Celsius Holdings, Inc. (NASDAQ:CELH) Q4 2017 Earnings Conference Call March 8, 2018 4:30 PM ET
Cameron Donahue - IR
John Fieldly - Interim CEO & CFO
Vanessa Walker - EVP, Marketing & Innovation
Jeff Van Sinderen - B. Riley
Greetings, and welcome to the Celsius Holdings Inc. 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Cameron Donahue, please proceed.
Thank you. Good afternoon, everyone. We appreciate you joining us today for Celsius Holdings Fourth Quarter and Full Year 2017 Earnings Conference Call.
Joining me on the call today are John Fieldly, Interim Chief Executive Officer and Chief Financial Officer; and Vanessa Walker, Executive Vice President of Marketing & Innovation. Following the prepared comments, we will open the call to your questions, and instructions will be given at that time. We have filed our annual 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 this call may contain forward-looking statements which are based on forecast, expectations and other information available to management as of today, March 08, 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 to turn the call over to John Fieldly for his prepared remarks. John?
Thank you, Cameron. Good afternoon, everyone and thank you for joining us today. 2017 was an outstanding year, we delivered exponential top line revenue growth of nearly 60% over the last year, while maintaining gross profit margins successfully and significantly expanding our global footprint in rapidly growing Asian market, and extending our product portfolio with new concepts and flavors, all while strengthening relationships with our consumers to deliver quantifiable results; and are in position to continue our success in 2018.
We are gaining ground and increasing momentum in an industry that was once dominated by only a few massive global brands. There is rapid change occurring in consumer buying preferences, we're establishing ourselves with appealing products in growing markets to capitalize on the direction our industry is headed. Our 2017 accomplishments are rewarding, but just as important, we are increasingly optimistic about 2018 and beyond. Our entry and expansion in Asia market was a critical step in our pursuit of building a global brand. Asia and China in particular, is one of the largest and fastest growing economies in the world, establishing the Celsius brand, operations and distribution through local and regional partners has accelerated our entrance into this market.
We committed considerable resources in Asia in 2017 with investments in excess of $7 million to promote our brands establishing local production at sourcing and successfully launching a subset of our product offerings. Our initial area of focus in China has been Beijing, Guangzhou and Shenzhen with initial expansion reaching in 35 cities across 14 provinces. We have gained over 8,000 points of distribution in our initial phase of launch with 50 subs distributors. Our partner, Qifeng Food is key to our success, and one of the reasons we feel confident entering China at this time. Qifeng is a company whose management team is led by senior executives with a strong history of brand development, operations and general management of related beverage sector brands throughout China.
In addition to a solid partnership in country, the consumer response has been overwhelmingly positive in our unique product positioning and health for brand. And we are incorporating lessons learned as we progress and plan for broader distribution in China. A foundation of our business in Asia is with strong capable partners and we are committed to building on our success to further grow our brands and increased placements of our products. We are already receiving reorders from Qifeng Foods which is providing tangible results that our strategy is working, and we are excited about the results as we continue to pursue and leverage Qifeng Foods distribution network of over 500 sub-distributors in country.
Our innovation of new products and flavors are aligning with a shift in consumer habits and trends towards health and wellness, and are targeting those individuals looking to live an active lifestyle. This is a key strategic component of our success; we have a long impressive list of industry accolades which include nearly two dozen global awards, one two additional awards in 2017, Celsius Heat, our new trainer grade product line for that hardcore fitness enthusiasts is our second line in the product portfolio. And Celsius Heat was awarded beverage industries 2017 Energy Innovation of the Year award in December. And our core line Celsius was named Best Functional Drink at the Innobev Global Conference in Europe this year. These awards are affirmation our products are innovative, creating a point of difference, and adding value to the beverage landscape today. We are capitalizing on today's trends and our innovation and product development strategy is meeting the demands for today's consumers. We are building an innovative product portfolio for health-minded individuals demanding more from their products that they consume.
