SodaStream International (SODA) Daniel Birnbaum on Q4 2015 Results - Earnings Call Transcript

SodaStream International Ltd. (NASDAQ:SODA)

Q4 2015 Earnings Call

February 18, 2016 8:30 am ET

Executives

Brendon Frey - Managing Director-Retail, Apparel & Footwear, ICR LLC

Daniel Birnbaum - Chief Executive Officer & Director

John K. Sheppard - President, SodaStream USA, Inc.

Henner Rinsche - General Manager-Germany/Austria

Daniel Erdreich - Chief Financial Officer

Analysts

Anton Joseph Brenner - ROTH Capital Partners LLC

Gregory J. McKinley - Dougherty & Co. LLC

Lubi Kutua - Jefferies LLC

Operator

Good day. My name is Alan, and I will be the conference operator today. At this time, I would like to welcome everyone to the SodaStream International Fourth Quarter Fiscal 2015 Earnings Conference Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you.

I would now like to turn the call over to Brendon Frey of ICR.

Brendon Frey - Managing Director-Retail, Apparel & Footwear, ICR LLC

Thank you, and welcome everyone. Present on the call today are Daniel Birnbaum, CEO; Danny Erdreich, CFO; Henner Rinsche, President of SodaStream Europe; and John Sheppard, President, SodaStream USA. Following the prepared remarks, we will open the call up to questions. Early this morning we filed a 6-K which includes the press release and financial tables, along with the CFO commentary document and a supplemental slide presentation. As a reminder, our presentation detailing the company's growth plan which was announced on October 29, 2014 and will be referenced during today's call and is still available on our IR website.

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 assurances as to their accuracy and we assume no obligation to update them.

Results that we report today should not be considered as an indication for future performance. Changes in economics, business, competitive, technological, regulatory or 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'll make reference to certain adjusted financial measures. The reconciliation of these adjusted measures to the most directly comparable IFRS measures can be found in the company's fourth quarter earnings release, which is posted to 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."

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

Daniel Birnbaum - Chief Executive Officer & Director

Thank you, Brendon, and welcome to everyone on the call with us today. Our fourth quarter results came in slightly ahead of our expectations to conclude what has been a year of significant change, as we worked to set the company up for renewed and sustainable growth. When we embarked on repositioning our brands and products towards health and wellness as part of the growth plan that we introduced in October 2014, our goal was to set the majority of the heavy-lifting done in 2015, even though we know it would be (02:53) disruptive to our near term performance.

This included developing and testing new marketing messages, including all new creative assets and PR agency infrastructure, developing an entirely new line of better-for-you flavors and clearing the retail channel ahead of our new product launches, right-sizing our U.S. distribution footprint, and reconfiguring our regional management structure and adding new leadership in key markets.

At the same time, we were in the final stages of completing our new state-of-the-art Lehavim facility and shifting production from our legacy sites in Israel and elsewhere which will improve our production and logistics efficiency moving forward.

I'm pleased with our teams who responded to the challenge of executing on all these different fronts. While there is certainly more work to be done before our business is on the path to achieving the household penetration and generating the financial results we believe it's capable of, it is rewarding to the see that several of our major initiatives are starting to gain traction.

With me on the call today is Henner Rinsche, President of Europe; and John Sheppard, President of the United States. Henner and John will discuss our recent performance as well as the key areas of focus for the coming year in their respective regions. But first, I'll briefly review our fourth quarter and full year results

Fourth quarter revenue was $112.9 million, up 3% on sequential basis, which was approximately $3 million ahead of our expectations. On a currency neutral basis revenue was $124.4 million, down slightly from a year ago. As you can see from the $11.5 million difference in our reported and constant currency revenue, changes in FX had a significant impact on our top-line, which pressured gross margins by approximately 330 basis points. While we did experience cost and expense savings, thanks to FX, the net impact on operating income was $5.4 million. On an adjusted basis, excluding FX, operating income increased 42% to $11.5 million and we generated $1.5 million in free cash flow, which should increase in 2016, now that the majority of the investments in our new plant in Lehavim are behind us.

