SodaStream International's (SODA) CEO Daniel Birnbaum on Q1 2018 Results - Earnings Call Transcript

SodaStream International (NASDAQ:SODA) Q1 2018 Results Earnings Conference Call May 2, 2018 10:30 AM ET

Executives

Brendon Frey - Managing Director, ICR

Daniel Birnbaum - Chief Executive Officer

Daniel Erdreich - Chief Financial Officer

Analysts

Jeff Van Sinderen - B. Riley FBR

Akshay Jagdale - Jefferies

Henner Rinsche - President of Europe

Jecka Glasman - General Manager, USA

Peter Grom - JPMorgan

Pablo Zuanic - SIG

Operator

Good day. My name is Matt, and I will be your conference operator today. At this time, I would like to welcome everyone to the SodaStream International First Quarter Fiscal 2018 Earnings 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. [Operator Instructions] Thank you.

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

Brendon Frey

Thank you, and welcome, everyone. Present on the call today are Daniel Birnbaum, CEO; Daniel Erdreich, CFO; Henner Rinsche, President of Europe; and Jecka Glasman, General Manager of the U.S. Following the prepared remarks, we will open the call up to questions.

Earlier this morning, we filed the 6-K, which includes the press release and financial tables along with a supplemental slide presentation. 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 the 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 be not be considered as an indication for 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 are forward-looking statements made today.

In addition, we may make reference to certain adjusted financial measures. A reconciliation of these adjusted measures to the most directly comparable IFRS 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.

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

Daniel Birnbaum

Thank you, Brendon, and welcome to everyone on the call with us this morning.

The positive momentum we experienced throughout last year carried into 2018 as revenue increased double digit for the ninth consecutive quarter and we achieved record first quarter revenue and profitability.

We are very pleased with our results they further validate that our strategies to expand household penetration and increase the usage continue to grain traction while at the same time, generate significant value for our shareholders.

Our first quarter performance includes a number of highlights that underscore the current strength of our business and reinforce our optimism about SodaStream's long runway for growth.

Starting with the financials, revenue increased 25% to a Q1 record $144 million. FX was an additional tailwind on top of it was 14% currency mutual growth we experienced during the quarter.

Growth was broad based, as our three largest regions increased double digits year-over-year with Western Europe up 22%, the Americas up 39%, and Asia Pacific up 28%, while CEMEA was down 5%. As a reminder, we sold our professional business which had been included in last year CEMEA's results. So excluding professionals, Q1 2017 contribution, CEMEA revenue also increased by 7%.

In terms of product performance, gas refill units grew 9% to $8.3 million, also a Q1 record. Flavor unit sales return to growth increasing 4% to $5.4 million as the launch of few options, I felt we ignite demand for this category. Sparkling water maker units were down 2% to $758,000, and up 9% excluding France. As a reminder, we acquired our French distributor in early February which temporarily muddied comparison and disrupted our selling.

Meanwhile, our gross margins increased 250 basis points to 55.2%, the highest level in six years and operating margins improves 100 basis points at 14.8%. EPS increased 23% to $0.81 and we ended the first quarter with $148 million in cash after spending $22 million on the purchase of our French distributor.

Looking at our regions. Starting in Western Europe, revenue increased 22% to $85 million in the first quarter, driven by the combination of unit growth and FX gains. Highlights from the quarter include Germany's 25th consecutive quarter of double digit growth, meaningful progress increasing our household penetration in Holland and solid gas refill sales across the region.

As mentioned the transition to direct distribution in France temporarily disrupted our selling early in 2018, but we're confident that we can accelerate growth in the strategically important market under the direction of our European leadership team.

The Americas was our fastest growing region with revenue increasing 39% to $36 million, as both Canada and the U.S. had a very strong quarter.

Sales in Canada were up 44% driven by exceptional growth in sparkling water makers, gas refills and flavors. This market has been on fire for a year and showing no sign of letting up.

Performance in the U.S. was also strong with a 33% increase in revenue. For the second consecutive quarter, sparkling water maker units sold and increased 39% this quarter with an equally high sell out increase compared to last year. At the same time, gas unit sales were up 5%. Finally, we're encouraged to see are flavor business in the U.S. up 39% year-over-year, driven mainly by the positive response to the launch of food trucks, our unsweetened naturally flavored essence that are very on trend with the growing popularity of flavored sparkling water.