To further meet the rapidly changing consumer consumption trends and capitalize on faster growing channels of trade, we watched a natural line extension of our original Celsius product in 2017. The natural line also contains our proprietary meta-plus formula and introduces 6 new flavors to this product line. Each natural SKU boosts a clean ingredient panel featuring natural caffeine source, and also is naturally sweetened. Since launching the natural line extension has been accepted at premium retailers nationwide, and is made available through multiple warehouses of leading natural channel distributors throughout the country. The natural channel and trade is a new business for Celsius and it's growth and continued expansion is promising for the new 12-ounce line extension. A natural cross-functional team was established amongst the existing sales members to support the launch and the line and focus resources on this fast-growing channel.
The introduction and innovation, the new products such Celsius Heat and the natural line extension builds upon our core business and establishes a roadmap for future growth reaching new consumers and new channels trade. We are focused on strengthening relationships with customers, expanding our product offerings into new channels of trade. Most recently, we announced our partnership with 7-Eleven authorizing nationwide placement for Celsius Heat. And we have expanded our offerings in many existing outlets and chains, getting better placements and additional points of distribution. In addition, our operations are positioned for scale and we are intrigued with our momentum and retailers interest in Celsius, and we're capitalized and position to capitalize on today's consumer trends.
In addition, in 2017 in May, our common stock was uplifted and began trading on the NASDAQ capital market. This was a significant milestone for us as it affirms our vision and supports our evolution as a public company allowing us to communicate with a broader audience; we believe this increases our appeal to institutional investors and enhances our trading liquidity and will fundamentally enhance the value of our Company for our shareholders.
I will now turn the call over to Vanessa Walker, Executive Vice President of Marketing & Innovation for her prepared remarks. Vanessa?
Thanks, John. Seismic shifts have become a reality for consumer goods companies, massive demographic changes are occurring as the millennial generation becomes the largest population worldwide. This young group is evolving global health and wellness trends and continuing to drive product portfolio change for all CPG companies. Technology advancements are changing the way brands are being marketed and sold around the globe, and the rapidly evolving retail landscape and socio economic forces are converging and accelerating this pace of change.
At Celsius Holdings we are preparing our product portfolio and business models to harness the power of these disruptive changes, changes which are leveling the playing field for companies our size. We are optimizing our core product proven formula with new additional flavors appealing to the changing case profiles of a millennial and re-strengthened our portfolio with the addition of a natural line extension creating a set of new SKUs with clean nutritionals specifically designed to broaden distribution, meeting retailer and consumer needs for a wider, more natural assortment. These changes in our product portfolio will remove barriers to distribution on the growing natural shelves in the traditional and new channels of trade including e-commerce. This move to create a line free of artificial sweeteners fill the void in our portfolio by creating a Celsius branded option for new and current faithful consumers shopping in any omni-channel format and making ingredient driven purchase decisions.
As the brands tagline would fit adorns [ph] packages, just below the brand mark and name, it is a significant and clear message about our shift in positioning from a weight loss or diet brand to our position today as a fitness strength. The live fit statement communicates our key product benefits in an inspiring and challenging way and speaks to a wider health-focused audience resonating as a coherent global brand. This position is based on universal truths for all those who aim to lead their best life and seek brands which will support them in their journey; this is a position we feel resonates in the E.U. and Asia markets, as well as North America. Effective consistent communication of this new global position is now possible as millennials are digital natives and their hyper connectivity will allow for greater impact and faster awareness of the brands benefits, values and brand image.
To further build our global brand packaging is being rolled out throughout the year in the E.U. and Asia, which will create a globally recognized brand providing vibrant energy and delicious flavors delivering a level of benefits apart from the competition. In China, a one-can-one-code campaign using QR codes underneath full tabs is being activated throughout the WeChat along with cyber shopping events on tmall.com and search engine optimization initiatives done by du.com, China version of Google, have led to multiple articles on the brand. Weibo, China's Twitter is seeding activation to key opinion leaders and influencers who are beginning to engage across different apps and platforms through marketing programs initiated by Qifeng team. Additional China activation plan for 2018 will stay the course and continue to build brand equity connecting with local Chinese consumers through sports and fitness-focused lifestyle aps focusing on training, yoga, healthy eating and more.
