Celsius Holdings Inc (CELH) 2010 Q1 法說會逐字稿

Good morning, and welcome to Celsius Holdings, Inc.'s First Quarter 2010 investor conference call. Joining me on the call today is Steve Haley, the Company's Chief Executive Officer and Geary Cotton, Chief Financial Officer.

During the course of this conference call, we will make forward-looking statements regarding future events and the future performance of the Company. We caution you that such statements reflect our best judgment based on factors currently known to us, and that you should not rely on such forward-looking statements since our actual events or results could differ materially as a result of a number of important factors.

These factors include general economic and business conditions, trends, the impact of competition, technology and regulations and other risks and uncertainties discussed in the reports we file from time to time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements or other information provided during this conference call.

In adherence to the Regulation Fair Disclosure, the Company has provided information on its first quarter 2010 results press release and this publicly announced conference call. We will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

I'll now turn the call over to Mr. Steve Haley.

Thank you, Bob. And thank you for joining us for our first quarter 2010 investor conference call. Financial results for our first quarter 2010 were released to the public earlier today in our press release distributed this morning. You can view a copy of this press release on our website at Celsius.com in the investor section.

Let's get started. Overall, we are pleased with the progress we made on many counts during the first quarter. We still got a lot of work to do, but the foundations we laid and the services we made from a strategic perspective is starting to serve us well, and our data analysis and research is pointing to a bright future for Celsius.

To put our financial performance for the quarter in a nutshell, our case volumes was slightly higher than expected, but our net sales revenue was a little lower. Scan data shows good month over month growth but it took longer than expected to get into some of the authorized shelves. We will explain all of this as we review the results and activities, and then Gary and I will open it up to your questions.

Over the last two quarters, we have dramatically increased our distribution and we are now starting to get meaningful data regarding actual consumer sales at the store level so we have more quantitative information to provide on this call than we've had in the past.

To help you compile and reflect on this information in addition to this live call, we will have an audio recording posted on our website and the transcript will be posted on www.streetevents.com, as well as filed in the SEC under cover of a current report on Form 8-K.

As we provide a deeper quantitative perspective of our sales and growth, we should first be clear on a few of the terms, on the last call, we introduced the description of All Commodity Volume or ACV. ACV is a metric that represents the total annual sales volumes of our retailers within the channels of Food, Drug, Club and Mass. We plan on updating you on our ACV progress each quarter.

We will also now be using case equivalent to express our unit volume. This simplifies the analysis because we are now selling various packaged sizes to different retailers or channel trade, so we need a way to normalize or calculate the volume growth company wide. For example, Costco sells a case of 15 12 ounce cans, Sam's Club of eight to 12, et cetera, and our own On-the-Go packets come in both seven and 14 count boxes.

For all our calculations, a case equivalent is a 24 unit case of 12 ounce Celsius, or 24 individual On-the-Go packets. As we have strategically and significantly increased our marketing investment, it's important to also understand that some marketing costs are deducted when calculating net sales or net revenue.

Geary commented on this on the last call, but it bears repeating since we have strategically decided to invest in more of these above the line promotion and plans. A key example of sales and marketing expenses that are above the line and deduct from gross revenues are coupons. We like this form of marketing because we only pay for it when a consumer purchases Celsius and redeems the coupon. So, you will hear more about above the line marketing costs versus below the line marketing expenses.

Geary will be getting into the financial results for the quarter in a minute, but let us first get into some analysis of our volume. We are pleased with the volume growth that we are experiencing. Celsius sales volume in case equivalent was three times the volume of the same quarter a year ago in comparing this quarter versus the fourth quarter of 2009, we had increase of 20%.

What we see as more important is the growth of reorders where we are more than double the case equivalent volumes this first quarter versus the Q4 of '09. The sales team did a good job of getting Celsius planned into thousands of new retailers or their locations over the last couple of quarters.

To better understand the strength of the brand and our progress, we separate out the new orders for the initial filling of the distribution pipeline and store shelves, from the reorders that follow once sales are fully through the supply chain. Of course, you can't get the consumer sales until the product is on the store shelf but once there, it's the amount of consumer pull through or purchases that matters.

We are pleased that the reorder rates from our retailers continue to grow. Even more important still is the actual consumer sales at the store level. As we have discussed on many prior calls, it can take 30 to 90 days to actually reach all of the store shelf plans in some of these large retailers.