Sales in the U.S. were also benefiting from improved retail execution including expanding our presence with existing accounts. For example at Bed Bath and beyond, we've improved the acceptability of gas refills by moving them from behind the customer service desk to a more prominent display within the store. At the same time, we continue to expand our direct-to-consumer home delivery operations and will be launching our new e-commerce platform in the coming weeks. With this infrastructure in place, we'll be able to build and hold more robust direct business in the United States.

Now the Asia Pacific, quarterly sales increased 28%, led by ongoing strength in Australia and Japan, two of our best performing markets over the past year. The meaningful increase in household penetration we achieved in Australia during 2017 is translating into strong gains for our consumables business. In Japan, sparkling water maker sales were particularly strong indicating that our strategies aimed at acquiring new users are working.

In summary, it has been a strong start to 2018. We're continuing to execute the product, distribution and marketing strategies that have fueled our success over the past couple of years. While we have made meaningful progress increasing household penetration and usage of our home carbonation system in many markets, here in still a long runway for growth. I'm confident that we're well positioned to capitalize on our opportunity in all markets to drive near and long term growth.

Over the remainder of this year, our focus is on generating consumer demand; one, new product introductions that further enhance the user experience; two, retail expansion to be more easily accessible to our consumers; and three, building brands heat to drive purchase and user loyalty.

Starting with product introductions. Our automatic one touch machine is currently in production and will roll out to retail later this quarter. A healthier flavor options such as Nature, Fruit Drops and infused are in various stages of rollout and are a powerful lineup to grow the flavored sparkling water category. And new carbonation bottles including dishwasher safe and reusable to go bottles which provide our users with additional usage opportunities and convenience are also rolling out during the course of this year.

On retail expansion, as we recognize the importance of accessibility and availability of our product-to-consumers, we're committed to constantly increase distribution with key retailers and are weeks away from roll out in the U.S. of our new advanced direct-to-consumer platform which will then gradually roll out to all markets.

Lastly, we will continue to build the brand key and brand relevancy to memorable marketing such as the most recent iteration of our highly successful April Fools' campaign SodaSoak Reza Farahan and The Mountain, a campaign in partnership with Bed Bath and Beyond which has already generated over 20 million views since its depute last month.

Staying on point with our environmental message is a major focus for the company as our home carbonation system is becoming increasingly more relevant to the global solution of a battle free world. On this point, we recently heard about micro plastics as an impossible global hazard related primarily to single use plastic bottles. On March 14, the Guardian, followed by BBC reported that "The World Health Organization launches health review after micro plastics found in 90% of bottled water" Well we don't let have all the fact, this new development is yet another example of the magnitude and global importance of the SodaStream system, which provides a unique alternative to single use plastic bottles. We are very excited to be the go to brand for hydration that is healthy for people and healthy for our planet.

Now that our outlook. Based on our first quarter results we're raising our full year guidance. For 2018, we're now forecasting revenue to grow approximately 15% compared to 2017, up from our previous forecast of approximately 12% and gross margin is now expected to be approximately 55%. As a result, we are now projecting operating income to increase approximately 15% and diluted earnings per share to increase approximately 8% over 2017 level. Excluding the increase in share based payment expense in 2018 compared to 2017, operating income is now projected to increase approximately 28% and diluted earnings per share are projected to increase approximately 22%.

To conclude, I am very pleased with our recent performance in current momentum. That said, our focus is firmly on the future and continuing to deliver profitable growth and increase shareholder value over the long term.

With that we're now ready to take questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question will come from Jeff Van Sinderen with B. Riley FBR.

Jeff Van Sinderen

Good morning. Congratulations on terrific results. One thing we're just wondering about is on the acquisition of the French distributor transition, I guess how should we think about unit sales there going forward in terms of the comparison and is there any more detail maybe you can give us and kind of what transpired there, maybe the breakout of unit impact from that transition in Q1?

Daniel Birnbaum

Okay. I'll ask Dannie to address those issues. Go ahead Dannie.

Daniel Erdreich

Okay. Jeff, we indicated in the last call that we expect French business to continue approximately $10 billion to revenue and will not have a significant impact on operating income. In this sense, the overall quality volume of machine that will be sold be year will be more or less the same as last year. We don't plan on high growth in this market in terms of volumes this year. And it will be in Europe's stabilization and preparing the market for future growth and future profits. I think this is a little bit tighter of the French business here.

