Celsius Holdings, Inc. (CELH) Q3 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to the Celsius Holdings Third Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Cameron Donahue. Thank you. Please begin.

Thank you. Good afternoon, everyone. We appreciate you joining us today for Celsius Holdings Third Quarter 2018 Earnings Conference Call. Joining me on the call today are John Fieldly, President and Chief Executive Officer; and Edwin Negron, Chief Financial Officer. Following prepared comments, we will open the call to your questions and then instructions will be given at that time. We have filed our quarterly report with the SEC and issued a press release today. All materials are available on the company's website at celsiusholdingsinc.com under the Investor Relations section. As a reminder, before I turn the call over to John, the audio replay will be available later today. Please also be aware that this call may contain forward-looking statements which are based on forecast, expectations and other information available to management as of today, November 8, 2018. These statements involve numerous risks and uncertainties, including many that are beyond the company's control. Except to the extent as required by applicable law, Celsius Holdings undertakes no obligations and disclaims any duty to update any of these forward-looking statements. We encourage you to review in full our safe harbor disclosures contained in today's press release and our quarterly filings with the SEC for additional information. With that, I'd like turn the call over to President and Chief Executive Officer, John Fieldly, for his prepared comments. John?

Thank you, Cameron. Good afternoon, everyone, and thank you for joining us today. During the third quarter, we achieved new record volume levels, and we further increased our footprint with increased distribution and expansion in a multiple other regions across multiple channels, expanding our reach and availability. Our focus and targeted investments in sales and marketing provided returns in the form of increased sales volumes, increased brand awareness and increased availability of our products as we continue to maintain premium pricing. This record volume level demonstrates our products are in demand, and our growing consumer base has never been stronger. For the third quarter, revenue increased 54% to a record $16.6 million. North America revenues increased 92% to a record $11.4 million, and international revenues increased 7%, driven by reorders in Asia, which were partially offset by a 15% decrease in European revenues, mainly as a result of our Swedish distribution partner returning to more normalized ordering patterns as they have optimized their inventory levels and are cycling new flavor launches when compared to the prior year. North America growth was driven from reorders from new accounts such as Target, CVS and Wawa, which we began sell-through during the quarter. In addition, we experienced strong growth from existing accounts as a result of the expansion in our consumer base and demand for our products. Our production has returned to more normalized traditional levels, following the challenges we face during the second quarter as we continue to add additional co-packers to alleviate bottlenecks and lay the foundation for accelerated growth. Third quarter reflects strong demand as we continue to capitalize on today's global health and wellness trends, targeting active health-minded consumers. These growing trends are present in every market, and the continued solid execution of our strategy to increase demand through a diversity of channels and geographic location continues to drive significant results. Most notably, we significantly expanded our presence in China with broader distribution to the modern trade through our previously established partner, Qifeng Food Technology, a national wholesale distributor of food and beverages. As you may recall, we began our partnership with Qifeng Food's more than a year ago when we initially entered China market with placements in small selection across Tier 1 cities including Beijing, Guangzhou and Shenzhen as well as more than 30 other small markets across 14 provinces. The majority of our placements were in smaller, less mainstream retailers, albeit the consumer response was overwhelmingly positive. With their network of distributors, national expertise and proven ability to execute operationally, Qifeng Foods has successfully placed CELSIUS in more than 45 cities across 33,000 locations across China, including 15,000 key accounts. Achieving broader distribution with larger retailers in China is a significant milestone in our efforts to increase product availability internationally. And we are positioning CELSIUS as a global beverage leader for active health-minded consumers. With our investment of more than $8 million in the Asian markets to date, we have established a local infrastructure, including distribution, sales, marketing and operational logistics that will support exponential growth as we continue to strengthen our foothold in the region. As we look into 2019, we are exploring further opportunities to partner with local influential strategic partners to further leverage our established operations, local infrastructure and local subsidiaries as well as further leveraging our existing local established networks to capitalize on today's health and wellness trends in the region, driving further availability and awareness for CELSIUS. Domestically, we have impressive gains in new distribution with placements on the energy drink shelves in Target, a key national retailer, broadening our national footprint. Additionally, our convenience store channel expansion continues with notable retailers such as Wawa, 7-Eleven, Sunoco, Circle K along with many others where we're seeing excellent