SODA

SodaStream International Ltd. (SODA)

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SodaStream (SODA)

Q1 2013 Results Earnings Call

May 8, 2013 8:30 a.m. ET

Executives

Yonah Lloyd - Chief Corporate Development and Communications Officer

Daniel Birnbaum - Chief Executive Officer

Danny Erdreich - Chief Financial Officer

Gerard Meyer - President, SodaStream USA

Analysts

John Faucher - JPMorgan

Joe Altobello - Oppenheimer

Jon Andersen - William Blair

Scott Van Winkle - Canaccord Genuity

Bill Schmitz - Deutsche Bank

Tony Brenner - Roth Capital Partners

Jim Chartier - Monness Crespi Hardt

Jim Duffy - Stifel Nicolaus

Greg McKinley - Dougherty

Presentation

Operator

At this time, I would like to welcome everyone to the SodaStream International first quarter fiscal 2013 earnings conference call. Today’s call is being recorded. [Operator instructions.] I would now like to turn the call over to Yonah Lloyd, chief corporate development and communications officer.

Yonah Lloyd

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 supplemental slide presentation featuring business highlights. These are also available at our IR website and on our IR app for both iPhone and Android platforms.

Present as well are Danny 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 would 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 these 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 projections or forward-looking statements made today.

In addition, we will make reference to certain non-GAAP financial measures, including adjusted net income. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company’s first quarter earnings release, which is posted on the company’s website.

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, everyone, for joining us today. 2013 is off to an excellent start. Strong gains from several of our largest markets in the Americas and Western Europe drove revenue to a record first quarter of $118 million. Soda maker sales increased 28%, and consumables sales grew 37%, delivering top line growth of 34% and adjusted net income growth of 26%.

The largest contribution to our performance came from the U.S., where results were exceptional across the board. Total U.S. sales increased 93% from a year ago, fueled by soda maker sales growth of 68% and consumables sales growth of 109%.

On a unit basis, sod makers increased 78%, flavors increased 119%, and gas refills rose 101%. First quarter gas refills of 1.1 million marked the first time quarterly refills surpassed 1 million units in the U.S.

U.S. growth came both from existing retail locations as well as from doors added since the first quarter of last year, notably Walmart. This growth spanned all machine models, including the Source, which was expanded to Walmart and Target during the quarter.

At $129, we didn’t anticipate the Source to be as significant a revenue driver in these channels as the $79 Jet. However, the excitement generated by its introduction has had a halo effect on our entire product portfolio at retail.

In April, we completed our most recent U.S. tracking survey. There were several highlights we’d like to share. First, unaided brand awareness increased from 25% to 38% since last July, and aided brand awareness increased from 46% to 63%. Second, more than 70% of consumers who purchased or received a SodaStream are still using it after one year. Third, over 80% of active users are using SodaStream at least once a week. And finally, almost 75% of our active users are using our syrups regularly to make soda. These results indicate robust brand awareness growth and more importantly, user stickiness. We look forward to providing more details around these findings at next week’s investor meeting.

Following a successful 2012, in which we enhanced our brand equity, expanded our distribution, and advanced our innovation agenda, we made the strategic decision to run an ad during the Super Bowl. Our as I mentioned was to capitalize on expanded retail presence and strong momentum coming out of the holiday season to further build awareness and strengthen our retail relationships by demonstrating our commitment to growing the category.

Strong selling ahead of the Super Bowl was followed by strong sell out and replenishment in the weeks immediately after the game, and we expect additional returns on this investment in the future quarters, particularly Q4.

The second major driver of our top line and the biggest contributors to operating income was continued strength from Western Europe. Revenue increased 17% as marketing activities generated strong growth in France, as well as some of our more established markets, like Germany and the Nordics. These results are a strong indicator that despite concerns around maturing markets and recessionary conditions, our business in Western Europe as a whole continues to be very healthy and very profitable.

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