In the Nordic region, Sweden has been staying the course, studying the core consumers and updating flavors and visuals as they prepare to launch the brand in Finland and Norway in 2017. Neighboring countries have widely accepted the brand which is the number one fitness drink in Sweden. The brand continues to grow as it is well positioned having originally led with brand ambassadors when launched into the fitness channel. The E.U. Asia and the U.S. are localizing the greater global consumer brand message. In the U.S., syndicated data indicates our brand is on the radar as never before in measured channels. The data is showing our growth in the positive momentum behind not only our brand but the category shift as a whole. The category which is reporting a single serve energy, other functional beverages has grown by 1.3% while the Celsius brand grew at 44% same period, and significantly outpaced the category passing competitors throughout 2017.
Out of the 200 measured energy other functional category brands, Celsius is now ranked in the top 15% of the lineup with only a 9.5% ACV. This spins data is as of the reporting date 1/28/2018 and measuring the reporting convenience channel stores. We are tremendously focused on gaining share and eyeing the size of the prize, a category reported at more than $11 billion in convenience alone, and we are optimistic about the data reporting significant upward trends and acceptance of the Celsius brand throughout this channel which offers tremendous room for growth as we continue to gain points at distribution for the original line and begin to see those same customers with our second line Celsius Heat.
We believe we will continue to see the industry evolving around consumers changing nutritional desires as they move beyond the traditional sugary energy brands, especially in the ultra-competitive single-serve cold bolt [ph] of the convenience channel. C-stores now desire to place and promote healthier brands and this will have a ripple effect across the channels creating cold single-serve trial with new consumers outside of the core Celsius fitness consumers.
Product portfolio additions in 2017; well, the Celsius Heat is the larger 16-ounce version of the original product formulae with added caffeine and [indiscernible] and marketed specifically as a carbonated pre-workout thermogenic [ph] with sales over $2 million at retail in the initial 9 months after the launch, it is an incredible feat by any measure for a new product launching into the marketplace. The wide acceptance in both, the trade and with consumers for this larger enhanced version of Celsius's proprietary brand is a nod to the strength of the fitness channel and passion surrounding the Celsius brand equity.
As previously mentioned in the Feb news release, 7-Eleven has authorized two SKUs for placement in their energy drink stores nationwide. The best-selling Cherry line and newer SKUs, Strawberry Dragon Fruit, which has been named a 7-Eleven first best and only item are to be featured in the store shelf sets in 2018. To support our new broader distribution in the convenience channel and our expanded product portfolio with millennials and active lifestylers across the globe, Celsius announced a new partnership with the Tough Mudder Obstacle Racing Series, a partnership which began in 2017 as a test across 10 cities. Announced late February for the 2018 season which is March through November, Celsius is the new Tough Mudder presenting sponsor and as part of the coveted logo lockup allowing name recognition and brand presence everywhere the Tough Mudder logo will appear in 2018. The official Tough Mudder 2018 presented by Celsius announcement was met with the nominal acceptance and lauded by fans of both brands as a great choice, making perfect sense, a truly authentic pairing.
Founded in 2009 and headquartered in Brooklyn, Tough Mudder is a global organization with reach in over 11 countries, and a great choice as Celsius continues to expand in the E.U. and Asia. In the U.S. they hold over 100 events in 33 cities countrywide with added 5K's this racing season and almost all cities allowing greater fanfare and a wider audience than those who are traditionally competing in the 10 to 12 mile obstacle course. Teams or individuals participating usually call themselves Tough Mudder Nation, and a marketing campaign is planned for hash tags 'Celsius Nation' to connect with a new fan base of fitness enthusiasts, a live-fit audience and a perfect match for the Celsius fitness drink. This partnership comprised of digital ambassadors, retail opportunities and experiential programs give Celsius access to over 3 million participants with Mudder engagers annually.