product acceptance. CELSIUS also saw a key expansion during the quarter at CVS, which provides significant opportunity for future growth and national exposure. With Target, initial placements included three SKUs: Sparkling Orange, Peach Mango and Sparkling Watermelon in single-serve 12-ounce cans now in more than over 1,000 of the over 1,800 location Target stores throughout the nation. Achieving placements at such a high profile, esteemed retailer as Target, our brand - takes our brand recognition to the next level. Target's focus on health-minded conscious millennials strategically aligns with one of our top audiences we are aiming to reach. The initial launch exceeded our expectations, and the buyer is already making plans to add additional flavors. In addition, during the quarter, we drove continued momentum in existing accounts, which was one of the key drivers of our growth in North America during the third quarter. Domestic sales was a record $11.4 million, which was up 92% year-over-year as a direct result of the work we are doing to increase brand awareness through our strategic investments in sales and marketing. We remain at record levels of production, and this, coupled with our strong network of distributors, puts us in the prime condition for a strong finish in 2018. We continue to focus on optimizing our routes to market in key regions with strong partners, where we have ongoing discussions with major distributor networks, which we are looking to leverage in 2019 as we continue to expand our footprint and availability. In addition, during the quarter, we continue to target consumers with a live, work and play, and our CELSIUS Original's core line was added to over 5,000 vending machines, in micromarkets of national refreshment solution providers, leading a new wave of healthy energy near the vending channel. Placement in the vending channel provides additional exposure to new customers while allowing customers to try a single-serve cold can of CELSIUS. Opportunities in this channel are showing significant upside. Initial feedback has been extremely positive, and we are exceeding our partner's expectations in both micromarket and glass front vending. With a dedicated team focused on growing this channel, we view vending as a key channel for future sales growth. It is yet another avenue for reaching consumers with a live, work and play. Our products are perfect for the vending channel who are demanding healthier energy options at work, on the go and on campus. As previously mentioned, the increases in North America and Asia were partially offset by the 15% decrease in European revenues, mainly as a result of our Swedish distribution partner returning to more normalized ordering patterns and as they have optimized their inventory levels and are cycling new flavors when compared to the prior year, although our distribution partner continued to see positive sales growth. We remain encouraged by the near-term prospect of adding several new key retailers to expand our distribution in Finland and Norway this year, which we believe will further our penetration and availability in those markets. Our military channel continues to exceed our distributors' and buyers' expectations. They are currently selling over 16,000 units per week, and the forward sales trajectory continues to trend upward for this channel. Demand for healthy, functional energy sets remain robust, our SPINS IRI data as of September 9, 2018, provides definitive proof and points that demand for our products in particular in the line - in line with market trends. The convenience channel market has growth of over 5.8% over the past 12 months, which compares to our growth with CELSIUS at a 41.8% growth rate in the same market. We are outpacing the category growth in the convenience channel by a measure of seven. We remain highly active with our sales and marketing initiatives, including programs during the quarter such as Tough Mudder, a series of competitive events for a range of athletic performances from beginner to the elite, with courses engineered for teamwork, where we attended over 18 events during the quarter and sampled over 75,000 health-minded consumers. Our marketing activities are in full swing with multiple events each and every weekend, with demonstrations and weekly guerilla sampling programs taking place between events. Through our targeted guerilla sampling events, we sampled over 150,000 consumers this year and growing. In addition, our team attended multiple consumer and trade events including Mr. Olympia in Vegas, where we sampled to an additional 12,000 health-minded consumers. Sequentially, to the end of the quarter, we added an additional Executive Vice President of Marketing, Matt Kahn, to serve for the company and lead our marketing initiatives. He brings over 20 years of marketing experience to CELSIUS, having served a majority of his career in the beverage industry for companies with great brands such as Coca-Cola, glacéau vitaminwater, smartwater, Powerade and Heineken as well. And he has a proven track record of building brands, driving innovation and motivating teams to deliver exceptional results. And he has an impressive outlook for our future. We're excited for him to join our team. The momentum of our business is continuing to accelerate with significant progress being made to expand distribution, increase brand awareness through our targeted and proactive marketing campaigns and management of production and cost of goods, all against a backdrop of increased consumer demand. We are encouraged by our progress we are making and energized by the opportunity before us. I look forward to providing you further additional updates as we head towards a strong 2018 finish. I will now turn the call over to Edwin Negron-Carballo, Chief Financial Officer, for his prepared remarks. Edwin?

