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SodaStream Reports Second Quarter Fiscal 2018 Results

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SodaStream Reports Second Quarter Fiscal 2018 Results

Company Achieves All-Time Records for Revenue, Operating and Net Income

Company Raises Full Year Outlook

PR Newswire

AIRPORT CITY, Israel, Aug. 1, 2018 /PRNewswire/ -- SodaStream International Ltd. (NASDAQ:SODA), the leading manufacturer of home beverage carbonation systems, announced today its results for the quarterly period ended June 30, 2018.

SodaStream Logo. (PRNewsFoto/SodaStream International Ltd.)

For the quarter ended June 30, 2018:

  • Revenue increased 31.3% to $171.5 million, compared to $130.6 million in the second quarter of 2017
  • Operating income increased 89.1% to $31.8 million, compared to $16.8 million in the second quarter of 2017
  • Net income increased 81.7% to $26.1 million, compared to $14.4 million in the second quarter of 2017
  • Diluted earnings per share (EPS) increased 77.9% to $1.14 compared to $0.64 in the second quarter of 2017

"We are extremely pleased to be reporting the most successful quarter in our Company's history," commented Daniel Birnbaum, Chief Executive Officer of SodaStream. "The product, distribution and marketing initiatives we are executing across our global portfolio of markets continue to propel our business to new heights and strengthen our foundation for future growth. Most notably, sales of sparkling water maker units increased 22% to over 1 million in the second quarter and sales of gas refill units grew 17% to an all-time record 9.7 million. These results underscore the progress we are making towards our primary strategic objectives of expanding household penetration and increasing usage of our home carbonation system. I believe we are now positioned better than ever to drive continued growth and increased shareholder value over the long-term, especially as SodaStream is a great alternative to single-use plastic bottles which are being revealed as a hazard not only to the environment but also to human health".

Second Quarter 2018

Geographical Revenue Breakdown


Three Months Ended










June 30, 2017



June 30, 2018



Increase
(decrease)



Increase

(decrease)




In millions USD



%


Western Europe


$

81.6



$

108.4



$

26.8




32.9

%

The Americas



28.1




38.4




10.3




36.4

%

Asia-Pacific



13.0




17.7




4.7




36.1

%

Central & Eastern Europe, Middle East, Africa



7.9




7.0




(0.9)




(11.6)

%

Total


$

130.6



$

171.5



$

40.9




31.3

%

 

Product Segment Revenue Breakdown


Three Months Ended










June 30, 2017



June 30, 2018



Increase



Increase




In millions USD



%


Sparkling Water Maker Starter Kits


$

46.9



$

64.9



$

18.0




38.3

%

Consumables



81.7




102.8




21.1




25.8

%

Other



2.0




3.8




1.8




87.0

%

Total


$

130.6



$

171.5



$

40.9




31.3

%

 

Product Segment Unit Breakdown


Three Months Ended










June 30, 2017



June 30, 2018



Increase



Increase





In thousands



%


Sparkling Water Maker Starter Kits



859




1,047




188




21.9

%


CO2 Refills



8,282




9,674




1,392




16.8

%


Flavors



5,340




5,785




445




8.3

%


 

Revenue increased $40.9 million, or 31.3%, to $171.5 million compared to $130.6 million in the same period in 2017 driven by growth in most of the Company's geographic regions, primarily Germany, France, Canada and the U.S. Changes in foreign currency exchange rates ("FX") positively impacted revenue by approximately $8.0 million, mainly driven by the strengthening of the Euro/U.S. Dollar exchange rate compared to the same period last year.

Gross margin increased 620 basis points to 59.3% compared to 53.1% for the same period in 2017. Gross margin was positively impacted by leveraging fixed infrastructure costs on higher revenue, the additional gross margin associated with the new French distribution model and the positive FX impact. The net FX impact on gross profit was approximately $7.0 million.

Sales and marketing expenses were $52.4 million, or 30.6% of revenue, compared to $40.9 million, or 31.3% of revenue, in the same period in 2017. Advertising and promotion expenses increased by $6.2 million to $27.2 million, or 15.9% of revenue, compared to $21.0 million, or 16.0% of revenue, in the same period in 2017. Sales team, distribution and logistics expenses were $25.2 million, or 14.7% of revenue, compared to $19.9 million, or 15.2% of revenue, in the same period in 2017.

General and administrative expenses increased $5.8 million to $17.4 million, or 10.2% of revenue, compared to $11.6 million, or 8.9% of revenue, in the same period in 2017. The increase was mainly due to higher share-based payment expenses and additional expenses associated with the new French distribution model.

Operating income increased 89.1% to $31.8 million, or 18.5% of revenue, compared to $16.8 million, or 12.9% of revenue, in the same period in 2017. The net positive FX impact on operating income was approximately $5.0 million.

