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Press release from PR Newswire

SodaStream Reports Record Third Quarter Results

Wednesday, November 07, 2012

SodaStream Reports Record Third Quarter Results07:30 EST Wednesday, November 07, 2012Third Quarter Revenue Increased to $112.5 Million Third Quarter Net Income Increased to $16.8 Million Third Quarter Diluted Earnings Per Share Increased to $0.80 Third Quarter Adjusted Diluted Earnings Per Share Increased to $0.87AIRPORT CITY, Israel, Nov. 7, 2012 /PRNewswire/ -- SodaStream International Ltd. (NASDAQ: SODA), a leading manufacturer of home beverage carbonation systems, announced today its results for the three and nine month periods ended September 30, 2012.(Logo: http://photos.prnewswire.com/prnh/20121107/NY07412LOGO )For the third quarter ended September 30, 2012:Total revenue increased 48.7% to $112.5 million from $75.7 million in the third quarter 2011.  Net income increased 65.9% to $16.8 million compared to $10.1 million a year ago, and Adjusted net income was $18.2 million compared to $11.5 million last year. Diluted earnings per share increased 66.7% to $0.80, compared to $0.48 in the third quarter 2011 and Adjusted diluted earnings per share were $0.87 compared to $0.55 a year ago."We had another very strong quarter highlighted by gains in all geographic regions and product categories with demand well ahead of our expectations" said Daniel Birnbaum, Chief Executive Officer of SodaStream. "Our growth strategies have yielded excellent financial results year-to-date and position the Company for continued expansion in 2013 and beyond. We enter the fourth quarter with strong momentum, especially in the U.S. where we've quickly built a powerful distribution network for our expanding portfolio of soda makers and consumables. Our newest flagship soda maker, the Source, is set to debut at select retailers worldwide. With its modern design and innovative functionality, we believe the Source is a transformational product that will broaden appeal of our entire system and help drive household penetration to a new level. To leverage our enhanced product portfolio and broad distribution, we are launching our first global branding campaign that highlights the revolutionary essence of SodaStream and challenges the traditional beverage industry. The progress we've made leading the growth of our category worldwide has put the Company on track to deliver significant value for our shareholders in the years ahead."Third Quarter 2012 Financial ReviewGeographical Revenue BreakdownRevenueThree Months EndedSeptember 30, 2012September 30, 2011 Increase IncreaseIn Millions USD%Western Europe$52.6$39.7$12.933%The Americas38.724.014.761%Central & Eastern Europe, Middle East, Africa10.37.52.837%Asia-Pacific10.94.56.4145%Total$112.5$75.7$36.849%Product Segment Revenue BreakdownRevenueThree Months EndedSeptember 30, 2012September 30, 2011 Increase IncreaseIn millions USD%Soda Maker Starter Kits$46.5$33.9$12.637%Consumables63.040.722.355%Other3.01.11.9180%Total$112.5$75.7$36.849%Product Segment Unit Breakdown Three Months EndedSeptember 30,2012September 30,2011 Increase IncreaseIn thousands%Soda Maker Starter Kits94171722431%CO2 Refills4,3373,63670119%Flavors7,7474,3993,34876%Gross margin for the third quarter 2012 was 54.2%, compared to 53.5% for the same period in 2011. This increase was primarily due to the increase in direct distribution that accounted for 69% of total revenue in the quarter vs. 56% in the third quarter 2011. This increase is mainly due to growing share of U.S. revenue and the shift to self-distribution in the Nordics. Gross margin was also positively impacted from leveraging fixed production costs on higher revenue, partially offset by a higher percentage of subcontracted manufacturing. Sales and marketing expenses for the third quarter 2012 totaled $35.8 million, or 31.8% of revenue compared to $23.1 million, or 30.6% of revenue for the comparable period last year. The increase is primarily due to higher advertising and promotion expense, which was in line with the plan to support the growing retail presence, especially in the U.S. This was partially offset by a decrease in other selling expenses as a percent of revenue, despite the aforementioned increase in self-distribution versus a year ago, driven by improved supply chain efficiency and expense leverage on higher revenue.   