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NASDAQSODA

 
SodaStream Reports Third Quarter Fiscal 2017 Results
Revenue Increased 13% to $139.8 Million
Operating Income Increased 24% to an All-Time Record $23.0 Million
Diluted EPS Increased 27% to $0.87
Company Finishes Third Quarter with Cash & Financial Investments of $136.6

AIRPORT CITY, Israel, Nov. 1, 2017 /PRNewswire/ -- SodaStream International Ltd. (NASDAQ: SODA), the leading manufacturer of home beverage carbonation systems, announced today its results for the quarter ended September 30, 2017.

SodaStream Logo. (PRNewsFoto/SodaStream International Ltd.)

For the quarter ended September 30, 2017:

  • Revenue increased approximately 13% to $139.8 million, compared to $124.2 million in the third quarter of 2016
  • Net income increased approximately 32% to an all-time record $19.8 million, compared to $14.9 million in the third quarter of 2016
  • Diluted earnings per share increased to $0.87 compared to $0.69 in the third quarter of 2016

"We achieved record profitability in the third quarter fueled by broad based growth in many of our markets combined with significant gross margin expansion," commented Daniel Birnbaum, Chief Executive Officer of SodaStream. "Our product, marketing and distribution strategies aimed at building a global sparkling water franchise continued to gain traction during the quarter as evidenced by the increase in gas refill units to an all-time record 8.4 million in the third quarter. This high-water mark underscores our progress expanding household penetration through new customer acquisition and better retention of existing users. As we head into the fourth quarter of 2017 and look out to next year, we remain confident that we are well positioned to continue building on the current momentum and further unlock the power of our business model to return greater value to our shareholders."

Third Quarter 2017 Financial Review

Geographical Revenue Breakdown


Three Months Ended










September 30,
2016



September 30,
2017



Increase



Increase




In millions USD



%


Western Europe


$

74.7



$

84.8



$

10.1




13.5

%

The Americas



29.8




30.2




0.4




1.2

%

Asia-Pacific



12.9




17.3




4.4




34.0

%

Central & Eastern Europe, Middle East, Africa



6.8




7.5




0.7




10.6

%

Total


$

124.2



$

139.8



$

15.6




12.5

%

 

The following table sets forth each region's contribution to total revenue for the third quarter of 2016 and 2017 (by percentage):

 

Region


Portion of the revenue in three months
ended




September 30,
2016



September 30,
2017


Western Europe



60.1

%



60.6

%

The Americas



24.0

%



21.6

%

Asia-Pacific



10.4

%



12.4

%

Central & Eastern Europe, Middle East & Africa



5.5

%



5.4

%

Total



100.0

%



100.0

%

 

Product Segment Unit Breakdown


Three Months Ended










September 30,
2016



September 30,
2017



Increase

(decrease)



Increase

(decrease)





In thousands



%


Sparkling Water Maker Starter Kits



788




847




59




7.5

%


CO2 Refills



7,673




8,386




713




9.3

%


Flavors



5,463




5,095




(368)




(6.7)

%


 

Revenue increased $15.6 million, or 12.5%, to $139.8 million compared to $124.2 million in the same period in 2016 driven by growth in all of the Company's geographic regions, highlighted by strong performances in Germany, Japan, Canada, Austria and Australia. Changes in foreign currency exchange rates ("FX") positively impacted revenue by $4.2 million, mainly driven by the strengthening of the Euro/U.S. Dollar exchange rate.

Gross margin increased 170 basis points to 53.5% compared to 51.8% for the same period in 2016. The increase reflects continued production optimization, the leveraging of fixed infrastructure costs on increased production volume, the introduction of higher margin sparkling water makers and changes in FX compared to the same period in 2016, partially offset by a higher portion of sparkling water makers in the product mix. The positive FX impact on revenue was mainly offset by an adverse impact of the weakening of the U.S. Dollar/Israeli Shekel exchange rate compared to the same period in 2016. The net positive FX impact on gross profit was $1.4 million.

