry is experiencing significant growth, driven by increasing consumer demand for functional beverages that offer benefits beyond the larger carbonated soft drink market such as various health benefits, energy boosts, or other fitness-related advantages. While growth slowed during the year ended December 31, 2024, the overall industry has continued to expand, supported by a shift toward healthier lifestyles, a preference for more natural ingredients, and increased lower-calorie options.
Consumer Behavior Changes - There's a rising trend of consumers seeking products that align with personal wellness and fitness goals. Our product range caters to this demand, particularly among health-conscious consumers and fitness enthusiasts.
Technological Advancements and Digital Trends - The integration of technology in marketing and sales strategies is becoming increasingly important to our business. Leveraging digital marketing channels, e-commerce platforms, and data analytics are essential for reaching and understanding modern consumers. Adapting to these technological trends is vital for staying competitive and meeting evolving consumer expectations.
Pepsi Partnership - In August 2022, the Company issued approximately 1.5 million shares of non-voting Series A Preferred Stock to Pepsi for an aggregate purchase price of $550 million, and concurrently entered into the Distribution Agreement and Transition Agreement.
This partnership capitalizes on Pepsi's robust distribution channels to expand our reach into key market segments, including supermarkets, convenience stores, health clubs, and other retail outlets. The alliance enhances our market penetration and brand visibility, contributing to our long-term growth strategy. Additionally, this collaboration aligns with our mission to innovate and deliver high-quality products to a broader consumer base. Our reliance on Pepsi’s distribution expertise forms a cornerstone of our strategy to enhance accessibility and presence in diverse retail environments, further solidifying our position in the competitive energy drink market. In the U.S., we utilize Pepsi's distribution network to supply supermarkets, convenience stores, health clubs and other merchants where our products are sold to consumers. For more information refer to Item 1. Business, and Note 12. Mezzanine Equity to our consolidated financial statements contained elsewhere in this Report.
Key Drivers of our Financial Success and Market Presence - Much of our financial success is dependent on our ability to market and connect with a diverse consumer base, including wellness-focused consumers, fitness enthusiasts and consumers looking for more functionality in their beverage consumption. We believe that our strategic marketing initiatives, aimed at different demographics and lifestyle segments, contribute to revenue growth and market share expansion. We adapt our marketing mix to align with changing consumer preferences, leveraging digital and social media channels for broader reach and engagement. Furthermore, our focus on product innovation is designed to meet the evolving demands of health-conscious consumers, while maintaining appeal to a general consumer base seeking quality and convenience, thereby enhancing our competitive position and financial performance. Our approach is to create a brand experience that is both inclusive and appealing to a wide range of consumers, fostering loyalty and driving sustainable growth. We believe that our multifaceted approach is crucial for driving enduring revenue growth and maintaining a strong market presence in the energy drink industry.
Our Business Risks
Our management has identified certain material opportunities, challenges and risks in the energy drink industry and the Company.
Brand Reputation and Consumer Trust Risks - Our success relies on maintaining a strong brand reputation and consumer trust. In the fast-paced consumer goods industry, public perception can shift rapidly due to various factors, including product quality issues, negative publicity, social media trends, and changing consumer preferences. A tarnished brand image, whether through real or perceived issues, can result in decreased customer loyalty, reduced sales, and ultimately, a negative impact on our financial performance.
To mitigate these risks, we are committed to maintaining high standards in product quality, engaging in responsible marketing practices, and actively managing public relations. We monitor consumer feedback continuously and respond swiftly to any concerns. Our management team is equipped to handle potential public relations challenges proactively to safeguard our brand image. However, despite these efforts, there is always a risk of unforeseen events that could harm our brand reputation.
Reliance on Key Partnership with Pepsi
Our business operations and financial health are significantly influenced by our strategic partnership with Pepsi, which plays a critical role not only in the distribution of our products but also in generating a substantial portion of our sales and accounts receivable. While this partnership has been instrumental in expanding our market reach and accelerating revenue growth, it also presents concentration risk. For more information, see Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements.
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The substantial portion of our sales attributed to Pepsi underscores our reliance on their distribution network. Any disruption in Pepsi's operations, shifts in their strategic focus, reduction in service levels or support for our products, or changes in the terms of our partnership could directly impact our sales performance and revenue streams. This dependency also extends to our accounts receivable, a significant portion of which is derived from Pepsi. Delays or defaults in these receivables could adversely affect our cash flow and financial planning. Although there is concentration risk with Pepsi as our partner, Pepsi is a premier public company across both consumer goods as well as beverages and has a strong balance sheet, thereby insulating us from some of the potential exposures that would exist with a smaller, less established partner. However, fluctuations in Pepsi's inventory management strategies, such as adjustments to quantities held on hand, have had and may continue to have the potential to reduce order volumes and impact our sales.
To address these risks, we are continuously engaged in strengthening our relationship with Pepsi, ensuring alignment in business strategies and operational goals. We actively monitor and manage our accounts receivable associated with Pepsi to maintain healthy cash flow. Additionally, we are exploring diversification strategies to reduce our reliance on a single partner. This includes seeking opportunities to expand our distribution channels and customer base, both domestically and internationally, to create a more balanced and resilient sales portfolio.
We recognize the critical importance of Pepsi to our current business model and are committed to an ongoing evaluation of this relationship. Our management team is focused on maintaining a balanced approach to our partnership, ensuring that it continues to support our growth objectives while actively managing the associated risks. We believe that by diversifying our market presence and continually assessing the partnership dynamics, we can sustainably grow our business and mitigate potential financial risks. In addition, we expect that continued growth and innovation, which increases our brand relevance within the energy drink category, will assist us in continuing to be an important component of the Pepsi energy drink portfolio.
Market Competition Risks
The energy drink industry is characterized by intense competition, involving a diverse array of competitors with varying market strategies and product offerings. This includes well-established companies with strong brand recognition, as well as emerging entities that may introduce innovative approaches or specialized products. The entry of new or strengthening competitors who employ aggressive pricing strategies, can significantly impact our market share and profitability. Additionally, continuing shifts in consumer preferences towards healthier alternatives or different beverage categories could intensify competition.
To address these challenges, we constantly innovate our product line, leveraging consumer insights through various channels, including customer feedback and social media trends, to ensure an understanding of our market and refine our marketing strategies. We also monitor the competitive landscape to anticipate and react to changes in competitor strategies, as the dynamic nature of our market means that we must constantly adapt to maintain our competitive edge. Changes in the competitive landscape could materially impact our results of operations and market position.
Market Expansion Risks
Our strategic growth plan includes expanding into new geographic markets and launching new product lines. These initiatives are key to increasing our market share and driving revenue growth. However, they also introduce inherent risks that could impact our business operations and financial health.
Successfully entering and thriving in new markets is contingent upon our understanding and adaptation to local consumer preferences, which may vary significantly from those in our current markets. A failure to accurately gauge these preferences could result in reduced product acceptance and lower sales in these regions.
Moreover, each new market presents unique regulatory challenges. Navigating varying regulatory landscapes and ensuring compliance is crucial. Non-compliance or changes in regulatory frameworks could lead to legal ramifications, increased operational costs, and potential delays in market entry.
Furthermore, as we venture into new territories, we encounter competition not only from well-established local brands but also from other global entities. This heightened competition can affect our market positioning, influence our pricing strategies, and ultimately impact our profitability in these new markets.
To mitigate these risks, we engage in market analysis to gain insights into local consumer trends and preferences. Collaborating closely with regulatory consultants, we aim to ensure full compliance with all regional legal and regulatory requirements. Additionally, we formulate and implement competitive strategies tailored to effectively contend with local and global competitors in these new markets.
Global Minimum Tax
Jurisdictions globally have implemented laws and policies from the Organization for Economic Co-operation and Development's (the "OECD") project to counteract base erosion and profit shifting. The OECD, representing the G20 and other nations, is advancing an initiative to redistribute taxing rights on multinational enterprises' profits to countries where their goods and services are sold.