General and administrative expenses for the third quarter 2012 were $8.7 million, or 7.8% of revenue, compared to $7.6 million, or 10.1% of revenue in the comparable period of last year. This includes the additional expenses associated with the acquisition of CEM Industries in the fourth quarter 2011 and the acquisition of the distribution activity in the Nordics in the first quarter 2012. Operating income increased to $16.4 million, or 14.6% of revenue as compared to $9.8 million, or 13.0% of revenue in the third quarter 2011. Tax benefit was $850,000 compared to a tax expense of $816,000 in the third quarter 2011. This is primarily attributable to an adjustment of tax provision following an agreement with the tax authorities in one of our jurisdictions. Excluding this adjustment the effective tax rate in the third quarter 2012 was approximately 8%, similar to the third quarter 2011.Balance Sheet ReviewOn August 31, 2012, the Company acquired the SodaStream related assets from its Canadian distributor and started operating its products' distribution in Canada as a self-distribution unit. This had no material impact on the results of operations. The main asset acquired in the transaction was inventory of $5.9 million. The inventory and cash balance at September 30, 2012 reflect this transaction. Cash and cash equivalents and bank deposits at September 30, 2012 were $50.7 million compared to $74.3 million on December 31, 2011. The decrease is primarily attributable to the acquisition of the Nordics and Canadian distribution activities, debt repayment and an increase in working capital. The Company had no outstanding loans and borrowings at September 30, 2012 compared to $4.0 million on December 31, 2011. Working capital at September 30, 2012 increased 29.5% to $101.4 million compared to $78.3 million on December 31, 2011. Inventories at September 30, 2012 increased 44.6% to $110.8 million compared to $76.6 million on December 31, 2011, primarily reflecting the additional inventory associated with the acquisition of the Nordics and Canadian inventory and the Company's business growth, primarily in the U.S.  Change of reporting currencyBeginning with the quarter ended March 31, 2012, the Company changed its reporting currency to the U.S. dollar (USD).  Previously, the Company presented its annual and quarterly consolidated balance sheets and related consolidated statements of operations and cash flows in Euro (EUR).  In accordance with IFRS, the financial statements for comparative periods were translated into the new reporting currency using the EUR to USD exchange rate at January 1, 2012 of EUR 1.00 = USD 1.2973.GuidanceBased on third quarter results and current projections for the remainder of the year, the Company is raising its outlook. The Company now expects 2012 revenue to increase approximately 46% over 2011 revenue of $289.0 million, up from its previous guidance of 40%. The Company now expects 2012 net income to increase approximately 59% over 2011 net income of $27.5 million, up from its previous guidance of 55%. This guidance assumes full year gross margin of approximately 54.5% and includes a share-based expense of approximately $5.6 million. Gross margin for the fourth quarter 2012 includes a higher mix of third party manufacturing and additional transportation expenses in order to meet the high demand for several new product launches scheduled for the holiday season. 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, November 7, 2012) 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 InternationalSodaStream 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 MeasuresThis press release contains certain non-IFRS measures, including Adjusted net income ("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 excludes the Share-Based Compensation Expense, should be considered in evaluating the Company's operations since they provide a clearer indication of the Company's operating results going forward.