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SodaStream Reports Third Quarter Results

AIRPORT CITY, Israel, Oct. 29, 2014 /PRNewswire/ -- SodaStream International Ltd. (NASDAQ: SODA), a leading manufacturer of home beverage carbonation systems, announced today its results for the three and nine month periods ended September 30, 2014.

SodaStream Logo.

For the third quarter ended September 30, 2014:

  • Revenue was $125.9 million compared to $144.6 million in the third quarter 2013
  • EBITDA was $15.7 million compared to $21.9 million in the third quarter 2013
  • Net income was $9.5 million compared to $16.4 million in the third quarter 2013
  • Diluted earnings per share were $0.45, compared to $0.76 in the third quarter 2013

"As we previously announced, our third quarter performance was pressured by challenging selling conditions for soda makers and flavors primarily in the U.S.," said Daniel Birnbaum, Chief Executive Officer of SodaStream. "Our performance outside the U.S. was mixed during the third quarter with strength in company operated markets such as Germany, Australia, Canada and Switzerland, partially offset by declines in distributor markets, namely France and the Czech Republic. Today, we are introducing a comprehensive growth plan that will serve as our blueprint for returning SodaStream to profitable growth. We are fully committed to getting the company back on track and leverage the unique opportunity we have to fulfill our role in the transformation underway in the beverage industry."

The company has posted a copy of its growth plan on the investor relations section of its corporate website at http://sodastream.investorroom.com/  


Third Quarter 2014 Financial Review












Geographical Revenue Breakdown









Revenue

Three Months Ended






September 30, 2013


September 30, 2014


 Increase (Decrease)


 Increase (Decrease)


In Millions USD


%

The Americas

$

49.8


$

29.5


$

(20.3)


(41%)

Western Europe


75.5



74.6



(0.9)


(1%)

Asia-Pacific


8.6



13.3



4.7


54%

Central & Eastern Europe, Middle East, Africa


10.7



8.5



(2.2)


(20%)

Total

$

144.6


$

125.9


$

(18.7)


(12.9%)

 

Product Segment Revenue Breakdown







Revenue

Three Months Ended






September 30, 2013


September 30, 2014


 Increase (Decrease)

 Increase (Decrease)


In millions USD


%

Soda Maker Starter Kits

$

62.5


$

41.5


$

(21.0)


(34%)

Consumables


79.1



81.2



2.1


3%

Other


3.0



3.2



0.2


7%

Total

$

144.6


$

125.9


$

(18.7)


(12.9%)

 

Product Segment Unit Breakdown









Three Months Ended






September 30, 2013


September 30, 2014


 Increase (Decrease)


 Increase (Decrease)


In thousands


%

Soda Maker Starter Kits

1,196


818


(378)


(32%)

CO2 Refills

5,806


6,396


590


10%

Flavors

8,261


7,607


(654)


(8%)

Gross margin for the third quarter 2014 was 51.2% compared to 54.1% for the same period in 2013. The decline was primarily due to deleveraging of fixed costs on lower sales, higher share of lower margin soda makers in the sales mix and inventory write offs, which were partially offset by a higher share of CO2 refills.

Sales and marketing expenses for the third quarter 2014 totaled $41.6 million, or 33.1% of revenue, compared to $47.5 million, or 32.9% of revenue for the comparable period in the prior year. The $5.9 million decline in sales and marketing expenses was attributable to lower advertising and promotion expenses which decreased to 12.5% of revenue from 15.5% of revenue in the third quarter of 2013. This was partially offset by an increase in selling expenses, including the additional costs of our newly acquired Japanese distribution channel.

General and administrative expenses for the third quarter 2014 were $13.9 million, or 11.1% of revenue, compared to $12.7 million, or 8.8% of revenue in the comparable period of last year. The increase was due to additional expenses related to our newly acquired Japanese distribution channel, as well as additional infrastructure (mainly information technology systems) to support future growth and operational efficiency. This was partially offset by lower share-based compensation expenses.

Operating income decreased to $8.9 million, or 7.1% of revenue, compared to $18.0 million, or 12.5% of revenue in the third quarter of 2013.

