Good day, ladies and gentlemen, and welcome to the Celsius Quarter Three 2022 Earnings Call. All lines are in a listen-only mode. Sorry. The floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Cameron Donahue. Sir, the floor is yours. Thank you. Good afternoon, everyone. We appreciate you joining us today for Celsius Holdings Third Quarter 2022 Earnings Conference Call. Joining in the call today are John Fieldly, President and Chief Executive Officer, and Jarrod Langhans, Chief Financial Officer. Following the prepared remarks, we'll open the call to your questions, and instructions will be given at that time. The company released the earnings press release upon market close this afternoon, and all materials will be available on the company's website, celsiusholdingsinc.com. As a reminder, before I turn the call over to John, an audio replay will be available later today and can be accessed with the same live webcast link in our conference call announcement release. Please also be aware that this call may contain forward-looking statements which are based on forecasts, expectations, and other information available to management as of November 9th, 2022. These statements involve numerous risks and uncertainties, including many that are beyond the company's control. Except to the extent required by law, Celsius Holdings undertakes no obligation or duty to update any of these forward-looking statements. We encourage you to review in full our safe harbor statement contained in today's press release and our quarterly filings with the SEC for additional information. With that, let's turn the call over to President and Chief Executive Officer John Fieldly for his prepared remarks. John? Thank you, Cameron. Good afternoon, everyone, and thank you for joining us today. The company achieved a record quarter in the third quarter of 2022, with sales over $188 million, delivering revenue growth of over 98%. According to the most recent scan data at retail per IRI MULO Total Energy, one week ending October 23rd, 2022, Celsius is now the third-largest energy drink in the United States. In addition, according to the trailing twelve-week IRI MULO Total Energy as of October 2nd, 2022, representing the majority of the third quarter, Celsius was again the number one brand driver of growth in the energy category in the United States, responsible for 29% of the category growth, driving over approximately incremental $123 million in sales for the category. This represents the third consecutive quarter at the number one spot and prior to the transition to the PepsiCo distribution network, which started October 1st, 2022, and will be represented in our fourth quarter numbers. We continue to see growth across all channels, including the non-tracked, with our club channel sales in the third quarter totaling over $34 million in sales increasing by approximately $20 million from the third quarter of 2021. Amazon sales, another non-tracked channel for the third quarter, hit a new quarterly record of approximately $16 million and year to date in 2022 totaled approximately $43 million and was up 108% compared to approximately $21 million in the nine months ending 2021. Third quarter retailer highlights include the benefits from our Walmart expansions announced in the first quarter of this year on a year-to-date basis, continuing to hit new revenue records. In the convenience channel, where we see the largest opportunity, Celsius continues to perform extremely well. According to the convenience and gas IRI, as of the 12 weeks ending October 2nd, 2022, total U.S. energy Celsius sales increased 158% in the channel, setting a new sales record. In the grocery channel, both Kroger and Publix lead the incremental revenue growth in the third quarter of 2022, with both retailers setting new records in sales and share gains in the energy category. We officially commenced our distribution partnership with PepsiCo subsequently to the third quarter, with the distribution to most of our retail accounts transitioning as of October 1, 2022. While early, initial track data on both ACV and items carried per store growth indicate impressive gains already gained and exceeding our initial expectations on both these tangible metrics. In addition, the transition process with respect to our retail partners as well as our consumers also have exceeded our initial expectations. As highlighted in the earnings supplement for the one week ending October 23, 2022, IRI data reported in MULO Total Energy, Celsius has surpassed Bang to be the number three energy drink in the United States with a 4.9% market share compared to Bang's 4.4%. In addition, Celsius has seen an approximately 11% increase in ACV since October 1, 2022 in the initial launch with the PepsiCo distribution network, with average items carried per store increasing from an average of 7.7 to 8.3 over the same three-week time frame. The convenience store channel Celsius has seen the largest gain, with approximately a 23% increase in ACV since October 1st of this year. Our third quarter sales hit another record of approximately $188 million, with US sales totaling up about $179.5 million and approximately $34 million sequential increase from the second quarter of this year. Revenue growth was driven by over a 60,000 increase in door count from the prior quarter, with convenience store additions representing 37,000 of the 60,000 increase, club channel expansion, as well as increased items carried at locations in conjunction with increased placements at retailers, including both branded coolers at retail locations. International sales only represented approximately about 4.6% of total sales for the quarter, with total sales approximately $8.7 million compared to $10.4 million in the prior year quarter. Our European revenues represented a $7.5 million of of an international revenue compared to $9.5 million a year ago quarter, a decrease approximately 21%, with around a third of the revenue decrease associated with foreign exchange impacts as well as timing of innovation and supply chain disruptions. Revenue for the