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SodaStream: A Fly In The Earnings Ointment


  • SodaStream's quarter seemed outstanding.
  • There was, however, a possible fly in the ointment.
  • The fly might be a one-off, but the ointment will require further monitoring.

Source: Company website.

As I was going through SodaStream's (NASDAQ:SODA) Q1 2018 earnings today, the numbers really seemed good. There was a large earnings and revenue beat. There was quite appealing revenue growth (+24.6% year on year). There was growth on consumer refills (CO2, flavors). In terms of revenues, everything seemed to be going gangbusters, with starter kits up 23.1% year on year and consumables up 27.4%. SodaStream also guided up on revenues, operating income and diluted EPS (earnings per share).

Sure, there were a few less interesting bits here and there. For instance:

  • Forex effects added a full $12 million to revenues. So the 24.6% revenue growth was more like +14.1% if we strip the forex effect.
  • France went from using a distributor to direct selling. This can juice up sales a bit, since they're now booked for the full price instead of at wholesale prices. The effect is not disclosed.

Anyway, overall it seemed a pretty solid report. Of course, with SodaStream trading for 26.8x 2018 earnings (after the guidance improvement), SodaStream needed everything to be perfect. That's where the fly in the ointment comes in. Not everything was picture perfect.

The Fly

There was a tiny detail that detracted from the rest of the picture. In the table showing volume changes, we had this (red highlight is mine):

What this means is that SodaStream sold a lower number of Soda machines. Of course, in SodaStream's business, the machines sold are the first step in the funnel. Those machines are the thing that will then require recurring consumable purchases.

Now, this isn't immediately critical. Perhaps it was the result of a one-off effect. I'll explain why.

In the previous quarter, SodaStream starter kits saw a 25.5% increase in units, but just a 26.1% increase in revenues. In this quarter, as we saw above, units

This article was written by

Paulo Santos profile picture

Portuguese independent trader and analyst. I have worked for both sell side (brokerage) and buy side (fund management) institutions. I've been investing professionally for around 30 years.

I have a Marketplace service here on Seeking Alpha called Idea Generator that's focused on deep value, real-time actionable ideas based on valuation and catalysts. The Idea Generator portfolio has beaten the S&P 500 by more than 74% since inception (2015).

I can be reached at paulo.santosATthinkfn.com.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (9)

shortseller 67 Ideas profile picture
As predicted... SODA Got a good neat down today as it rolled over off 90..My Tape read heavily suggests that the last 30 point move in soda was exasperated buy a short squeeze.. Priced to perfection is an understatement.. Kid never buy a one product company.. This FAD stock will become another GPRO / FIT.... 2Billion c'mon try 200 million tops...Short this name..$$$
Federico Cuneo profile picture
All in all it was a very solid report, with huge growth in North America and even growth in the flavors business.
The stock reacted as always, a sell off! We will see the stock move above 100 when summer comes, it is one of the best growth stories in the market.
Federico Cuneo profile picture
Paulo, it was explained in the CC. France in 1Q 2017 bought 50% of their years supply, so they bought a lot of merchandise. In 1Q 2018 it was the opposite, since the distribution business was bought by SodaStream, they did not order or bought very little merchandise.
It was stated that without France soda machines units would have increased 9%
Paulo Santos profile picture
Ok, it was partially one-off due to that as I had speculated (that it was possibly one-off). However, 9% is still a large drop in growth from the previous Q.

Also, if France was selling through the merchandise, it would have made no sense for orders to have collapsed there on the transition. And if it wasn't selling through, then previous numbers were unduly inflated.
shortseller 67 Ideas profile picture
Nice spot.. This name is headed back to 50.00..Bloated Market cap of 2.1 billion.. if they made 100 million a year it would take 20 years to make any money... I am short nice to see it finally cracked.....$$$
Paulo, as per the 6-K the company explains that the deviation is fully explained by France moving from distribution to direct. Ex France machine sales was up 9% y/y in the quarter
Paulo Santos profile picture
Well, that also partially explains the ASP -- direct sales have a "fuller price". But why would distribution to direct impact sales numbers (selling off inventory?)? And +9% is still a large slowdown.
This is a non-article ... they just raised guidance for full year revenue growth (25% increase) so management clearly not concerned
Paulo Santos profile picture
I also included the raised guidance within the article. You can be sure that investors will track those kit numbers, though. But I also talked about why the kit numbers could be one-off.


The guidance was for +15%, not +25%.
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