When we look at the actual POS or Point of Sales scan data, once we are on the shelf, we see that the consumer sales are growing faster month over month than we had planned.In some retailers, the initial sales were lower and we were slower than planned, so it's good to see the higher monthly growth rates coming in now.

Sale on our mature accounts continue to grow and are strong; this is the reason why we are so optimistic about our prospects. What we are now working to do is speed up the growth ramp for this large number of new retailers that we are -- just now, getting to the shelves. For the last four months, we have had monthly volume growth each month over the prior month.

Our ACV penetration continues to grow, the calculation shows we are at a 42% total not including convenience, which is a fragmented channel and get to much scan data from. The biggest increase is the food and grocery channel, where we have grown from 29% to almost 38%.

Significant new retailers included in the ACV calculations since our last update includes 1,000 Publix stores, 113 of the total 633 Sam's Club and 751 of the total 3,500 Wal-Mart stores. Initial pipeline fill orders for Publix and Sam's were in the quarter's numbers. But Wal-Mart was not -- it will be included in the second quarter figures.

We believe that we are in less than 5% of cooler doors for convenience, food, drug and mass channels of trade and this represents a significant opportunity for us. The convenience channel and the immediate consumption cold doors is an area that we are currently giving special attention and focus.

The recent large increases in our resale distribution has been predominantly four packs that are usually warm and in the health and nutrition parts of the store. As those longer term investors are aware, we turned our focus to a more national distribution mid-year in 2009 and we added more retailers where we could ship direct to the retailer's own distribution supply chain. This was the fastest way to get national distribution.

We are now working to get more singles into the cold door compartments or cooler doors so it's easier and lower cost for a cost for a new consumer to try Celsius. This also makes it easier to try multiple flavors to determine your favorite.

Our strategy in attracting large distributors now is different and our opportunity is much better than a year ago. We have a national marketing campaign in progress and Celsius has shown the ability to get into a wide range of retailers, so we have removed almost all the risks for a distributor in taking on a new brand like Celsius.

We are now more focused on larger distribution networks or systems, instead of bringing on one local distributor a time. We are presently in preliminary discussions with potential distribution partners, which could include cold door distribution as well as international licensing arrangements.

We have always believed the largest volumes will come from the club and mass channels like Costco, Sam's and Wal-Mart, but since trial is so important in building in a new brand, and each convenience chain added is important, and we continue to bring on new convenience chains.

Some notable new convenience retailers that the sales team added this quarter are Casey's General Stores, Cumberland Farms, Maverik, Loaf'n Jug's, and we also continue to make progress in adding more 7-Eleven franchise stores.

In addition to continuing to grow our ACV, the sales team is also focused on enhancing our shelf placements and supplemental display. The initial challenge with a retailer is first get in to the store, then with success, we can get additional placement to move to better shelf space and increase the number of SKUs.

Increasingly, we have more retailers where Celsius has been able to prove itself and get such support as end caps and additional displays. Meijers is a good example. Their sales are up 112% and accordingly, they will now be adding the two teas, and we have two months of end cap support this quarter.

Vitamin Shoppe where sales were up 164% year-over-year is adding our On-the-Go Packets, and many of their stores have them at the check-out counter. I might also point out that Celsius is the best selling national brand beverage in the store and you will see end cap and supplemental displays in many Vitamin Shoppes around the country.

You can see that once we get into a store, we are able to work on enhancing our position and increasing the promotion. We will continue to work on increasing the number of stores and each quarter, we will update you on our ACV level. We will also continue focusing on enhancing our shelf placement and getting more cold singles aid in trial.

I want to also point out that Celsius sales were in more channels than those included in the ACV calculation. In addition to growing our ACV retail distribution, we are broadening our distribution in other channels such as military, e-commerce, and the health and fitness channel. We are now in the 160 AAFES exchanges here in the US and overseas.

Special thanks on this one goes to Mario Lopez. Mario helped us get -- not only started but also accelerated for shipment earlier in the year than we had previously hoped. Also, the Navy will be taking Celsius at 60 of their top exchanges around the globe. We are excited about the consumer acceptance of Celsius and the increased month over month growth rate of consumer purchases.

If, however, the biggest challenge that we've had in previous quarters was to get on to the shelves, we see the biggest challenge now to dramatically increase the consumer awareness and an understanding of what Celsius is and the benefits it can bring.

