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(SODA) Reports Record Second Quarter Results

Second Quarter Revenue Increased 29% to $132.4 Million Second Quarter Net Income Increased 36% to $12.9 Million Second Quarter Diluted Earnings Per Share Increased 33% to $0.60 Second Quarter Adjusted Diluted Earnings Per Share Increased 42% to $0.74

AIRPORT CITY, Israel, July 31, 2013 /PRNewswire/ — SodaStream International Ltd. (NASDAQ: SODA), a leading manufacturer of home beverage carbonation systems, announced today its results for the three and six month periods ended June 30, 2013.

For the second quarter ended June 30, 2013:

  • Revenue increased 28.5% to $132.4 million from $103.0 million in the second quarter 2012.
  • EBITDA increased 47.6% to $18.0 million from $12.2 million, and Adjusted EBITDA increased 53.9% to $21.0 million from $13.6 million in the second quarter 2012.
  • Net income increased 36.1% to $12.9 million compared to $9.5 million in the second quarter 2012, and Adjusted net income was $15.8 million compared to $10.9 million in the second quarter 2012.
  • Diluted earnings per share increased 33.3% to $0.60, compared to $0.45 in the second quarter 2012 and Adjusted diluted earnings per share were $0.74 compared to $0.52 in the second quarter 2012.

 

Daniel Birnbaum, Chief Executive Officer of SodaStream, commented, “Our business performed very well during the second quarter, with revenue up 29% year-over-year on top of very strong gains a year ago that were fueled by the launch at Wal-Mart. Importantly, operating income grew at a faster pace than revenue as we leveraged expenses to drive earnings per share ahead of expectations. With global first half unit sales of soda makers, gas refills and flavors up 18%, 30%, and 25% respectively, we are making great progress against our plan to grow our installed base and strengthen user loyalty. Our strong momentum in the Americas and Western Europe, combined with improving trends in Asia-Pacific, position us well to achieve our upwardly revised outlook for 2013.”

 

Second Quarter 2013 Financial Review
Geographical Revenue Breakdown
Revenue Three Months Ended
June 30, 2012 June 30, 2013  Increase (decrease)  Increase (decrease)
In Millions USD %
The Americas $ 30.7 $ 47.4 $ 16.7 55%
Western Europe 54.0 68.1 14.1 26%
Asia-Pacific 9.9 10.8 0.9 9%
Central & Eastern Europe, Middle East, Africa 8.4 6.1 (2.3) (27%)
Total $ 103.0 $ 132.4 $ 29.4 29%

 

Product Segment Revenue Breakdown
Revenue Three Months Ended
June 30, 2012 June 30, 2013  Increase  Increase
In millions USD %
Soda Maker Starter Kits $ 39.8 $ 49.9 $ 10.1 25%
Consumables 61.6 78.9 17.3 28%
Other 1.6 3.6 2.0 134%
Total $ 103.0 $ 132.4 $ 29.4 29%

 

Product Segment Unit Breakdown
Three Months Ended
June 30, 2012 June 30, 2013  Increase  Increase
In thousands %
Soda Maker Starter Kits 764 935 171 22%
CO2 Refills 4,230 5,542 1,312 31%
Flavors 7,200 8,505 1,305 18%

 

Gross margin for the second quarter 2013 was 54.3% compared to 54.4% for the same period in 2012, with continued impact of the dependency on manufacturing by subcontractors.

Sales and marketing expenses for the second quarter 2013 totaled $43.6 million, or 33.0% of revenue, compared to $37.1 million, or 36.0% of revenue for the comparable period in the prior year. The 300 basis point improvement in sales and marketing expenses as a percent of revenue is mainly attributable to lower advertising and promotion expense as a percent of revenue of 15.1% compared to 17.8% in the second quarter 2012 driven by higher revenue.

General and administrative expenses for the second quarter 2013 were $13.6 million, or 10.3% of revenue, compared to $9.2 million, or 9.0% of revenue in the comparable period of last year, mainly due to an increase of $1.6 million in share-based compensation expense to $3.0 million in the quarter, compared to $1.4 million in the second quarter 2012, additional expenses related to our Canadian distribution and additional infrastructure to support growth.

Operating income increased 50.8% to $14.7 million, or 11.1% of revenue, compared to $9.7 million, or 9.5% of revenue in the second quarter 2012.

Tax expense was $1.1 million representing a 7.9% effective tax rate compared to $134,000 or a 1.4% effective tax rate in the second quarter 2012. This increase in effective tax rate is primarily due to the release of past-years’ tax provisions in the second quarter 2012 not recurring in the current period.

