SodaStream International's CEO Discusses Q2 2012 Results - Earnings Call Transcript

SodaStream International Ltd. (SODA)

Q2 2012 Earnings Conference Call

August 08, 2012, 08:30 a.m. ET


Yonah Lloyd - Executive Director, Corporate Development and Communication

Daniel Birnbaum - CEO

Daniel Erdreich - CFO

Gerard Meyer - President, SodaStream USA


Joe Altobello - Oppenheimer

Jon Andersen - William Blair

John Faucher - JPMorgan

Bill Schmitz - Deutsche Bank

Tony Brenner - ROTH Capital Partners

Jim Duffy - Stifel Nicolaus

Jim Chartier - Monness, Crespi and Hardt

Mitch Pinheiro - Janney Capital Markets

Greg McKinley - Dougherty



Good day. My name is Matt and I will be your conference operator today. At this time I’d like to welcome everyone to the SodaStream International Second Quarter 2012 Earnings Conference Call. Today’s call is being recorded. All lines have been placed on mute to prevent any background noise. (Operator Instructions) Thank you.

I will now turn the call over to Yonah Lloyd, Executive Director of Corporate Development and Communication. Please go ahead sir.

Yonah Lloyd

Thank you, Matt. Welcome everyone. This morning’s call will consist of prepared remarks from our CEO, Daniel Birnbaum. We filed the 6-K this morning which includes the press release and financial tables along with the CFO commentary document and a supplement slide presentation featuring business highlights. These are also available at our IR website and on your new IR App. Present as well are Daniel Erdreich, our CFO; and Gerard Meyer, President and General Manager of our U.S. Subsidiary. Following Daniel’s remarks we will open the call for questions.

I’d like to remind everyone that certain statements will be made during today’s conference call which are forward-looking within the meaning of Securities Laws. Due to the uncertainty of this forward-looking statements, our actual results may differ materially from anything projected in these forward-looking statements. As such we can give no assurance as to their accuracy and we assume no obligation to update them. Results that we report today should not be considered as an indication of future performance. Changes in economics, business, competitive, technological, regulatory and other factors could cause SodaStream’s actual results to differ materially from those expressed or implied by the projection or forward-looking statements made today. For more detailed information about these factors and other risks that may impact our business, please review the paragraph in this morning’s press release that begins with the words, ‘this release contains’.

And now it is my pleasure to the turn the call over to the Chief Executive Officer of SodaStream, Daniel Birnbaum.

Daniel Birnbaum

Thank you for joining us today. We are very pleased to share with you our second quarter results. During this quarter we saw strong top line growth from both soda makers and consumables reinforcing the validity of our business model and our potential to achieve mass market appeal.

To start, sales increased 49% to $103 million representing the highest quarterly revenue in company history, marking the first time we crossed the $100 million. The revenue increase was driven by growth across all regions, highlighted by triple digit growth in both the Americas and Asia-Pacific and double-digits growth in Western Europe.

In terms of product segments, both soda maker and consumable revenues increased 49% with soda maker unit sales of 764,000 and all time record highs for gas refills and favors of 4.2 million and 7.2 million units, respectively.

Within the Americas, the U.S. had a fantastic quarter. Sell-in and sell-through of soda makers and consumables were strong fueled by both new and existing distribution channels and increase marketing investment.

Soda maker unit sales in the U.S. were up 63% from a year ago, which is acceleration from recent quarters aided by the pipeline filled to Wal-Mart in May. More importantly this sell-in was followed by strong sell-through in Wal-Mart. We win this similar sell-through results of soda makers with other key retailers, driven in part by a heavier A&P spend than included a run of TV and radio leading into Fathers Day.

The consumables side of our business experienced strong growth in the U.S. with unit sales of CO2 refills and flavors up 93% and 148%, respectively. Demand for our flavors including core flavors such as diet cola and energy continues to grow along with our user base. At the same time the launch of our Country Time and Crystal Light cobranded flavors has exceed expectations, which along with the recent expansion of our partnership with Kraft to include Kool-Aid gives us added confidence in the incremental revenue potential of co-branding relationships.

The strong balanced growth we achieved in the U.S. during the second quarter is evidence we are successfully executing on our dual strategy, penetrating more households to create a larger user base and generating increased activity among existing users.

Western Europe posted solid gains with second quarter revenue up 25% or 17% excluding the benefit from the convergence to direct distribution in the Nordics which occurred in the first quarter of 2012. We continue to experience healthy demand in our established markets led by Germany and the Nordics. The fact that these large established markets are helping drive growth in our oldest region is further validation of our brand and products and underscores the sustainability of our business model.

In newer markets like France and the UK growth is coming from both soda makers and consumables as we’re penetrating more household and generate more user activity much as we are doing in the U.S. We did experience softness in Italy during the second quarter; our distributor who manages a range of products besides SodaStream is experiencing some difficulties.

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