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The OECD's framework implements a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as "Pillar Two"). Certain jurisdictions in which the Company operates have enacted their respective tax laws to comply with Pillar Two. Starting in 2025, we have come within the scope of the Pillar Two rules. As of now, we do not expect Pillar Two to have a material impact on our effective tax rate or our consolidated results of operation, financial position, and cash flows. We will continue to monitor pending legislation and implementation by individual countries.
Results of Operations
Year ended December 31, 2024 compared to year ended December 31, 2023
Revenue
For the year ended December 31, 2024, revenue was approximately $1,355.6 million, an increase of $37.6 million or 2.9% from $1,318.0 million for the year ended December 31, 2023.
Revenue growth in North America accounted for $17.6 million of the overall increase, up 1.4% from 2023. Slower industry-wide growth within the energy drink sector tempered our performance. Additionally, timing of orders by our largest distributor, Pepsi, along with increased promotional activity negatively impacted revenues compared to 2023. Despite these challenges, North America experienced continued gains in distribution points, shelf space, and SKUs per location, which we believe positions us for future growth as market conditions improve.
European revenues for 2024 were approximately $61.7 million, representing an increase of $18.0 million or 41.1% from 2023. The revenue increase in Europe was predominantly driven by successful innovation launches, increased brand awareness through our marketing campaigns and expansion into new markets. Other international markets generated approximately $7.4 million in revenue during 2024, with Asia-Pacific revenues contributing an additional $5.7 million in 2024.
The following table sets forth the amount of revenues by geographical location for the years ended December 31, 2024 and December 31, 2023:
(in thousands) Years Ended December 31,
Revenue Source 2024 2023 Dollar Change Percentage Change
Gross Profit
For the year ended December 31, 2024, gross profit increased by $47.1 million or 7.4% to $680.2 million from $633.1 million for the year ended December 31, 2023. Gross profit margins increased to 50.2% for the year ended December 31, 2024 from 48.0% for the year ended December 31, 2023. Gross profit margin improvements resulted from decreases in raw and package material unit cost and reduced outbound freight cost as a percentage of revenue partially offset by increased promotional allowances as a percentage of revenue from the reduction in disproportionate distributor sell-in.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for the year ended December 31, 2024 were $524.5 million, an increase of $157.7 million or 43% from $366.8 million for the year ended December 31, 2023.
The changes within SG&A expenses included:
•a $61.5 million increase in marketing investments, driven by initiatives and events aimed at enhancing brand awareness to reflect our commitment to long-term growth, helping to ensure that our brand remains top-of-mind with consumers and well-positioned in an increasingly competitive market;
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•a $52.8 million increase in expenses related to a legal accrual in connection with ongoing litigation, refer to Note 15. Commitments and Contingencies to our consolidated financial statements included elsewhere in this Report;
•a $35.5 million increase in employee costs, reflecting our ongoing investments to support growth;
•a $20.3 million increase in SG&A expenses due to the write-off of receivables, restructuring, contractual co-packer obligations, acquisition related expenses and other project-related fees; and
•a $12.4 million decrease in other SG&A expenses.
Other Income (Expense)
Total other income for the year ended December 31, 2024 was $39.3 million, which reflects an increase of $13.9 million versus $25.4 million for the year ended December 31, 2023. The increase was primarily attributable to interest income earned on cash held in our money market accounts.
Net Income Attributable to Common Stockholders
Net income attributable to common stockholders for the year ended December 31, 2024 was $107.5 million, representing basic earnings per share of $0.46 based on a basic weighted average of 233.7 million shares outstanding. In comparison, for the year ended December 31, 2023 the Company had a net income attributable to common stockholders of $182.0 million, representing basic earnings per share of $0.79 based on a weighted average of 230.8 million shares outstanding. Diluted earnings per share was $0.45 and $0.77 for the years ended December 31, 2024 and December 31, 2023, respectively.
Liquidity and Capital Resources
General
As of December 31, 2024, we had cash and cash equivalents of approximately $890.2 million and working capital of $959.0 million.
Our primary sources of liquidity are cash flows from operations and our existing cash balances, which includes $542.0 million of net proceeds received from our issuance of Series A Preferred Stock to Pepsi in 2022. We believe that cash available from operations, including our cash resources, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable and other assets, and purchases of capital assets and equipment for the next twelve months and beyond.
Purchases of inventories, increases in accounts receivable and other assets, equipment purchases (including coolers), advances to certain co-packers and distributors, and payments of accounts payable and income taxes are expected to remain our principal recurring uses of cash and material cash requirements.
Pending acquisition of Alani Nu
In connection with the Alani Nu acquisition, the Company expects to pay a total consideration that ranges from $1,775.0 million to $1,800.0 million, consisting of:
•$1,275.0 million in cash, subject to adjustments to be funded through a combination of new debt and cash available;
•approximately 22.5 million shares of Celsius common stock, with an aggregate value of $500.0 million, based on the volume-weighted average price per share for the 10 trading days ended February 18, 2025; and
•up to $25.0 million in additional contingent cash consideration, dependent on Alani Nu’s 2025 revenue performance.
The completion of the acquisition is subject to customary closing conditions, including regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements Act. Failure to obtain necessary approvals could result in a $53.3 million termination fee payable by Celsius to Alani Nu.
The company believes its current liquidity position, cash flow from operations, and access to financing facilities will be sufficient to meet its near-term and long-term obligations, including the consummation of the pending acquisition of Alani Nu.
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Cash flows for the years ended December 31, 2024 and 2023
Cash flows provided by operating activities
Cash flows provided by operating activities totaled $262.9 million for 2024, which compares to $141.2 million net cash provided by operating activities for the year ended December 31, 2023. The $121.7 million increase in net cash provided by operating activities can be attributed to higher cash provided by operating income, as well as the timing of certain payments and strategic inventory management as a part of working capital initiatives.
Cash flows used in investing activities
Cash flows used in investing activities totaled $101.7 million for 2024 compared to cash used in investing activities of $14.2 million for the year ended December 31, 2023. The change in cash used in investing activities was primarily attributable to the $75.3 million acquisition of Big Beverages during the year. Additionally, purchases of property, plant and equipment increased to approximately $23.4 million versus $17.4 million for the years ended December 31, 2024 and December 31, 2023, respectively.
Cash flows used in financing activities
Cash flows used in financing activities totaled $26.0 million for 2024, representing an $0.8 million increase from the $25.2 million cash used in financing activities in 2023. The increase was mainly due to the repurchase of common stock for tax withholdings, partially offset by increased proceeds from exercised stock options. Cash used in financing activities was primarily attributable to the dividend payments related to the Series A Preferred Stock totaling $27.5 million for each of the years ended December 31, 2024 and December 31, 2023.
Off Balance Sheet Arrangements
As of December 31, 2024 and 2023, we had no off balance sheet arrangements.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our consolidated financial statements, we are required to make judgments and estimates that significantly affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. These estimates are based on historical experience, current trends and various other assumptions we believe to be reasonable under the circumstances. It is important to note that these critical accounting estimates are essential in fairly portraying our financial condition and results, and involve complex, subjective judgements. We continually review the underlying factors used in our estimates, including reviewing the significant accounting policies impacting the estimates, to ensure compliance with U.S. GAAP. However, due to the inherently uncertain nature of estimates, and the dependence on a number of underlying variables and a range of possible outcomes, actual results may be materially different. We have identified the accounting estimate below as critical to understanding and evaluating the financial results reported in our consolidated financial statements.
The following accounting policy and estimate should be read in conjunction with the descriptions of our significant accounting policies and recent accounting pronouncements, contained in Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements set forth elsewhere in this Report.