Our research tells us that our previous advertising and positioning is not getting across all the benefits of Celsius. The clinical studies continue to prove how beneficial Celsius is when combined with light or moderate exercise. Also, we've learned more and more of our most avid, loyal, and vocal fans. It became more clear that we could not only broaden our target market, but do it with a more focused and impactful positioning or message.

Our first elements for this new leadership positioning as your ultimate fitness partner was launched in April, and we are rolling out more throughout this quarter. In fact, our new television ad started airing on many cable channels this last Monday. It's a national cable buy that should deliver upwards of 90 million impressions each week. So far, the response that we have received has been positive.

This approach helps us stress all the benefits beyond only the calorie burning and extended energy delivered by Celsius, reducing fat, increasing muscle and endurance, along with healthier ingredients and good taste are all important aspects of the unique Celsius value proposition.

Another characteristic of our new television format is we should have much more timely analysis available to gauge its effectiveness. This particular format includes the opportunity for the consumer to receive a coupon that that includes the promotional codes that will give us more tracking analysis of the best channels and times and shows.

On the last call, I mentioned one of the types of couponing that we were starting to use; it's a couponing system that would print a coupon along with the receipt at check out. The coupons for Celsius would be printed based on the consumer has purchased.

The feedback shows that the branding continuity or keeping users in the franchise was almost double of what was expected. This validates our thoughts that we have a loyal core consumer base. Now not all stores are set up with this type of promotional vehicle, but those that were showed over 89,000 shopping trips with Celsius in the basket, and 30% of those bought more than one four-pack at a time. This is a sign that Celsius consumers will stock up or pantry load.

Our number one focus right now is to build awareness. We are continuing with print, radio, television, as well as various digital and mobile marketing elements that emphasize our new positioning. We are doing more to integrate this with more exposure from Mario Lopez as well.

He is many of our ads and hopefully you have seen him each night holding a can of Celsius, while he is hosting Extra on NBC. Also, we'll continue full page print ads in our new positioning publications like -- of our new positioning to publications like Women's Health and Men's Health, as well as the publication from some our top retailers like GNC and Vitamin Shoppe and (inaudible).

These national programs are enhanced with some excellent micro-targeting efforts with fitness trainers, gym owners and consumers who attend health clubs. And all of these efforts are trackable to measure their estimates.

In summary, before turning it over to Geary, our case volumes are ahead of our internal plan, but our net revenue is about 15% less than our expectation, mainly due to the strategic decision to use more above the line promotions than previously planned.

We still have a few major retailers to bring on and are confident that we will be successful in adding them. Our main focus over the next quarter will be to grow consumer awareness and repeat sales. To increase trial and broaden distribution, we will be working to add significant distribution partners for the immediate consumption market, followed by a renewed focus internationally.

We are in some discussions with potential partners regarding various scenarios that utilize MetaPlus inside other products and brands. As you can imagine, these can take some time and we can't publicly disclose anything at this time. We are excited about our new positioning that could address a larger target market with a more leadership focused message, and we will be monitoring the impact over the next several months.

Let me now turn it over to Geary, who will get into more of the financial details.

Thank you, Steve. As Steve mentioned, there is so much more quantitative data this quarter than we have had in the past. We are going to share as much data as we can so you can assess the progress of our company on your own.

The first point I want to address is our business will be a bit choppy during this initial pipeline distribution period. This is because of the delay in getting through this retailer's distribution system. So, it will be a while before reorders smooth out and become more predictable.

The second point I would like to make is about reorder volume from existing customers not including the pipeline fill. I will talk in case equivalent terms to help you understand through case volumes which is not affected by coupons and discounts. In the first quarter of 2009, we shipped approximately 36,000 case equivalents to existing customers. In the first quarter of 2010, we shipped approximately 89,000 case equivalents, a more than doubling of the reorder volume from existing customers from a year ago.

From Q4 2009 to Q1 2010, reorder volume from existing customers more than doubled from 40,000 cases to 89,000 cases, this is a very important statistic to understand the true progress of our business. Total case equivalent volume including both reorders and pipeline for the first quarter over the fourth quarter of 2009 increased by 20%. Remember, revenue for the same period was 100,000 less in Q1 2010 versus Q4 2009.