Thank you, John. Total revenue for the third quarter of 2018 was a record $16.6 million compared to $10.8 million in the third quarter of 2017, which translates to a significant increase of 54%. By geography, North American sales were up a robust 92% year-over-year from $5.9 million in the third quarter of 2017 to $11.4 million in the third quarter of this year. This increase was mainly due to growth in existing accounts and distribution expansion. In Asia, sales also increased considerably from $362,000 in the year-ago quarter to $1.4 million in the current period, an increase of 273% due primarily to the recent modern trade launch that John discussed. The strengthening of North American and Asian sales was partially offset by a slight decrease of - in revenue of 3% pertaining to other international regions and a 50% decrease in revenue in Europe as a result of our principal European distributor lowering their inventory levels, timing delays regarding launch of new flavors and discontinuation of certain other flavors. The net increase in revenues was driven by higher sales volumes as opposed to increases in product pricing. Gross profit dollars for the third quarter of 2018, increased by a healthy 47% to $6.9 million, up from $4.7 million in the year-ago quarter. In contrast, gross profit margin slightly decreased to 41.5% in 2018 when compared to the prior year results of 43.3%. The increase in gross profit dollars was mainly attributable to increase in sales volume, while the decrease in gross profit margin was mainly attributable to increases in promotional allowances, slotting charges and increase in production and repackaging costs. Selling and marketing expenses for the quarter ended September 30, 2018, were $8.7 million compared to $4.7 million in the year-ago quarter, an increase of 84%. The increase is due primarily to marketing investments to continue to build our brand, particularly in the China market and investments in employee costs. Regarding general and administrative expenses for the third quarter of 2018, it amounted to $2.3 million compared to $1.6 million for the year-ago quarter, an increase of 47%. The increase was primarily due to an increase in stock-based compensation of $552,000 when compared to Q3 for 2017 as well as increases in employee costs of $129,000 and increase in professional fees of $91,000, which were partially offset by savings of $44,000 in other administrative areas. Net loss to common stockholders for the third quarter of 2018 was $4.2 million or $0.08 per share compared to $1.7 million or $0.04 per share for the corresponding period last year. These losses included preferred dividends of approximately $44,000 for the third quarter of 2018 and $92,000 for the third quarter of 2017. Operating expenses for the third quarter of 2018 included noncash charges, such as depreciation, amortization and stock-based compensation, for a total of $1.3 million compared to $734,000 for the third quarter of 2017. As such, adjusted EBITDA for the third quarter of 2018 was a loss of $2.9 million, which included $5.1 million related to investments in our product launch in China and distribution expansion in Hong Kong. Excluding the investment in Asia, adjusted EBITDA was a positive $2.2 million, a significant improvement year-over-year compared to $1.1 million in 2017. We believe this information and comparisons of adjusted EBITDA and other non-GAAP financial measures enhance the overall understanding and visibility of our true business performance. To that effect, a reconciliation of our GAAP results to non-GAAP figures has been included in our earnings release. Now turning to our year-to-date results, for the first nine months of 2018, revenues increased a solid 40% from $27 million to $37.9 million in this year. The increase was a