Financial income increased to $1.8 million compared to $315,000 in the third quarter of 2013 mainly due to derivative financial instruments gain following the Euro/U.S. dollar devaluation and reduction of liabilities in Israeli Shekel following its devaluation against the U.S. Dollar.

Tax expense decreased to $1.2 million compared to $1.9 million in the third quarter of 2013 due to lower income before tax. Effective tax rate increased to 11.5% compared to 10.5% in the third quarter of 2013 due to changes in the distribution of profit before tax among different jurisdictions.

Balance Sheet Review

  • Cash and cash equivalents and bank deposits at September 30, 2014 were $39.9 million compared to $40.9 million at December 31, 2013. The slight decrease is primarily due to the investment in our new production facility and the acquisition of our Japanese distributor, offset by cash generated from operating activities and an increase in bank debt.
  • The Company had $35.8 million of bank debt at September 30, 2014, mainly for financing the investment in its new production facility, compared to $15.5 million of bank debt at December 31, 2013.
  • Working capital at September 30, 2014 increased 11.6% to $173.4 million compared to $155.4 million at December 31, 2013, mainly due to a decrease in trade payables and an increase in inventory from our newly acquired Japanese distribution channel. Inventories at September 30, 2014 increased 8.2% to $152.2 million compared to $140.7 million at December 31, 2013.
  • Operating cash flow for the quarter increased to $22.7 million compared to $5.0 million in third quarter 2013 mainly due to decrease in working capital.

Guidance

Based on third quarter results and current projections for the remainder of the year, the Company is revising its outlook:

  • The Company now expects full year 2014 revenue to decrease approximately 9% over 2013 revenue of $562.7 million.
  • The Company now expects full year 2014 EBITDA to decrease approximately 26% over 2013 EBITDA of $62.2 million.
  • The Company now expects full year 2014 net income to decrease approximately 42% over 2013 net income of $42.0 million.

Conference Call and Management Commentary

Detailed CFO commentary and a supplemental slide presentation have been filed with the Securities and Exchange Commission today under the cover of Form 6-K and will be posted on the Company's website, http://sodastream.investorroom.com.

The Company has scheduled a conference call for 8:30 AM Eastern Standard Time (U.S. time) today (Wednesday, October 29, 2014) to review the Company's financial results. The conference call will be broadcast over the Internet as a "live" listen only Webcast. To listen, please go to: http://sodastream.investorroom.com.  Listeners are urged to login approximately 20 minutes before the conference call is scheduled to begin in order to register, as well as download and install any necessary audio software.  An archive of the Webcast will be available for 30 days after the call.

About SodaStream International

SodaStream manufactures beverage carbonation systems which enable consumers to easily transform ordinary tap water instantly into carbonated soft drinks and sparkling water. Soda makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks and sparkling water. Our products are environmentally friendly, cost effective, promote health and wellness, and are customizable and fun to use. In addition, our products offer convenience by eliminating the need to carry bottles home from the supermarket, to store bottles at home or to regularly dispose of empty bottles. Our products are available at approximately 70,000 retail stores in 45 countries around the world.  For more information on SodaStream, please visit the Company's website: www.sodastream.com.

To download SodaStream's investor relations app, which offers access to SEC documents, press releases, videos, audiocasts and more, please visit http://itunes.apple.com/us/app/soda-ir/id524423001?mt=8 for your iPhone/iPad, or https://play.google.com/store/apps/details?id=com.theirapp.soda for your Android mobile device.

Forward Looking Statements

This release contains forward-looking statements, which express the current beliefs and expectations of management. Such statements are based on management's current beliefs and expectations and involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to: our ability to maintain or expand sales in our target markets, including the United States; our ability to maintain or continue to develop our presence in retail networks; our ability to develop and implement production and operating infrastructure to effectively support our growth; the success of our marketing campaigns and media spending in terms of increased sales or increased product and brand name awareness; our ability to maintain our customer base in markets where we have an established presence; the risks associated with our reliance on exclusive arrangements for the distribution of our beverage carbonation systems and consumables in each of the markets in which we use third-party distributors; our ability to compete effectively with other companies which currently offer, or may offer in the future, competing products; our ability to maintain margins due to decline in product selling price and\or rising costs; potential product liability claims if any component of our beverage carbonation systems is misused; our ability to protect our intellectual property rights; our being found to have a dominant position in certain markets which may place limits on our ability to operate; risks associated with our being a multinational corporation, including fluctuations in currency exchange rates; our potential exposure to greater than anticipated tax liabilities; our products being subject to extensive governmental regulation in the markets in which we operate; adverse conditions in the global economy which could negatively impact our customers' demand for our products; and other factors detailed in documents we file from time to time with the United States Securities and Exchange Commission.  Forward-looking statements in this release are made pursuant to the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Investor Contact:
Brendon Frey
ICR 
Phone: + 1 203-682-8200 
brendon.frey@icrinc.com