Balance Sheet Review

 

  • Cash and cash equivalents and bank deposits at June 30, 2013 were $35.2 million compared to $62.1 million at December 31, 2012. The decrease is primarily attributable to the investment in our new production facility, an increase in working capital and the purchase of our Italian distributor’s business.
  • The Company had $16.1 million of bank debt at June 30, 2013 mainly for financing the investments in the new production facility, compared to no bank debt at December 31, 2012.
  • Working capital at June 30, 2013 increased 55.5% to $148.0 million compared to $95.1 million at December 31, 2012. Inventories at June 30, 2013 increased 27.5% to $143.7 million compared to $112.7 million at December 31, 2012, mainly due to additional inventory from the acquisition of our Italian distributor’s business and the increased revenue.

Guidance

 

Based on second quarter results and current projections for the remainder of the year, the Company is raising its outlook.

 

  • The Company now expects full year 2013 revenue to increase approximately 30% over 2012 revenue of $436.3 million, up from its previous guidance of 27%.
  • The Company now expects full year 2013 Adjusted EBITDA to increase approximately 38% over 2012 Adjusted EBITDA of $61.1 million, up from its previous guidance of 36%.
  • The Company now expects full year 2013 Adjusted net income, which excludes share-based compensation expense, to increase approximately 30% over the Adjusted net income of $50.0 million reported in 2012, up from its previous guidance of 27%.
  • The Company expects full year 2013 net income to increase approximately 23% over 2012 net income of $43.9 million, up from its previous guidance of 20%.

Conference Call and Management Commentary

 

Detailed CFO commentary and a supplemental slide presentation have been filed as part of today’s 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, July 31, 2013) 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 more than 60,000 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.

Non-IFRS Financial Measures

This press release contains certain non-IFRS measures, including Adjusted net income, Adjusted Earnings Before Interest, Income Tax, Depreciation and Amortization (“Adjusted EBITDA”), and Adjusted diluted earnings per share (“Adjusted diluted EPS”).

Adjusted net income represents net income calculated in accordance with IFRS as adjusted for the impact of the share-based compensation expense. Adjusted EBITDA represents earnings before interest, income tax, depreciation and amortization, and further eliminates the effect of the share-based compensation expense. Adjusted diluted EPS represents earnings per share calculated in accordance with IFRS as adjusted for the impact of the share-based compensation expense.

The Company believes that the Adjusted net income, Adjusted EBITDA and Adjusted diluted EPS, which exclude share-based compensation expense, should be considered in evaluating the Company’s operations. Adjusted net income and Adjusted diluted EPS exclude share-based compensation because it is a non-cash expense that does not reflect the performance of the Company’s underlying business and operations.  Adjusted EBITDA facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures (affecting interest expenses, net), tax positions (such as the impact on periods or companies of changes in effective tax rates) and the age and book depreciation and amortization of fixed and intangible assets, respectively (affecting relative depreciation and amortization expense, respectively).

These measures should be considered in addition to results prepared in accordance with IFRS, but should not be considered a substitute for the IFRS results. The non-IFRS measures included in this press release have been reconciled to the IFRS results in the tables below.

 

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 expand into our target markets, including the United States; our ability to continue to develop or maintain 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; 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.

Company Contact:
Yonah Lloyd
Chief Corporate Development and Communications Officer
SodaStream International Ltd.
Phone: +972-3-976-2462
yonahl@sodastream.com

 

Investor Contacts (US):
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,
2012 2013 2012 2013
(Unaudited) (Unaudited)
Revenue $ 190,887 $ 250,029 $ 103,019 $ 132,390
Cost of revenue 86,521 114,006 47,016 60,452
Gross profit 104,366 136,023 56,003 71,938
Operating expenses
Sales and marketing 64,351 82,498 37,083 43,639
General and administrative 18,866 25,226 9,225 13,617
Other income, net (80) – (41) –
Total operating expenses 83,137 107,724 46,267 57,256
Operating income 21,229 28,299 9,736 14,682
Interest expense, net 5 154 128 129
Other financial expense, net 154 792 24 582
Total financial expense, net 159 946 152 711
Income before income taxes 21,070 27,353 9,584 13,971
Income tax expense 1,509 2,406 134 1,108
Net income for the period $ 19,561 $ 24,947 $ 9,450 $ 12,863
Net income per share
Basic $ 0.97 $ 1.20 $ 0.47 $ 0.62
Diluted $ 0.94 $ 1.17 $ 0.45 $ 0.60
Weighted average  number of shares
Basic 20,217 20,719 20,289 20,756
Diluted 20,913 21,318 20,932 21,416

 

 