result of strong growth in North American sales revenue of $10.6 million when compared to the same period for 2017. Revenue from Asia and other markets also reflected an increase of approximately $2.4 million when compared to the same period in 2017. These increases were partially offset by a decrease in our European revenue of 23%. Here again, the net increase in revenues was driven by additional sales volume as opposed to increases in product pricing. Gross profit dollars from the first nine months of 2018 increased by a solid 34% from $11.6 million to $15.6 million for the nine months ended September 30, 2018. Gross profit margins decreased to 41.2% in 2018 from 43% for the same period in 2017. The increase in gross profit dollars is primarily attributable to increases in sales volume, while the decrease in gross profit margin is mainly related to increases in promotional allowances, slotting charges and increase in production and repacking costs. Sales and marketing expenses increased by $9.2 million during the first nine months of 2018 to $18.4 million when compared to $9.3 million in 2017. The increase is primarily due to marketing program investments including China investment of $8.1 million as well as increases in human resources investments in both marketing and the sales areas. General and administrative expenses for the nine months ended September 30, 2018, were approximately $7.4 million, an increase of $2.2 million from $5.3 million for the nine months ended September 30, 2017. The increase in general and administrative costs is mainly related to the increase in stock-based compensation, the settlement of a territorial dispute with a distributor and an increase in research and development costs, which were partially offset by savings in other areas. Below the operating line, other expenses, which mainly relate to interest expense, were basically flat year-over-year at $123,000 for the first nine months of 2018 compared to $122,000 for the first nine months of 2017. The net loss attributed to common stockholders for the first nine months of 2018 was $10.5 million or a loss of $0.21 per share compared to a net loss of $3.3 million or $0.08 per share for the year-ago period. Operating expenses for the first nine months of 2018 included noncash charges for depreciation, amortization and stock-based compensation totaling approximately $3.4 million compared to $2.4 million in the nine months of 2017. Adjusted EBITDA for the first nine months of 2018 was a negative $6 million, which included $8.1 million of expenses related to a product launch in Asia and onetime expenses mainly pertaining to a settlement of a lawsuit with a former distributor of approximately $1 million. Excluding the Asia investment and onetime charges, we delivered a positive non-GAAP adjusted EBITDA of $2.1 million for the nine months of 2018. Now turning to the balance sheet, as of September 30, 2018, the company had cash of $5.3 million and working capital of $16.3 million. This compares to $14.2 million in cash and working capital of $20.6 million as of December 31, 2017. We continue to have good turns in our working capital with good margins. As such, we continued to believe that our current cash balance and the results of our operations will deliver sufficient liquidity to meet our anticipated cash needs during the next 12 months. Cash used in operations for the first nine months of 2018 totaled $9 million. The use of cash in 2018 is mainly related to increased operational losses, driven by high levels of investments in product launches and marketing initiatives primarily in Asia. That concludes our prepared remarks. Operator, you may now open the call for questions. Thank you.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Jeff Van Sinderen with B. Riley. Please proceed.