Net financial expense was $1.1 million compared to $0.6 million in the same period in 2017. Tax expense was $4.5 million with an effective tax rate of 14.8%, compared to $1.8 million with an effective tax rate of 11.1% in the same period in 2017.

Net income was $26.1 million, or $1.14 per diluted share, based on 23.0 million weighted shares outstanding, compared to net income of $14.4 million, or $0.64 per diluted share, based on 22.5 million weighted shares outstanding in the same period in 2017.

Balance Sheet

At June 30, 2018, the Company had cash and financial investments totaling $171.7 million compared to $155.2 million at December 31, 2017.

Cash flow from operations less investing activities was $24.4 million compared to $10.8 million in the same period in 2017.

Working capital increased 21.7% to $161.0 million compared to $132.3 million at December 31, 2017. Inventories increased 30.5% to $126.7 million compared to $97.1 million at December 31, 2017.

Six months 2018

Geographical Revenue Breakdown


Six Months Ended










June 30, 2017



June 30, 2018



Increase

(decrease)



Increase

(decrease)




In millions USD



%


Western Europe


$

151.6



$

193.7



$

42.1




27.8

%

The Americas



53.7




73.9




20.2




37.6

%

Asia-Pacific



25.2




33.3




8.1




32.3

%

Central & Eastern Europe, Middle East, Africa



15.4




14.2




(1.2)




(8.2)

%

Total


$

245.9



$

315.1



$

69.2




28.1

%

 

Product Segment Revenue Breakdown


Six Months Ended










June 30, 2017



June 30, 2018



Increase



Increase




In millions USD



%


Sparkling Water Maker Starter Kits


$

87.5



$

114.9



$

27.4




31.3

%

Consumables



153.7




194.5




40.8




26.6

%

Other



4.7




5.7




1.0




21.1

%

Total


$

245.9



$

315.1



$

69.2




28.1

%

 

Product Segment Unit Breakdown


Six Months Ended










June 30, 2017



June 30, 2018



Increase



Increase





In thousands



%


Sparkling Water Maker Starter Kits



1,629




1,805




176




10.8

%


CO2 Refills



15,884




17,946




2,062




13.0

%


Flavors



10,543




11,217




674




6.4

%


 

Revenue increased 28.1% to $315.1 million from $245.9 million in the same period in 2017 driven by growth in most of the Company's geographic regions, primarily Germany, U.S., France and Canada. Changes in FX positively impacted revenue by approximately $20.0 million, mainly driven by the strengthening of the Euro/U.S. Dollar exchange rate.

Gross margin increased 450 basis points to 57.4% compared to 52.9% in the same period in 2017. Gross margin was positively impacted by leveraging fixed infrastructure costs on higher revenue, the positive FX impact and changes in product mix, partially offset by an adverse impact on cost of revenue from the strengthening of the Israeli shekel against the U.S. Dollar. The net FX impact on gross profit was approximately $15.0 million.

Sales and marketing expenses were $95.8 million, or 30.4% of revenue, compared to $75.7 million, or 30.8% of revenue, in the same period in 2017. The increase in sales and marketing expenses was mainly due to higher advertising and promotion expenses. Advertising and promotion expenses increased by $10.4 million to $47.7 million, or 15.1% of revenue, compared to $37.3 million, or 15.2% of revenue, in the same period in 2017. Sales team, distribution and logistics expenses were $48.1 million, or 15.3% of revenue, compared to $38.4 million and 15.6% of revenue, in the same period in 2017.

General and administrative expenses were $32.0 million, or 10.2% of revenue, compared to $21.7 million, or 8.8% of revenue in 2017. The increase was mainly due to higher share-based payment expenses, additional expenses associated with the new French distribution model and the impact from FX.

Operating income increased 62.6% to $53.1 million, or 16.9% of revenue, compared to $32.7 million, or 13.3% of revenue in the same period in 2017. The net positive FX impact on operating income was approximately $8.0 million.

Net financial expense was $1.6 million compared to net financial income of $0.4 million in the same period in 2017. Tax expense was $6.8 million, reflecting an effective tax rate of 13.3%, compared to $4.0 million, or an effective tax rate of 12.0%, in the same period in 2017.

Net income was $44.7 million, or $1.94 per diluted share, based on 23.0 million weighted shares outstanding, compared to net income of $29.1 million, or $1.3 per diluted share, based on 22.5 million weighted shares outstanding in the same period in 2017.

Guidance

For 2018, the Company currently expects full year revenue to increase approximately 23% over 2017 revenue, up from its previous guidance of approximately 15%.

Operating income for 2018 is now expected to increase approximately 44% over 2017 operating income, compared to its previous guidance of approximately 15%.