Jeff Van Sinderen

Okay, fair enough. And then on the, if you see the one touch roll out and they said you're in production now, how should we think about that in terms of geographic roll out? I guess any other color on that roll out would be helpful?

Daniel Birnbaum

Yeah, that rollout is starting in the U.S. and will gradually introduce it to other markets. Most markets will get, the deflection of Germany, Austria they won't get it this year, they'll get it early next year, but will be rolling out as capacity increases and as we learn from the early feedback, but U.S. is first to get it.

Jeff Van Sinderen

Okay. And I think you said the marketing as you did around April flows with success, so we thought it was terrific. We just wondering any more color I guess on I think the success of some of your recent marketing campaigns would be helpful?

Daniel Birnbaum

Yeah, by the way we take a very measured approach to our marketing. We test everything almost everything before we hear it, if we spend media on it. On April 4, we did not spend media, very tiny exceptions and the success was remarkable, we had 20 million views of the video. And when you combine the impressions of all the PR we had on this campaign, it exceeds 5 billion. So that's an exceptionally successful campaign. By the way we were ranked among the top five April 4th campaigns in almost every major media outlet in the world. So that's an example, great success.

Another example with the Jillian Michaels campaign it's running in U.S. almost regularly now with very few weeks off air and that's proven to be also very successful campaign. In Canada, we have another campaign which is focused also on health and wellness and it's a different campaign and it's also proving to be very successful. In Germany, another European markets are focuses more on convenience elements of our product, 'Time To Say Good Bye' is the name of the campaign, we're running in Germany and elsewhere and the meaning is time to say goodbye to your single use plastic bottles. If we see our campaigns are responding well, we'll pull of course and if you see it, this responding will step on it.

Jeff Van Sinderen

Okay, very good. Thank you for taking my questions and continued success.

Daniel Birnbaum

Thank you.

Operator

And we will now here from Akshay Jagdale with Jefferies.

Akshay Jagdale

Hi, good morning. Can you hear me?

Daniel Birnbaum

Good morning, Akshay.

Akshay Jagdale

Good morning. First question - oh great. First question is regarding your guidance and FX, so can you - how did FX spare in the quarter relative to your expectations and what are your expectations for FX contribution to the top line now versus last quarter?

Daniel Birnbaum

Okay. Very important question, because it is in the impact. Dan, why don't you give some color on this?

Daniel Erdreich

Sure. High actually. When we provided a breakdown of the contribution of FX to revenue this quarter, it was - we grew 25% and the FX contributed 11% to this, 14% was actually real growth. We indicated when gave our guidance large time, we said we're using exchange rates of one 1.20 euros, dollars to euro for the year, as another significant currencies is Israeli shekels to which we indicated if we are using 3.5 Israeli shekels to dollar. Our guidance right now is based on the same assumptions. So moving from our former guidance to this one, there is another impact, additional impact resulting from FX.

Overall, if you do the math, our breakdown revenue just gives an indication on this, 50% of our revenue is denominated in euros, 20% U.S. dollar and 30% to other currency. If you calculate based on this, you will see that overall with this exchange rate, because usual FX is about $25 million to our growth this year. This comes - this included in an overall guidance increase of $82 million for the year. So there is some portion of FX included here but the vast majority is just real business expansion.

Akshay Jagdale

That's extremely helpful and thanks for all the detail there. So in other words, the change - the increase in your guidance on the top line is related to a real growth, correct?

Daniel Erdreich

Correct.

Akshay Jagdale

Okay. And then I just wanted to ask about the soda maker volumes right, obviously even it's rather, so they were down about 2%, I know you mention France, excluding France they were up about I think 9%. So it's your first time you've seen a decline since I think the fourth quarter of 2015. So can you in your top three regions, can you just talk through a little bit the takeaway trend that you're seeing and I know at times there's a difference between shipments and takeaway. So if you can give us some color on your top three markets or top four markets on takeaways and sort of when we should see the gap between takeaways and shipments narrow? That would be great?

Daniel Birnbaum

We are - I think it's important to understand that excluding France is an important element here because last year the distributor bought about 50% of their annual purchases of machines from us in Q1 and this year they didn't, because they knew that the deal with them, we did close a deal in early February, they just didn't buy from us, knowing that they would be selling it back to us and financing it so. So that had a major impact and that's why that's the main reason why we would exclude France from the calculations. And when you do that, you get a 9% growth of sparkling water makers. So there's not of decline as we like to compare it.