other international markets total $1.1 million, up approximately 30% from $883,000, which included royalties from China. We believe there is significant opportunity for international growth going forward with PepsiCo as part of our distribution agreement that we entered into. Both Pepsi and Celsius are committed in expanding internationally, utilizing Pepsi's best-in-class international distribution system. While we just began our distribution partnership with Pepsi and our initial focus will be in the U.S. distribution and transitioning our distribution to the PepsiCo DSD U.S. distribution network, we see significant opportunity to capitalize on a global scale, reflecting the changes in consumer preferences for better for you offerings, low and no sugar, and the need for more energy. While the U.S. transition has taken a majority of our focus to date, we expect to have additional international rollouts, details through additional calls and quarterlies going forward through 2023. Gross profit for the quarter increased 109% to approximately $79 million, up from approximately $38 million a year ago quarter. Gross profit margins were 41.8% and 49.6% excluding outbound freight for the three months ending September 30th, 2022, compared to 39.7% and 48.8% excluding outbound freight in the prior year quarter. This represents a 330 basis point increase from the second quarter gross margin percent and consistent with our expectations and discussions from our second quarter earnings conference call. We reiterate our expectations for continued sequential gross margin% improvements, through the fourth quarter, with gross margin% expected to be in the mid-40s% by year-end. Our product channel mix, sales mix also has impacted margins as the club channel revenues has historically had a lower margin levels due to the secondary repack nature, of the product. With the rapid growth of the channel, which contributed to approximately $34 million in revenue in the third quarter, it has increased our overall margin pressure, and we continue to initiate production efficiencies to improve margins in this channel, including working with our co-packers who have the capabilities to produce in line, and also so we can limit the number of secondary production facilities. Even with higher sales than originally forecasted in sales mix in the club channel, our margin guidance has stayed consistent for 2022 as we continue to optimize our supply chain and gaining incremental efficiencies against rising inflation pressures. In addition, with our transition from a significant number of independent distribution partners to the PepsiCo distribution network, this will allow our team to consolidate sales, marketing, distribution efforts with planned associated cost benefits, which we expect to recognize and leverage through 2023 and beyond. We will also provide additional clarity on both gross and operating leverage and targets as we move through the transition. Expect to see additional leverage as we look to drive efficiencies post-transition. Some additional highlights for the third quarter. 92% of our MULO-reported MULO retail store locations are now serviced through our DSD network, up from 72% in the third quarter of 2021. Our mass channel is now more or less 100% DSD serviced, and 99% of our convenience channel is serviced by DSD. Industry-backed third-party data continues to show accelerating growth metrics, and we are confident that Celsius will continue to drive sales even higher as we increase our ACV across channels through additional launches with nationwide retailers, independent chains, and through our new partnership with the PepsiCo distribution network. Consumer demand for Celsius on a dollar basis accelerated in the third quarter of 2022 and has accelerated after the initial distribution shift on October 1 this year to the PepsiCo distribution network. The most recent reported Nielsen data as of October 22nd, 2022, shows Celsius sales are up 118% year-over-year for the two weeks, 120% for the twelve weeks, and 126% for the third quarter. This compares to the total energy category, which grew 10% for the two-week period, ending 10% for the twelve-week period and 10% in the third quarter over the same time period. On Amazon, Celsius is the second-largest energy drink with an 18.5 share of the energy drink category, ahead of Red Bull at a 12.01% share and trailing Monster at a 26.2 share on a year-to-date basis, ending October 22, 2022, and according to Stackline total U.S. Energy on Amazon. Celsius reported sales year over year grew 79% compared to Amazon energy drink sales business, which grew at 39%, outpacing the category. The company placed an additional 550 coolers in the third quarter of 2022 and over 3,500 since the beginning of 2021. The company anticipates a continued acceleration of cooler placements through 2022 and into and through 2023, in addition to the incremental placements and Pepsi energy coolers, which provides approximately over 50,000 additional placements that are rolling out right now. US store count now totals 174,000 locations nationwide in the US, growing over 60,000 doors or 54% from 114,000 doors as reported in the third quarter of 2021, with additional expansion planned throughout the rest of the year and into 2023. It's being accelerated by the PepsiCo distribution agreement. Convenience store locations increased by 77% or approximately 37,000 locations to 86,000 locations at the end of the third quarter of 2022, compared to 49,000 locations at the end of the third quarter in 2021. On our co-packer front, we continue to expand our partners and scale at existing locations, improving line time priority. Our total U.S. co-packer footprint now totals 13 that are active, which will help keep our product in stock and support our massive growth. Before I turn the call over to Jarrod, I want to close my prepared comments recognizing the amazing job of the entire team and our partners which they have done, establishing Celsius as a leading brand, driving growth in the entire energy drink category in the U.S. Our consumer