What happened

Shares of Celsius Holdings (CELH 4.80%) were climbing today after the fast-growing energy drink maker delivered a better-than-expected second-quarter earnings report last night.

The stock closed up 9.9% Wednesday.

So what

Revenue in the quarter jumped 137% to $154 million, ahead of the analyst consensus at $148.7 million. North American revenue growth was particularly strong with sales up 171% to $145.4 million.

Direct store distribution growth was 208%, reflecting strong expansion in brick-and-mortar stores, a sign the company is transitioning from rapid growth in online channels during the pandemic. Gross margin in the quarter fell from 43.4% to 38.5% likely due to inflationary headwinds, but adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) still surged from $8 million to $17.1 million, showing the business is scaling well against its fixed costs.

Earnings per share under generally accepted accounting principles (GAAP) jumped from $0.01 to $0.12, beating estimates at $0.08.

Celsius also gave some more details on its recently announced strategic partnership with PepsiCo. As it said on Aug. 1, the beverage giant made a $550 million investment in Celsius in convertible preferred stock, and PepsiCo acquired certain distribution rights for Celsius in the U.S. with an opportunity for future expansion. Pepsi will also be its preferred partner for global distribution.

Now what

Management did not offer guidance in the earnings report, but the strong growth in a challenging macroeconomic environment has to be encouraging to investors as it shows Celsius customers are willing to spend on the product even as they cut back in other areas.

Meanwhile, the Pepsi deal adds another reason to believe in the company's long-term growth. It also mirrors a similar deal between Coca-Cola and Monster Beverage, further evidence that Celsius can deliver the kind of blockbuster returns that Monster did. 

Celsius seems to be on a similar path as the stock is up more than 2,000% in the last three years after exploding early in the pandemic.