If you look at the key markets, then you see the U.S. is up 39% and the other markets we don't report selectively, but there are some markets they did really well and there's some markets that didn't do so grate on machines. Canada was great, Japan was great and Australia was strong. Germany had a relatively weak quarter, a slight decline in machine sales year versus year which can drag down the overall averages. But that's really timing driven. There's nothing going on fundamentally there and we see the growth, the tremendous growth of gas consumption in Germany and in the other markets where the machine volume has been very, very high. So there's a lot of timing issues going on here.

I'll also remind that Q1 is our softest machine quarter. It's the quarter we do not invest strongly in machine volume. So as we guided low double-digits for machines going into the year, actually for all product categories, we still stand by that guidance and I'd expect to see acceleration of machine growth in income quarters.

Akshay Jagdale

That's helpful. But what is your read on French consumption or takeaway. So I understand that there's this transition in their distribution model, but I believe there's some data that you can access and you probably have more than what we can access, but what the consumption trends in France specifically?

Daniel Birnbaum

Yeah, for that I would ask Henner Rinsche should take - give you some color. And I'll just say that France is a strategic market with tremendous potential and we're putting in place the fundamentals. Henner will speak about it, but the consumption is great, the gas is solid. We just need to execute well which is really the reason we bought the business. So Henner, why don't you give some color on what's going on in France?

Henner Rinsche

Sure. Hi, Akshay. So in France, sell out or takeaway as you call it in quarter one was not really great, it was doing fine on gas refills were sell out or takeaway was flex year-on-year in quarter one. But we did have double-digit decline in France in Q1 on sparkling water makers and on flavors which is of course due to the fact that nobody invested any money in the sales actives or marketing activities during that transition.

So in the meantime, we have made very good progress first of all, in terms of the organization. So we put in place a new management team. We have at France a new General Manager, a new Head of Sales and new Head of Finance and New Head of Human Resources. And France, now we put into the President of Europe, so I am taking over that market now. And then we have had a very productive meetings with the key French retailers where we have agreed to strongly increased in-store presence in France in the coming quarters which means addition and not prominent sales and floor space compared to year before.

And then of course our marketing programs, our new advertising and communication contain as being thoroughly quantitatively tested with French consumers in 2018 with a strong results and it actually went live yesterday on May 1. So overall, we believe that we have potential to substantially increase the household penetration in France, which today stands at 5% and we think that over the next couple of years, we can take that to double-digits like in a couple of other European countries.

Akshay Jagdale

That's extreme helpful. One last question, which is on the U.S. business, I know every quarter you give us some additional details, can you provide those for us in terms of sales, soda maker units and CO2 cylinder as well as flavor numbers for the U.S. or North America?

Daniel Birnbaum

Sure. We have Jecka on call, So, I'll ask, she'd provide some color on what's going on in the U.S.

Jecka Glasman

Thanks, Daniel. Yeah, so the U.S. business is as Daniel said is building the momentum and growing the momentum and we see an excellent result in machine sales both from sell-in and sell-out perspective. So we're seeing approximately 40% increase compared to last year on the machine sales.

Akshay Jagdale

And how did CO2 cylinder refill sales do this quarter? And what were the sales in total from the U.S. business?

Jecka Glasman

So, on the resale side, we see a good trend of pick up. The sell-out figures are about 10% up compared to last year and we expect to continue and see a double-digit growth in gas sell numbers throughout the year. The sell-in and was 5% as was mentioned earlier and the 5 points difference is mainly related to timing issues of shipments et cetera. Flavors, as we said, flavors are up in the U.S. from a sell-in is 40% so this is a great indication of the improvement and mostly driven by the food drops that are perceived extremely well in the market.

From an overall revenue standpoint, we are looking where we finish the first quarter roughly 33% over last year numbers.

Akshay Jagdale

Great, thank you, I pass it on. I appreciate it.

Daniel Erdreich

Actually, I want to give you the numbers. Machine sales were close to 100,000 in the quarter, and both gas refills and flavor were about 1.2 million this quarter.

Akshay Jagdale

Perfect. Thank you very much. Appreciate it.

Daniel Birnbaum

Thank you, Akshay.

Operator

[Operator Instructions] We will now hear from Peter Grom with JPMorgan.

Peter Grom

Hey, good morning, everyone.

Daniel Birnbaum

Hi Peter.