demand remains robust, our portfolio is resonating with a broad consumer base, and our teams are positioned to leverage opportunities for growth going forward with our new partner, PepsiCo. I'll now turn the call over to Jarrod Langhans, our chief financial officer, for his prepared remarks. Jarrod? Thank you, John. Before jumping into the financial results for the quarter, I'll cover a few administrative items, including transaction-related items stemming from our PepsiCo distribution agreement. It was a very exciting and busy quarter. The announcement of the partnership with Pepsi through a distribution agreement and investment is a significant step in our growth and key to our ability to not only continue to grow the category but to grow market share. Although Pepsi did not start distributing our product until October 1st, we worked in conjunction with their operations team to make sure that they had Celsius in all of their key locations across the U.S. As John mentioned, the transition has gone very well, and we are excited to see the early results of this long-term partnership. Let's walk through some accounting highlights associated with this transaction. Let's start with the termination expenses. Included within our quarterly results, we recorded $155.4 million of termination expenses associated with termination notices issued during the quarter so that we could transfer distribution to Pepsi. We had an additional $50 million of termination expenses agreed upon in the fourth quarter as well, which will be recorded in our Q4 results. We have already transitioned most of our distribution footprint over to Pepsi, but there will be some activity in Q4 and through the beginning of Q1 2023. These expenditures were funded by Pepsi, and as a result, we have recorded the funding as a deferred revenue that will be amortized over the twenty-year period of the associated distribution agreement. Looking at the preferred share investment, we received $550 million in cash from Pepsi during the quarter as a payment for the Series A preferred shares. As a part of generally accepted accounting principles, we value this instrument at $832.5 million and recorded this valuation net of issuance costs within the mezzanine section of our balance sheet. The difference in cash proceeds and the valuation was recorded as another asset, and we will amortize this balance over the 20-year period associated with the distribution agreement as a contra revenue. Let's talk taxes as well. Our effective tax rate for the nine months ended September 30th, 2022 was -33.5%. Nine months ended September 30th, 2022, deferred from the statutory federal income tax rate of 21%, primarily due to the tax impact of the $282.5 million Series A preferred stock value adjustment, which will be expensed over 20 years for book purposes. As this expense is nondeductible for tax purposes, we recorded $71.4 million in deferred tax liabilities in the third quarter as a discrete item. The effective income tax rate for the nine months ended September 30th was also impacted by disallowed stock-based compensation expense, state and local income taxes, and the release of certain state income tax reserves. I believe that covers the unique items from the agreements with Pepsi. Looking at other activities that occurred during the quarter, we had previously planned on bringing our FAST Bar brand to the U.S. from Finland, but as a result of the Pepsi partnership, we will be focusing on our core Celsius Energy brand in the U.S. transition and rolling this product out internationally, and in turn, we performed evaluation whereby we determined that the FAST brand was impaired in the amount of $2.4 million. Moving on to litigation costs. As was noted in an 8-K that we issued last month, we have agreed to settle a class action filing in the amount of $7.8 million associated with our can label. Although we believe that our claims on the can were accurate, we believe that the cost, energy, and focus that would have been needed was better utilized on transitioning over to Pepsi and growing our business. In regards to the SEC review, we do not have an update, but we'll continue to cooperate with any inquiries or requests that are received. Turning to our third quarter financial results. Our third quarter ended September 13th, 2022, had revenue of approximately $188.2 million, an increase of $93.3 million or 98% from $94.9 million for the three months ended September thirtieth, 2021. Approximately 102% of this growth was a result of increased revenues from North America, where third quarter 2022 revenues were $179.5 million, an increase of $95.1 million or 112% from the same period in 2021. The balance of the revenues for the three months ended September 30th, 2022 quarter were mainly attributable to European revenues of $7.5 million, which decreased by $2 million from the same period in 2021 due to foreign exchange rates, timing of new product launches, and continuing supply chain challenges. Asian revenues, which include royalty revenues from our China licensee, contributed an additional $1 million, an increase of 37% from approximately $700,000 for the same period in 2021. Other international markets generated approximately $200,000 in revenues during the three months ended September 30th, 2022, an increase of 3%. The total increase in revenue is largely attributable to increases in sales volume as opposed to increases in product pricing. The primary factors behind the increase in North American sales volume were related to continued strong triple-digit growth in traditional distribution channels, combined with an increase in and optimization of our products presence in world-class retailers. Additionally, revenues were increased as a result of building inventories at Pepsi warehouses and distribution centers in anticipation of the transition to the Pepsi distribution network. These revenues were offset by the prior distribution network, which reduced their inventory balances as a majority of the prior distribution system was terminated as of September 30th, 2022. Gross profit for the three