Diluted earnings per share is now expected to increase approximately 31% over 2017, compared to its previous guidance of an approximate 8% increase.

This guidance now assumes an increase in share-based payment expense of approximately $13.0 million over 2017, up from previous guidance of approximately $12.0 million. This guidance is based on assumed average exchange rates of 1.17 Euro/U.S. Dollar and 3.60 U.S. Dollar/Israeli Shekel.

Conference Call and Management Commentary

A supplemental slide presentation has 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.

The Company has scheduled a conference call for 8:30 AM Eastern Standard Time (U.S. time) today (Wednesday, August 1, 2018) 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 Adjusted EBITDA which is a non-IFRS measure. Adjusted EBITDA represents earnings before interest, other components of financial expense (income), income tax, depreciation and amortization.

We believe that Adjusted EBITDA, as described above, should be considered in evaluating the Company's operations. This measure facilitates 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).

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. 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. A reconciliation of Adjusted EBITDA to Net income, the most closely comparable IFRS measure, is included at the end of this press release.

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, 2017 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 six months ended



For the three months ended




June 30,



June 30,




2017



2018



2017



2018




(Unaudited)



(Unaudited)


Revenue


$

245,929



$

315,130



$

130,637



$

171,485


Cost of revenue



115,793




134,235




61,218




69,851



















Gross profit



130,136




180,895




69,419




101,634



















Operating expenses

















Sales and marketing



75,677




95,756




40,855




52,426


General and administrative



21,652




32,034




11,617




17,426


Other expenses, net



142




-




142




-



















Total operating expenses



97,471




127,790




52,614




69,852



















Operating income



32,665




53,105




16,805




31,782



















Financial expense (income), net



(408)




1,594




645




1,130



















Income before income tax



33,073




51,511




16,160




30,652



















Income tax expense



3,969




6,833




1,790




4,542




































Net income for the period



29,104




44,678




14,370




26,110




























Net income per share

 

















Basic


$

1.34



$

1.99



$

0.66



$

1.15


Diluted


$

1.30



$

1.94



$

0.64



$

1.14



















Weighted average number of shares

















Basic



21,673




22,506




21,794




22,644


Diluted



22,464




23,012




22,502




22,980




 

 


Consolidated Balance Sheets as of
















December 31,



June 30,




2017



2018




(Audited)



(Unaudited)




(In thousands)


Assets









Cash and cash equivalents


$

85,168



$

96,707


Financial investments



70,000




74,995


Inventories



97,088




126,678


Trade receivables ,net



124,352




135,379


Other receivables



19,250




20,263


Derivative financial instruments



404




1,532


Total current assets



396,262




455,554











Property, plant and equipment



171,543




171,703


Intangible assets



38,365




45,997


Deferred tax assets



6,435




9,758


Other receivables



4,260




4,244


Total non-current assets



220,603




231,702











Total assets



616,865




687,256











Liabilities









Derivative financial instruments



215




-


Trade payables



61,215




70,973


Income tax payable



14,350




18,026


Provisions



2,602




2,925


Other current liabilities



30,461




30,949


Total current liabilities



108,843




122,873











Employee benefits



2,403




2,788


Other non-current liabilities



164




165


Deferred tax liabilities



4,279




5,303


Total non-current liabilities



6,846




8,256











Total liabilities



115,689




131,129











Shareholders' equity









Share capital



3,599




3,700


Share premium



234,406




248,937


Translation reserve



(10,738)




(15,097)


Retained earnings



273,909




318,587


Total shareholders' equity



501,176




556,127











Total liabilities and shareholders' equity


$

616,865



$

687,256


 

 



Consolidated Statements of Cash Flows




























For the six months ended



For the three months ended




June 30,



June 30,




2017



2018



2017



2018




(Unaudited)



(Unaudited)


Cash flows from operating activities

















Net income for the period


$

29,104



$

44,678



$

14,370



$

26,110



















Adjustments:

















Depreciation of property, plant and equipment



8,327




10,488




4,933




5,065


Amortization of intangible assets



1,536




2,013




754




1,133


Change in fair value of derivative financial instruments and
financial investments



(330)




533




1,076




(1,072)


Other expenses, net



142




-




142




-


Share based payment



1,594




6,608




1,137




4,405


Interest income, net



(161)




(141)




(108)




(83)


Income tax expense



3,969




6,833




1,790




4,542





44,181




71,012




24,094




40,100


Increase in inventories



(6,997)




(18,580)




(3,533)




(10,890)


Increase in trade and other receivables



(3,765)




(9,044)




(15,517)




(5,329)


Increase in trade payables and other liabilities



12,244




7,195




6,907




9,700


Increase (decrease) in employee benefits



192




35




111




(78)


Increase in provisions



576




323




559




201





46,431




50,941




12,621




33,704


Interest paid



(67)




