The energy drink space is big and filled with many upstart players. One that has risen to prominence in recent years is Celsius (NASDAQ: CELH). The company was able to differentiate itself in the crowded space by making its portfolio sugar-free and by claiming its drinks are thermogenic, allowing drinkers to burn calories even while resting.

In short, Celsius has quickly skyrocketed to the No. 3 spot in the U.S. energy drink industry by market share, trailing only Red Bull and Monster Beverage.

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It’s unclear whether Celsius will ever be able to further climb the ranks of this market — Monster and Red Bull still have sizable leads at this point. But the company is still taking market share. As of its third-quarter report, management believes it has 12.1% market share, up from 11.4% earlier this year.

It’s here that astute observers might raise an eyebrow. How can Celsius possibly be taking market share when its Q3 revenue was down a painful 31% year over year, which included a 33% plunge in North America?

There is a simple explanation for this apparent contradiction. And the details here may help inform whether Celsius is a stock worth buying following its steep sell-off.

When someone meanders down to a convenience store and picks a can of Celsius over a can of Monster or Red Bull, that’s great for Celsius from a market-share perspective — it got a sale whereas the other two didn’t. But when that consumer walks up to the register and pays, that doesn’t count as revenue for Celsius.

Technically speaking, Celsius doesn’t sell beverages to thirsty consumers. Rather, it sells its beverages to distributors who in turn sell to retailers and consumers. That’s how it works in the consumer-packaged goods space. And normally, revenue tracks pretty closely with end sales to consumers. But sometimes, there can be disruption.

In this case, Celsius’ top distributor ordered too much product last year. Now, the distributor needs to correct its inventory levels. Celsius’ revenue consequently took a hit of over $100 million from this single partner. And yet, end sales to consumers still went up 7% year over year. Considering this 7% sales growth outpaced growth in the industry, its market share increased even though revenue to the company plunged.

Imagine if I pitched Celsius stock like this: “Celsius stock is down more than 70% from its all-time high, and its revenue plunged more than 30% last quarter. Would you like to buy shares?” Many investors would likely decline the offer. After all, who wants to own shares of a business in severe decline?

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