In terms of product performance, sparkling water maker units declined to 24% to 769,000, flavor units declined 8% to $5.6 million and gas refills increased 7% to a fourth quarter record of 6.7 million units.

For the year, revenue was $416 million or $475 million on a constant currency basis, a decline of 7% from 2014 revenue of $511.8 million. Adjusted operating income, excluding changes in FX increased 10% to $33.8 million.

Sparkling water maker units declined 25% for the year to $2.4 million, and flavor units declined 29% to $22.3 million. The change in sparkling water makers and flavor units reflect the impact of our repositioning and our decision to reduce A&P spend, while we developed our new marketing methods. That said, I would note that declines in flavor units moderated significantly as the year progressed, which coincided with the launch of our new flavor line in several regions during the third and fourth quarters.

Meanwhile, gas refill units increased 7% to an all-time annual record of $26.8 million, representing roughly 1.4 billion liters of finished beverage consumed with our system. For comparison, according to Canadian Beverage Research, Perrier sells about 500 million liters of sparkling water annually.

Indeed, our record gas number is the best indication that our global user base is increasingly consuming sparkling beverages made at home using SodaStream, and we're confident that usage rates will continue to grow as existing and new consumers embrace our repositioning as a water brand and are attracted to our healthier beverage alternatives versus what's available in the market today, namely sugared soft drinks.

To summarize the year, if you exclude changes in FX and the one-time charges associated with the restructuring, revenue was down 7%, with the majority of the declines coming in the first half of the year. And operating income and EBITDA both improved meaningfully as we leveraged selling and marketing expenses. While we're not satisfied with our reported results, we are confident that the progress we've made over the past year is helping create a stronger, more efficient organization that is better-positioned to capitalize on the significant market opportunity as consumers rapidly shift from sugared soft drinks to healthier water-based products.

As a reminder, the five pillars are; organization, marketing, product and innovation, distribution, and operations. We made important progress on each pillar in 2015, which is providing our brand and business with good momentum as we start 2016.

Let me share a few highlights. Starting with organization, we reconfigured our regional management structure and put in place new leadership in key markets. This included naming Henner Rinsche as President of Europe, and making sure that we have the right people to lead the business in each of the key countries in this region as we look to drive more consistent growth across Western Europe. And in September, we appointed John Sheppard, President of the U.S., to lead our turnaround in this market.

Moving to marketing, we launched the brand's new positioning around health and wellness in the U.S. and rolled out a marketing campaign centered on this initiative. In Europe, we continued to see strong consumer response to our 'convenience' messaging in a number of key markets, and we bolstered our marketing and PR teams to ensure that we have the talent in place to support these initiatives.

Turning to products and innovation, we launched our new portfolio of better-to-you sparkling water flavors made with natural ingredients and no artificial sweeteners, as well as our new automated Sparkling Water Maker, the Power, and we continue to work on a number of innovative new products that we'll launch this year, including the Mix and the Spirit, our new entry level Sparkling Water Maker.

With respect to distribution, we've worked to rationalize our distribution to focus on our best performing doors and up-market retail as well as on regaining shelf space and expanding into new points of distribution that will afford our consumers added convenience, including home delivery, and curbside exchange of our CO2 refills.

Finally, operations, where we unified our production under new Lehavim site and closed our Alon Tavor and Mishor Adumin facilities. These actions increased our production capacity, improved efficiencies and significantly reduced the need for costly third-party manufacturers. We are in the final stages of completing our new logistics center on this site, which will further contribute to logistics savings and inventory optimization.

For more specifics on how the application of our growth plan is positively transforming our U.S. business, I'm going to turn the call over to John.

John K. Sheppard - President, SodaStream USA, Inc.