Hi, everyone and congratulations to your team on the strong metrics.

Thank you, Jeff.

John, can you speak a little bit more about the domestic sell-through trends? Maybe delve into the rollout with CVS and Target, and I guess how those are going, and how the door count might evolve in the future there?

Yeah. Absolutely, Jeff. For the quarter, we saw great sell-through. Fairly all of our channels are showing extremely strong sell-through, and Target and CVS has been a great opportunity for us this year in 2018, where we initially launched, as we call it, a smaller test last quarter in regards to about 500 stores. Target has expanded us further. We're in over 1,000 stores today. There is a lot of opportunity to continue to scale in 2019. We see Target as a great partner for us, a great national footprint to capitalize on. And we're getting great interest and seeing good takeaways on the product. So we see Target as a great long-term partner. We had very strong sell-through throughout the quarter, and the same goes with CVS. CVS, we're in 500 - about 550 locations and growing. We do have buyer resets coming up. We've gone through the year-end reviews, and it looks extremely positive to continue to partner with them towards 2019 as we look to move forward. And we're also actively speaking with other vendors in that drug channel as well, where we see great opportunity, really targeting that health-minded consumer.

Okay, great. And then I know you added marketing count recently. Just wondering any early thoughts on how you might evolve your marketing plans?

Yeah. We did bring on Matt Kahn to the marketing team. He has over 20 years of experience as I previously stated. He is a great addition to the team. He has a proven track record of building brands, driving innovation and really motivating teams to deliver exceptional results. So we'd look - you won't see anything drastic, any changes. We have a firm foundation that has been laid. Vanessa Walker, just thank her for her services and dedication to the company. We have a great foundation that has been laid to build upon. So you're going to see more from us as we continue to scale along. In 2019, you're going to see more consumer activation, more trade activation as well. But we're not going to move away from our core. We are targeting consumers, health-minded consumers with a live, work and play through a variety of initiatives from social media to key ambassador and influencer programs as well as events and guerilla sampling plans through 2019.

Okay, great. And then if I could squeeze in one more. I think in your prepared comments, you said production is normalizing. Given the increased volumes you're running, maybe you can speak to how your co-packer setup is evolving and how that should benefit you going forward.

Yeah. As we continue to grow in scale, co-packer availability out in the North America has been challenging. There's a lot of growth in the sleek can business. We are operating and producing at these co-packers throughout the country. Currently, we're operating at four co-packers. We are in talks currently with four other co-packers for 2019 as we continue to build out the supply chain. At this point, we are bringing inventory levels back up to more normalized levels to really support the growth as we look to continue this momentum into 2019. There is availability out there. You're starting to see we have - there is some talk about cans being - having supply issues, but we have good relationships with our can manufacturer, and we have not been affected with that. They've been working with them very closely as well. They were just in the office two weeks ago, and they are committed to partnering with CELSIUS and ACV to manage upsides. So really working solidifying those relationships with our partners and suppliers as this is a joint effort as we build this brand together. So we see great opportunity and availability for 2019 to support the growth that we're seeing and the interest and the demand that has been created.

Okay, great to hear. Thanks for taking my questions and best of luck for the rest of Q4.

Thank you, Jeff.

Thank you. [Operator Instructions] Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed.

This is actually Destiny on for Jeff. How are you guys doing?

Excellent Destiny, thank you for calling in.

No problem, I just like to echo the congratulations on a phenomenal quarter. I had a few questions. Could you just explain a bit more some of the strategic partners we're evaluating in China? What areas do you think they will be in and things like that?

Sure. We currently - as we continue to scale throughout China, we are looking to leverage - further leverage our strategic networks as the last two rounds of financing brought in influential strategic investors that are located in China. We're also talking to a variety of other strategic investors that we would be able to leverage further to really drive CELSIUS further, quicker and to a broader audience. We're talking a variety of different strategics, which are also within retail segment as well as with - that can help also with advertising as well. So I don't have any further information I can share at this point, but we are talking to a variety of local strategic investors to help us penetrate further into the market.

Okay, got it. And then it sounds like you're having some great success or early success with the vending channels. Do you think you'll be able to replicate that in China as well or is there really no interest there? And then I have follow-up on the vending channel.

Yeah, absolutely. That's - we are replicating our same strategy in North America as well as in the Nordics as well in China. We see great opportunity in healthy vending in micromarkets within office buildings. And that's been a great success for us. We initially rolled that out and partner with Vistar as well as Canteen and several other large national vending wholesalers. And the initial rollout started in the second quarter, and it's really turned out very successful in the third quarter. And we see that continuing to build throughout 2019. We see great opportunities, and we're working at - we see the same opportunities as well in Hong Kong, where you're seeing a lot of office buildings as well. Cold availability, and there's nothing best than a healthier - a healthy CELSIUS energy drink next to healthier products in these healthier vending alternatives.