months ended September 30th, 2022, gross profit increased by approximately $41 million or 109% to $78.7 million. Gross profit margin reflected an increase to 41.8%, 49.6% excluding outbound freight of revenues for the three months ended September 30th, 2022, relative to 39.7% or 48.8% excluding outbound freight for the prior year quarter. The improvement in gross profit dollars was due in part to the improved average can prices within our inventory, as well as improved freight costs relative to the third quarter of last year. Sales and marketing expenses for the three months ended September 30th, 2022 were approximately $198.8 million, an increase of approximately $176.1 million or 779% relative to September 30th, 2021. This increase was primarily attributable to termination expenses of prior distributors, which resulted in an increase of $155.4 million when compared to the prior year quarter. As a percentage of sales and marketing represented approximately 23% of revenue in the third quarter of 2022 after backing out the $155.4 million of termination fees, compared to 24% for the third quarter of 2021. General and administrative expenses for the three months ended September 30th, 2022 were approximately $27.5 million, an increase of $4.2 million or 18% from $23.3 million for the three months ended September 30th, 2021. Employee costs for the three months ended September 30th, 2022 reflect an increase of $900 thousand as investment in this area are also required to properly support our higher business volume and the commercial and operational areas of our business. Impairment expenses increased by approximately $2.4 million when compared to the prior year quarter. These increases were offset by an $11.7 million decrease in stock-based compensation, which amounted to $6.3 million in the current quarter when compared to the prior year quarter. Management deems it very important to motivate employees by providing them ownership in the business in order to promote over-performance, which translates into the continued success of our business based on key performance attributes. Administrative expenses also increased by $12.3 million, primarily due to a litigation settlement in the amount of $7.8 million, as well as increased costs associated with third party service providers, including internal control and SOX compliance, audit fees, and other litigation. Lastly, all other administrative expenses, which were mainly composed of research, development, and quality control testing, increased by approximately $300,000. As a total percent of revenue, G&A costs decreased to 15% of sales for the three months ended September 30th, 2022, compared to 25% in the prior year. When you take some of the outliers out of the equation and exclude items such as $7.8 million for the litigation settlement agreement, $2.4 million related to the brand impairment charge, and stock-based compensation of $6.3 million, G&A expense as a percentage of sales was 6% for the third quarter 2022, and excluding the stock-based compensation of $17.9 million in 2021, the G&A expense as a percentage of sales was 6% as well. Focusing now on liquidity and capital resources. As of September 30th, 2022 and December 31st, 2021, we had cash of approximately $727 million and $16.3 million, respectively, and working capital of approximately $755.7 million and $169.2 million, respectively. Included within the Q3 2022 cash balance was approximately $135 million of cash that will be utilized for termination payments. Cash flows provided by operating activities totaled $171 million for the nine months ended September 30th, 2022, which compares to $52.1 million in net cash used in operating activities for the nine months ended September 30th, 2021. The approximately $223 million increase in cash generation was driven by the timing of transactional costs associated with the Pepsi distribution system, as well as continued growth in the operations of the company. Looking at inventory, total Q3 inventory ended at $154 million, down relative to the $191 million at the end of December 2021. As we benefited from growth in our business as well as a pipe fill in advance of Pepsi beginning to distribute our product. We would expect some increases as we continue to grow and also as we prepare to launch a number of new flavors in the first quarter of 2023. We will continue to carry some additional inventory in order to make sure that we are able to keep up with the significant growth we are experiencing, but would expect to start to drive some efficiencies in our DIO as we move through 2023. With the latest injection of funds from our PepsiCo transaction, we have sufficient firepower to take our business to the next level as we transition into the Pepsi distribution network across the U.S. and then internationally. This concludes our prepared remarks. Operator, you may now open the call for questions. Thank you. The floor is now open for questions. If you do have a question, please press star one on your telephone keypad at this time. If your question has been answered, you can remove yourself from the queue by pressing one. Again, ladies and gentlemen, it's star one to ask a question. Our first question comes from Mark Astrachan from Stifel. Go ahead, Mark. Yeah, thanks and good afternoon, everyone. I guess I wanted to start on the distribution gains and the shelf space. You know, obviously we all know the challenges that Bang is dealing with. You're obviously also transitioning into basically the same shelves that they had. Is it simply a 1-to-1 sort of trade-off there? How do you think about what your shelf space is gonna look like, you know, as you go forward over the next kind of 3-6 months as the changeover is completed heading into the spring sets? Do you think you can end up with more space? How do you think about the number of SKUs you can put on shelves relative to where you are or where Bang is today? Maybe that's just a good starting point. Thanks. Yeah. Thank you, Mark. We appreciate it. Great question. We have some audio difficulty. The team down in South Florida, we