Plan for retailer tie-in's including giveaways, contests for free Mudder entries and displays will be ongoing throughout the partnership and made available to traditional channels of trade, as well as the fitness channel which will assist both brands in building awareness and image built through association of one another's name. Tough Mudder and Celsius are together gaining a tremendous amount of acceptance and excitement by fans surrounding this union.
That concludes the marketing and innovation portion of our call. I'll turn it back over to John Fieldly. John?
Thank you, Vanessa. Total revenue for the fourth quarter of 2017 was $9.1 million compared to $6.3 million in the fourth quarter of 2016. The 46% increase was driven by 92% year-over-year increase in domestic revenues which was driven from branded growth rates of 151% in health and fitness accounts and an 80% growth in internet retailer accounts and a 73% increase in retail accounts. This growth was partially offset by a 12% decline in international revenue that was primarily driven by decline in orders from our Nordic distributor, as a result of order timing impacted by a new cane [ph] design launch in the first quarter of 2018.
We remain excited about further opportunities in this market, specifically with the launch of our new BCAA product and the expansion into Norway, both commencing in the first quarter of 2018. This Nordic revenue decline was partially offset by new revenues from China and Hong Kong. Gross profit for the fourth quarter of 2017 was $3.8 million or 41.6% of revenues compared to $2.6 million or 41% of revenues for the corresponding period last year. The improvement in gross profit was driven almost entirely by higher revenues and the diligent management of motional allowances and cost of goods.
Bills and marketing expenses for the three months ending December 31, 2017 were $7.3 million compared to $2.0 million for the three months ending December 31, 2016, an increase of 265%. This increase is due primarily to increases in investment in sales and marketing programs of roughly around $4.9 million with a focus on expansion in the launch of products in Asia, mainly focused on China and Hong Kong. In addition, increases in human resource investments during that period was $333,000 and increases in warehousing costs was $108,000 due to increasing inventory levels to support exponential growth.
General and administrative expenses for the three months ending December 31 2017 were $1.6 million compared to $963,000 for the three months ending December 31, 2016, an increase of 70%. The increase was primarily due to increases an option expense of $388,000, investments in human resources of $191,000, investments in research and development costs increasing $90,000 and other related office expenses. Total other expense was $38,000 for the fourth quarter of 2017 compared to $51,000 for the fourth quarter in 2016. The favorable variance was primarily a result of lower interest expense and a lower outstanding debt balance versus the prior year.
Net loss to common shareholders for the fourth quarter of 2017 was a loss of $5.3 million or $0.12 per share basic and diluted compared to a net loss of $509,000 or $0.01 per share basic and diluted for the corresponding period of last year. Net loss attributable to common stock holders is inclusive of preferred dividends. For the three months ending December 31, 2017, the net loss includes preferred dividends of $92,000 and the three months ending December 31, 2016, the net loss includes preferred dividends of $90,000.
Operating expenses for the quarter included non-cash expense including depreciation, amortization and stock-based compensation which totaled roughly $606,000 compared to $222,000 last year. Adjusted EBITDA for the fourth quarter of 2017 was a negative $4.6 million compared to a negative adjusted EBITDA of $140,000 for the corresponding period of 2016. When excluding net Asian investments of $5.2 million in the fourth quarter of 2017, the Company achieved a positive non-GAAP adjusted EBITDA of $705,000 for the fourth quarter in 2017. We believe information concerning adjusted EBITDA and non-GAAP financial measure enhances overall understanding of financial performance and reconciliation of our GAAP results as non-GAAP measure has been included in our earnings release.