Thanks, Daniel. The fourth quarter revenues for the U.S. were higher than our expectations, but still reflected an 18% decline versus last year. However, as we said in the previous earnings call, we were reducing our A&P investment by roughly 50% from a year ago, as we were just beginning the process of reviewing and developing our comprehensive marketing strategy. So, despite revenue being down, U.S. operating profit was up substantially in the fourth quarter. In addition, we began to see encouraging signs of revenue growth during the latter part of the fourth quarter, which we will discuss in a moment.

As I assess my first 90 days with the company, I'm excited to report that we have made significant strides in positioning the business for growth. While there is still a lot of work to be done, I'm confident that the U.S. business has tremendous potential to grow and that the key growth engines are being put in place right now.

I'm pleased to announce that starting this week, we are going to be back on air with a media campaign in a few key test markets. The marketing campaign, which is focused on showing how our Sparkling Water Makers fit into everyday life, tested well with consumers in a handful of similar markets.

More importantly, we are confident that our media campaigns, as part of our overall comprehensive marketing strategy will attract new consumers to our products. The other two marketing growth engines are PR and digital. We have just restructured our portfolio of public relations agency partners to bring fresh initiatives and activations to leverage our exciting content and benefits to the relevant audiences, including opinion leaders.

For example, we are leveraging our strategic relationship with the American Diabetes Association to communicate to the 30 million Americans with diabetes that SodaStream helps them hydrate healthy. We will also bring this news to medical professionals and celebrities with diabetes. The same approach goes for our exciting sustainability benefit. Finally, we restructured our approach to digital and will activate a program to build a community of evangelist consumers' in this online sphere (12:37).

To lead and execute these marketing activities and anchor our brand behind an ownable health and wellness positioning, we bolstered our marketing team and recently hired Emma Froelich-Shea, a world-class marketing executive who joins us from Hain Celestial. Emma started just a few weeks ago, but is quickly learning the business and I am confident she'll make meaningful contributions to the brand.

I'm excited for everyone to see what will be coming on the marketing front over the course of 2016 and beyond. In our last call, I mentioned the importance of improving our execution at retail. We are working with our retail partners to improve our presentation on shelf, including the in-store position, the size, the assortment, and displays.

At the same time, we are working to expand our distribution in appropriate channels, and particularly to make our CO2 exchanges more accessible to the U.S. consumer. To this end, during the fourth quarter, we tested a CO2 home delivery system with UPS in select areas of the Mid-Atlantic, including parts of New Jersey and Pennsylvania, and we plan to roll this – out this service nationally by year-end. This new system offers current and future SodaStream users an easy, consumer-friendly way to purchase and return CO2 cylinders in a few quick steps from the comfort of their home.

With respect to distribution, we are selectively expanding our retail footprint. I'm excited to announce that in the next two weeks, we are launching our test with a national wellness-focused retailer and are optimistic that we will be able to roll out nationally during the course of the year.

And as mentioned in previous calls, we are exploring other means of gas exchange through the drug channel, Do-It-Yourself stores, and others. To help ensure our success at retail, we upgraded and expanded our sales and merchandising teams. We hired a number of seasoned account managers and we doubled the size of our merchandizing organization to assist in this critical task of improving our in-store execution.

Another important growth engine for the U.S. is our product lineup. We're still refining our flavors and adding key flavors, such as the return of Fountain Mist and introducing Caffeine-Free Diet Cola following strong consumer demand. I'm also excited about the upcoming launch of our new green tea flavor, Natural Energy; and above all, our coconut water concentrate. To the best of my knowledge, this is the first such concentrate available and may also be used to prepare still (14:55) coconut water, which is one of the fastest growing segments in the U.S. beverage category.

And to complement our flavor lineup for those consumers who desire a cola fix, we continue to gradually expand availability of our Pepsi partnership, which is now available for sale on Amazon.