Sales and marketing expenses were $38.9 million, or 27.8% of revenue, compared to $34.9 million, or 28.1% of revenue, in the same period in 2016. Advertising and promotion expenses increased by $1.6 million to $16.8 million, or 12.0% of revenue, compared to $15.2 million, or 12.2% of revenue, in the same period in 2016.

General and administrative expenses increased $2.2 million to $13.0 million, or 9.3% of revenue, compared to $10.8 million, or 8.7% of revenue in the same period in 2016. The increase was mainly due to an increase in share-based payment expenses.

Operating income increased 24.0% to $23.0 million, or 16.5% of revenue, compared to $18.6 million, or 14.9% of revenue, in the third quarter of 2016. Changes in FX did not have a material impact on operating income. The positive FX impact on gross profit compared to the same period in 2016 was mainly offset by an adverse impact of the strengthening of the Euro/U.S. Dollar rate on the operating expenses.

Net financial expense was $0.4 million compared to $0.2 million in the same period in 2016.

Tax expense was $2.8 million with an effective tax rate of 12.5%, compared to $3.4 million with an effective tax rate of 18.8% in the same period in 2016.

Net income was $19.8 million, or $0.87 per diluted share, based on 22.6 million weighted shares outstanding compared to net income of $14.9 million, or $0.69 per diluted share, based on 21.7 million weighted shares outstanding in the same period in 2016.

Balance Sheet Review

At September 30, 2017, the Company had cash and financial investments totaling $136.6 million compared to $57.3 million at December 31, 2016.

Cash flow from operations less investing activities, excluding financial investments, was $26.3 million compared to $26.1 million in the same period in 2016. During the third quarter of 2017, the Company invested $20.0 million in short-term investments.

Working capital decreased 1.3% to $123.1 million compared to $124.8 million at December 31, 2016. Inventories increased 20.0% to $105.6 million compared to $88.0 million at December 31, 2016.

Nine months 2017 Financial Review

Geographical Revenue Breakdown


Nine Months Ended










September 30,
2016



September 30,
2017



Increase



Increase




In Millions USD



%


Western Europe


$

211.7



$

236.3



$

24.6




11.7

%

The Americas



78.7




83.9




5.2




6.6

%

Asia-Pacific



34.7




42.5




7.8




22.3

%

Central & Eastern Europe, Middle East, Africa



19.2




23.0




3.8




20.2

%

Total


$

344.3



$

385.7



$

41.4




12.0

%

 

The following table sets forth each region's contribution to total revenue for the first nine months of 2016 and 2017 (by percentage):

Region


Portion of the revenue in nine months
ended




September 30,
2016



September 30,
2017


Western Europe



61.5

%



61.3

%

The Americas



22.8

%



21.7

%

Asia-Pacific



10.1

%



11.0

%

Central & Eastern Europe, Middle East & Africa



5.6

%



6.0

%

Total



100.0

%



100.0

%

 

Product Segment Unit Breakdown


Nine Months Ended










September 30,
2016



September 30,
2017



Increase

(decrease)



Increase

(decrease)





In thousands



%


Sparkling Water Maker Starter Kits



2,000




2,476




476




23.8

%


CO2 Refills



21,995




24,270




2,275




10.3

%


Flavors



16,721




15,638




(1,083)




(6.5)

%


 

Revenue increased 12.0% to $385.7 million from $344.3 million in the same period in 2016. The increase was driven by growth in all geographical regions, highlighted by strong performances in Germany, Canada, Japan, Australia and Austria. Changes in FX did not have a material impact on revenue.

Gross margin increased 200 basis points to 53.1% compared to 51.1% in the same period in the prior year. The increase reflects continued production optimization, the leveraging of fixed infrastructure costs on increased production volume and the introduction of higher margin sparkling water makers, partially offset by a higher portion of sparkling water makers in the product mix and changes in FX compared to the same period in 2016.