Again, revenues were lower because of the promotional expenses. Promotional expenses, which are deducted from gross revenue to derive net revenue, increased from 134,000 in Q1 of 2009 to 811,000 in this quarter. It is also important to understand our internal model did take into consideration the pipeline fill, but we are off by approximately 400,000 from our anticipated sales for this quarter.

We also were a bit aggressive on our initial anticipated case turns at retail, one of the assumptions we underestimated was our month over month growth rate. The two months compounded growth rate based on various scan data show that February and March grew 24% on average over the previous respective months at the retail level.

Using all of the new information we have learned, we have updated our forecast and we have revised our guidance to the $18 million to $22 million range. We believe it's in our shareholder's best interest to review our guidance at this stage of the year, as we seek to deliver the best and most current information we have at our fingertips. With that said, our growth pace continues to quicken and we believe there is upside to our new guidance.

The new range does not assume any significant new accounts as well as increased distribution in Wal-Mart. As Steve mentioned, we shipped only 750 Wal-Mart stores out of the 3,500 total stores in April. We certainly hope to get good news later in the year that we are expanding distribution to the remaining stores. This provides some upsides to our guidance, but at this stage of the game, we base the information we were able to glean from the first quarter, we have decided to take a more conservative approach to our outlook.

It's important for investors to note that while our guidance are changed, our employee bonus plan still remains at reaching the $25 million in net sales, so we are highly motivated to do everything possible to meet and exceed that mark.

As we indicated in earnings release, gross profit was affected by the reduction of net sales for promotional expenses. If you were to look at the product cost as a percentage of gross revenue, the actual cost of good went down from 40.2% to 38.1% compared to the first quarter of 2009. This decrease in cost of goods was partly offset by an increase in freight cost.

Gross profit margins based on net sales went from 44% to 36%. Gross margins for the remainder of the year is expected to remain uneven, our financial model estimates coupon redemption which can affect gross margins significantly depending on the success of the various programs. The margins can also be affected by pipeline build.

For example, 1.7 million was shipped in the fourth quarter of 2009, but no couponing and demo costs were incurred with that initial order, increasing gross margins in the fourth quarter. We now expect margins to range anywhere from 30% to 50% for the remaining three quarters, as the Company is in this aggressive promotional model and strategically increasing coupon efforts to induce trial and increase brand awareness and market share.

To that end, sales and marketing expenses have increased significantly as our planned sales and marketing campaign goes into full swing. Expenses for the category increase from $1.2 million in the first quarter of 2009 to $4.8 million, a fourfold increase.

Direct advertising increased by $2.4 million, product sampling by $723,000, and employee cost by $169,000. Planned selling and marketing costs will be about $0.5 million lower in the second quarter, and then scaled down in the third and fourth quarters. With our recently completed capital raise and the conversion of debt to equity, I'm pleased to report that we have the resources to execute on this kind of aggressive sales and marketing effort, and expect that we will bear considerable fruit as we enter the second half of the year.

General and administrative expenses increased from $355,000 for the first quarter of 2009 to $1.4 million for the same period in 2010, an increase of $1 million. This is mainly due to an increase of employed cost of $497,000. Of this amount, $340,000 relates to a change in duty payout to the previous CFO under the terms of his employment contract. I have asked Jan to remain with the Company as the Vice President of Finance, which he has accepted.

$204,000 of the $1 million increase relates to an increase in stock option expense and $103,000 of the increase relates to an increase in allowance for bad debt. There was a loss on extinguishment of debt of $322,000; this represents the non-cash charge related to a modification of convertible debt.

Net interest expense increased from $29,000 to $257,000, an increase of $228,000. Of this increase, $155,000 is related to the amortization of the convertible debt discount, as well as a non-cash charges in connection with the conversion of debt to equity -- the balance of the increase related to increased interest expense. Net loss for the first quarter was $5.9 million. Of this amount, approximately $760,000 related to non-cash items, mainly the stock option expense as well as the charge for extinguishment of debt and the amortization of debt discount.

As I mentioned earlier, sales were $400,000 less than our internal forecast, net operating loss was approximately $300,000 more not including non-cash items in our internal forecast. So, we were not significantly off our expectations. The Company is still projecting to have available cash through the fourth quarter and is still projecting profitability beginning in the first quarter of 2011.

I will now turn it back to Steve for closing remarks before turning it over for questions. Thank you.