Peter Grom

Hey, I just hoping you could break out the increasing gross margin guidance, so raw material has got a little more since you last reported, so I am just hoping some you could break out what other key offsets here?

Daniel Erdreich

Sure. Yeah. Hi, Peter. Well, we've guided last time 54.5% operating profit. We indicated that France would contribute 100% gross margin and now we raise this to 55% gross margin there going forward. Basically just continued better performance that we're leveraging our fixed and base in our production side. We have some contributed of FX that be included in the guidance and we continue to develop and further and more profitable machines, we produce better machines with better functionality but its lower production cost. This is an ongoing thing and obviously contributes and it makes us to raise our gross margin guidance.

Peter Grom

Okay. Great. Thanks, guys. Congrats.

Operator

And for our final question, we'll hear from Pablo Zuanic with SIG.

Pablo Zuanic

Good morning, everyone. I had few questions. First on - it seems the price needs FX an adjusting foot prints was going significant compared to other quarters are maybe or not making adjustments, so if you can comment on that? Your dollars are sparking, other units were up 9%, France down 2% including France, but [indiscernible] say for so make it revenues are consumables. And the reason I say that is consumer revenues up 27% but units that are 7% globally right that's a 20% price mix effect and typically has been a lot less than that. I'm sure franchise you have to take place into that, can you and explain, was that a price hick or something or am I doing something wrong? Thanks.

Daniel Birnbaum

Okay. Hi, Pablo, you came across a little bit but if I understood your question correctly you were asking about the gas between…

Pablo Zuanic

Yeah. I'm sorry, Daniel, that was something different - am sorry. I understand that I'm trying to make adjustment for FX for France, but even if I made those adjustments, it seems to me that the price mix this quarter was a lot more than in previous quarter. So the simple question is did you take pricing up or was there a mix effect in machines or do you think prices up on gas, just trying to understand that?

And the reason I asked that is for example, consumable revenues were up 27%, consumable unit went up 7% right, that's almost a 20% difference and we haven't seen that before. I'm sure the French who explains about it, but if you can use some context to that. I mean if you just give us you gave a number adjusted for France for units for machines units, maybe you can do it for receivable, some for revenue by projects, if you can? Thanks.

Daniel Birnbaum

Right, right. So really the question is around the gap between the 9% increase in machine excluding France and the 23% increase in revenue on machines excluding France, is that right?

Pablo Zuanic

Right. I mean if you can explain because I suppose the 23% revenue increase in machines, I'd like to know what number - what was a number if you adjust for France, right, obviously it must have been much higher. Right, I mean adjusted, the sparkling units you adjusted, you told us 9% up ex-France, down 2% including France. Revenues for machines are up 23% of course that includes FX up 23% including France. So ex-France it must be up a lot more. But if I do the same thing for say consumables, your consumable revenues are up of 27% you're consumable units up 7%. It just seems to me that and I could be wrong that there was some pricing that came through machines or mix after making all adjustments in consumables? If you can comment on that I mean I don't know if it's too detail, you can leave it offline?

Daniel Erdreich

Well, I'll let Dannie answer it.

Daniel Birnbaum

I understand there is few - yeah, we can go into more detail offline, but just other general audience understand, FX had a significant impact also on the gap between revenue of the product versus the unit count, so it's very significant. The other thing is mix between consumables and machines where the mix was favorable this quarter in favor of consumables. Consumable this quarter were 64% of total revenue and last year were 62%. So that's a driver for increased gross margin.

And the other thing is the mix within the machine category, Daniel mentioned in the previous question that we are focused, we are making sure to maintain profitability and even enhance profitability on our machines segments and we're not allowing ourselves to roll to low cost and low margin machines. We want to generate profit on the machines which we know contribute to our usage in loyalty and with that profit, we generate a higher gross margin and we can invest more in marketing, if fuel the continual growth on the business

So there's two mixes going on, one between machines and consumables the other is within the category of machines. And so that the FX affect them that's when we see there's gap in favor of the revenue. Daniel, do gave anything to add to that more specifically?

Daniel Erdreich

Yeah, first just the small correction, Pablo. The increase in volume of gas is 9% not 7% and with regard to France, the impact of France which cause addition revenue, France was very marginal. Also in terms of gas refills, like machines, it wasn't be gas. So it wasn't really France. It's combination of FX, there were some price increases compared to Q1 of last year and market like Germany, the impact in euros, there is an mix impact obviously as Daniel mentioned. So with all these you were able to achieve a yes annual growth rates on both machines and consumables which are higher than the volume growth numbers that I have indicated.