Changes in FX negatively impacted gross profit by $5.1 million, mainly driven by the strengthening of the Israeli Shekel against the U.S. Dollar compared to the same period in 2016.

Sales and marketing expenses were $114.5 million, or 29.7% of revenue, compared to $105.6 million, or 30.7% of revenue in the same period in 2016. The increase in sales and marketing expenses was mainly due to higher advertising and promotion expenses. Advertising and promotion expenses increased by $7.2 million to $54.1 million, or 14.0% of revenue, compared to $46.9 million or 13.6% of revenue in same period in 2016.

General and administrative expenses were $34.6 million, or 9.0% of revenue, compared to $32.4 million, or 9.4% of revenue in 2016.

Operating income increased 56.2% to $55.7 million, or 14.4% of revenue, compared to $35.6 million, or 10.4% of revenue in the same period in 2016. Operating income was negatively impacted by $5.3 million due to changes in FX.

Net financial expense were immaterial compared to $1.3 million in the same period in 2016.

Tax expense was $6.8 million, reflecting an effective tax rate of 12.2%, compared to $5.5 million, or an effective tax rate of 16.0%, in the same period in 2016.

Net income was $48.9 million, or $2.17 per diluted share, based on 22.5 million weighted shares outstanding, compared to net income of $28.8 million, or $1.35 per diluted share, based on 21.3 million weighted shares outstanding in the same period in 2016.

Guidance

Based on third quarter results and current projections for the remainder of the year, the Company is raising its outlook and now expects 2017 revenue to increase approximately 13% to $536 million compared to $476.1 million in 2016 and diluted earnings per share to increase approximately 40% to $2.90 compared to $2.07 in 2016.

This outlook is based on assumed average exchange rates of 1.17 Euro/U.S. Dollar and 3.50 U.S. Dollar/Israeli Shekel in the fourth quarter of 2017.

Conference Call and Management Commentary

A supplemental slide presentation have been furnished as part of today's report of a foreign private issuer on a Form 6-K and will be posted on the Company's website at http://sodastream.investorroom.com. Beginning with the quarter ended September 30, 2017, the Company will not be providing a separate CFO commentary; instead, any pertinent information will be incorporated into the earnings release in connection with the announcement of the Company's results for the relevant quarter.

The Company has scheduled a conference call for 8:30 AM Eastern Standard Time (U.S. time) today (Wednesday, November 1, 2017) 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 is the #1 sparkling water brand in volume in the world and the leading manufacturer and distributor of Sparkling Water Makers. We enable consumers to easily transform ordinary tap water into sparkling water and flavored sparkling water in seconds. By making ordinary water fun and exciting to drink, SodaStream helps consumers drink more water. Sparkling Water Makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks. Our products promote health and wellness, are environmentally friendly, cost effective, customizable and fun to use. Our products are available at more than 80,000 individual retail stores across 45 countries. To learn more about how SodaStream makes water exciting and follow SodaStream on Facebook, Twitter, Pinterest, Instagram and YouTube, visit http://www.sodastream.com.

Non-IFRS Financial Measures

This press release contains EBITDA and Adjusted EBITDA, which are non-IFRS measures.

EBITDA is a non-IFRS measure, which represents earnings before financial expense (income), income tax, depreciation and amortization. Adjusted EBITDA is a non-IFRS measure, which is calculated in the same way as EBITDA, and further eliminates the effect of impairment of other intangible assets. We believe that EBITDA and Adjusted EBITDA, as described above, should be considered in evaluating the Company's operations. Both measures facilitate operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures (affecting financial expenses (income), net), tax positions (such as the impact on periods or companies of changes in effective tax rates) and the age and depreciation charges and amortization of fixed and intangible assets, respectively (affecting relative depreciation and amortization expense, respectively). Adjusted EBITDA is useful to an investor in evaluating our operating performance because it excludes unusual costs associated with non-recurring events and without regard to non-cash items.