(105)




(39)




(59)


Income tax received



115




22




15




2


Income tax paid



(2,438)




(6,107)




(88)




(2,513)


Net cash from operating activities



44,041




44,751




12,509




31,134



















Cash flows from investing activities

















Interest received



228




247




147




143


Investment in bank deposits



(7,000)




-




-




-


Investment in financial investments



-




(5,000)




-




-


Proceeds from investment grants



3,903




-




1,177




-


Proceeds from sale of property, plant and equipment



1,563




222




1,563




185


Proceeds from (payment for) derivative financial instruments, net



1,379




(1,871)




581




(735)


Acquisition of subsidiary, net of cash acquired



-




(20,828)




-




1,050


Acquisition of property, plant and equipment



(9,885)




(11,140)




(4,670)




(6,334)


Acquisition of intangible assets



(1,095)




(1,747)




(504)




(1,041)


Net cash used in investing activities



(10,907)




(40,117)




(1,706)




(6,732)



















Cash flows from financing activities

















Proceeds from exercise of employee share options



9,749




8,024




2,223




347


Net cash from financing activities



9,749




8,024




2,223




347



















Net increase in cash and cash equivalents



42,883




12,658




13,026




24,749


Cash and cash equivalents at the beginning of the period



50,250




85,168




80,403




73,518


Effect of exchange rates fluctuations on cash and cash equivalents



1,398




(1,119)




1,102




(1,560)



















Cash and cash equivalents at the end of the period


$

94,531



$

96,707



$

94,531



$

96,707


 

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

 



Six months ended



Three months ended




June 30,



June 30,




2017



2018



2017



2018




(Unaudited)

(Unaudited)



(Unaudited)

(Unaudited)




Revenue (in thousands)















Western Europe


$

151,579



$

193,715



$

81,556



$

108,399


The Americas



53,680




73,876




28,113




38,343


Asia-Pacific



25,191




33,331




13,018




17,714


Central & Eastern Europe, Middle East & Africa



15,479




14,208




7,950




7,029


Total


$

245,929



$

315,130



$

130,637



$

171,485




















 



Six months ended



Three months ended




June 30,



June 30,




2017



2018



2017



2018




(Unaudited)

(Unaudited)



(Unaudited)

(Unaudited)




As a percentage of revenue















Western Europe



61.7

%



61.5

%



62.4

%



63.2

%

The Americas



21.8

%



23.4

%



21.5

%



22.4

%

Asia-Pacific



10.2

%



10.6

%



10.0

%



10.3

%

Central & Eastern Europe, Middle East & Africa



6.3

%



4.5

%



6.1

%



4.1

%

Total



100.0

%



100.0

%



100.0

%



100.0

%




















 



Six months ended



Three months ended




June 30,



June 30,




2017



2018



2017



2018




(Unaudited)

(Unaudited)



(Unaudited)

(Unaudited)




Revenue (in thousands)















Sparkling Water Maker starter kits (including
exchange cylinders)


$

87,499



$

114,874



$

46,908



$

64,895


Consumables



153,684




194,508




81,715




102,825


Other



4,746




5,748




2,014




3,765


Total


$

245,929



$

315,130



$

130,637



$

171,485




















 



Six months ended



Three months ended




June 30,



June 30,




2017



2018



2017



2018




(Unaudited)

(Unaudited)



(Unaudited)

(Unaudited)




As a percentage of revenue















Sparkling Water Maker starter kits (including
exchange cylinders)



35.6

%



36.5

%



35.9

%



37.8

%

Consumables



62.5

%



61.7

%



62.6

%



60.0

%

Other



1.9

%



1.8

%



1.5

%



2.2

%

Total



100.0

%



100.0

%



100.0

%



100.0

%




















 

Reconciliation of Net income to Adjusted EBITDA*
















Six months ended



Three months ended




June 30,



June 30,




2017



2018



2017



2018





(Unaudited)




(In thousands)
















Reconciliation of Net Income to Adjusted EBITDA














Net income


$

29,104



$

44,678



$

14,370



$

26,110



Interest income, net



(161)




(141)




(108)




(83)



Other components of financial expense (income), net



(247)




1,735




753




1,213



Income tax expense



3,969




6,833




1,790




4,542



Depreciation and amortization



9,863




12,501




5,687




6,198



 

Adjusted EBITDA


$

42,528



$

65,606



$

22,492



$

37,980



 

*The Company's presentation of Adjusted EBITDA is the same as its previous presentation of EBITDA except that the Company has broken out separately the element of "Financial expense (income), net" that is attributable to interest and other components of financial expense (income), net.

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/sodastream-reports-second-quarter-fiscal-2018-results-300689992.html

SOURCE SodaStream International Ltd.

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