Consolidated Balance Sheets as of
December 31, June 30,
2012 2013
(Audited) (Unaudited)
(In thousands)
Assets
Cash and cash equivalents $ 62,068 $ 25,200
Bank deposits – 10,000
Inventories 112,679 143,692
Trade receivables 86,650 93,346
Other receivables 28,021 25,794
Derivative financial instruments 803 1,622
Assets classified as available-for-sale 868 879
Total current assets 291,089 300,533
Property, plant and equipment 76,906 92,369
Intangible assets 41,978 45,410
Deferred tax assets 2,133 2,312
Other receivables 271 276
Total non-current assets 121,288 140,367
Total assets 412,377 440,900
Liabilities
Loans and borrowings – 16,143
Derivative financial instruments 261 –
Trade payables 86,431 72,737
Income tax payable 8,866 10,215
Provisions 1,304 1,519
Other current liabilities 37,022 32,912
Total current liabilities 133,884 133,526
Employee benefits 1,939 2,005
Provisions 537 549
Deferred tax liabilities 1,527 2,350
Total non-current liabilities 4,003 4,904
Total liabilities 137,887 138,430
Shareholders’ equity
Share capital 3,330 3,356
Share premium 178,338 185,654
Translation reserve 3,628 (681)
Retained earnings 89,194 114,141
Total shareholders’ equity 274,490 302,470
Total liabilities and shareholders’ equity $ 412,377 $ 440,900

 

 

Consolidated Statements of Cash Flows
For the six months ended For the three months ended
June 30, June 30,
2012 2013 2012 2013
(Unaudited) (Unaudited)
(In thousands)
Cash flows from operating  activities
Net income for the period $ 19,561 $ 24,947 $ 9,450 $ 12,863
Adjustments:
Amortization of intangible assets 687 1,140 344 712
Change in fair value of  derivative financial instruments 504 (537) (774) (537)
Exchange rate differences on bank deposits – – 1,094 –
Depreciation of property, plant  and equipment 3,818 5,777 2,167 3,224
Share based payment 2,835 5,354 1,424 2,960
Interest expense, net 5 154 128 129
Income tax expense 1,509 2,406 134 1,108
28,919 39,241 13,967 20,459
Increase in inventories (12,541) (24,784) (2,639) (14,982)
Increase in trade and other receivables (21,798) (19,369) (4,635) (30,558)
Increase (decrease) in trade payables 12,464 (13,232) 11,921 6,001
Decrease in employee benefits (13) (1) (33) (15)
Increase (decrease) in provisions and other current liabilities 4,459 (5,238) 2,668 6,860
11,490 (23,383) 21,249 (12,235)
Interest paid (237) (179) (123) (125)
Income tax received 1,486 3,539 143 91
Income tax paid (2,291) (966) (1,098) (256)
Net cash from (used in) operating activities 10,448 (20,989) 20,171 (12,525)
Cash flows from investing  activities
Interest received 1,079 94 949 36
Investment in bank deposits (10,000) (10,000) (10,000) (10,000)
Proceeds from bank deposits 38,919 – 38,919 –
Proceeds from (payments for) derivative financial  instruments, net (554) (543) (760) 562
Acquisition of subsidiary, net of cash acquired (9,758) (1,179) – (1,179)
Acquisition of property, plant  and equipment (14,506) (19,328) (10,379) (8,724)
Acquisition of intangible assets (963) (2,489) (723) (1,380)
Net cash from (used in) investing  activities 4,217 (33,445) 18,006 (20,685)
Cash flows from financing  activities
Proceeds from exercise of employee share options 1,274 1,832 686 681
Change in short-term debt (3,873) 16,143 (2,951) 8,070
Net cash from (used in) financing activities (2,599) 17,975 (2,265) 8,751
Net increase (decrease) in cash and cash equivalents 12,066 (36,459) 35,912 (24,459)
Cash and cash equivalents at the beginning of the period 34,769 62,068 11,090 49,888
Effect of exchange rates  fluctuations on cash and cash equivalents (242) (409) (409) (229)
Cash and cash equivalents  at the end of the period $ 46,593 $ 25,200 $ 46,593 $ 25,200

 

 

Information about revenue in reportable segments
The Americas Western Europe Asia-Pacific Central and Eastern

Europe,

Middle East, Africa

 Total
(In thousands)
Six months ended:
June 30, 2012 (Unaudited) $ 56,283 99,725 19,868 15,011 $ 190,887
June 30, 2013 (Unaudited) $ 95,712 121,385 20,151 12,781 $ 250,029
Three months ended:
June 30, 2012 (Unaudited) $ 30,650 54,074 9,927 8,368 $ 103,019
June 30, 2013 (Unaudited) $ 47,373 68,087 10,832 6,098 $ 132,390

 

 