Revenue Recognition - Promotional (Billbacks) Allowance
The Company’s promotional allowance programs with its distributors or retailers are executed through separate agreements in the ordinary course of business. These agreements provide for one or more arrangements that are of varying durations. The Company’s billbacks are calculated based on various programs with distributors and retail customers, and accruals are established for the Company’s anticipated liabilities. These accruals are based on agreed upon terms as well as the Company’s historical experience with similar programs. Differences between such estimated expenses and actual expenses for promotional and other allowance are recognized in earnings in the period such differences are determined.
The Company conducts regular reviews of promotional activities and related financial data, including final invoicing for previous periods. Such reviews are essential for ensuring the accuracy of accounting estimates related to accrued promotional allowances for the Company's customers.
Promotional allowances are recorded as reductions to revenue and primarily include consideration given to the Company’s distributors or retail customers including, but not limited to the following:
•discounts from list prices to support price promotions to end-consumers by retailers;
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•reimbursements given to the Company’s distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products;
•the Company’s agreed share of fees given to distributors and/or directly to retailers for advertising, in-store marketing and promotional activities;
•the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers;
•incentives given to the Company’s distributors and/or retailers for achieving or exceeding certain predetermined volume goals;
•discounted products;
•contractual fees given to the Company’s distributors related to sales made directly by the Company to certain customers that fall within the distributors’ sales territories; and
•contractual fees given to distributors for items sold below defined pricing targets.
For more information on our promotional allowance policies, including changes to the estimate, see Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 4. Revenue to our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Commodity Pricing and Market Risks
In the normal course of our business, our financial position and supply chain are routinely subject to a variety of risks, notably those related to commodity pricing. The production of our products and transportation are heavily reliant on commodities such as aluminum, sucralose, caffeine, vitamins, and power sources. Customarily, we purchase the raw materials and these costs expose us to price volatility and fluctuations. Currently, ongoing global events, including conflicts and inflationary pressures, as well as adverse weather conditions and supply chain disruptions, can significantly influence these costs and their availability. To mitigate supply chain risks, we typically purchase raw materials from multiple sources and utilize multiple co-packers for manufacturing and third-party service providers for transportation. In relation to manufacturing, we typically have multiple co-packers across each geographical area, thereby allowing us to have redundancy if a manufacturer were to have operational challenges in a specific region or to utilize as our business grows. In addition, we typically hold sufficient inventory in order to offset short-term market disruptions, helping ensure continuous production and supply.
Our competitive environment limits our ability to offset rising costs through higher product pricing. Despite this, we believe that the risk from cost fluctuations is currently immaterial. To stabilize aluminum costs, we enter into agreements with 12-month durations, effectively reducing short-term volatility. Other raw material prices such as flavors and ingredients may experience fluctuations over varying periods, dependent on factors such as, market trends, contractual terms, and strategic decisions. We mitigate the risk of increasing costs by either renegotiating prices with current suppliers or seeking one of our alternative vendors offering favorable terms. Our reliance on price locking as a primary cost management strategy negates the need for hedging in our financial risk management approach.
Interest Rate Risk
Our financial assets subject to interest rate fluctuations were cash and cash equivalents of $890.2 million as of December 31, 2024. These balances are held in interest-bearing accounts, and changes in interest rates would directly affect our interest income.
Currently, we have no debt other than trade payables incurred in the ordinary course of business; therefore, we have no debt-related interest expense that could be impacted by fluctuating interest rates. This absence of debt underscores our stable financial position and reduces our exposure to interest rate risk, which primarily affects our interest income.
Foreign Currency Exchange Risk
We operate internationally, leading to exposure to foreign currency exchange risk. The Company’s foreign subsidiaries’ functional currencies are either the local currencies of the countries where operations are located or the U.S. dollar. We periodically remeasure the assets and liabilities denominated in non-functional currencies and the gain or loss from these adjustments is included in the consolidated statements of operations and comprehensive income (loss). Translation gains and losses that arise from translating net assets from functional currency to U.S. dollars, and gains and losses on long-term intercompany balances, are recorded to other comprehensive income (loss), net of income tax. For a detailed discussion of our foreign currency gains, losses, and translation adjustments, including the impact on our financial results, please refer to Note 2. Basis of Presentation and Summary of Significant Accounting Policies.
A substantial majority of our operations and investment activities are transacted in U.S. dollars, limiting our exposure to foreign currency exchange risk. While at present, our foreign currency exchange risk is not considered material to our overall financial position, accounting for approximately 0.2% of our revenue in 2024, and approximately 0.1% of our 2023 revenue, we continuously monitor and assess our exposure to currency fluctuations and the potential impact to our financial position and results of operations.
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Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 commences on page F-1, immediately following the signature page to this Report, and is incorporated by reference in this Item 8.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms adopted by the SEC. These controls also ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act are accumulated and communicated to the Company’s management, including our President and Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial and accounting officer), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our President and Chief Executive Officer, as well as our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024. Based on that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and financial officers and effected by the Company’s Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. This includes policies and procedures that:
•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our President and Chief Executive Officer and our Chief Financial Officer conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2024, based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013).
Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2024.
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Successful Remediation of Prior Year Material Weakness
As of December 31, 2023, management had identified a material weakness in internal control over financial reporting related to the ineffective design and operation of business process-level controls in the following areas:
•Accounting for revenue recognition;
•Accounting for promotional allowances; and
•Accounting for inventories.
Throughout 2024, the Company dedicated substantial resources to remediate the identified material weakness. These remediation efforts included:
•Implementation of enhanced business process-level controls related to revenue recognition, promotional allowances, and inventory accounting;
•Strengthening review and approval controls to ensure appropriate oversight and accuracy;
•Expansion of formal accounting policies and procedures;
•Increased training and accountability measures within the finance and accounting functions; and
•Completion of management testing, confirming that the new controls were designed and operating effectively for a sufficient period of time.
Based on these remediation efforts and the results of management’s testing, we concluded that the material weakness identified as of December 31, 2023, was fully remediated as of December 31, 2024.
Attestation Report of the Registered Public Accounting Firm
Ernst & Young LLP, our independent registered public accounting firm, which also audited our consolidated financial statements included in this Report, issued an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2024, which appears in Item 8. Financial Statements and Supplementary Data.
Changes in Internal Control Over Financial Reporting
Except for the remediation of certain aspects of the prior year material weaknesses in internal controls over financial reporting described above, there have been no other changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Rule 10b5-1 Trading Arrangements
From time to time, certain of our executive officers and directors have, and we expect they will in the future, enter into, amend and terminate written trading arrangements pursuant to Rule 10b5-1 of the Exchange Act or otherwise. During the quarter ended December 31, 2024, none of our officers or directors adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Except to the extent included below, the information required by this item will be included in our Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2024 (the "2025 Proxy Statement”) and is incorporated herein by reference.
Insider Trading Policy
We have adopted an Insider Trading Policy which governs the purchase, sale and/or any other dispositions of our securities by the Company and its directors, officers and employees and is reasonably designed to promote compliance with insider trading laws, rules and regulations and applicable exchange listing standards. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all our directors, officers (including our principal executive officer and principal financial officer) and employees. We intend to disclose information pertaining to any amendment to, or waiver from, the provisions of the Code of Business Conduct and Ethics that apply to the Company’s principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions and that relate to any element of the Code of Business Conduct and Ethics enumerated in the SEC rules and regulations by posting this information on the Company’s website, https://www.celsiusholdingsinc.com/. The information on the Company’s website or linked to or from the Company’s website is not incorporated by reference into, and does not constitute a part of, this Report or any other documents the Company files with, or furnishes to, the SEC.
Item 11. Executive Compensation.
The information required by this item will be included in our 2025 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be included in our 2025 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions and Director Independence.
The information required by this item will be included in our 2025 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information required by this item will be included in our 2025 Proxy Statement and is incorporated herein by reference.
