SodaStream International Ltd. Delivers Strong Holiday-Quarter Growth

By Demitrios Kalogeropoulos Markets Fool.com

SodaStream (NASDAQ: SODA) posted fourth-quarter earnings on Feb. 15 that showed accelerating sales and profit momentum as it closed out 2016. Net income more than tripled thanks to firmer demand for its repositioned water carbonation machines.

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Here's how the holiday quarter results held up against the prior year:

Metric

Q4 2016

Q4 2015

Year-Over-Year Change

Revenue

$132 million

$113 million

17%

Net income

$15.6 million

$5.0 million

213%

EPS

$0.71

$0.24

201%

Data source: SodaStream's financial filings.

What happened this quarter?

SodaStream's strong third-quarter momentum carried through to the critical holiday-season quarter as growth accelerated to a 17% pace from 13%, thanks to a solid improvement in the key U.S. market.

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Image source: Getty Images.

Highlights of the quarter included:

  • Starter kit sales spiked higher by 22% to nearly 1 million units. Higher average prices helped revenue for that category grow even faster, as sales rose 37% to nearly $60 million.
  • Carbon dioxide refill sales rose 10% to cross 7 million units.
  • SodaStream's biggest market, Europe, enjoyed an 18% sales spike, and the U.S. region also performed well with a 20% increase. Growth in the Asia-Pacific segment slowed to a 9% pace from 43% last quarter.
  • Gross profit margin jumped over 4 percentage points to 52% of sales thanks to a combination of lower production costs and higher selling prices.
  • Other operating costs drifted lower, helping operating income rise to 14% of revenue from 5% last year.
  • SodaStream spent slightly less on marketing as a percentage of sales, mainly thanks to the spiking revenue base.

What management had to say

"I am very pleased with the strong momentum we built throughout the year, which continued in the fourth quarter with robust revenue growth and record high operating income," CEO Daniel Birnbaum said in a press release. "Our 2016 full year performance underscores that the strategies we've implemented to build a global brand franchise and accelerate household penetration of our home carbonation system are working successfully."

Executives are especially pleased that their new marketing message is resonating with customers, who are looking for healthier drinking options. "Consumers are responding positively to our messaging around health & wellness, convenience, and the environment and are using SodaStream to produce sparkling water in record numbers," Birnbaum said.

Management also highlighted their success around cost cuts and production tweaks that are resulting in much stronger operating profits. "We are growing our business in a highly efficient manner following expense optimization efforts and the recent consolidation of our manufacturing, logistics and distribution activities in Israel," the CEO explained.

Looking forward

Executives predict revenue will rise in the high single digits in 2017 to mark a slight slowdown from last year's 15% spike. Its gross margin should continue to stay above 50% of sales, and that strength will likely combine with lower expenses to push operating income higher by 30%.

With revenue and profit both headed in the right direction after a brutal two-year period of declines, management's focus is on winning market share and extending its sales base back toward the peak it set in 2013 of nearly $600 million.

Last year's jump from $413 million of annual revenue to $476 million still leaves plenty of room for improvement, but the $44 million in net income SodaStream just managed is the highest it has ever achieved.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of SodaStream. The Motley Fool has a disclosure policy.