Curious if any of you pays attention to this "energy drink" company.
- Revenue growth rates and same-store sales have been historical. However, I am deeply confused by where those 400% and 300%+ numbers came from:
(1). According to their own public SEC filings, penetration of the U.S. market had reached c.92% in Q3'21 (we are present in 92% of all U.S. counties). To me that says whenever you walk into a not-so-crap kind of store, you get to see Celsius drinks on the shelf.
(2). Their Direct to Store Delivery, which means using distributors for almost all products, was the main driver. The pricing of Celsius drinks are not cheap. If distributors are not getting substantial rebates, what makes Celsius drinks superior than, Gatorade, Pepsi, Coke? Have distributors just somehow developed larger appetites in this COVID-19 world?
(3). In the U.S., COVID-19 caused spending lackluster is still looming. How come people suddenly all run outdoors and drink Celsius? Yes, more people are going back to the office and that expectation (along with other factors) made stocks like Peloton plunge, and Lululemon's acquisition of Mirror was way too expensive.
(4). The media should really be writing all over this brand. They are not.
- How come this not-so-impressive CEO, after getting onboard since 2018, suddenly pumped up sales by so much, so vastly much? Why is he not one of the hottest CEOs right now? Or he is and I just don't know?
- How come inventory is so big yet revenue is growing on such a large scale? Do Celsius people just assume their drink is gonna sell like crazy and pre-manufacture everything because they know this is a prophecy that must come true? Customer acquisition seems expensive considering how much they spend on sales & marketing. Is that strategy called burn cash, get customers, and monetize? But this is non-tech consumer products, and the strategy described is consumer tech.
- Why did they acquire that Finnish company anyways? That company was a Nordic distributor of Celsius, and Nordic Co. had large amount of accounts receivables outstanding. The whole business of Nordic Co. was sell Celsius products, plus some energy cookies locally R&D-ed and manufactured. I believe Celsius now has the power to decide when to unleash those A/R balances as revenue?
- The company made a lot of adjustments and had a lot of items. When I was working through the 3 statements, this was unpleasant. The numbers also didn't add up to a certain extent. Eventually I had the model balanced but I left out some not-so-big numbers here and there. Might be me being inexperienced but that could also be some manipulation of small numbers. Their publicly-filed cash flow statements are also very confusing. The numbers simply don't add up if you strictly follow their cash flow adjustments.
- Celsius submitted this file saying they wrongly reported share-based compensation. I found that to be absurd. SBC calculation is not that hard. You have a strike price on an option, and if your current/to-be-exercised stock price is higher than that strike, your option is in-the-money, and you exercise it, and get some shares. You also pay a small amount exercising that option, calculated using the TSM. You pocket the difference as a person while the Co. records that expense. How could you possibly have that wrong? The number's in the millions, and I'm thinking there might be more "financial reporting issues" to come.
- Add: this company is also involved with a guy named Carl DeSantis and his bunch of small co.s, with money flowing to Carl DeSantis. Like I know the phrase stockholder capitalism, but it doesn't quite make sense to direct all cash just to your biggest shareholder alone.
- An interesting thing about shareholder structure: Hong Kong business tycoon Li Ka Shing owsn ~9% of the company, and Kimora Lee Simmons Leissner, wife of in-court-trial Goldman banker TIm Leissner (1MDB scandal, see Matt Levine) owns about 5%. The CEO only owns <1.6% of the company (which currently stands at >$50mn).
I know I'm no expert on hedge fund investing, but this company is really interesting and I wonder if anyone covers it.
The drinks taste okay, not terrible. You drink it 30 minutes before doing sports and you get a kinda serious fatigue the next day.
its not even healthy for you, good short
I think you've got it right on this one. Sadly it’s like #17 on my list of total-bs trading above $1bn mkt cap.
Thank you.
I was playing basketball with a few buddies back in New Year holiday and somebody brought this drink, so I kept following this stock.
Started doing some research when the stock was ~$64. Now it's like $44. 52-week high was ~$110
If I'm allowed to trade stocks I could've pocketed some decent profit.
I actually drank one this morning... I like the taste of the orange. Really no other benefit to me. I had one before a workout once and I felt sick.
If you don't mind, would you PM the other top 16 bs-trading > $1bn mkt. cap stocks? I'm an ib analyst and I'm legit not allowed to trade so I won't act on your (precious) information.
Just for fun.
No can do, but kudos on being skeptical and doing more work than a lot of seasoned analysts in this mkt. Take a look at the list at the list of IPOs that were made available on Robinhood and you should find plenty to keep yourself busy on short research.