35
PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a)The following documents are filed as part of this Report:
(1)Financial Statements.
The following consolidated financial statements and the report of our independent registered public accounting firm are filed as Item 8. Financial Statements and Supplementary Data of this Report:
Consolidated Balance Sheets as of December 31, 2024 and 2023
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022
Consolidated Statements of Changes in Stockholders’ Equity and Mezzanine Equity for the years ended December 31, 2024, 2023 and 2022
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
(2)Financial Statement Schedules.
All financial statement schedules called for under Regulation S-X are omitted because the information is not required under the related instructions or the required information is shown in the financial statements or notes thereto, or included elsewhere in this Report.
(3)Exhibits.
See Index to Exhibits.
Index to Exhibits
Exhibit Incorporated by Reference
Number Exhibit Description Form Exhibit Filing Date
10.4† Form of Restricted Stock Unit Award Grant Agreement 10-K 10.4 2/29/2024
10.5† Form of Performance Stock Unit Award Grant Agreement 10-K 10.5 2/29/2024
36
19.1* Celsius Holdings, Inc. Insider Trading Policy
21.1* Subsidiaries of Registrant
23.1* Consent of Ernst & Young LLP
31.1* Section 302 Certification by Chief Executive Officer
31.2* Section 302 Certification by Chief Financial Officer
32.1** Section 906 Certification by Chief Executive Officer
32.2** Section 906 Certification by Chief Financial Officer
101.INS Inline XBRL Instance Document
37
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
__________________________________________________
*Filed herewith.
** Furnished herewith.
† Management contract or compensatory plan arrangement.
+ Pursuant to Item 601(b)(10)(iv) of Regulation S-K, portions of this exhibit have been omitted because the Company customarily and actually treats the omitted portions as private or confidential, and such portions are not material and would likely cause competitive harm to the Company if publicly disclosed. The Company will supplementally provide a copy of an unredacted copy of this exhibit to the U.S. Securities and Exchange Commission or its staff upon request.
Item 16. Form 10-K Summary.
None.
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CELSIUS HOLDINGS, INC.
Date: March 3, 2025 By: /s/ John Fieldly
John Fieldly,President and Chief Executive Officer(Principal Executive Officer)
Date: March 3, 2025 By: /s/ Jarrod Langhans
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures Title(s) Date
John Fieldly
Jarrod Langhans
/s/ Cheryl S. Miller Director March 3, 2025
Cheryl S. Miller
/s/ Hal Kravitz Director March 3, 2025
Hal Kravitz
/s/ Joyce Russell Director March 3, 2025
Joyce Russell
/s/ Damon DeSantis Director March 3, 2025
Damon DeSantis
/s/ Nicholas Castaldo Director March 3, 2025
Nicholas Castaldo
/s/ Caroline Levy Director March 3, 2025
Caroline Levy
/s/ Hans Melotte Director March 3, 2025
Hans Melotte
/s/ Israel Kontorovsky Director March 3, 2025
Israel Kontorovsky
39
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Balance Sheets as of December 31, 2024 and 2023 F-5
Notes to Consolidated Financial Statements F-9
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Celsius Holdings, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Celsius Holdings, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)(the COSO criteria). In our opinion, Celsius Holdings, Inc. (the Company) has maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity and mezzanine equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated March 3, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boca Raton, Florida
March 3, 2025
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Celsius Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Celsius Holdings, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity and mezzanine equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 3, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-3
Accrued Promotional Allowances
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2021.
Boca Raton, Florida
March 3, 2025
F-4
Celsius Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
ASSETS
Current assets:
Note receivable-net — 2,318
Prepaid expenses and other current assets 18,759 19,503
Right of use assets-operating leases 21,606 1,957
Right of use assets-finance leases-net 230 208
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lease liability operating leases 3,265 980
Lease liability finance leases 100 59
Lease liability operating leases 16,674 955
Lease liability finance leases 211 193
Commitment and contingencies (Note 15)
Mezzanine Equity:
Stockholders’ Equity:
Accumulated other comprehensive loss (3,250) (701)
Retained earnings (accumulated deficit) 105,521 (12,053)
[1] Includes $168.2 million and $130.4 million from a related party as of December 31, 2024 and December 31, 2023, respectively.
[2] Amounts in this line item are associated with a related party for all periods presented.
[3] Includes $1.7 million and $0.1 million to a related party as of December 31, 2024 and December 31, 2023, respectively.
[4] Includes $0.2 million and $1.0 million to a related party as of December 31, 2024 and December 31, 2023, respectively.
[5] Includes $75.1 million and $51.8 million to a related party as of December 31, 2024 and December 31, 2023, respectively.
The accompanying notes are an integral part of these audited consolidated financial statements
F-5
Celsius Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share amounts)
For the years ended December 31,
Other income (expense):
Interest income on note receivable — 128 237
Other income 1,793 — —
Income allocated to participating preferred stock[3] (10,117) (17,348) —
Other comprehensive (loss) income:
Earnings per share[4]:
Weighted average shares outstanding[4]:
[1] Includes $742.0 million, $782.3 million and $142.3 million for the years ended December 31, 2024, 2023 and 2022, respectively, from a related party.
[2] Includes $2.4 million for each of the years ended December 31, 2024 and 2023 with no balance for 2022 from a related party.
[3] Amounts in this line item are associated with a related party for all periods presented.
[4] Forward Stock Split - The accompanying consolidated financial statements and notes thereto have been retrospectively adjusted to reflect the three-for-one stock split that became effective on November 13, 2023. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for more information.
The accompanying notes are an integral part of these audited consolidated financial statements
F-6
Celsius Holdings, Inc.
Consolidated Statements of Changes in Stockholders’ Equity and Mezzanine Equity
(in thousands)
Stockholders’ Equity
Common Stock Mezzanine Equity
Stock option exercises, RSUs and PSUs converted 4,420 1 3,683 — — 3,684 — —
Foreign currency translation — — — (2,495) — (2,495) — —
Adoption of accounting standard — — — — (82) (82) — —
Stock option exercises, RSUs and PSUs converted 2,640 1 2,285 — — 2,286 — —
Foreign currency translation — — — 1,180 — 1,180 — —
Stock option exercises, RSUs and PSUs converted 3,300 2 3,856 — — 3,858 — —
Treasury Stock (12) — (324) — — (324) — —
Foreign currency translation — — — (2,549) — (2,549) — —
(1) Forward Stock Split - The accompanying consolidated financial statements and notes thereto have been retrospectively adjusted to reflect the three-for-one stock split. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for more information.
The accompanying notes are an integral part of these consolidated financial statements
F-7
Celsius Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
For the years ended December 31,
Cash flows from operating activities:
Impairment of intangible assets — — 2,379
Loss on disposal of property, plant and equipment 173 198 —
Other operating activities (324) — —
Changes in operating assets and liabilities:
Note receivable-net 2,318 — —
Prepaid expenses and other current assets 1,074 (7,980) 2,214
Accrued distributor termination fees (248) (3,739) 3,986
Change in right of use asset and lease liability-net 535 (102) (183)
Cash flows from investing activities:
Collections from note receivable — 3,233 2,592
Purchase of non-marketable equity securities (3,000) — —
Cash flows from financing activities:
Principal payments on finance lease obligations (61) (44) (63)
Repurchase of common stock related to tax withholdings (2,261) — —
Effect on exchange rate changes on cash and cash equivalents (997) 1,257 50
Supplemental disclosures:
Cash paid for:
[1]Includes $0.6 million and $0.1 million associated with a related party for the years ended December 31, 2024 and 2023 with no balance for 2022.
[2] Amounts in this line item are associated with a related party for all periods presented.
[3] Includes $(37.8) million, $(98.8) million and $(31.6) million associated with a related party for the years ended December 31, 2024, 2023 and 2022, respectively.