Moving to the annual results; total revenue for 2017 was a record $36.2 million compared to $22.8 million for 2016. The 59% increase was primarily driven by 72% growth in domestic revenues driven from blended growth rates of a 49% growth in retail accounts, 143% growth in health and fitness accounts, and 84% growth in Internet retailer accounts. In addition, we had a 37% growth in international revenues from 2016; international revenue growth was primarily resulted increased sales volume through Funk Food and People's Choice, our Nordic distribution partner, as well as initial revenues generated from the launch and distribution of our products in the Asian market, China and Hong Kong.
Gross profit for the year 2017 was $15.4 million compared to $9.7 million. Gross profit margins for both 2017 and 2016 remain steady at 42.7% of revenue. The 59% increase in gross profit dollars, primarily attributable to increases in revenue while controlling promotional allowances and costs of goods. Sales and marketing expenses for the year ending December 31, 2017 were $16.6 million compared to $8.7 million for the year ending December 31, 2016. The increase was primarily due to increases in investments in sales and marketing expenses of $6.7 million with a focus on expansion in the launch of products into China and Hong Kong. Increases in warehousing costs of $375,000 as a result of keeping a higher inventory balance on-hand to support our expansion growth. In addition, we had increases in human investments and human resources of $756,000.
General and administrative costs for the year ending December 31, 2017 was $6.9 million compared to $3.9 million for the year ending December 31, 2016. The increase in 2016 to 2017 was primarily due to increases in stock-based compensation, roughly increased about $1 million, investments in human resources of around $869,000, and the issuance of restricted stock for the period of $328,000 as well as additional increases in general and administrative expenses. Total other expense for the full year 2017 decreased to $161,000 down from $223,000 in the prior year as a result of lower interest expense which was partially offset by a gain of sale of equipment in 2016. Net loss to common shareholders for the full year 2017 was $8.6 million, loss of $0.19 per share basic and diluted, compared to a net loss of net $3.4 million or $0.09 per share basic and diluted for the full year in 2016.
Net losses and losses attributable to common stockholders and are inclusive of preferred dividends for the full year of December 31, 2017 and December 31, 2016 the net loss includes preferred dividends of $366,000 for each period. Operating expenses for the full year 2017 include non-cash expense including depreciation, amortization and stock-based compensation which totaled approximately $2.6 million compared to $1.6 million for the full year in 2016. Non-GAAP adjusted EBITDA for the full year of 2017 was a negative $5.5 million compared to a negative $1.2 million in 2016, excluding 2017 one-time charges of $823,000 and the net Asia market investment of $7.3 million, the Company achieved a positive non-GAAP adjusted EBITDA of $2.7 million for full year 2017.
Turning to the balance sheet; as of December 31, 2017, the Company had cash of $14.2 million and working capital of $20.6 million. This compares to $11.7 million in cash and $15.4 million in working capital as December 31, 2016. We believe our current cash balance to be sufficient to meet our anticipated cash needs through the next 12 months. Cash used in operation for the full year 2017 totaled $8.4 million compared to $2.4 million used in 2016. We are motivated by these results and energized by trajectory of our business and the industry as a whole. As a result of our solid execution against our strategic plan we entered 2018 with increasing momentum and tactical plans to leverage our business model and deliver value for our shareholders.
That concludes our prepared remarks. Operator, you may now open the call up for questions.
[Operator Instructions] Our first question is with Jeff Van Sinderen with B. Riley. Please proceed with your question.
Jeff Van Sinderen
John, let first say congratulations to you and Vanessa your whole team on terrific progress in 2017 and also for putting out positive adjusted EBITDA for the year.
Thank you, Jeff. We're very excited on the results this year, it really demonstrates the momentum that we've been able to accomplish and our team is executing well. And I think it's all proven our hard work is reflected in these financial results, so thank you.
Jeff Van Sinderen
Could you speak a little bit more about the international launch timing that impacted the quarter? It sounds like the new can I guess it was -- sounds like an anomaly; so should we expect revenues in that segment to be up in Q1? Just wondering how to think about that.