Okay, got it. And then I also believe that I've read that all the original products are available to be implemented into a vending machine. How are your distributors determining which ones to put in? Does it go by geography or based on demand, things like that?

We have a - well, we have a standard planograms that are set up. You will see variances out there in the marketplace based on the operator that's managing those vending machines. So you will see inconsistencies throughout the market around different flavor availability, but you will see a lot - mainly our core flavors that we're pushing this time of the year, entering summer. We have Kiwi Guava as a new great flavor with great acceptance, Raspberry Acai, and the Orange is a great flavor as well, as well as all our other favors that we offer. But all favors - you are correct that all flavors are available through the vending. It does get limited on the number of slots of availability so you will see a variance out there in the marketplace.

Right. Okay. And then I thought - or I heard that you also mentioned premium pricing. So what types of pricing trends are you seeing as compared to last year, even last quarter?

Well, what we are doing are maintaining our pricing. We're driving strong revenue growth maintaining our gross profit margins, and we are not discounting price. We are driving our premium pricing in the marketplace, and this growth is not coming from discounting products. I think that's what we are trying to clarify early in the earlier comments, that this growth is organic growth from consumers, from reorders, on a great trajectory, and it's not driven by discounted products. This is sustained growth.

Okay, thank you for clarifying that. I believe that does it for me. Thank you for taking the questions.

Excellent, thank you for your time.

Thank you. [Operator Instructions] And our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed.

Thanks, good afternoon guys.

Good afternoon Anthony.

So I just want to understand the launch in China and how much more money is going in there. Because the sales and marketing expense for the quarter was a lot more than we were looking for. Was that mostly due to the investments in China or was there something else there?

Yeah. During the quarter with the investments in China, that probably is higher than you anticipated, we did do a lot of activation in the quarter as we are entering the planograms for resets or the planogram discussions as all the retailers are planning out 2019. So there was a lot of activation that took place during the quarter as we're setting the stage in China for 2019 as we continue discussions with these key accounts to further the penetration within the market.

And John, I think - or Edwin, I think I missed the number for how much was invested specifically in China. It was a combination of people and marketing, I guess, you said. What was the increased expense? Because I heard one number but I don't know how - what time, just for the quarter?

Yeah, you're talking of - for the year-to-date, it was $8 million, about $8.1 million of investment in China.

That's what I heard, year-to-date. And for the quarter, how much was it?

For the quarter, it was about $5.1 million.

For this quarter, it was $5.1 million, okay. That wasn't just in sales and marketing. You have sales and marketing and then there were some other investments in the quarter, right, in China?

That's correct. We had sales - obviously, we invested in North America. We had a variety of activation going on. As mentioned, we were very active in the third quarter in North America at a variety of trade shows, consumer events, Tough Mudder events. We hit it out, thousands, hundreds of thousands of cans, a lot of activation, and getting great feedback with the targeted marketing.

And so just as we go forward though, this was more of a - based on all the things you just mentioned, John, it was more of an anomaly for this quarter than it is in the go-forward expectation, correct?

That would be correct.

Okay. And then I don't know if I missed it, but did you give an update on 7-Eleven?

Just briefly touched on 7-Eleven, 7-Eleven is doing extremely well. We are seeing good turns. We're partnered with McLane. And things are moving along very nicely with 7-Eleven. We see them as a great partner. They allow us to have national broad distribution. We're using them as a great example of what's our CELSIUS can perform within the convenience channel. And that's allowed us to expand this year throughout Wawa, further expansion within racetrack, our QT and Circle K as well in key regions.

Okay. And then just in Norway. Are those timing issues, inventory issues, all of that is that pretty much resolved right now? Or is there still some lingering issues there?