are in the middle of a little bit of a hurricane, but with weather coming through here. If we have a little choppiness. Great question, Mark. I mean, what we're seeing there is a lot of opportunities out there. I think what you're seeing, especially with the gains right now that we're seeing as of October first, you know, as referenced in the prepared remarks, where we did see the number of SKUs just in the three-week period increase, on shelf space, with the largest gain coming from convenience. You know, there is obviously a disruption that's out there with Bang and the distribution network that they have exited and what they're putting together. There is opportunities that are really coming out of, you know, out of normal course of resets that the team is vigorously working to take advantage on, as well as every other brand in the set, in the energy category. You know, what we do look at when you look at what we were able to capture with Coca-Cola Energy, when that was going through and being delisted in many retailers, we were able to take advantage a lot of that opportunity and gain incremental shelf space on that change. I think the momentum we have allows us to be one of the top choices, when you look at, when retailers are looking to add and find a replacement, if that's what they so choose at certain retailer locations. You know, I think we're in a good advantage to take, you know, to move into some of that space as we have, as you're seeing a variety of key retailers. As you look forward and we look for the spring resets, I think we're in really great position. We know we're incremental to the category. We know, you know, being the number one driver of growth in the category puts us in really good position as we're looking, you know, for resets. Right now we're in the midst of buyer season, selling season, coming out of one of the greatest shows the company has ever had out in Vegas. I know there's a lot of retailers coming by the booth. I think we're well positioned. Obviously, you know, we don't provide forward guidance on revenues, but, you know, we feel really optimistic on where this brand is positioned, especially leveraging Pepsi in our new distribution partnership. That's great. Maybe just one sort of related follow-up there. If you could talk a bit about the velocity in terms of sales per point of distribution or however you wanna think about that metric as you transition, especially into convenience stores where you're selling single-serve items. How should we be thinking, you know, generally about kind of where the current trends are and how we think about that going forward? Yeah, that's something we're watching really closely. Now, keep in mind, you know, like when we're looking, we're entering a lot of new distribution, and we're also entering some new markets where the brand, you know, has lower awareness than really where we've been building out over the last, you know, call it two to three years in some of our core markets. As you saw in our P&L, we're further increasing our investments and expanding. You know, it's something we're really watching closely. I think we're getting into more of those tier 3, tier 4 accounts that, as we go forward, potentially, you know, may not be as productive as the tier 1s and tier 2 accounts which we are in today. You know, we're watching that closely. You know, when we look at it seems to be, you know, at a level basis right now, kind of what we're seeing over the last several data points. You know, that's really to be determined. The brand has been performing really well, so it's something we're watching closely as well. I can't really give you an answer on that at this point. Got it. All right. Well, thanks, all. Excellent. Thank you, Mark. Thank you. Our next question comes from Kevin Grundy from Jefferies. Go ahead, Kevin. Hey, everyone, this is Noah on for Kevin. I was looking to dig a little further into your PepsiCo distribution transition. First, just starting off in the U.S., could you give us a little more context on how much business has already been transitioned? So some early observations in the areas of your business that has been shifted and what your expectations are for the remainder of the year. Thanks. Yeah, I mean, if you listen to the Pepsi call that was about a month ago, they were two weeks into October, they had already announced that, you know, we were in excess of 80% with our DSD business, and we've continued to expand out there. Like I said on the call, there are a handful more geographies or territories that Pepsi will be rolling out into over the course of Q4 and into Q1. But really everything that we planned on transferring to them, plus additional territory, has been kind of locked in. You know, although I don't have an exact number for you, we're confident by the time we get to early Q1, we'll be in great shape. Now, there are still a couple distributors out there that we are not transitioning. At the end of the day, we'll end up transitioning most of all of our DSD network. Yeah, I think, Noah, just to chime in as well to add a little bit more color in regards to what we're seeing. You know, when you look at that data point that we referenced in the pre-recording and also in our earnings supplement that was filed, when you look at the momentum we've gained since October first, I think it really shows the team's doing an excellent job on the way we're wired into Pepsi and a lot of our team members. The transition is moving really nicely. In talking about those 50,000 incremental cooler spaces and that Coca-Cola Energy, we're already seeing those come to fruition, as well as food service coming to fruition, especially at the college university level. We're seeing a lot of extremely positive, you know, the first three to four weeks of the relationship. Great. That's really helpful. Just one more, if I may. In terms of the potential international expansion that could occur, could you maybe just share some thoughts on sort of how you're thinking about expansion and sort of what the timeline is on that and how that would work through