Non-IFRS measures should be considered in addition to results prepared in accordance with IFRS and should not be considered a substitute for the IFRS results. A reconciliation of EBITDA and Adjusted EBITDA to Net income, the most closely comparable IFRS measure, is included at the end of this press release. In addition, EBITDA and Adjusted EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include information about possible or assumed future results of our business and financial condition, as well as the results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," "potential," or the negative of these terms or other similar expressions: 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 discussed under the heading "Risk Factors" in the Annual Report on the Form 20-F for the year ended December 31, 2016 and other documents filed with or furnished to the Securities and Exchange Commission. 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,




2016



2017



2016



2017




(Unaudited)



(Unaudited)


Revenue


$

344,265



$

385,712



$

124,228



$

139,783


Cost of revenue



168,285




180,728




59,889




64,935



















Gross profit



175,980




204,984




64,339




74,848



















Operating expenses

















Sales and marketing



105,636




114,533




34,943




38,856


General and administrative



32,383




34,633




10,833




12,981


Other expenses, net



2,327




142




-




-



















Total operating expenses



140,346




149,308




45,776




51,837



















Operating income



35,634




55,676




18,563




23,011



















Financial expense, net



1,314




22




210




430




































Income before income taxes



34,320




55,654




18,353




22,581



















Income tax expense



5,502




6,795




3,443




2,826




































Net income for the period



28,818




48,859




14,910




19,755




























Net income per share

 

















Basic


$

1.36



$

2.25



$

0.70



$

0.90


Diluted


$

1.35



$

2.17



$

0.69



$

0.87



















Weighted average number of shares

















Basic



21,145




21,739




21,198




21,870


Diluted



21,297




22,542




21,701




22,581




 









Consolidated Balance Sheets as of
















December 31,



September 30,




2016



2017




(Audited)



(Unaudited)




(In thousands)


Assets









Cash and cash equivalents


$

50,250



$

116,629


Financial investments



7,000




19,998


Inventories



87,986




105,616


Trade receivables ,net



87,430




95,017


Other receivables



20,613




22,708


Assets classified as held for sale



1,484




-


Derivative financial instruments



2,112




324


Total current assets



256,875




360,292











Property, plant and equipment



164,628




165,921


Intangible assets



37,582




38,496


Deferred tax assets



4,154




7,020


Other receivables



2,688




3,846


Total non-current assets



209,052




215,283











Total assets



465,927




575,575











Liabilities









Derivative financial instruments



-




751


Trade payables



41,643




53,962


Income tax payable



8,312




15,273


Provisions



2,646




2,321


Other current liabilities



22,262




28,238


Total current liabilities



74,863




100,545











Employee benefits



2,306




2,223


Other non-current liabilities



73




117


Deferred tax liabilities



5,166




4,983


Total non-current liabilities



7,545




7,323











Total liabilities



82,408




107,868











Shareholders' equity









Share capital



3,461




3,556


Share premium



214,609




228,721


Translation reserve



(34,161)




(13,039)


Retained earnings



199,610




248,469


Total shareholders' equity



383,519




467,707











Total liabilities and shareholders' equity


$

465,927



$

575,575


 



 

Consolidated Statements of Cash Flows




























For the nine months ended



For the three months ended




September 30,



September 30,




2016



2017



2016



2017




(Unaudited)



(Unaudited)


Cash flows from operating activities

















Net income for the period


$

28,818



$

48,859



$

14,910



$

19,755



















Adjustments:

















Depreciation of property, plant and equipment



10,926




14,998




3,930




6,671


Amortization of intangible assets



2,596




2,215




775




679


Impairment of other intangible assets



1,830




-




-




-


Change in fair value of derivative financial instruments



626




1,447




58




1,777


Other expenses, net



-




142




-




-


Exchange rate differences on long-term loans and borrowing



642




-




243




-


Share based payment



3,513




3,457




1,032




1,863


Interest expense (income), net



369




(235)