When you look at -- Sweden was impacted, usually the fourth quarter has been a little softer for us in regards to our Nordic volumes, due to it being outside of the beverage season. They also had some timings of orders in regards to some production at our production facility and we were transitioning out of a new packaging design in the market which they will be rolling out in Q1. When you're looking at our quarterly revenues on the international front, in regards to Sweden and the Nordic area, we are very excited and optimistic about the second line in their product portfolio, the DCA product which is rolling out momentarily and we continue to gain traction we are maintaining our top position in the fitness category there, and we're seeing -- we continue to see strong results according to Nielsen data. So we are very confident about the momentum we were able to capture on annual basis in that region, and continue to move into 2018.
Jeff Van Sinderen
And how is the DCA rollout going, I know it's very early days but just wondering what sort of response you've gotten there with that?
Yes, it's just rolling out now. We commenced production about three weeks ago, it's now available in a few local fitness centers and we'll be rolling in out -- our partner, our master distributor will be rolling it out through their infrastructure where they have a very high ACV in the fitness channel. So that will be the first point of entrance and then, as it continues to progress and gain traction, we'll roll that second line into the hypermarkets or the mass retail.
Jeff Van Sinderen
And then speaking about distribution, can you give us any more color on how the rollout with 7-Eleven will go? What you're expecting there? Then any other thoughts on -- I guess extending distribution in 2018?
Sure. We put it -- we did announce the partnership with 7-Eleven in regards to the addition of our new Heat line that we launched in 2017. And that is very promising, we are very excited about that. We launched in 7-Eleven now, about 2.5 years ago and it shows you that the product is turning well to have them continue to partner with Celsius. We are in all their DCs with our core line and by having Celsius Heat now entered into the 7-Eleven system, that allows us to gain placement in over 22 of their DCs. So we will go after that, we will leverage that and be able to gain additional placements throughout the country; so at this point in time through our hybrid network we were able to deliver a Celsius Heat case at a retailer -- any retailer throughout the country which is we are very excited about.
And initial feedback has been very positive, we're rolling through specific targeted programs to get that on-shelf, to get complete compliance. It will be a slower rollout as it was with our core line when we first launched 7-Eleven, keep in mind they have 8,000 stores but they work on a franchised model; so we are rolling through that, we're attending a lot of events, and we have a variety of tactical programs to support that.
Jeff Van Sinderen
If we could turn to Asia for a moment, I think you said that was up 85% sequentially, just wondered if there is any more color you can give us on how the China business is progressing? How sell-through's are there? What the outlook is in that region?
We've been very excited with our partner as we mentioned, Qifeng Foods has been -- we're very satisfied with the execution at store level. We know a lot of other brands are entering that marketplace, and they are having a lot of challenges with execution. The execution that we are seeing is a very targeted, we are going -- we are aligning and creating an energy set and our product is being positioned right next to the sell -- the Red Bull product, as well as Monster and CareAbout. So we are defining that set, our placements have been very good, we are gaining ACV hearing about 35 of the sub-distributors of a total of 500 sub-distributors that are available; so we are gearing up momentarily as we speak and we'll continue to roll that out and leverage Qifeng's network.
[Operator Instructions] Our next question is with Anthony Cysteine [ph], private investor. Please proceed with your question.
Good Afternoon. I just want to congratulate you guys there on your successful 2017 and with the continued growth and expansion. I guess my question is just concerning as the interim that's still in front of Mr. Fieldly's title. I guess it's been a year now and I was wondering if we should expect a permanent fill or you to have the interim removed from your title and in your future otherwise I was just kind of curious what we should be expected of the Board of Directors to be filling that job hopefully sooner than later, permanently without the interim. Based on the past year, I think this really is definitely -- we're in the chance and the opportunity to fill the job permanently but that's not my decision; I was just hoping that you could shed some light on that in light of a year passing now.
