Celsius's (NASDAQ:CELH) Q4 Sales Beat Estimates
Energy drink company Celsius (NASDAQ:CELH) announced better-than-expected results in Q4 FY2023, with revenue up 95.2% year on year to $347.4 million. It made a GAAP profit of $0.17 per share, improving from its loss of $0.09 per share in the same quarter last year.
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Celsius (CELH) Q4 FY2023 Highlights:
Revenue: $347.4 million vs analyst estimates of $331.5 million (4.8% beat)
Adjusted EBITDA: $65.2 million vs analyst estimates of $58.4 million (11.6% beat)
EPS: $0.17 vs analyst expectations of $0.18 (6.5% miss)
Gross Margin (GAAP): 47.8%, up from 44.4% in the same quarter last year
Market Capitalization: $15.7 billion
With its proprietary MetaPlus formula as the basis for key products, Celsius (NASDAQ:CELH) offers energy drinks that feature natural ingredients to help in fitness and weight management.
Beverages and Alcohol
These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales Growth
Celsius is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.
As you can see below, the company's annualized revenue growth rate of 116% over the last three years was incredible for a consumer staples business.
This quarter, Celsius reported magnificent year-on-year revenue growth of 95.2%, and its $347.4 million in revenue beat Wall Street's estimates by 4.8%. Looking ahead, Wall Street expects sales to grow 37.6% over the next 12 months, a deceleration from this quarter.
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Operating Margin
Operating margin is an important measure of profitability accounting for key expenses such as marketing and advertising, IT systems, wages, and other administrative costs.
This quarter, Celsius generated an operating profit margin of 17%, up 35.4 percentage points year on year. This increase was encouraging, and we can infer Celsius was more efficient with its expenses because its operating margin expanded more than its gross margin.
Zooming out, Celsius was profitable over the last two years but held back by its large expense base. It's demonstrated mediocre profitability for a consumer staples business, producing an average operating margin of 5.5%. However, Celsius's margin has improved by 44.4 percentage points on average over the last year, an encouraging sign for shareholders. The tide could be turning.
Key Takeaways from Celsius's Q4 Results
We were impressed by how significantly Celsius blew past analysts' revenue and adjusted EBITDA expectations this quarter. On the other hand, its EPS missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The market was likely expecting more, and the stock is down 1.9% after reporting, trading at $66.42 per share.
So should you invest in Celsius right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