Staying on product, during the second half of 2016, we will be launching our new generation sparkling water maker, the Spirit. This machine actually has the snap-lock functionality and a beautiful design at an entry level price. We expect the Spirit to be an important vehicle in taking SodaStream to the next level of household penetration. While we've always cautioned from focusing on revenue per door, considering that we had 2,000 fewer doors in the fourth quarter than in the previous year because of our decision to execute – to exit, sorry, a few retailers, it is worth noting that our revenue per door actually increased double digits at our top-three customers during Q4. In fact, our top customers saw machine sales increase over 150% in the month of December alone.

To recap, the main engines of our turnaround and future growth are: repositioning the brand around health and wellness, supported by an integrated marketing campaign, including TV, PR, and digital; expanding distribution into healthy and convenience retailers, as well as increasing CO2 available – availability including home delivery; improving in-store execution, driven by stronger retail relationships and on-the-ground merchandisers; and introducing innovative new flavors in Sparkling Water Makers.

In closing, I believe the prospects for SodaStream in the U.S. are bright, and I am confident we are on the path towards renewed growth.

I look forward to updating you on our progress, and I'll now turn the call over to Henner.

Henner Rinsche - General Manager-Germany/Austria

Thanks, John. The fourth quarter capped a solid year for SodaStream in Western Europe. Sales increased 6% on a constant currency basis. We enjoyed ongoing strength in Germany, Austria, and Switzerland, all three of which grew double-digits during the quarter, while at the same time implementing turnover plans in several other European countries, including France and the Nordics.

Sales in both Germany and Austria have now grown double-digits on a constant currency basis for 16 quarters in a row. This period of remarkable growth is a testament to what's achievable when you listen to consumers and craft a message and marketing campaign that aligns with their needs.

For those of you that are unfamiliar with our brand positioning in these markets, it predominantly centers on convenience. This is what the German consumers told us they value the most. The ability to make great-tasting sparkling water at home and not have to log (17:36) big, bulky bottles back from their local supermarkets.

We incorporated this feedback into what would eventually become our "no logging" (17:44) ad campaign that we tested and then rolled out across TV, print, digital and social, in Germany, Austria, and more recently Switzerland with great success. Along with great in-store execution, it's what's been driving growth in these markets in the past four years, including the fourth quarter of 2015; and Sparkling Water Makers and gas refills, they are both up double-digits.

We are now working to take some of these learnings and deploy them more broadly in Europe. Let me take a minute to discuss some key European markets. We believe that the blueprint that we created for success in Germany, Austria, and Switzerland will help drive the business forward in other key markets. So what does that mean? Well, first we need to start by really getting to know the consumers, asking what they want and listening to their answers and then tailoring our marketing efforts to focus our messaging on those areas.

In the Nordics, our initial consumer research indicates that consumers buy into the idea that a SodaStream machine could make their lives easier if they can avoid the hassle of dragging bottles from the stores to their homes. This benefit gives SodaStream a legitimate right to be placed in the kitchen counter as an everyday product.

Based on this insight, the Nordics team has adjusted its strategic approach, has incorporated best practices from Germany, Austria and Switzerland into the new marketing concept. The pre-tested 2D (19:14) communication and the revised product portfolio aims to grow the consumer base in the Nordic countries. Therefore we are confident that we can turn around the previously declining Nordics business.

Similarly, we are working to reaccelerate growth in France by developing more targeted, focused, consumer messaging, like we've done successfully in Germany and Switzerland. Meanwhile, gas sales in France remain positive, growing 12% year-on-year. In 2016, I am confident that gas sales will continue to grow and that Sparkling Water Maker sales (19:49) will return to positive territory as the accumulated inventories from the previous year have largely cleared and our new messaging gains further traction.

As you can see, Europe continues to be a combination of highly successful and challenging markets, which (20:07) we are working to turnaround. We are focused on listening to the consumer, which will enable us to continue to drive the business forward in Germany, Austria, and Switzerland. While these geographies are strong in their own right, they also serve as great learning grounds for us. We are consistently taking these successes and working to translate them to other countries. There is a lot of opportunity in Europe as we work to drive more consistent growth across the region.