the systems? Yeah. You know, right now we're extremely focused on the U.S. transition. You know, both parties see opportunities on an international front, with over 126 markets that Pepsi has great distribution in. You know, it's timing and sequencing. I think we're very cognizant about that, being very methodical in our approach. When you look at, you know, they're gonna be our preferred partner going forward. We'll have more details to come as we really look through 2023. We're really taking timing and sequencing and as we scale, and we wanna make sure that we enter these markets appropriately, and that we have the right strategy in place as well. Great. Thanks, guys. Thank you. Our next question comes from Peter Grom from UBS. Go ahead, Peter. Thanks, operator. You know, good evening, everyone. I guess, just to start, can you maybe just help us understand the impact from the sales to Pepsi in the quarter? I think the 10-Q says that Pepsi made up about 12.4% of sales, which is pretty substantial. I guess, is there any way to kind of quantify or break out what was kind of one-time in nature versus kind of what is recurring? And I guess what I'm really trying to get at and understand, you don't give forward guidance, but how should we be thinking about 4Q revenue growth in North America, given all the noise that kind of occurred through this, you know, transition? Thanks. Yeah, Peter, good to hear from you. You know, like we talked about on the call back in August, it's gonna be noisy in this quarter and next quarter. We did have a pipe fill, so there is some timing there. To be honest, it's very difficult to put an exact number on what was the benefit of the pipe fill versus the offset of the distributors winding down their inventory, and then pulling back at the end retailer or the end customer. You know, if we had to kind of peg it, are we talking, I don't know, $15 million-$20 million, somewhere in that range that could potentially be shifted from one quarter to the other on the top end? I don't know if that's the exact number, but that's kind of the gut feel I have. Again, you got the transition where there's a little bit of a dip you take if you go back and look at some of the data with Bang, they had the same impact. At the same time, we're getting into a lot of space that we haven't been in. As we look at Q4 and then into Q1, those coolers John talked about, food service. We were, you know, it's not an apples to apples comparison when we look at what happened with Bang in terms of what is the data telling us. We think there's still a very big opportunity in Q4 and into Q1 to get into a lot of space we haven't been to before, on top of expanding the SKU counts and the retailers we're at, and getting into more space from, you know, as there's some disruption within the industry. I think overall, that's probably the best I could do for you. It's not exact. I don't have a bunch of data to support it, but that's kind of the feel we have. Got it. That's really helpful. Can I just ask one on just the gross margin trajectory? I may have missed this, so apologies, but are we through the higher cost cans at this point? John, I think you mentioned, you know, mid-forties by year-end. I might be, you know, reading too much into this, but is that in reference to an exit rate, or should we still be expecting fourth quarter gross margins to still be in that same ballpark? Thanks. Yeah. No, Peter, excellent question. I mean, the international cans, we were anticipating cycling through the majority of our international cans by the end of the third quarter. Due to the flow of some of the international cans, the way they've come in on East Coast, West Coast, we are sitting on still some international cans, although they're a much smaller amount of our overall total inventory, mainly on the West Coast of the country. When we look at our margins and some of the improvements, also the sales mix we talked about with the Costco pack, variety packs. You know, when we look at the mid-40s%, we believe we can hit the mid-40% range by the end—continue to hit the mid-40% range by the end of the year. You're looking at somewhere between 43.5% to 47.5%, somewhere around that range. It's a little bit hard to say with you got gas prices that come down. We're seeing some softening in the aluminum pricing as well. Then we will be cycling through some of those international cans on that mix, as we go through here. Then we also did have some returns come through as well, of some product that's flowing through in regards to the moving out of the prior distribution network. A little bit of a, as Jarrod mentioned, noise that's coming through the system. Getting to that mid-40 range, I think is definitely a high for us as an organization. Thank you. Again, ladies and gentlemen, to queue up for questions, it's star one. Our next question comes from Jeff Van Sinderen from B. Riley. Go ahead, Jeff. Hi, everyone. Just wanted to circle back to a couple of things on the ramp with Pepsi's DSD. Sounds like it's going extremely well. I guess, what are the next steps that you touched on a lot on Q4? What are the next steps as we think about Q1? I know you mentioned kind of the spring reset, and then overall, what are the milestones we should be looking for to track the progress when you report Q4 and Q1? Yeah, I think, no, Jeff, great question. I mean, we are seeing a great opportunity. I think the milestones you're gonna see within this is really the expansion and convenience. We started to see that really just in a few weeks. I mean, we see a huge opportunity in convenience, expanding that ACV and the number of SKUs and items per store. So, you know, that's really where you're gonna see, you know, robust growth out of the organization and also maintaining that velocity at retail, which is so critical. So those are the metrics we're really watching. You know, convenience is a massive opportunity, and PepsiCo has this program, a medals program, which is a loyalty program with over 150 independent retailers. That's gonna be a big opportunity as we start to