I should caveat this - while being short, I was in a gas station and a horde of teens came in freaking out that the last 3 gas stations didn’t have any Celsius. It was a small position in my ‘bullshit basket’ and hadn’t done my typical level of diligence, so this worries me. Bought a drink, tried it, went back to filings and dotted my Is and crossed Ts and still though projections and valuations were ridiculous, even if the fad has some legs. It’s been killed though and now just trades with ARK names on growth factor and interest rate news, but I’d guess it’s still a good short, but don’t really follow anymore. There are just a bunch of similarly valued companies right now that don’t even have a product or service - for example there are like 7 flying taxi companies with 0 revenue and >1bn ev.
Thanks for that input. Good to know.
don't know the company, and not digging it up. But odd that it didn't report its 10K on time. How are the executives being compensated? What are their performance targets and how does it compare to the peer group?
Good point, I haven't looked at it. Putting this inside my toolkit.
It seems like you’re thesis here is that this is just a fad drink and all your other points are really nits. Why is it so unbelievable to you for them to have 4x revenue growth when they admit their market penetration test is whether the drink is available in a state - I.e., if it is in one store it counts. Selling 8 drinks vs 2 YoY is 4x growth…they are likely working with small numbers.
To be frank your post has a lot of elements of poor short theses I see…you’ve decided the drink is a fad, fine, but I’m not sure how you are reaching to that this could be a fraud. Because their sbc number looks off? I think you’ve decided the company is bad and are over correcting on the severity of their issues.
there isn’t even a catalyst here. Show us that they are fraudulently accounting for revenue, working capital will never turn to cash, and they’ll run out of money soon without some massively dilutive equity raise within 6 months and that’d be interesting
Thank you so much ! I left out a lot of details in this post so with criticism I could see how to better the research.
Per your 2 and 3, right now numbers do show that working capital never turn to cash / they are cash flow negative consistently, and the SEC had actually sent inquiry letters regarding their multiple equity raising efforts and refused to proceed with those. Top line numbers are by no means small, although I’m still looking into 1.
You the man. SEC correspondence can be very fruitful (and funny) to read. Take a look at correspondence on MCG whose CFO stepped down today and who's chairman is best buds with Epstein/Weinstein/Maxwell. They tried to file and S1 without including the most recent year financials and the ensuing back in forth is really something else.
You can always make catalyst by posting a short report or sending it over to Muddy waters or Hindenburg research haha.
Indeed you can, also if you write it up well, worth a try sending to VIC you might get in
To be fair - some people use fraud when they really mean “extremely promotional” and “aggressive accounting” and misleading KPIs which aren’t technically illegal fraud (most likely to find illegal fraud in healthcare I.e. Medicare/Medicaid fraud). But when you can’t tie out the numbers and they delay 10k it’s another point for the mosaic and I think a meaningful one to put your antennas up, but I don’t allege this is an illegal fraud.
Yes...thanks for saying that.
I agree with this. For some reason, people tend to become much more passionate about shorts vs longs and as such begin conflating issues you've highlighted - aggressive accounting, high promotion - with fraud. A better way to frame my advice to OP would be to take emotion out of the equation as the initial post is filled with it...whether an idea is long or short you must be dispassionate and decide the outcome based on the cold, hard facts. I took an extremely brief look at the Company's IR page and note that they claim they capture less than 2% of the energy drink market (however that is defined and calculated), and their financial statements seem to tie out to me after a very brief review. I have been on the other side of preparing financial statements and things can happen that lead to a restatement. Especially as this is just SBC, I don't think its anything to crucify anyone over. However, I note that it is the sort of thing people like Spruce Point will pick up and make a few slides over but I personally think that is the wrong way to go about shorting companies...if you focus on cash burning enterprises with limited access to capital markets I think you create much more asymmetric opportunities and protect your downside.
i need a good short
i use to work at a firm that covered this company.
Drink companies and energy drink companies can be funny, since their basically easy to make they can be set up in a lot of ways, not exactly a fraud, but also not exactly providing what they say.
I believe couple years ago, national beverage (they make la croix) got into some dispute about illegal activity.
someone needs to cover his short
Product is great. Fad the healthy energy drink market at your own risk.It is hilarious they 5xed sales because there shifted the marketing spend to IG influencers.... they get it
Sold this thing at 5 bucks and still hurts my soul. I do like TAP as another play as they own equity in the rocks drink and like their seltzer portfolio
I've looked at the company before and will push back on some of your points. I won't make any sort of stock or price target rec, but don't think the company is a fraud by any stretch.
(1). According to their own public SEC filings, penetration of the U.S. market had reached c.92% in Q3'21 (we are present in 92% of all U.S. counties). To me that says whenever you walk into a not-so-crap kind of store, you get to see Celsius drinks on the shelf.
***They've reached 92% of counties because of a new distribution agreement (I'll discuss this further below). But this doesn't mean shit. Their ACV/shelf space is still way below that of other energy and bevs names, as is their TDP (total distribution points).