With that, I'll turn it back to Daniel for his closing comments.

Daniel Birnbaum - Chief Executive Officer & Director

Thank you, Henner and thank you, John. Continuing the discussion of our regional performances, in Asia-Pacific our fourth quarter results were driven primarily by softness in machine sales in Australia, where we began repositioning SodaStream as a Sparkling Water brand, late last year. Importantly, gas results were up low single-digits there, indicating that consumers continue to use our system on a consistent basis, a trend that we expect will accelerate following the launch of our new flavor line this month.

We also continued to face headwinds from the ongoing issues with our Korean distributor that we discussed last quarter, while Japan, which is a small but important market, grew strong double digits on a constant currency basis.

Finally, in CEMEA, double-digit growth in Israel and South Africa on a constant currency basis more than offset a decline in sales through our Czech distributor. While we – while selling to the Czech Republic has remained challenging, gas sell-out continues to increase double digits, a strong indication that our user base in that country remains active.

With respect to our future performance, we want to share some thoughts about the upcoming year. At this point, we expect revenue to be roughly flat compared to 2015. With the consolidation of our production base into our new facility in Lehavim completed, we're forecasting a 200 basis point lift in gross margins in 2016 compared to Q4's run rate of 48%, in line with our previous expectations.

For 2016, we will be increasing A&P as a percentage of revenue by roughly 150 basis points versus 2015 to support broader awareness of our brand repositioning and drive consumer demand for our enhanced portfolio of products.

As a reminder, 2015 A&P was at historically low levels as we held back spending while we tested and refined our marketing message. While operating income, excluding restructuring charges will be similar to 2015 levels, net income will be lower due to the fact that we will not repeat the $6 million financial income gain from currency hedging that we recorded in the first quarter of 2015.

Excluding this benefit, net income is projected to be approximately flat year-over-year. CapEx for 2016 is expected to be approximately $25 million compared to $54 million in 2015, and G&A is expected to increase to approximately $20 million, up from $17 million this past year. And as I mentioned earlier, we expect to generate positive free cash flow in 2016.

Before we open the call up to questions, I want to thank our dedicated employees for their hard work and commitment this past year. Thanks to your efforts, we're tracking towards the goals we laid out in our growth plan and I'm confident we will build on our early accomplishments to create a stronger, more profitable company in the years ahead.

Operator, we are now ready for questions.

Question-and-Answer Session

Operator

Thank you sir. And we will take our first question from Tony Brenner with ROTH Capital Partners.

Anton Joseph Brenner - ROTH Capital Partners LLC

Thank you. I am wondering, as you introduce the new line of flavors in Europe in several key markets in 2016, what kind of disruption there will be as you work through existing retail inventories and clear those out in preparation for that change?

Daniel Birnbaum - Chief Executive Officer & Director

Hi Tony, good morning. I think based on our experience and learning so far in the markets we have already launched the new flavors, which represents probably about 60% of our flavor revenue globally, we expect minimal disruption in the transition, particularly in Europe. So this is not something that we should allot for in a material way.

Anton Joseph Brenner - ROTH Capital Partners LLC

Okay. And when will that change take place? When will those flavors be introduced in Western Europe?

Daniel Birnbaum - Chief Executive Officer & Director

Well, let's see. We have different markets and each one is in a different quarter. Australia – by the way, global the (25:26) Australia is happening right now as we speak. In the larger central European markets, Germany, Swiss, Australia, we are expecting that in Q4 of 2016 rolling into Q1 of 2017. It will be a gradual rollout and we have to still determine the exact timing. I'll give you an example. In France for example, we rolled out in stages, where we rolled out the waters ahead of the classics. So we did it in two stages. And we are still learning from that to try to develop the most optimal phasing of the new flavors and the phase-out of the older flavors.

Anton Joseph Brenner - ROTH Capital Partners LLC

Okay. In your projection of flat revenues for the year, what assumption is built into that for negative currency?