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 StatementsThis 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 LloydChief Corporate Development and Communications OfficerSodaStream International Ltd.Phone: +972-3-976-2462yonahl@sodastream.com Investor Contacts (US): Brendon Frey ICRPhone: + 1 203-682-8200brendon.frey@icrinc.com  Consolidated Statements of OperationsIn thousands (net income per share amounts in units)For the nine months endedFor the three months endedSeptember 30,September 30,2011201220112012(Unaudited)(Unaudited)Revenue$203,265$303,369$75,655$112,482Cost of revenue94,858138,05235,15251,531Gross profit108,407165,31740,50360,951Operating expensesSales and marketing 62,737100,17623,12935,825General and administrative22,40827,6077,6058,741Other income, net(121)(134)(40)(54)Total operating expenses85,024127,64930,69444,512Operating income23,38337,6689,80916,439Interest expense (income), net(1,200)40(506)35Other financial expense (income), net(647)642(609)488Total financial expense (income), net(1,847)682(1,115)523Income before income taxes25,23036,98610,92415,916Income tax expense (tax benefit)3,067659816(850)Net income for the period$22,163$36,327$10,108$16,766Net income per shareBasic$1.14$1.79$0.51$0.82Diluted$1.08$1.73$0.48$0.80Weighted average  number of shares Basic19,37620,28120,00620,410Diluted20,45220,98421,00221,027 Consolidated Balance Sheets as ofDecember 31,September 30,20112012(Audited)(Unaudited)(In thousands)AssetsCash and cash equivalents$34,769$30,676Bank deposits39,48520,056Inventories76,625110,806Trade receivables58,45280,861Other receivables20,06420,338Derivative financial instruments322235Assets classified as available-for-sale837815Total current assets230,554263,787Property, plant and equipment46,43472,845Intangible assets 25,35838,084Deferred tax assets1,1681,774Other receivables224269Total non-current assets73,184112,972Total assets303,738376,759LiabilitiesLoans and borrowings4,006-Derivative financial instruments-424Trade payables47,38372,236Income tax payable9,1718,908Provisions3971,515Other current liabilities21,07128,592Total current liabilities82,028111,675Employee benefits1,4971,458Provisions514531Deferred tax liabilities7171,161Total non-current liabilities2,7283,150Total liabilities 84,756114,825Shareholders' equityShare capital3,2383,292Share premium168,601174,458Translation reserve1,4712,185Retained earnings 45,67281,999Total shareholders' equity218,982261,934Total liabilities and shareholders' equity $303,738$376,759 Consolidated Statements of Cash FlowsFor the nine months endedFor the three months endedSeptember 30,September 30,2011201220112012(Unaudited)(Unaudited)(In thousands)Cash flows from operating  activitiesNet income for the period$22,163$36,327$10,108$16,766Adjustments:Amortization of intangible assets4771,10781420Change in fair value of  derivative financial instruments466504(79)-Depreciation of property, plant  and equipment3,1286,0299732,211Share based payment4,0404,2931,3481,458Interest expense (income), net(1,200)40(506)35Income tax expense (tax benefit)3,067659816(850)32,14148,95912,74120,040Increase in inventories(20,081)(23,909)(9,747)(11,368)Increase in trade and other receivables(19,048)(37,984)(10,878)(16,186)Increase in trade payables6,09123,5885,59811,124Decrease in employee benefits(14)(28)(6)(15)Increase in provisions and other current liabilities845,8242321,365(827)16,450(2,060)4,960Interest paid(272)(334)(79)(97)Income tax received-1,733-247Income tax paid(3,010)(3,047)(1,357)(756)Net cash from (used in) operating activities(4,109)14,802(3,496)4,354Cash flows from investing  activitiesInterest received1,0031,181221102Investment in bank deposits(51,892)(20,000)(51,892)(10,000)Proceeds from bank deposits-38,919--Proceeds from (payments for) derivative financial  instruments, net(44)7(25)561Acquisition of subsidiary, net of cash acquired-(10,954)-(1,196)Acquisition of property, plant  and equipment(14,067)(23,759)(7,770)(9,253)Acquisition of intangible assets(650)(2,125)(398)(1,162)Net cash used in investing  activities(65,650)(16,731)(59,864)(20,948)Cash flows from financing  activitiesShare issuance42,929---Proceeds from exercise of employee share options8991,61882344Change in short-term debt(8,609)(3,873)198-Net cash from (used in) financing activities35,219(2,255)280344Net decrease in cash and cash equivalents(34,540)(4,184)(63,080)(16,250)Cash and cash equivalents at the beginning of the period68,62734,76996,98046,593Effect of exchange rates  fluctuations on cash and cash equivalents(154)9133333Cash and cash equivalents  at the end of the period$33,933$30,676$33,933$30,676 Information about revenue in reportable segmentsWestern EuropeThe AmericasCentral andEasternEurope, MiddleEast, AfricaAsia-PacificTotal(In thousands)Nine months ended:September 30, 2012 (Unaudited)$152,33694,94325,31430,776$303,369September 30, 2011 (Unaudited)$113,45751,91825,72412,166$203,265Three