[4] Includes $(1.6) million and $(0.1) million associated with a related party for the years ended December 31, 2024 and 2023, respectively, with no balance for 2022.
[5]Includes $0.8 million $1.3 million and $(2.3) million associated with a related party for the years ended December 31, 2024, 2023 and 2022, respectively.
[6] Includes $23.3 million $37.9 million and $13.9 million associated with a related party for the years ended December 31, 2024, 2023 and 2022, respectively.
[7] Includes $(10.4) million and $(9.7) million associated with a related party for the years ended December 31, 2024 and 2023 with no balance for 2022.
The accompanying notes are an integral part of these audited consolidated financial statements
F-8
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Business Overview
Celsius Holdings, Inc. (the “Company,” “Celsius Holdings” or “Celsius”) was incorporated under the laws of the State of Nevada on April 26, 2005.
Celsius is a functional energy drink company operating in the United States (“U.S.”) and internationally. The Company engages in the development, processing, marketing, sale, manufacturing, and distribution of functional energy drinks and other products to a broad range of consumers, including fitness enthusiasts. Celsius provides differentiated products with innovative formulas, many of which are clinically proven and are meant to positively impact the lives of its consumers. The Company's brand has proven to be attractive to a broad range of customers.
Celsius is marketed as a premium lifestyle and energy drink formulated to power active lifestyles. Celsius products are currently offered in major retail segments across the U.S., including conventional grocery, natural food stores, convenience stores, fitness centers, mass market retailers, vitamin specialty stores and e-commerce platforms. Additionally, the Company's products are available in select markets across Canada, Europe, and the Asia-Pacific region.
Agreements with PepsiCo Inc.
On August 1, 2022, the Company entered into multiple agreements with PepsiCo Inc. (“Pepsi”), including a long-term agreement that resulted in Pepsi becoming the primary distribution supplier for Celsius products in the U.S. (the “Distribution Agreement”). Under this agreement, the Company granted Pepsi a right of first offer in the event the Company intends to manufacture, distribute or sell products in certain additional countries or channels during the term of the agreement.
In connection with entering into these agreements, the Company issued and sold to Pepsi approximately 1.5 million shares of the Company's Series A Convertible Preferred Stock (“Series A” or “Series A Preferred Stock”) in exchange for cash proceeds of $550 million, excluding transaction costs. For additional information regarding the Company's agreements with Pepsi, see Note 4. Revenue, Note 11. Related Party Transactions, and Note 12. Mezzanine Equity.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the "SEC").
Certain prior period amounts have been reclassified to conform to the current period's presentation in the consolidated financial statements and accompanying notes. Specifically, Accounts payable and Accrued expenses were previously combined but are now presented as separate line items on the consolidated statements of cash flows.
In accordance with Rule 4-08(k)(1), Rule 5-02, and Rule 5-03 of Regulation S-X, certain related party transactions previously disclosed in Note 11. Related Party Transactions, are now presented on the face of the consolidated balance sheets, consolidated statements of operations and comprehensive income, and consolidated statements of cash flow for all periods presented.
Common Stock Split — On November 13, 2023, the Company effected a three-for-one stock split to stockholders of record on such date (the "Forward Stock Split"). For clarity and consistency in financial reporting, all shares, restricted stock units, performance stock units, stock options, and per share amounts presented in the accompanying consolidated financial statements and related notes have been retrospectively adjusted to account for the effects of the stock split for all periods presented.
Principles of Consolidation — The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in accordance with U.S. GAAP.
Business Combinations — The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations ("ASC 805"). Under this guidance, the results of operations of an acquired business are included in the Company’s consolidated financial statements and related notes prospectively from the acquisition date.
F-9
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
The Company allocates the purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed based on their fair values as of the acquisition date. Any excess of the purchase consideration over the fair value of net assets acquired is recognized as goodwill. During the measurement period, which does not exceed twelve months from the acquisition date, adjustments to the preliminary fair value estimates may be recorded as additional information becomes available. Measurement period adjustments, if applicable, are recognized in the reporting period in which the adjustments are determined and reflected as a prospective adjustment to goodwill.
Transaction costs associated with acquisitions, such as advisory, legal, and consulting fees, are expensed as incurred.
Goodwill and intangible assets recognized as part of acquisitions are subsequently tested for impairment in accordance with the Company’s accounting policy for goodwill and indefinite-lived intangible assets. See Note 9. Goodwill and Intangibles for further discussion of impairment testing.
Segment Reporting — Operating segments are defined as components of an enterprise that engage in business activities, maintain discrete financial information, and undergo regular review by the chief operating decision maker (the "CODM"), who is the Chief Executive Officer, to assess performance and allocate resources, see Note 16. Segment Reporting.
Although the Company operates in multiple geographical regions, it functions as a single operating segment because its operations and strategies are centrally designed and executed and remain significantly similar across these regions. The CODM evaluates operating results and allocates resources on a consolidated basis due to the significant economic interdependencies between the Company's geographical operations. As a result, the Company is managed as a single operating segment and has a single reportable segment.
Significant Estimates — The preparation of consolidated financial statements and accompanying disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. These estimates and judgements are reviewed on an ongoing basis and are revised when necessary. Significant estimates include promotional allowances, intangibles, assets and liabilities assumed as a part of business combinations, the allowance for current expected credit losses, leases, allowance for inventory obsolescence and sales returns, the useful lives of property, plant and equipment, impairment of goodwill and intangibles, deferred taxes and related valuation allowance, and the valuation of stock-based compensation.
Concentrations of Risk — The majority of the Company’s revenue is derived from the sale of CELSIUS® functional energy drinks. Powder sales accounted for approximately 4.7%, 3.7% and 4.1% of revenue for the years ended December 31, 2024, 2023 and 2022.
Revenue from customers accounting for more than 10.0% of total revenue for the years ended December 31, 2024, 2023 and 2022 was as follows:
Accounts receivable from customers accounting for more than 10.0% of total accounts receivable at December 31, 2024 and 2023 were as follows:
F-10
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
Cash Equivalents — The Company considers all highly liquid instruments with original maturities of three months or less, when purchased to be cash equivalents. As of December 31, 2024 and 2023, the Company did not hold any instruments with original maturities exceeding three months.
Financial instruments that potentially subject the Company to concentrations of credit risk primarily include cash and cash equivalents, and accounts receivable. At December 31, 2024 and 2023, the Company had approximately $889.2 million and $755.5 million, respectively, in excess of the FDIC limit.
Accounts Receivable and Current Expected Credit Losses — The Company is exposed to potential credit risks associated with its product sales and related accounts receivable, as it generally does not require collateral from its customers. The Company’s expected loss allowance for accounts receivable is determined using historical collection experience, current and expected future economic and market conditions, an assessment of the current status of customers’ trade accounts receivables, and where available, an evaluation of the financial condition and credit ratings of larger customers, including credit reports. Customers are pooled based on common risk factors, and the Company reassesses these customer pools on a periodic basis. The allowance for credit losses is based on aging of the accounts receivable balances and estimated credit loss percentages. The Company estimated expected credit losses for its note and royalty receivable related to Qifeng Food Technology (Beijing) Co. Ltd ("Qifeng") by assessing credit risk using the probability of default and incorporating forward-looking information. Based on this assessment, the related receivables were fully written off during the year ended December 31, 2024.
Changes in the allowance for expected credit losses for the year ended December 31, 2024 were as follows:
Allowance for Expected Credit Losses
Other current period change for expected credit losses 7,997
Inventories — Inventories are valued at the lower of cost or net realizable value with costs approximating those determined under the first-in, first-out method. Changes in the inventory reserve are included in cost of revenue. See Note 5. Inventories for more information.
Deferred Costs — The Company deferred the excess of the Series A Shares' fair value over the proceeds received from Pepsi as part of the Distribution Agreement. These deferred costs are amortized over the twenty-year term of the agreement, aligning the recognition of the costs with the benefits derived from the agreement.