Daniel Erdreich - Chief Financial Officer

Hi, Tony, it's Danny.

Anton Joseph Brenner - ROTH Capital Partners LLC

Hi, Danny.

Daniel Erdreich - Chief Financial Officer

Hi. We're coming off – basically we are – in starting (26:22) the year we are coming off two years of decline, 9% decline in 2014, 7% decline currency-neutral in 2016. So basically we are right now aiming at – to possible flattening (26:38) revenue. As we move forward during the year and we see results of the turnaround and growth in various markets, we may revise this assumption. But that's for now the basic assumption that we are coming out with.

Anton Joseph Brenner - ROTH Capital Partners LLC

So flat. And I'm – I guess I'm a little puzzled as to why, given an expected rebound in the U.S. and expected increase in Europe, why you are projecting flat revenues for the year?

Daniel Birnbaum - Chief Executive Officer & Director

Well, you know it's still early in the growth plan and it's early in the year and we're coming out of a kind of a rough patch. The last two years have been down years, and so – while we are very confident about the growth potential and the success that we have here in this plan, we're on track. It's still early to put big numbers ahead of us until we are more confident. We see that there is actual traction there, but this has no reflection on our lack of confidence in the plan.

Anton Joseph Brenner - ROTH Capital Partners LLC

Okay. Thank you.

Operator : We will take our next question from Greg McKinley with Dougherty & Company.

Gregory J. McKinley - Dougherty & Co. LLC

Yeah. Thank you. I wonder if you could just recap for us in Europe, both for the fiscal year as well as Q4, what were your revenues on a – what was your revenue growth on a – or contraction on a constant currency basis? I'd be interested in understanding how that – excluding currency, impacts how that trend changed during the course of the year?

And then, can you also give us some color in Europe on units in Q4?

Daniel Birnbaum - Chief Executive Officer & Director

Okay. I'll ask Henner to take that.

Henner Rinsche - General Manager-Germany/Austria

So, in Europe, on a constant currency basis revenue was up pretty similarly in high single-digits in Q4 and in total year. In terms of the units, we've actually had in both total year and quarter four a double-digit decline on Sparkling Water Makers and a double-digit growth on gas refills and a decline on flavors. So basically the fourth quarter and the total year were somewhat similar with a little bit of an upward trend in fourth quarter.

Gregory J. McKinley - Dougherty & Co. LLC

Okay. But even with that you're still at high single-digit constant currency revenue growth?

Henner Rinsche - General Manager-Germany/Austria

Yes.

Gregory J. McKinley - Dougherty & Co. LLC

Okay. And then, as you think about your cost structure for 2016 – I know you talked about advertising and promotional spending increasing, but with the different size revenue base and then what have been expected (29:54) 24 months ago, do we feel that our cost structure, be it G&A or sales and marketing, are there pockets there for – belt-tightening opportunities there that the company hasn't yet executed on?

Henner Rinsche - General Manager-Germany/Austria

Greg, if I – we had – actually, we do expect some additional savings in G&A and distribution and selling expenses, but against this we are increasing, as Daniel said by 160 basis points the A&P the Sparkling Kits (30:37) revenue for next year. So these two will balance off one another, the savings on the G&A and selling with the additional marketing. As for gross margin, eventually given all the components, we expect a small increase overall to about 50% and this will be a 40% basis point increase versus the overall total yields (31:08) gross margins and with – given the currencies, it's a reflection of additional optimization that we spoke about.

Gregory J. McKinley - Dougherty & Co. LLC

Okay. Thank you.

Operator

And we will take our next question from Akshay Jagdale with Jefferies.

Lubi Kutua - Jefferies LLC

Hey, good morning. This is Lubi filling in for Akshay. I am wondering, could you tell us what the estimated size of your installed base is now, both at the overall company level as well as in the U.S.? And then I have a follow up. Thanks.