Before opening it up for questions, let me once again say that we are excited about the volume growth in what looks like strong consumer acceptance when they understand Celsius and have a change to try it.

We are intensely focused on increasing the overall awareness of our value proposition and getting more new customers to be able to try Celsius. To be conservative, we lowered our guidance for the topline revenue, but believe there is good upside potential and we are striving to beat the goals that we set.

We see Celsius as being aligned with some major consumer trends, and believe we have a good business model for revenue and margin growth. The team and I are committed to hitting or exceeding the numbers that are expected, and we are working together to grow the Celsius brand and company as well as the exciting new category.

With that, we will open it up for your questions.

Bob, do we have any questions on the queue?

Yes, our first question comes from the line of Mickey Schleien with Ladenburg Thalmann. Please proceed with your question.

Good morning, Steve, how are you?

Good, Mickey, how are you?

Hi, Mickey.

Hi, Geary. There were a lot of numbers in your prepared remarks and I'm scribbling away as fast as possible, but I wanted to go back to Geary's discussion on case volume, I think it's really important to understand that. Geary you were talking about 36,000 cases shipped in 1Q '09 I think you said 89,000 in 1Q '10, and 40,000 in 4Q '09. Were those initial orders or total volume? I just couldn't keep track of everything.

Yes, and -- it's a very important point to understand our numbers because the pipeline affects the way these numbers come in. Let me give you those numbers and I'll break it between what we consider initial pipeline and reorders

And I will start with Q1 '09. In Q1 '09, there was 4,909 pipeline initial cases. The reorders from existing companies was 36,411 for a total of 41,319. Now, I'm going to skip right over to the fourth quarter, where we really have our first quarter of significant pipeline fill and for Q4 '09, we shipped 63,338 cases of initial order, and we have 39,941 of reorders from existing customers.

In Q1 of 2010, we have 35,322 of pipeline and a total of 88,953 for reorders, a total of 124,275 in case equivalent terms in Q1.

Okay. So, reorders sequentially more than doubled from the fourth quarter?

That's from 39,000 to 88,000.

Okay, fair enough. In terms of your revised revenue guidance, can you give me some idea of the trajectory that you are assuming for volumes and prices and I guess buried within that is you know coupon redemption to get to the $18 million to $22 million?

Yes. First of all, the cost of goods as I mentioned have come down from a true cost standpoint -- they're going up because of the promotion expense that we have decided to accelerate. But -- what was your question?

I want to understand the trajectory of -- well, I guess the shape of the curve that you are sort of assuming for volume and prices to get to the $18 million to $22 million for the year. In other words, you did roughly $2 million in the first quarter, it sounds to me like you're assuming some growth in the next quarter but, very meaningful growth in the second half of the year. Is that correct?

Well, we expect significant growth in Q2. Remember, we are going to have a pipeline of Wal-Mart that we shipped in April which was more significant than the Costco pipeline that we shipped in the fourth quarter, so that will be included. So, we are expecting for our sales to increase significantly in Q2.

Okay. And in terms of coupon redemption, two questions -- are these sort of two for one coupons, or can you give us an idea of what the coupons are? And what can we expect in terms of coupon activity? Is this something that you are going to continue heavily in the second quarter, or is it going to start to die down as the brand awareness builds up?

As far as the type of coupons, I'll answer that, then Geary can give you a little bit more about where we see them heading. But it's many types, Mickey, of coupons. It does include those above the line -- does include if you go to a store and there's a buy one get one or buy two get two or something like that.

But it's also -- and it's those things I mentioned if you get something at a cash register because you bought a certain product, here's coupon that spits out. It's also though, like we did at FSIs or free standing inserts in some of the newspapers around the country that would offer a certain amount that's off -- that gets included in there.

There is a wide range of ways that we try to incent someone to go to the store and try Celsius. And we strategically switch to a little bit more of this type of promotional activity than just a below the line expenses because we do see it's -- a lot of data that -- if we can track that goes -- if someone tries it, they will become a loyal customer, so we need to get them into it.

There is skepticism, there is something that can have so many good benefits -- really taste good, and so tasting becomes a big issue and we want to induce that trial. So we are increasing that amount. In March, we ramped it up pretty heavily and they'll going to the second quarter.

You want to answer --?