115




(74)


Income tax expense



5,502




6,795




3,443




2,826





54,822




77,678




24,506




33,497


Decrease (increase) in inventories



11,825




(12,408)




3,037




(5,411)


Decrease (increase) trade and other receivables



2,615




(4,253)




(1,159)




(488)


Increase in trade payables and other liabilities



1,267




17,645




3,214




4,842


Increase in employee benefits



215




215




39




23


Increase (decrease) in provisions



494




(325)




748




(342)





71,238




78,552




30,385




32,121


Interest paid



(428)




(94)




(135)




(27)


Income tax received



207




121




162




6


Income tax paid



(5,225)




(3,279)




(413)




(841)


Net cash from operating activities



65,792




75,300




29,999




31,259



















Cash flows from investing activities

















Interest received



60




328




21




100


Investment in financial Investments, net



(7,000)




(13,000)




(7,000)




(6,000)


Proceeds from investment grants



2,828




3,903




2,828




-


Proceeds from sale of property, plant and equipment



-




1,590




-




27


Proceeds from (payment for) derivative financial instruments, net



(1,043)




1,094




(168)




(285)


Acquisition of property, plant and equipment



(21,828)




(14,103)




(6,049)




(4,218)


Acquisition of intangible assets



(1,525)




(1,631)




(561)




(536)


Net cash used in investing activities



(28,508)




(21,819)




(10,929)




(10,912)



















Cash flows from financing activities

















Proceeds from exercise of employee share options



1,918




10,750




1,199




1,001


Repayments of long-term loans and borrowings



(17,693)




-




(7,529)




-


Change in short-term debt



(2,861)




-




-




-


Net cash from (used in) financing activities



(18,636)




10,750




(6,330)




1,001



















Net increase in cash and cash equivalents



18,648




64,231




12,740




21,348


Cash and cash equivalents at the beginning of the period



34,534




50,250




40,943




94,531


Effect of exchange rates fluctuations on cash and cash equivalents



675




2,148




174




750



















Cash and cash equivalents at the end of the period


$

53,857



$

116,629



$

53,857



$

116,629


 

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,




2016



2017



2016



2017




(Unaudited)



(Unaudited)




Revenue (in thousands)















Sparkling Water Maker starter kits (including
exchange cylinders)


$

114,090



$

140,791



$

45,463



$

53,292


Consumables



223,014




238,816




76,938




85,132


Other



7,161




6,105




1,827




1,359


Total


$

344,265



$

385,712



$

124,228



$

139,783


 



Nine months ended



Three months ended




September 30,



September 30,




2016



2017



2016



2017




(Unaudited)



(Unaudited)




As a percentage of revenue















Sparkling Water Maker starter kits (including
exchange cylinders)



33.1

%



36.5

%



36.6

%



38.1

%

Consumables



64.8

%



61.9

%



61.9

%



60.9

%

Other



2.1

%



1.6

%



1.5

%



1.0

%

Total



100.0

%



100.0

%



100.0

%



100.0

%

 

Reconciliation of Net income to EBITDA and Adjusted
EBITDA
















Nine months ended



Three months ended




September 30,



September 30,




2016



2017



2016



2017





(Unaudited)




(In thousands)
















Reconciliation of Net Income to EBITDA and Adjusted EBITDA














Net income


$

28,818



$

48,859



$

14,910



$

19,755



Financial expenses, net



1,314




22




210




430



Income tax expense



5,502




6,795




3,443




2,826



Depreciation and amortization



13,522




17,213




4,705




7,350



EBITDA


$

49,156



$

72,889



$

23,268



$

30,361



Impairment of other intangible assets



1,830




-




-




-



 

Adjusted EBITDA


$

50,986



$

72,889



$

23,268



$

30,361



 

SOURCE SodaStream International Ltd.


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