penetrate that opportunity and then the food service opportunity that's out there. Unfortunately, that channel is majority unreported. When you're looking at reported numbers, really, I think the opportunity is getting that ACV number when you look at, you know, the two largest players, you know, north of that 90 ACV range, where, you know, we have room to grow as it stands now. Okay. That's helpful. Then if we could switch to the club channel for a minute. I know you mentioned Walmart. I'm not sure if you mentioned Sam's Club. Maybe I missed it, but just wondering, you know, as you sit here today, what do you feel is left to do in the club channel? I know you mentioned margins there too, but. Then maybe any other retailers that are not part of the network or maybe they are part of the network that you're eyeing here to potentially add. From the club channel, you know, we just started getting into Sam's Club at the end of Q1. Mm-hmm. If you kinda looked at Costco a year before that, you know, it took 2, 3 quarters for it to get ramped up. Sam's Club is really starting to ramp up for us, and it's starting to really produce very well for us. I think we still have good continued growth in Sam's Club, consistent with what we saw with Costco. Then there's still BJ's, which we're in stores now, but we've got some more opportunity to expand across their entire footprint. I think, you know, there's still some good room to grow for club, and club's gonna be a good area for us. The other thing is we've seen, you know, the demographics coming out of club have, it's not cannibalized the growth in other channels. It seems to be a consumer that's got the same interest, same, you know, Live Fit, interest, Essential Energy and those kind of things, but it's a consumer that may not be shopping in the other channels. We're seeing good growth come out of both areas, and it's continued. Makes sense. Just one more sort of housekeeping. I'm just wondering how many coolers that Pepsi has that you're getting into, in their network at this point? Yeah. I think at this point, you know, we don't really have a clear number on the total opportunity. What we've been told and really what we're working towards is there's roughly around 50,000 Pepsi owned coolers that we will be gaining additional placement in. There's also other opportunities at given retailers that, you know, Pepsi owns the space, and we're able to participate in. It's probably a lot much larger number than that, but the 50,000 is really what we're told is immediate opportunity today. Yeah. There's the other coolers that we see as well. You know, as I make my rounds across Florida, I've seen us enter different coolers over the last three weeks. You know, I'll be in a store or a shopping center, and one week we're not there, and then you know, I give the sales guys a hard time, and we're there the next week. You know, that's an area that they are rolling us out. They could get us there week 1, but the goal is to really get us across those 50,000 energy coolers, but then also the opportunity to get into their other coolers as well. Okay. Excellent. Best of luck with the remainder of the transition to Pepsi. Thanks. Thank you. Our next question comes from Jeffrey Cohen from Ladenburg Thalmann. Go ahead, Jeffrey. Oh, hi, John and Jared. How are you? Excellent, Jeff. Just a couple questions from our end. Jarrod, you were talking earlier about the termination expense paid. One, was that paid? You said it was paid by Pepsi, and it'll show up under deferred revenue. Is that right? It was paid by Pepsi, yes. We had an initial tranche of $174.7 million, of which we ended up accruing 155 for. We've got whatever we don't spend, we send back. We also did have some settlements in Q4 as well. Right. That would be, I think you stated 50 for Q4. Is there any follow-on after Q4 expected or that should be wrapping it up? It's a good question. I think that we're, you know. We're in great shape from that perspective. I can't say absolutely nothing after that, but, you know, the goal is to really be in a position that we're locked in, moving into 2023 clean, and really focused on, you know, getting into all the locations and having them, you know, with a stable footprint and knowing exactly what they need to do as we roll out and we look to really start to capture market share in 2023. Got it. Okay. Then secondly, for us, could you talk a little bit about SKUs from two perspectives, I imagine. The first perspective being what's the right number for some of these retailers and SKUs? I know you started out with ones and twos and threes and a number of them. Talk about that a little bit, and then talk about SKUs from the company's perspective as far as the totals you have. John did mention some new flavors coming in 2023. Will flavors more out of favor go away as new flavors are added on, or how should we think about that in 2023? Yeah. I think it's, you know, you've been following the company for some time with in the stores in one or two flavors, and now we've grown. You know, look at Publix as an example. We have well over 15 flavors and SKUs and products now in retail as well as multi-pack. There's a massive opportunity for us where we stand. I think when you look at, you know, where we're at now on average nationwide, you're looking at about 8.6 items. A lot of the major other players and leaders in the category have, you know, north of 20-30 items in a given outlet. The opportunity to grow is we're just getting started here. You know, now the number three energy drink officially as of, you know, the last data pull for the 1 week. Just really excited about that. I think that's gonna open up additional opportunities, especially with the Bang transition. Also when you look at the resets that are gonna take place, you know, next year, upon retailers resetting for, you know, the transformation of the energy category, better for you and New Age Energy, which Celsius is a major contributor to. I'm not gonna have a real specific number for you, but we're gonna get as much space as we can out there for sure. Got