Henner Rinsche - General Manager-Germany/Austria

Well, our estimated number globally is around 9 million users, and in the U.S. it's probably around 1.25 million households.

Lubi Kutua - Jefferies LLC

Okay. And then in the – for the U.S., could you give us a breakdown of your sales – your unit sales by Sparkling Water Makers, CO2 refills, and flavors?

Henner Rinsche - General Manager-Germany/Austria

Yeah, I'll give it, Akshay. It's – Sparkling Water Makers were 115,000 in Q4, gas refills 1,125,000, and flavors were 1,229,000.

Lubi Kutua - Jefferies LLC

Thank you. And then just lastly, so it seems like soda makers sales – unit sales went down sort of across the board, yet CO2 sales – unit sales were up, which would imply I think a higher attachment rate or usage per installed maker. So just wondering, do you believe that to be the case, and if so, what do you think is driving that? Thank you.

Daniel Birnbaum - Chief Executive Officer & Director

No, the numbers are right, I mean, gas numbers are up 7% – almost 7.5%, but I don't think it's a reflection in higher attachment rates. Let's remember that most of our consumption globally is for sparkling water – for plain sparkling water. This is what people drink day in and day out.

So it's a bit early in the U.S. to measure attachment rates, and let's get through this – the curve of the transition and see how the attachment rates look once we're already positioned on the new health and wellness with the new product assortments being adopted by consumers.

So, I wouldn't attach the growth in gas as a higher attachment rate. It's just a slightly higher installed base.

Lubi Kutua - Jefferies LLC

Okay. Thank you. I'll pass it on.

Daniel Birnbaum - Chief Executive Officer & Director

Thank you.

Operator : We will take a follow-up question from Greg McKinley with Dougherty & Company.

Gregory J. McKinley - Dougherty & Co. LLC

Yeah. Thank you. I'm wondering if there is any insights you can share with us around how you feel, both distributor and retail partner inventory channel positions here are exiting the holidays, because your balance sheet actually had less inventory on it than I was expecting. So I'm curious if you have some perspective on channel level inventories post-holidays and how does that if at all impact how you'd view Q1 revenues in the context of your 2016 guidance?

Daniel Birnbaum - Chief Executive Officer & Director

Okay, thanks. First of all, globally we are feeling – well, what we know from our retail inventory status is that retail inventory – pipeline inventory is healthy on SodaStream. And specifically for the U.S., I'll let John comment on the situation over there coming out of the holidays. Go ahead, John.

John K. Sheppard - President, SodaStream USA, Inc.

Oh! Thanks, Greg and thanks, Daniel. Yeah. Coming out of the holiday, I think what we saw was a very good – actually for the holiday season, very good sales, particularly from our top-three customers in the U.S. I think we were up double-digit there. So to Daniel's point, I mean the inventory levels were healthy and are healthy right now. I think post-holiday, we don't see any major changes going forward. We saw good demand and we were able to meet most of that demand. And so, the excitement that we saw there from the holiday season was that, even without media – strong media campaign, we were able to get some pretty good sales going through the system.

Gregory J. McKinley - Dougherty & Co. LLC

Great. Thank you.

Operator

And at this time, it appears there are no further questions at this time. I'd like to turn the call back to our presenters for any additional or closing remarks.

Brendon Frey - Managing Director-Retail, Apparel & Footwear, ICR LLC

Thank you, and thank you all for joining us today. We look forward to seeing many of you at the IHA Show in Chicago early next month, where we will debut our new beautiful entry level Sparkling Water Maker, the Spirit, along with new flavor of – that – they'd be launching in the next couple of months and the new flavors include our coconut water, and our energy, natural energy, and green tea concentrates. Otherwise, we'll speak with you all again when we report our first quarter results in May. Have a great day.

Operator

And ladies and gentlemen, that does conclude today's SodaStream International fourth quarter fiscal 2015 earnings conference call. I'd like thank everyone for their participation. You may now disconnect.

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