First of all, thank you Anthony for those comments. We have been performing well over the last couple years and our results this year are phenomenal, team has really executed, we are focused, I will tell you that the Board is going through -- continuously move through that process, they do have a committee and we are anticipating that there would be announcements sometime in the near future there, or going to their final process. So it is -- the Board is focused on finding a permanent CEO, and we look for -- as soon as we have a final formal announcement, we will be sharing that with everyone. But I can assure all our investors, we are focused on driving shareholder value and driving on delivering results, and I think that's demonstrated in our 2017 results. So -- but thank you for that kind comments, Anthony.
[Operator Instructions] Our next question is with Gerry David [ph] with Gerry David & Associates. Please proceed with your question.
John and Vanessa, I don't have a question but just a comment. I have to say this is one of the most exciting times for Celsius, the quantum growth that you've had this past year, your expansion, the broadening of the product lines, I am personally excited about Celsius in the future and as an investor in the company, I congratulate everybody at Celsius on just an outstanding job, so that's my comment.
Our next question is with Diane Maggie [ph], a private investor. Please proceed with your question.
Yes, congratulations from me too, it's great to see the expansions continuing. My question is about the aluminum -- the cost of aluminum considering the President is going to prepare tariffs on aluminum coming in from China and others. Do you get your aluminum from domestic sources or is this going to affect your cost of the product?
Thank you, Diane and we appreciate you being an investor, I know you're a long time investor as well, we appreciate your commitment and interest in Celsius. One thing, it's very interesting when you say that about our -- some of our input costs into our cost of goods. We have -- we are committed as an organization through our supply chain and continue to drive improvements in our gross profits and that's with all of our suppliers, so we are leveraging our suppliers as we continue to scale and grow. We will be able to continue to gain efficiencies throughout our supply chain. And I think that's demonstrated in our 2017 results, when you look at our overall gross profit margins which includes outbound freight which is 42.7% of gross profits and we were looking at almost 60% increase in revenues all while maintaining our gross profit margins which that shows you the focus and dedication of our staff, our management team, not only on sales and promotional costs; promotional allowances are included in our net revenue number as reported which the team did a great job controlling, and also our cost of goods and outbound freight charges.
So we are monitoring our costs very closely. We have not been affected by the increase in tariffs as you mentioned which is anticipated, we will be monitoring that closely. Our aluminum actually represents a fairly small amounts of our cost of goods; so the financial impact or burden will likely be immaterial to our overall gross profit margins as we are positioned to further improve gross profit margins as we continue to scale and grow. So thank you for your interest and I appreciate all the support, and we are focused on and dedicated on improving results.
Ladies and gentlemen, our question-and-answer session has concluded. And I would like to turn the call back over to John Fieldly for closing remarks.
Thank you. Our 2017 results demonstrates the excitement and demands for our products. We are gaining momentum and we look forward to 2018 and leveraging our global infrastructure. Domestically, we just concluded a successful selling season and are in the final negotiations with multiple known accounts which we will be announcing once purchase orders are received. In Asia, we are currently on-track to grow revenues and deliver tangible results as we continue to penetrate and leverage our partner's network of over 500 sub-distributors. And in the Nordic region, despite the normal seasonality we received in the fourth quarter and the delays in production, we expect continued growth and additional upside opportunities with our new expansion into Norway, and our new expansion in our product portfolio with BCAA line which launches in Sweden and Finland in the first quarter of 2018.
I truly congratulate our entire team at Celsius as they have done an outstanding job. We are focused, disciplined and results driven, and are committed to driving shareholder value. In addition, I would like to thank all of our investors for their support and commitment to Celsius. And before I close, I want to highlight that we will be presenting at the upcoming ROTH Capital Conference on March 12, as well as the B. Riley Investor Conference which takes place May 24 to 26. Thank you everyone for your time today, and have a great day.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.