Property, Plant and Equipment — Property, plant and equipment are stated at cost, net of accumulated depreciation and if applicable, impairment. Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful life of the asset, generally ranging from three to fifteen years. Routine repairs and maintenance that do not improve or extend the useful life of the assets are expensed as incurred. When property, plant and equipment is sold or retired, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 7. Property, Plant and Equipment for more information.
Leases — The Company follows the provisions of ASC Topic 842, Leases ("ASC 842"). The Company leases office space, a storage facility, machinery and equipment, warehouses, and vehicles, both in the U.S. and internationally under operating and finance leases that expire at various dates through 2034. For new or modified agreements, the Company assesses whether an arrangement contains a lease by evaluating whether the Company obtains (1) the right to substantially all the economic benefits from the use of the asset and (2) the right to direct how and for what purpose the asset is used.
If the arrangement contains a lease, the Company records a right-of-use asset and a lease liability, initially recognized based on the discounted future lease payments over the term of the lease. If the rate implicit in the lease is not readily determinable, the Company's incremental borrowing rate is used in calculating the present value of the lease payments. Right-of-use assets exclude any lease incentives received. The majority of the Company's leases are deemed operating leases. Operating lease costs are included in selling, general and administrative expenses.
F-11
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
The Company has no residual value guarantees associated with its leases. Lease cost may include both lease and non-lease components, such as shared operating costs that typically cover property expenses, including insurance, utilities, and maintenance. Where applicable, the Company elected the practical expedient to account for lease and non-lease components as a single lease component in the calculation of lease liabilities and right-of-use assets. Leases with terms of 12 months or less are not recorded on the consolidated balance sheets.
Long-Lived Assets — In accordance with ASC Topic 360, Property, Plant, and Equipment the Company reviews the carrying value of long-lived assets, which includes property, plant and equipment-net, right-of-use assets, and definite-lived intangibles-net, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized for a long-lived asset if its carrying amount is not recoverable and exceeds its fair value. The carrying amount is not considered recoverable when it exceeds the sum of the undiscounted cash flows expected to result from use of the asset over its remaining useful life and final disposition. The Company did not record any impairment charges related to long-lived assets for the years ended December 31, 2024, 2023 or 2022.
Long-Lived Asset Geographic Data — The following table consists of geographic long-lived asset information, which includes property, plant and equipment-net, right-of-use assets, and definite-lived intangibles-net and excludes goodwill and indefinite-lived intangibles, for individual countries that represent a significant portion of the total:
Long-lived assets related to foreign operations 17,101 14,394
Goodwill and Intangible Assets— Indefinite-lived intangible assets and goodwill are not amortized but instead, are evaluated for impairment at least annually on October 1st, or when events indicate that an impairment exists.
In the qualitative assessment, management considers factors including macroeconomic conditions, industry conditions, cost factors regarding raw materials and operations, legal and regulatory environments and historical financial performance. If an impairment indicator exists, a quantitative assessment is performed. The Company performs its goodwill impairment analysis at the reporting unit level, consisting of one reporting unit, as of October 1, 2024.
If management determines, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative goodwill impairment test would be required. The quantitative test for goodwill impairment is performed by determining the fair value of the reporting unit. Management has performed its evaluation and determined the fair value of the reporting unit is significantly greater than the carrying amount and, accordingly, the Company has not recorded any impairment charges related to goodwill during the year ended December 31, 2024 or December 31, 2023.
The addition of the Pepsi distribution network in 2022 shifted the Company’s primary focus to the U.S. market, and as a result it was determined that impairment indicators for the Func Food brand's indefinite-lived intangible asset were present. The Company does not anticipate focusing on the expansion of Func Food branded products and the Company plans to focus on Celsius branded products. As a result of the strategic shift, which the Company considered a triggering event, the Company quantitatively tested the Func Foods' brand name for impairment utilizing the relief from royalty method to determine its fair value. As a result of the quantitative assessment, the Company recorded an impairment charge of $2.4 million for the year ended December 31, 2022 which is presented within selling, general and administrative expenses, see Note 9. Goodwill and Intangibles.
Other Current Liabilities —Other current liabilities primarily consist of various state beverage container deposits and VAT/GST payables. As of December 31, 2024 and December 31, 2023, state beverage container deposits payables were $12.6 million and $10.1 million, respectively. As of December 31, 2024 and December 31, 2023, VAT/GST payables were $1.7 million and $0.8 million, respectively. Other current liabilities, excluding these amounts, totaled $1.5 million as of December 31, 2024, with no balance as of December 31, 2023.
F-12
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
Deferred Revenue — The Company may receive payments from new distributors in territories as reimbursement for contract termination costs paid to the prior distributors in those territories. Amounts received pursuant to these new or amended distribution agreements entered into with certain distributors relating to the costs associated with terminating the Company’s prior distributors are accounted for as deferred revenue and recognized ratably over the anticipated life of the respective new or amended distribution agreements.
Distributor Termination Fees — For the years ended December 31, 2024 and December 31, 2023 termination fees related to termination charges associated with certain prior distributors were immaterial. The Company incurred approximately $193.8 million in such expenses for the year ended December 31, 2022. These costs were included in selling, general and administrative expenses upon termination of the distributor agreements.
Revenue Recognition — The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Revenue is recognized when performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred based on the commercial terms of the agreement with the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods.See Note 4. Revenue for more information.
Cost of Revenue — Cost of revenue consists of the costs of raw materials, co-packing fees, repacking fees, inbound and outbound freight charges, certain internal transfer costs, warehouse expenses incurred prior to the manufacturing of the Company’s finished products, inventory allowance for excess and obsolete products, and certain quality control costs. Raw materials account for the largest portion of the cost of revenue. Raw materials include concentrates and liquid bases, cans, other containers, flavors, ingredients and packaging materials.
Shipping and Handling Costs — Shipping and handling costs for freight charges on goods shipped are included in cost of revenue. Freight expense on goods shipped for the years ended December 31, 2024, 2023 and 2022 were approximately $50.7 million, $58.7 million and $26.8 million, respectively.
Advertising Costs — Advertising costs are expensed as incurred and charged to selling, general and administrative expenses. The Company mainly uses targeted marketing initiatives, such as sporting events, print, radio, and television advertising, alongside direct sponsorships and endorsements. The Company incurred advertising expenses of approximately $221.6 million, $160.0 million and $85.1 million, for the years ended December 31, 2024, 2023, and 2022, respectively.
Research and Development — Research and development costs are charged to selling, general and administrative expenses as incurred and consist primarily of consulting fees, raw material usage and production testing. The Company incurred expenses of approximately $1.0 million, $1.7 million and $0.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Foreign Currency Gain/Loss — The Company’s foreign subsidiaries’ functional currencies are either the local currencies of the countries where operations are located or the U.S. dollar. The Company’s foreign subsidiaries remeasure their assets and liabilities denominated in non-functional currencies on a periodic basis, and the gain or loss from these adjustments related to fluctuations in foreign exchange rates is included in the consolidated statements of operations and comprehensive income as foreign exchange gain (loss). For the years ended December 31, 2024, 2023 and 2022, the Company recognized net foreign exchange losses of approximately $1.7 million, $1.2 million, and $0.4 million, respectively.
Foreign Currency Translation— The assets and liabilities of foreign operations are translated into U.S. dollars, which is the Company's reporting currency, using current exchange rates. Translation gains and losses, as well as exchange gains and losses on intercompany balances of a long-term investment nature, are included in other comprehensive (loss) income as foreign currency translation adjustments, net of income tax. For the years ended December 31, 2024, 2023 and 2022 the Company experienced a foreign currency translation net loss of approximately $2.5 million, a net gain of $1.2 million and a net loss of approximately $2.5 million, respectively.
