SODASTREAM INTERNATIONAL LTD 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.
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, September 30, Increase Increase
2016 2017
---- ----
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, September 30,
2016 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, September 30, Increase Increase
2016 2017
(decrease) (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, September 30, Increase Increase
2016 2017
---- ----
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, September 30,
2016 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, September 30, Increase Increase
2016 2017
(decrease) (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 $114,090 $140,791 $45,463 $53,292
exchange cylinders)
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 33.1% 36.5% 36.6% 38.1%
exchange cylinders)
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 - - -
===== === === ===
$50,986 $72,889 $23,268 $30,361
Adjusted EBITDA
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SOURCE SodaStream International Ltd.