Yes, as far as the -- in our model, we make assumptions on what the coupon redemption will be. That is a -- that can range widely-- the funny thing is that if you are successful and you get a lot of coupons, probably your sales are going to go higher than what we've projected.

If the coupons don't get redeemed, then there some cushion in our model, which will actually increase sales. So it's a good news bad news type of thing; we want couponing because we know it brings back customers and we have -- we are very aggressive in our model going into the remainder of the year, actually Q2 and Q3 are very heavy in what we have assumed in the form of couponing and then it scales down in Q4.

And then going into next year, as we build this awareness up that will get to more normal levels. We will always have some type of promotion but certainly not to the extent that we are in this promotional phase.

Okay. My next question is regarding the 24% growth rate, you've talked about in your prepared remarks and also in the press release. I just want to make sure I understand that. It's scan data from your exiting points of sale -- this is volume data or revenue data or something else?

This is data on a -- I think it's -- I'm not sure if it's on units or net sales, but it's the scanned data that we get from our retailers and we put it in -- we've only been receiving this information really since January and February and March. When we talk about that 24% increase, that was the increase -- the average increase from January to February, and from February to March.

But that's not clear whether it's units or transactions or net sales.

It should be about the same, whether it's net sales or unit it's very significant. Now, your question is [do we] assume that going forward that we are going forward that we are going to grow that growth rate? Absolutely not.

When we did our forecast, we looked at the existing churns, we look at existing growth by customer, pipeline sales, we took a lot of factors that we didn't have available to us in -- when we came up with the 25 and now, we put this all into our model and it comes to this new range. And again, the range is fairly large and depending on the amount of coupon redemption, it could be affected, but I think we have taken a very conservative approach in estimating what the coupon redemptions are going to be.

Okay. I don't want to monopolize the call, but I got a few housekeeping questions I wanted to ask. Is your -- do you expect your selling and marketing expense -- how do you expect this to trend for the balance of the year? You did 4.8 in the first quarter.

Yes, we expected to go down by about $0.5 million in Q2 and then ramped down to about $3 million and then down to about $2.7 million in the fourth quarter. I feel comfortable in giving you those numbers because that's what's in our plan right now. The coupons are -- those are pretty much a guess, but these are the numbers that we have and we have been sticking to our below the line expenses--

Okay. And likewise, on G&A, is the $1.4 million a sort of good run rate of the year, or something you need to change there?

No, you got -- you'd recall we have a $340,000 onetime expense and you also had some bonuses that -- discretionary bonuses that were included, that should come down. Your G&A should come down by about $400,000 or $500,000 in the future quarters.

Okay. And when I did the interest rate on your debt -- on the average amount of debt outstanding, it looks really high it was 18%. I think Geary may have commented on some factors in interest expense that I missed. Were there some non-cash charges in the sort of 56,000 that you reported?

There was about 155,000 of amortization, if you -- going forward, if you use a $57,000 quarter number that should get you the interest for the remaining quarters.

Okay. And has the fully diluted share count changed significantly since this balance sheet was published? You were at 14.7 million?

it's 18.4 million after the -- the 14.7 million, remember is the average during the period so the conversion is weighted for the time.

Right, right.

At this point in time, there are 18.4 million shares outstanding. If you want to add dilution -- if you had dilution at $5 -- at the $3 level, it's 300,000 shares dilution at $4 is about 400,000 additional shares.

Okay. So, our model is okay. And last couple of questions. You didn't publish your Q yet, when will that be out, and what was your operating cash flow in the quarter?

The Q will be out today. And the cash -- the cash, what was the question regarding --?

Cash flow from operations, what was the total for the first quarter? I'm assuming it was a negative number.

Yes, it was a negative number, the cash flow from operation, Jan, was about --. Hold on one second. $3.4 million negative.

Okay. Million dollars. Right?

Yes.

Thanks for your time, Steve and Geary.

Bob do we have another one in the queue there?

There are no other further questions in the queue at this time.

We have someone on line here, Jan?

Yes, the first question on the line is, Is it possible that a huge company like Dr. Pepper, Snapple or Pepsi could buy Celsius in its entirety?

The question is could a large company buy us in its entirety? Certainly that can be down the road. We are not making any comments on that now. We are building the Company for -- building long term --for the long term growth -- profitable growth long term, and some sort of outcome like that could be in the future but it's not -- we're not running the Company as if that's our only plan.