The Company's operations in different countries required that it primarily transacted in the following currencies for the year ended December 31, 2024:
Australian Dollar,
Canadian Dollar,
Chinese Yuan,
Euro,
Hong Kong Dollar,
New Zealand Dollar,
Pound Sterling, and
F-13
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
Swedish Krona.
Fair Value of Financial Instruments — ASC 820, Fair Value Measurement ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, note receivable, and accrued expenses approximate fair value due to their short-term maturities and market interest rates.
Income Taxes — The Company accounts for income taxes pursuant to the provisions of ASC Topic 740, Accounting for Income Taxes. This approach requires, among other things, an asset and liability approach to calculating deferred income taxes, and recognizing deferred tax assets and liabilities for expected future tax consequences stemming from temporary differences between asset and liability carrying amounts and their tax bases. A valuation allowance is established to offset any net deferred tax assets for which management believes it is more-likely-than-not that the net deferred asset will not be realized.
Earnings per Share — The Company computes earnings per share ("EPS") in accordance with ASC Topic 260, Earnings per Share (“ASC 260”), which requires that basic earnings per share of common stock are computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock outstanding. It also requires companies with different classes of stock (e.g., common stock and participating preferred stock) to calculate EPS using the two-class method. The two-class method is an allocation of earnings (distributed and undistributed) between the holders of common stock and a company’s participating preferred stockholders. Under the two-class method, earnings for the reporting period are allocated between common stockholders and other security holders based on their respective participation rights in undistributed earnings. The more dilutive of the two-class method or the treasury stock method is used.
The Company also computes diluted EPS, which includes the effect of all potentially dilutive shares of common stock that were outstanding during the period. Such dilutive securities may include restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options, and convertible preferred stock. For the computation of diluted EPS, the numerator is adjusted for the reallocation of earnings to participating securities, reflecting the impact of potentially dilutive securities. The denominator is adjusted to include the weighted average number of additional shares of common stock that would have been outstanding if potentially dilutive shares of common stock had been issued. See Note 3. Earnings per Share for more information.
Stock-Based Compensation — The Company follows the provisions of ASC Topic 718, Compensation — Stock Compensation ("ASC 718") and related interpretations. Stock-based compensation cost is measured on the date of the grant based on the fair value of the stock awards. The costs are recognized, over the respective vesting periods of the grants. The Company uses straight-line amortization of compensation expense over the requisite service or vesting period of the grants, where applicable and recognizes forfeitures as they occur. See Note 14. Stock-Based Compensation for more information.
Selling, General and Administrative Expenses — Selling, general and administrative expenses include various operating expenses such as warehousing costs after manufacturing, expenses for advertising, samplings and in-store demonstrations, costs for merchandise displays, point-of-sale materials and premium items, sponsorship expenses, other marketing expenses and design expenses. Selling, general and administrative expenses also include costs such as payroll costs, travel costs, professional service fees (including legal fees), depreciation and amortization, and other selling, general and administrative costs.
F-14
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (the "FASB") issued ASU ("Accounting Standard Update") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard enhances segment reporting requirements, necessitating detailed disclosures on key segment expenses and other items, including segment profit or loss measures. It also mandates that companies with a single reportable segment provide comprehensive disclosures. The Company adopted the provisions of ASU 2023-07, beginning December 31, 2024, see Note 16. Segment Reporting. The adoption only impacted disclosures and did not have an effect on the Company's financial condition, results of operations or cash flows.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, introducing changes to income tax disclosures, primarily relating to effective tax rates and cash paid for taxes. This ASU requires companies to provide an annual rate reconciliation in both dollar figures and percentages, and changes the way annual income taxes paid are disclosed by all entities, necessitating a breakdown by federal, state, and foreign jurisdictions. The standard becomes effective for public business entities for fiscal years beginning after December 15, 2024. Prospective application is permitted. The Company expects ASU 2023-09 to impact only disclosures with no effect on the Company's financial condition, results of operations or cash flows. The Company is currently assessing the impact of ASU 2023-09 on the financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), to enhance expense disclosures by requiring more detailed information on the types of expenses included in certain captions within the consolidated financial statements. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of adopting ASU 2024-03 on the financial statements and disclosures.
3. EARNINGS PER SHARE
The Company’s Series A Preferred Stock is classified as a participating security in accordance with ASC 260. Net income allocated to the holders of Series A Preferred Stock is based on the Series A stockholders’ proportionate share of weighted average shares of common stock outstanding on an if-converted basis. The Series A Preferred Stock is not contractually obligated to share in losses.
Under the two-class method, for diluted EPS, net income is reallocated to the Series A Preferred Stock, and all potentially dilutive securities based on the contractual participating rights of the respective securities to share in the current earnings as if all of the earnings for the period had been distributed. Common shares issuable under PSU awards were excluded from the dilutive EPS calculation as the related target goals had not been met as of the reporting period end date.
F-15
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
For the years ended December 31,
Numerator:
Dividends on Series A convertible preferred stock (27,500) (27,462) (11,526)
Income allocated to participating preferred stock (10,117) (17,348) —
Effect of dilutive securities:
Allocation of earnings to participating securities $ 10,117 $ 17,348 $ —
Reallocation of earnings to participating securities (9,971) (16,934) —
Denominator:
Dilutive effect of common shares 3,737 6,180 —
Earnings per share:[1]
(1) Forward Stock Split - The share numbers have been retrospectively adjusted to reflect the three-for-one stock split that became effective on November 13, 2023. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for more information.
For the years ended December 31, 2024, 2023 and 2022, approximately 22.0 million, 22.0 million, and 30.6 million potentially dilutive securities were excluded from the computation of diluted earnings per share related to common stockholders, as their effect was antidilutive.
4. REVENUE
The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. The primary performance obligation is the promise to sell finished products to customers, including distributors, wholesalers, and retailers. Performance obligations are typically satisfied once control or title is transferred based on the commercial terms of the applicable agreements with customers, and traditionally such agreements do not allow for a right of return. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Revenue is recorded net of variable consideration, such as provisions for returns, discounts and allowances. Such provisions are calculated using historical averages and adjusted for any expected changes due to current business conditions. Consideration given to customers for cooperative advertising is recognized as a reduction of revenue except to the extent that there is a distinct good or service, in which case the expense is classified as selling, general and administrative expenses, in the Company's consolidated statements of operations and comprehensive income. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in incentives the Company offers to its customers and their customers.
F-16
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
Information about the Company’s revenues by geographical location for the years ended December 31, 2024, 2023 and 2022 was as follows:
For the years ended
All of the Company’s North American revenue was derived from the United States and Canada. Revenue from Puerto Rico is included in the 'Other' category.
Promotional (Billback) Allowances
The Company’s promotional allowance programs with its distributors or retailers are executed through separate agreements in the ordinary course of business (variable consideration). These agreements provide for one or more of the arrangements described below and are of varying duration. The Company’s billbacks are calculated based on various programs with distributors and retail customers, and accruals are established for the Company’s anticipated liabilities. These accruals are based on agreed upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and distributor and retail customer performance levels. Differences between estimated and actual promotional and other allowances are recognized in the period such differences are determined.
Promotional allowances are recorded as reductions to revenue and primarily include consideration given to the Company’s distributors or retail customers including, but not limited to the following:
•discounts from list prices to support price promotions to end-consumers by retailers;
•reimbursements given to distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products;
•the Company’s agreed share of fees given to distributors and/or directly to retailers for certain advertising, in-store marketing and promotional activities;
•the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers;
•incentives provided to distributors and/or retailers for achieving or exceeding certain predetermined volume goals or other incentive targets;
•discounted products;
•contractual fees paid to distributors related to sales made directly by the Company to certain customers that fall within the distributors’ sales territories; and
•contractual fees given to distributors for items sold below defined pricing targets.