(2). Their Direct to Store Delivery, which means using distributors for almost all products, was the main driver. The pricing of Celsius drinks are not cheap. If distributors are not getting substantial rebates, what makes Celsius drinks superior than, Gatorade, Pepsi, Coke? Have distributors just somehow developed larger appetites in this COVID-19 world?
***Celsius and energy drinks tend to be sold as single cans, which have much higher margins vs multi packs. So distributors can get a good rebate. The explosive growth has been driven by an agreement with ABI. Before that they were using shitty mom and pop trucks. The goal is to get into gas stations and convenience stores, which ABI can easily do. Looking at it from ABI's perspective, if you're selling something in secular decline (beer) and can get margin on another product while filling your trucks, why not do it?
(3). In the U.S., COVID-19 caused spending lackluster is still looming. How come people suddenly all run outdoors and drink Celsius? Yes, more people are going back to the office and that expectation (along with other factors) made stocks like Peloton plunge, and Lululemon's acquisition of Mirror was way too expensive.
***Celsius brands itself as "performance energy" targeting active lifestyle people. So it's a niche. Maybe people want to shed COVID weight and try the product? Who knows? It's very low calorie and taste is pretty good, so it's doing well off a small base so far. Likely won't hit red bull or monster market share, but so far so good. The Nielsen data is growing 200-300% and that data doesn't lie.
How come inventory is so big yet revenue is growing on such a large scale? Do Celsius people just assume their drink is gonna sell like crazy and pre-manufacture everything because they know this is a prophecy that must come true? Customer acquisition seems expensive considering how much they spend on sales & marketing. Is that strategy called burn cash, get customers, and monetize? But this is non-tech consumer products, and the strategy described is consumer tech.
***Every beverage company has had issues getting aluminum cans. Celsius has an agreement with a large HK investor Li Ka-Shing. He's a shipping magnate and has sourced cans from Asia, which Celsius has loaded up on which has resulted in large inventory build. Their products fly off the shelves, so I'd say this is the right move.
Why did they acquire that Finnish company anyways? That company was a Nordic distributor of Celsius, and Nordic Co. had large amount of accounts receivables outstanding. The whole business of Nordic Co. was sell Celsius products, plus some energy cookies locally R&D-ed and manufactured. I believe Celsius now has the power to decide when to unleash those A/R balances as revenue?
***No idea why they did this. They should focus on US for now. They also have distribution agreement in APAC. Too early.
***On stock based comp: they have a few employees since all manufacturing is done 3rd party. They pay everyone in stock, not just management level. SEC tightened up on options accounting late last year, so could be related to this. See https://www.sec.gov/oca/staff-accounting-bulletin-120
***They filed their 10K today, so within allowed period.
CELH is the white claw of energy drinks. It might seem like a fad now but there's a lot of upside if it sticks around. I think there are also a lot of investors looking at the returns of Monster Energy since it first went public and trying to replicate that.
Can you quantify that analogy and tie it into valuation? I'm not privy to White Claw's share/growth/margins and what kind of impacts the 100 scale-backed copycats have had. You could be right it's the White Claw of energy, certainly, but I what does that assertion translate to in terms of earnings / fair value? Do you think shipping costs or aluminum for cans are going down or up? Are energy drinks discretionary? Similar regulatory burden and mkt size and unit economics etc. vs alcohol? While this is obviously an exaggeration - NKLA was the TSLA of trucks! The era of stocks going up simply by conflating themselves with a successful theme was a symptom of QE and abundant yield-starved capital. Qualitative, "it could be the next x" theses don't work through a cycle, when capital finds discipline and risk premium manipulation doesn't force people to value only bull-cases. Not trying to be pedantic, just saying - gotta bridge to numbers. I could say "no they're not the white claw of energy" and there we have two subjective opinions - a good jumping off of for wasted time
Go to any college campus and you’ll see every girl drinking one whether it’s on the way to class or going to the gym. I have never seen anyone over the age of 26 drinking a Celsius.
Again, not denying it's popular, but at a HSD/LSD sales multiple and still burning cash, it better get a lot MORE popular and profitable from here. Maybe it will. A lot about the financials seems off as well. Also to the point of 92% penetration 1) always poke into the wording on such stats - why was that stat chosen and cut that way? I think the poster above noting that it's got a small presence in a lot of counties doesn't really mean what the 92% was meant to convey 2) If it actually WAS 92% penetrated from a distribution standpoint where's all the white space, just higher turnover from each SKU - luckily it's just a silly stat - any product that partners with a Valero or Exxon will immediately be in 92% of counties.
The catalyst for a name like this is a sharp turn in the 2nd derivative of sales growth, when they’re still burning cash
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