In the Nordics, we're starting to see that inventory move to more normalized levels. We mentioned that last quarter that we would see more normalized. This quarter we saw it being more normalized. We will still see and experience historical, I guess, seasonality effects, but we do see normalized level of revenues or inventories on their side. The product is still growing in the market, and we are very confident to continue to move forward with further expansion. As we mentioned, Norway and Finland are good opportunities. We continue to move further into those grocery outlets as well as hypermarkets within the region.

Okay and then just lastly on SKU expansion. I know you said you have three brands and 1,000 of the 1,800 Target stores. When for most of these stores are the resets going to take place where maybe you can get additional SKUs into whether be it CVS or Target or -

Yeah. Traditionally, the meetings take place in the back half of the year, so a lot of meetings have already taken place, and some are still taking place as we speak. And a lot - and the retailers usually will update their sets, their planograms usually towards the back half of Q1 to Q2, you'll start to see some resets taking place. So very confident to further expand in all of our channels with the momentum that we're experiencing currently.

Okay, thanks guys.

Thank you, Anthony.

Our next question comes from the line of Jerry David a private investor. Please proceed.

Hi, John, I just wanted to make a couple of comments. First, congratulations to you and the entire team. Hitting that $16.6 million top line revenue is absolutely critical in the beverage industry. And I'm so excited about you hitting that number because all the beverage companies are really being measured on that. So congratulations on that and the tremendous growth. And also the investment in China, it's just that, to me, it's a golden egg waiting, and you guys are just doing a great job there with your alignments and so forth in China. And the last thing I will comment is Matt Kahn, what a great pick you got there. He is a great guy with a great background, and I can see him really taking - helping take CELSIUS to the next level. I just want to congratulate you, such a great job to you and the rest of the team.

Thank you, Jerry. We truly have a very strong and dedicated and passionate team, a focused team. And we look forward to continuing to drive further success. Thank you very much.

Thank you. [Operator Instructions] Our next question comes from the line of Peter Sheffield [indiscernible] Productions. Please proceed.

Good afternoon gentlemen.

Good afternoon, Peter.

So what I really wanted to kind of just touch base on was the China expansion. And as of the last earnings call, at that time, to my understanding, the product was located in 25,000 locations at that time. So over the last quarter here, the revenue of $1.4 million, I was kind of crunching the numbers real quick, when I look that, about $60 in products per location. Is that a number that we are aiming for? Is that above what we're looking for or below? What is that for?

Excellent question, we're not really using same-store sales data. We have not done that in the past. A lot of those stores came on late in the quarter. We are in about 127 subdistributors that are servicing those locations and about 15,000 key accounts. So the 25,000 was through the quarter, and then we closed the additional accounts towards the back half of the quarter.

Okay. And then just in regards to kind of future revenue and cash. What are you anticipating that the continued investment in China and the additional locations that we'll be adding would in turn result to revenue growth in the future?

We're looking to move our investment into more normalized levels as we move forward, to be further in line. We have investment in the initial year of launch, which was this year. And we're looking for - as we moved through Q4 and then towards 2019, we're looking for more normalized P&L. There will still be investments, but they'll be more normalized.

Okay, I appreciate gentlemen. Thank you.

Thank you.

Thank you. We have reached the end of our Q&A session. I would like to turn the floor back over to management for closing remarks.

Thank you. On behalf of the company, I'd like to thank everyone for their continued interest. Our third quarter result demonstrates our products are gaining considerable momentum. We are capitalizing on today's health and wellness trends. Our active healthy lifestyle position is a global condition with mass appeal. We're building upon our core business and leveraging opportunities and deploying best practices. I am very proud of our dedicated team, and I thank our investors for their continued support. On December 5 and 6, management will be available and will be presenting at LD Micro. We look forward to seeing many of you there. Thank you everyone for your interest in CELSIUS, and have a great day.

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