For the years ended December 31, 2024, 2023, and 2022, promotional allowances included as a reduction of revenue were $455.1 million, $315.2 million, and $158.5 million, respectively.
Accrued promotional allowances were $135.9 million and $99.8 million as of December 31, 2024 and 2023, respectively.
F-17
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
Agreements with Pepsi
The Company executed multiple agreements with Pepsi on August 1, 2022, including the Distribution Agreement relating to the sale and distribution of certain of the Company’s beverage products in existing channels and distribution methods in the U.S., excluding certain existing customer accounts and sales channels, and the U.S. Virgin Islands (collectively, the “Territory”). Under the Distribution Agreement, the Company granted Pepsi the right to sell and distribute its existing beverage products in existing channels and distribution methods and future beverage products that are added from time to time as licensed products under the Distribution Agreement in the Territory. The Distribution Agreement represents a master service agreement and can be canceled by either party without cause in the nineteenth year of the term (i.e., 2041), the twenty-ninth year of the term (i.e., 2051) and in each 10th year thereafter (i.e., 2061, 2071, etc.) by providing 12 months’ written notice to the other party on August 1st of the year preceding the year of termination. Except for a termination by the Company “with cause” or a termination by Pepsi “without cause,” (each as defined in the Distribution Agreement), the Company is required to pay Pepsi certain compensation upon a termination as specified in the Distribution Agreement.
The Company agreed to provide Pepsi a right of first offer in the event the Company intends to (i) manufacture, distribute or sell products in certain additional countries as specified in the Distribution Agreement or (ii) distribute or sell products in any future channels and distribution methods during the term of the Distribution Agreement. Pepsi agreed to meet and confer in good faith with the Company regarding the terms and conditions upon which Pepsi may be willing to sell or distribute the Company's products, either directly or through local sub-distributors in certain other additional countries. The Distribution Agreement includes other customary provisions, including non-competition covenants in favor of the Company, representations and warranties, indemnification provisions, insurance provisions, and confidentiality provisions. In the fourth quarter of 2023, under the terms of the Distribution Agreement, the Company and Pepsi agreed to extend distribution to the Canadian market, which commenced in January of 2024.
On August 1, 2022, the Company and Pepsi also executed a transition agreement providing for the Company’s transition of certain existing distribution rights in the Territory to Pepsi (the “Transition Agreement”). Under the terms of the Transition Agreement, Pepsi agreed to pay the Company up to $250.0 million in multiple tranches to facilitate the Company’s transition of certain distribution rights to Pepsi. The Company received $227.8 million from Pepsi that were contractually restricted to be used only to pay termination fees due to other distributors; any excess cash received over amounts due to other distributors was required to be refunded to Pepsi. During 2023, $34.8 million of such funds were refunded to Pepsi. As of and after December 31, 2023, there was no refund liability owed to Pepsi.
On March 23, 2024, the Company entered into Amendment No. 1 to the Distribution Agreement with Pepsi, pursuant to which the Company has agreed to provide Pepsi with an incentive program designed to incentivize and compensate Pepsi for its continued focus on and actions to support the Company. These incentives are accounted for as promotional allowances and recorded as a reduction to revenue.
5. INVENTORIES
Inventories-net consists of the following:
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets totaled approximately $18.8 million and $19.5 million, at December 31, 2024 and 2023, respectively, consisting mainly of tax receivables, prepaid insurance, prepaid advertising, prepaid advances to co-packers related to inventory production, prepaid general expenses, prepaid slotting fees, and deposits on purchases.
F-18
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
7. PROPERTY, PLANT AND EQUIPMENT
The following table summarizes the Company's property, plant and equipment balances and includes the estimated useful lives that are generally used to depreciate the assets on a straight-line basis:
Estimated UsefulLife in Years December 31,2024 December 31,2023
Leasehold improvements 3-5 2,561 —
Less: accumulated depreciation (10,791) (4,650)
Depreciation expense amounted to approximately $6.5 million, $2.6 million and $1.4 million for the years ended December 31, 2024, 2023, and 2022, respectively, and is reflected in selling, general and administrative expenses.
8. LEASES
The Company leases office space, warehouses, and vehicles, in the U.S. and internationally under both operating and finance leases. Variable lease expense related to operating leases, excluding non-lease components included in total lease costs, did not have a significant impact on the Company's consolidated financial statements.
In September 2024, the Company entered into a non-cancelable sublease agreement for office space, which commenced in October 2024 and extends through 2029. The sublease terminates in the event the related master lease is terminated. Upon commencement, the Company recognized a right-of-use asset and lease liability related to the agreement in accordance with ASC 842. In November 2024, the Company acquired all of the outstanding voting equity interest of Big Beverages and recognized right-of-use assets and lease liabilities for the property leases assumed with the acquisition in accordance with ASC 805 and ASC 842. Refer to Note 17. Acquisition.
The components of lease costs were as follows:
For the years ended December 31,
Amortization of right of use assets- finance lease 126 86 110
F-19
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
Supplemental cash flow information and non-cash activity were as follows:
For the years ended December 31,
Cash paid for amounts related to lease liabilities:
Operating cash flows from finance leases (interest) $ 11 $ 7 $ 7
Operating cash flows from operating leases 1,684 836 670
Financing cash flows from finance leases (principal) 61 44 63
Non-cash lease activity:
Weighted-average remaining lease terms and discount rates:
For the years ended December 31,
Weighted-average remaining lease terms in years
Weighted-average discount rate
The aggregate annual lease obligations at December 31, 2024, were as follows:
Operating Leases Finance Leases
Total future minimum lease payments $ 23,042 $ 330
Less: amounts representing interest 3,103 19
Present value of lease liabilities 19,939 311
F-20
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
9. GOODWILL AND INTANGIBLES
As of December 31, 2024 and December 31, 2023, goodwill was approximately $71.6 million and $14.2 million, respectively. The balance as of December 31, 2024 included additional goodwill of $58.3 million which was recognized as part of the business combination described in Note 17. Acquisition.
The carrying amount and accumulated amortization of intangible assets, net of the impact of foreign exchange rate fluctuations as of December 31, 2024 and December 31, 2023, were as follows:
Estimated UsefulLife in Years December 31,2024 December 31,2023
Definite-lived intangible assets
Less: accumulated amortization (2,692) (2,233)
Definite-lived intangible assets, net $ 11,778 $ 11,678
Indefinite-lived intangible assets
As of December 31, 2024 and December 31, 2023, there were no indicators of goodwill or intangible asset impairment, while in 2022, an intangible asset impairment was recorded related to the Func Food brand for $2.4 million. Amortization expense for the years ended December 31, 2024, 2023 and 2022 was approximately $0.6 million, $0.5 million and $0.5 million,respectively. Amortization expense is included in selling, general and administrative expenses.
The following is the future estimated annualized amortization expense related to customer relationships and certain trade names:
F-21
Celsius Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 2024
(Tabular dollars in thousands, except per share amounts)
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
As of December 31, 2024 and December 31, 2023, accounts payable was approximately $41.3 million and $42.8 million, respectively.
Accrued expenses consisted of the following:
Contractual co-packer obligations 9,350 —
As of December 31, 2024, accrued legal included $54.9 million related to ongoing litigation, refer to Note 15. Commitments and Contingencies.
11. RELATED PARTY TRANSACTIONS
Transactions with Pepsi
As further described in Note 12. Mezzanine Equity, on August 1, 2022, the Company issued approximately 1.5 million shares of non-voting Series A Preferred Stock to Pepsi. The shares accounted for approximately 8.5% of the Company’s outstanding common stock on the date of issuance, on an if-converted method. The securities purchase agreement (the "Purchase Agreement"), pursuant to which Pepsi acquired the Series A Preferred Stock, grants Pepsi the right to designate a nominee for election to the Company’s Board of Directors (the "Board"), provided that Pepsi meets certain ownership requirements.