The next question from the same person, is Geary Cotton says that the next few quarters will be choppy, we do not have our own manufacturing facilities, is part of this choppy forecast in part, trying to get the manufacturing time allocations in other people's factories?

No the choppiness is, as I mentioned, comes basically from the pipeline fill. You are sending products to a distributor, it has to get to their distribution, get it to the retail store. Then it needs to sit in the backroom. Then it needs to get -- put in to the planogram. So, that is what I'm referring to as choppy.

We don't have a capacity problem at all getting the products and shipping it to any customers.

It's another question about is the large company like Pepsi, Coca-Cola could be buying Celsius in 2010 and --

We answered that.

And when are the executives at Celsius is projecting this Company will become profitable?

We are projecting that would be in the first quarter of 2011.

And we have another one here. I believe the product is a great product, but as investors we are not being rewarded, do you believe the Company stock has upside and why? Do potential partnerships involve global food and beverage companies? Can you tell us what type of potential products that MetaPlus might being added to?

That is a long question there, and one part was the stock -- share price not going up? And the -- another was the partners that we are talking to and what type of companies they are and what that could mean.

On the first part, and I've said this many times, we are not building or running the Company just to get the share price up. That has happened in the past not because of anything we published or put out, but it -- share price goes up and goes down out in the market. What we are doing is building a good, strong, long term company and brand.

I know this frustrates -- since the share price is down right now, but we are not working top just get the share price up, it is to build a long term solid company, and we want to make sure that is communicated over and over again to our investor base.

As far as some of the partnerships that we are working on, yes, it's going to probably be -- if we go on with a food and beverage company but as I mentioned, we really can't talk much about that, and I hope you can appreciate what that does -- why we can't as we are in these discussions with them.

As far as the product that MetaPlus can go into -- with a key thing for us to -- milestone to move just from the ready to drink and liquid over to solids, we have now been able to prove that. We have been able to prove that also now in studies, and that opens up a lot of opportunities for us as to what type of product MetaPlus -- we may take the benefits of MetaPlus too. And remember, MetaPlus comes with the now seven clinical studies that show what it can do both with and without exercise.

But we can't talk much more about other than it would be probably from larger food or beverage type company either here in the states or internationally.

Is Mario Lopez the only celebrity spokesperson that Celsius is planning to use?

Is Mario the only celebrity we are planning to use? Right now, he is our main spokesperson. We have had discussions with a lot of other celebrities in both the celebrity status or sports status, that would -- like Celsius or enjoy Celsius. We are not in any specific discussions or negotiations with anyone other than Mario right now, and we are excited about Mario. But we are open to other partners as time goes on.

Can you explain more about the convenience store plans?

Can we explain more about convenience store plans? We are on a path to continue adding convenience stores as we have been doing each quarter, the convenience store, and if you broaden that to places where you can have single Celsius -- singles not four pack and cold, that makes it easier to try. If we are doing television ads for example and you can only try it with a four pack, that is a little more expensive and harder if you wanted to try two or three flavors, so the cold doors become important to us.

And we are continuing with our current sales force and CROSSMARK as a broker -- we are all out there building up the number of convenience stores or cold doors. I did mention that we are in some discussions with larger distribution networks or systems where we might get a large amount of territory or a large amount of new stores delivered through one large beverage network.

We can't really say much more than that right now than that is our strategy. Instead of doing as we did the first three and a half years of the company where we were going to one distributor at a time and convincing them and hoping they would bring Celsius into their portfolio, we are now talking to large networks at one time which would get major parts of territory, and this goes for both here in the United States as well as internationally. And we hope that that is a bit part of our strategy going forward.

There are no more questions.

Bob, do you have any on the phone?

There are no further audio questions at this time.

All right, I appreciate everybody being on the call. Hopefully, you see that we are excited about our future. The growth that we are seeing is good, we are going to focus on building awareness this quarter and next pretty heavily. Some of that focus on building the awareness involves such marketing elements that do detract from revenue.

It's an interesting thing -- do you hope to have better success with actually lower revenue or not? We are trying to balance that. And we are trying also to communicate as effectively and accurately as we can with you as an investor base so you know what we are doing and where we are going.

I appreciate it. We look forward to updating you on our next conference call after this important quarter. Thank you.

This concludes today's teleconference. You many disconnect your lines at this time. Thank you for your participation.