months ended:September 30, 2012 (Unaudited)$52,61138,66010,30310,908$112,482September 30, 2011 (Unaudited)$39,68324,0077,5144,451$75,655 Reported (IFRS) to Adjusted (non-IFRS) Reconciliation of Consolidated Statements of OperationsNine months ended September 30,20112012ReportedShare basedReportedShare based(Unadjusted)paymentAdjusted(Unadjusted)paymentAdjusted(Unaudited)In thousands (net income per share amounts in units)Revenue$203,265$-$203,265$303,369$-$303,369Cost of revenue94,858-94,858138,052-138,052Gross profit108,407-108,407165,317-165,317Operating expensesSales and marketing 62,737-62,737100,176-100,176General and administrative22,408(4,040)18,36827,607(4,293)23,314Other income, net(121)-(121)(134)-(134)Total operating expenses85,024(4,040)80,984127,649(4,293)123,356Operating income23,3834,04027,42337,6684,29341,961Interest expense (income), net(1,200)-(1,200)40-40Other financial expense (income), net(647)-(647)642-642Total financial expense (income), net(1,847)-(1,847)682-682Income before income taxes25,2304,04029,27036,9864,29341,279Income tax expense3,067-3,067659-659Net income for the period$22,163$4,040$26,203$36,327$4,293$40,620Net income per shareBasic$1.14$1.35$1.79$2.00Diluted$1.08$1.28$1.73$1.94Weighted average  number of shares Basic19,37619,37620,28120,281Diluted20,45220,45220,98420,984 Reported (IFRS) to Adjusted (non-IFRS) Reconciliation of Consolidated Statements of OperationsThree months ended September 30,20112012ReportedShare basedReportedShare based(Unadjusted)paymentAdjusted(Unadjusted)paymentAdjusted(Unaudited)In thousands (net income per share amounts in units)Revenue$75,655$-$75,655$112,482$-$112,482Cost of revenue35,152-35,15251,531-51,531Gross profit40,503-40,50360,951-60,951Operating expensesSales and marketing 23,129-23,12935,825-35,825General and administrative7,605(1,348)6,2578,741(1,458)7,283Other income, net(40)-(40)(54)-(54)Total operating expenses30,694(1,348)29,34644,512(1,458)43,054Operating income9,8091,34811,15716,4391,45817,897Interest expense (income), net(506)-(506)35-35Other financial expense (income), net(609)-(609)488-488Total financial expense (income), net(1,115)-(1,115)523-523Income before income taxes10,9241,34812,27215,9161,45817,374Income tax expense (tax benefit)816-816(850)-(850)Net income for the period$10,108$1,348$11,456$16,766$1,458$18,224Net income per shareBasic$0.51$0.57$0.82$0.89Diluted$0.48$0.55$0.80$0.87Weighted average  number of shares Basic20,00620,00620,41020,410Diluted21,00221,00221,02721,027 EBITDA and Adjusted EBITDA Nine months endedThree months endedSeptember 30,September 30,2011201220112012(Unaudited)(In thousands)Reconciliation of Net Income to EBITDA and Adjusted EBITDANet income$22,163$36,327$10,108$16,766Interest expense (income), net(1,200)40(506)35Income tax expense (tax benefit)3,067659816(850)Depreciation and amortization3,6057,1361,0542,631EBITDA27,63544,16211,47218,582Share based payment4,0404,2931,3481,458Adjusted EBITDA$31,675$48,455$12,820$20,040 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 endedThree months endedSeptember 30,September 30,2011201220112012(Unaudited)Revenue(in thousands)Soda maker starter kits (including exchange cylinders)$84,912$119,800$33,868$46,486Consumables114,684177,02940,71062,979Other3,6696,5401,0773,017Total$203,265$303,369$75,655$112,482Nine months endedThree months endedSeptember 30,September 30,2011201220112012(Unaudited)As a percentage of revenueSoda maker starter kits (including exchange cylinders)41.8%39.5%44.8%41.3%Consumables56.4%58.4%53.8%56.0%Other1.8%2.1%1.4%2.7%Total100.0%100.0%100.0%100.0%(*)The Company reclassified prior periods' data such that revenue from spare cylinders, formerly presented under the "soda maker starter kits" category, are presented under the "consumables" category, as the purchase of a spare cylinder more closely resembles the purchase of other consumables than it does the initial purchase of a soda maker. The effect was an increase in revenue from consumables by $9,905 thousand and $ 3,932 thousand for nine months and three months ended September 30, 2011, respectively  (increase in 480 basis points and 520 basis points of total revenue of these periods, respectively), and the same decrease in revenue from soda maker starter kits for the respective periods (and the same decrease in basis points of total revenue of those periods, respectively)     SOURCE SodaStream International Ltd.