 


Consolidated Statements of Operations







In thousands (other than per share amounts)




















For the nine months ended


For the three months ended


September 30,


September 30,


2013


2014


2013


2014


(Unaudited)


(Unaudited)

Revenue

$

394,613


$

385,248


$

144,584


$

125,905

Cost of revenue


180,372



187,668



66,366



61,428













Gross profit


214,241



197,580



78,218



64,477













Operating expenses












Sales and marketing


130,047



134,723



47,549



41,636

General and administrative


37,886



40,358



12,660



13,931













Total operating expenses


167,933



175,081



60,209



55,567













Operating income


46,308



22,499



18,009



8,910













Interest expense, net


295



552



141



219

Other financial expense, net


336



(1,210)



(456)



(2,002)













Total financial expense, net


631



(658)



(315)



(1,783)













Income before income taxes


45,677



23,157



18,324



10,693













Income tax expense


4,331



2,672



1,925



1,229













Net income for the period

$

41,346


$

20,485


$

16,399


$

9,464













Net income per share












Basic

$

1.99


$

0.98


$

0.79


$

0.45

Diluted

$

1.93


$

0.96


$

0.76


$

0.45













Weighted average  number of shares












Basic


20,757



20,956



20,831



21,000

Diluted


21,383



21,243



21,532



21,193

 


Consolidated Balance Sheets as of













December 31,


September 30,


2013


2014


(Audited)


(Unaudited)


(In thousands)

Assets






Cash and cash equivalents

$

40,885


$

39,901

Inventories


140,709



152,196

Trade receivables


123,936



95,275

Other receivables


22,208



35,405

Derivative financial instruments


538



2,286

Total current assets


328,276



325,063







Property, plant and equipment


107,132



125,792

Intangible assets


48,104



48,015

Deferred tax assets


1,089



1,337

Other receivables


398



464

Total non-current assets


156,723



175,608







Total assets


484,999



500,671







Liabilities






Loans and borrowings


15,452



12,458

Derivative financial instruments


103



-

Trade payables


90,749



68,496

Income tax payable


9,869



9,675

Provisions


1,614



2,007

Other current liabilities


29,674



31,615

Total current liabilities


147,461



124,251







Loans and borrowings


-



23,344

Employee benefits


2,221



2,015

Provisions


714



699

Deferred tax liabilities


2,997



2,059

Total non-current liabilities


5,932



28,117







Total liabilities


153,393



152,368







Shareholders' equity






Share capital


3,378



3,399

Share premium


193,649



201,180

Translation reserve


3,394



(7,946)

Retained earnings


131,185



151,670

Total shareholders' equity


331,606



348,303







Total liabilities and shareholders' equity

$

484,999


$

500,671







 


Consolidated Statements of Cash Flows














For the nine months ended


For the three months ended


September 30,


September 30,


2013


2014


2013


2014


(Unaudited)


(Unaudited)



(In thousands)

Cash flows from operating  activities












Net income for the period

$

41,346


$

20,485


$

16,399


$

9,464













Adjustments:












Amortization of intangible assets


1,769



2,042



629



781

Change in fair value of  derivative financial instruments


(267)



(1,324)



270



(1,588)

Exchange rate differences on long-term loans and borrowing


-



(1,030)



-



(1,030)

Depreciation of property, plant  and equipment


8,605



10,085



2,828



3,994

Share based payment


8,238



6,732



2,884



2,195

Interest expense, net


295



552



141



219

Income tax expense


4,331



2,672



1,925



1,229



64,317



40,214



25,076



15,264

Increase in inventories


(37,591)