it. Lastly for us, is 13 a good number on the co-packer front, or could that change based on volumes and/or geographies? We're, you know, we're at 13 now, but we've got backup ones beyond that. We've got co-packers that we can turn on quickly. And some of them, you know, there's a number of co-packers that have multiple locations, so we're co-packing in some of their locations, so we can flip on their other locations as well. We're set up, you know, from a capacity perspective for a number of years to come. Perfect. That's for us. Thanks for taking the questions. Excellent. Thank you. Our next question comes from Anthony Vendetti from Maxim Group. Go ahead. Yes, thanks. Most of my questions have been answered, just on the marketing front. Is Pepsi spending any direct dollars other than you know working on the distributor side and putting you know your SKUs in their coolers and so forth? Are they spending any actual marketing dollars on their own, or is that all gonna be under Celsius? Yeah. It's still early in the relationship, so there's definitely opportunities to partner on different things and different programs, whether, you know, we've talked about the college opportunities. Is there a college program that we can partner on from a sponsorship perspective? Those are definitely on the table. I'm not saying we're specifically having any discussion about that, but I'm saying those types of things we are having discussions about as to how we can work together. When it comes to the various pricing and the go-to-market strategy, there are some opportunities for us to, if you would think, kind of co-op for things like that. You know, the energy drink category is very promotional, so there are opportunities and we will be, you know, running kind of joint promotions when it comes to the pricing of the cases and working with our, especially our key accounts across the board. There's the MEDALS program that Pepsi has as well that there's opportunities. I guess you could call some of that more back shop promotions. The front facing promotions, again, the opportunities. Those are really gonna be more of our focus. You know, it's up to us to really push the brand and push the velocity when it comes to that component. Yep. Just to follow up on the coolers, right? Because you placed 550, you're now at over 3,500. Pepsi has, you know, 50,000 initial coolers you're gonna look at. But you mentioned you're looking to roll out more specific Celsius coolers. Does that still make sense? And if so, why, versus, you know, just focusing on the Pepsi coolers at this point? I think, I mean, we're really focused on all opportunities, and the Celsius branded cooler will be wholly owned by, you know, Celsius, and they'll only carry Celsius. There's a huge opportunity there. We see the benefit on both the, you know, co-branded or coexistent in the energy Pepsi coolers for availability. Our branded coolers are, you know, a silent salesperson that's out there for us. We see the great returns, we got great ROI, and we do have a significant amount of coolers on order currently. Okay, great. I'll hop back in the queue. Thanks. Thank you. Our next question comes from Sean McGowan from ROTH Capital. Go ahead, Sean. Thank you. First, I just wanted to, Jarrod, if you wouldn't mind repeating the comments you made in your prepared remarks on the tax kind of noise in the quarter. I think the recording got a little muffled there. Would you mind repeating some of that? Then I have a follow-up. Yeah. The gist of the noise this quarter is when we valued the preferred shares, we put them on the books at $832.5 million. It's a $282.5 million dollar premium, basically call it a premium. Since that's reported as an asset on the books and amortized onto revenue over the distribution agreement, so roughly 20 years. From a tax perspective, it's not deductible. There's a book-tax timing, basically a DTL. You know, we booked that through the tax line this quarter. That's what caused the noise. Okay. What do you think we should be using as the effective tax rate, you know, kind of going forward when you don't have an event like that? I kind of look to the 21% federal and, you know, roughly 5%-6% from the state rate. Okay. 26. All right. Thank you for that. On the other question I had was, can you remind me, did you take any additional price increases during the third quarter? You know, and the reason I'm asking you is, like, relative to my expectations, accounts receivable were higher and inventory was lower than I thought, which suggested to me that the timing may have been, you know, some shipments may have been later than I thought. You know, how does that? If there's any price increase during the quarter that might have helped the gross margin because it came after a price increase. No, I mean, we have kind of a rollout we've been doing, so nothing's changed from that perspective. Okay. That continued a little bit Q4 as well. That's just we've got some of these accounts 'cause, you know, with our growth, we've been picking up more even throughout this year, right? From a pricing perspective, nothing's changed from the prior commentary. From margin perspective. Okay. We Okay. Thank you. At this time, I would now like to turn it back to management for any closing remarks. Thank you. On behalf of the company, I'd like to thank everyone for their continued interest and support. Our results demonstrate our products are gaining considerable momentum, and we're capitalizing on today's global health and wellness trends and the transformation taking place in today's energy drink category. Our active position is a global position with mass appeal. We're building upon our core business and leveraging opportunities and deploying our best practices. We have a winning portfolio, strategy and team in a large, rapidly growing market that consumers want. In addition, I'd like to thank all of our investors for their continued support and confidence in our team. Thank you everyone for your interest in Celsius. Stay healthy, stay fit. Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.