Reported (IFRS) to Adjusted (non-IFRS) Reconciliation of Consolidated Statements of Operations
Six months ended June 30,
2012 2013
Reported Share based Reported Share based
(Unadjusted) payment Adjusted (Unadjusted) payment Adjusted
(Unaudited)
In thousands (other than per share amounts)
Revenue $ 190,887 $ – $ 190,887 $ 250,029 $ – $ 250,029
Cost of revenue 86,521 – 86,521 114,006 – 114,006
Gross profit 104,366 – 104,366 136,023 – 136,023
Operating expenses
Sales and marketing 64,351 – 64,351 82,498 – 82,498
General and administrative 18,866 (2,835) 16,031 25,226 (5,354) 19,872
Other income, net (80) – (80) – – –
Total operating expenses 83,137 (2,835) 80,302 107,724 (5,354) 102,370
Operating income 21,229 2,835 24,064 28,299 5,354 33,653
Interest expense, net 5 – 5 154 – 154
Other financial expense, net 154 – 154 792 – 792
Total financial expense, net 159 – 159 946 – 946
Income before income taxes 21,070 2,835 23,905 27,353 5,354 32,707
Income tax expense 1,509 – 1,509 2,406 – 2,406
Net income for the period $ 19,561 $ 2,835 $ 22,396 $ 24,947 $ 5,354 $ 30,301
Net income per share
Basic $ 0.97 $ 1.11 $ 1.20 $ 1.46
Diluted $ 0.94 $ 1.07 $ 1.17 $ 1.42
Weighted average  number of shares
Basic 20,217 20,217 20,719 20,719
Diluted 20,913 20,913 21,318 21,318

 

 

Reported (IFRS) to Adjusted (non-IFRS) Reconciliation of Consolidated Statements of Operations
Three months ended June 30,
2012 2013
Reported Share based Reported Share based
(Unadjusted) payment Adjusted (Unadjusted) payment Adjusted
(Unaudited)
In thousands (other than per share amounts)
Revenue $ 103,019 $ – $ 103,019 $ 132,390 $ – $ 132,390
Cost of revenue 47,016 – 47,016 60,452 – 60,452
Gross profit 56,003 – 56,003 71,938 – 71,938
Operating expenses
Sales and marketing 37,083 – 37,083 43,639 – 43,639
General and administrative 9,225 (1,424) 7,801 13,617 (2,960) 10,657
Other income, net (41) – (41) – – –
Total operating expenses 46,267 (1,424) 44,843 57,256 (2,960) 54,296
Operating income 9,736 1,424 11,160 14,682 2,960 17,642
Interest expense, net 128 – 128 129 – 129
Other financial expense, net 24 – 24 582 – 582
Total financial expense, net 152 – 152 711 – 711
Income before income taxes 9,584 1,424 11,008 13,971 2,960 16,931
Income tax expense 134 – 134 1,108 – 1,108
Net income for the period $ 9,450 $ 1,424 $ 10,874 $ 12,863 $ 2,960 $ 15,823
Net income per share
Basic $ 0.47 $ 0.54 $ 0.62 $ 0.76
Diluted $ 0.45 $ 0.52 $ 0.60 $ 0.74
Weighted average  number of shares
Basic 20,289 20,289 20,756 20,756
Diluted 20,932 20,932 21,416 21,416

 

 

EBITDA and Adjusted EBITDA
Six months ended Three months ended
June 30, June 30,
2012 2013 2012 2013
(Unaudited)
(In thousands)
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Net income $ 19,561 $ 24,947 $ 9,450 $ 12,863
Interest expense, net 5 154 128 129
Income tax expense 1,509 2,406 134 1,108
Depreciation and amortization 4,505 6,917 2,511 3,936
EBITDA 25,580 34,424 12,223 18,036
Share based payment 2,835 5,354 1,424 2,960
Adjusted EBITDA $ 28,415 $ 39,778 $ 13,647 $ 20,996

 

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:
Six months ended Three months ended
June 30, June 30,
2012 2013 2012 2013
(Unaudited) (Unaudited)
Revenue
(in thousands)
Soda maker starter kits (including exchange cylinders) $ 73,314 $ 92,866 $ 39,830 $ 49,914
Consumables 114,050 150,893 61,631 78,831
Other 3,523 6,270 1,558 3,645
Total $ 190,887 $ 250,029 $ 103,019 $ 132,390

 

Six months ended Three months ended
June 30, June 30,
2012 2013 2012 2013
(Unaudited) (Unaudited)
As a percentage of revenue
Soda maker starter kits (including exchange cylinders) 38.4% 37.1% 38.7% 37.7%
Consumables 59.8% 60.4% 59.8% 59.5%
Other 1.8% 2.5% 1.5% 2.8%
Total 100.0% 100.0% 100.0% 100.0%
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