(15,604)



(12,807)



(11,659)

Decrease (increase) in trade and other receivables


(35,792)



23,425



(16,423)



9,572

Increase (decrease) in trade payables


(8,765)



(21,488)



4,467



8,099

Increase (decrease) in employee benefits


24



(70)



25



(89)

Increase in provisions and other current liabilities


578



3,933



5,816



2,167



(17,229)



30,410



6,154



23,354

Interest paid


(289)



(549)



(110)



(220)

Income tax received


3,769



715



230



5

Income tax paid


(2,287)



(4,361)



(1,321)



(422)

Net cash from (used in) operating activities


(16,036)



26,215



4,953



22,717













Cash flows from investing  activities












Interest received


114



42



20



15

Investment in bank deposits


(10,000)



-



-



-

Proceeds from (payments for) derivative financial  instruments, net


50



(527)



593



721

Acquisition of subsidiary, net of cash acquired


(1,179)



-



-



-

Acquisition of property, plant  and equipment


(26,296)



(43,710)



(6,968)



(15,499)

Acquisition of intangible assets


(3,543)



(4,054)



(1,054)



(1,508)

Net cash used in investing  activities


(40,854)



(48,249)



(7,409)



(16,271)













Cash flows from financing  activities












Proceeds from exercise of employee share options


4,011



820



2,179



79

Receipts of long-term loans and borrowings


-



30,210



-



30,210

Change in short-term debt


20,013



(8,830)



3,870



(31,997)

Net cash from (used in) financing activities


24,024



22,200



6,049



(1,708)













Net increase (decrease) in cash and cash equivalents


(32,866)



166



3,593



4,738

Cash and cash equivalents at the beginning of the period


62,068



40,885



25,200



36,244

Effect of exchange rates  fluctuations on cash and cash equivalents


9



(1,150)



418



(1,081)













Cash and cash equivalents  at the end of the period

$

29,211


$

39,901


$

29,211


$

39,901

 


Information about revenue in reportable segments
















The Americas


Western Europe

Asia-Pacific

Central &
Eastern Europe, Middle East,
Africa


Total


(In thousands)

Nine months ended:










September 30, 2013 (Unaudited)

$

145,503


196,851

28,738

23,521


$

394,613

September 30, 2014 (Unaudited)

$

105,141


214,805

37,396

27,906


$

385,248











Three months ended:










September 30, 2013 (Unaudited)

$

49,791


75,466

8,587

10,740


$

144,584

September 30, 2014 (Unaudited)

$

29,504


74,589

13,265

8,547


$

125,905

 


EBITDA













Nine months ended


Three months ended


September 30,


September 30,


2013


2014


2013


2014


(Unaudited)


(In thousands)













Reconciliation of Net Income to EBITDA












Net income

$

41,346


$

20,485


$

16,399


$

9,464

Interest expense, net


295



552



141



219

Income tax expense (tax benefit)


4,331



2,672



1,925



1,229

Depreciation and amortization


10,374



12,127



3,457



4,775

EBITDA

$

56,346


$

35,836


$

21,922


$

15,687

 

The following tables present the Company's revenue, by product type for the periods presented, as well as such revenue by product type as a percentage of total revenue:
































Nine months ended


Three months ended


September 30,


September 30,


2013


2014


2013


2014


(Unaudited)


(Unaudited)


Revenue


(in thousands)













Soda maker starter kits (including exchange cylinders)

$

155,350


$

119,534


$

62,484


$

41,464

Consumables


229,969



254,835



79,076



81,212

Other


9,294



10,879



3,024



3,229

Total

$

394,613


$

385,248


$

144,584


$

125,905

 


Nine months ended


Three months ended


September 30,


September 30,


2013


2014


2013


2014


(Audited)


(Unaudited)


(Unaudited)


As a percentage of revenue









Soda maker starter kits (including exchange cylinders)

39.4%


31.0%


43.2%


32.9%

Consumables

58.3%


66.1%


54.7%


64.5%

Other

2.3%


2.9%


2.1%


2.6%

Total

100.0%


100.0%


100.0%


100.0%

 

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SOURCE SodaStream International Ltd.