Pablo Zuanic

Follow-up, in terms of profit margin guidance for the year, I suppose that you have factored the fact that you're taking other distribution there, right, because you're obviously went and doubled your higher revenue base and higher EBIT base, because you take quarter distribution spread, but mathematically within lower margins, right. So that was including guidance and if it was not - you are keeping guidance means your underlying margins are even higher.

Daniel Erdreich

Well, obviously we have included in the France data, the new French data within our guidance, so all of this is included.

Pablo Zuanic

I know but what I'm saying, when you gave guidance for 2018 in terms of profit margins, when you gave that in January or February, that are in fact of taking over distribution in France, right or not?

Daniel Erdreich

But we - when we gave our former guidance, it was factored us, again is was marginal.

Pablo Zuanic

Right. Okay. Look I want to move on to more strategic questions but I don't know if I miss here but we can't say that he's stepping down from President of Europe and he's going to be in France, I'm sure I miss that. But the declining machines in Germany, I would say I would call it a bit of a concern right and I think that the quarter consider positives and I'm not trying to harp on something negative but it's a biggest market, we're supposed to go from 7% household penetration to 20%, suppose you expand those, more discounters you have a lot of tailwinds there, yet machines are down. I don't if you can give U.S. more context there and if you can clarify he said he's moving to run France from running Europe? Thanks.

Daniel Erdreich

Pablo, look, I think it's not right way to look at any specific market by measuring what's that congress based on a single quarter second quarter results, I do not know you recall the growth in the machine sales in Q3 of 2017 was 7.5%. And the quarter after have increased 25% in Q4, so there are timing issues related to very, very big and large deals that take place in each of our market and especially in Germany, I can tell you that there are some very significant large folded that are coming through in Germany for a volumes of machine that we didn't see so far. So it's just by nation.

Pablo Zuanic

Alright. The other question on Henner, is he changing positions?

Daniel Birnbaum

No, no. Henner is focusing his attention on France being a strategic market. He is continuing to be the President of Europe. The gentleman who has been running Germany until now [indiscernible] running Germany, Austria which is always been the case is getting additional responsibility for Switzerland. So that the German speaking countries that are under his umbrella and Henner is focusing on Western Europe and typically on France because that's a reflection of the opportunity in France and want his attention in France and West Germany, but he is available and he is living in Germany, and he is coaching and counseling..

Pablo Zuanic

Great. Okay. And just a couple of other ones, so in the U.S. market you're talking about doing a better execution of before and beyond, any common there whether there's potential to open new doors where these cost go to other stores or the focus shouldn't be so much on that?

Daniel Birnbaum

Jecka, Can you address that?

Jecka Glasman

Sure, absolutely. Hi, Pablo. That actually we're doing all of the above basically, so we continue to focus on our meaningful expanded distribution at our current retail partners moving from promotional placement to permanent placement, increasing the floor space, making gas exchange more accessible at various retailers especially specifically at that. And in addition, we are growing or looking to grow our door and retail network looking at groceries, looking at hardware stores, department stores, Costco of course are going back to - Costco will be there. The summer, so there's a lot going on.

Pablo Zuanic

And if I may and if - there is only two more questions. So Daniel, in terms of you're taking over the French business and obviously low to opportunity that on potential. Give us examples of other markets where you have taken over distribution and where things have worked out. It seems to me that in Japan things worked out, in Italy they didn't work out so much. Just give us some context here to think what are going forward? Thanks.

Daniel Birnbaum

No, we actually have a very strong track record of taking over distributors. Canada is one outstanding example. Canada is probably - Canada and Australia are two strongest markets right now with robust growth and trajectory looking forward. With that over several years ago another one is Japan which we actually after it was ran by distributor for three or four years and going nowhere, we took it over and now it has explosive double, triple digit growth.

The Nordics is a little bit difficult because the penetration is quite high there and there's a competitive situation which we actually I believe we did not handle well and we learned from, it is good to have those experiences as well.

So it's mixed there but by and large it's a good path, we know how to take over distributorship and there's no - in our mind we're very confident about France. We know we need to do, we need to invest in the market have a start team in place in traditional products, now don't do when you need to do to grow this market and we will carry I may.

Pablo Zuanic

Good. And the two more, regarding the one touch machine, is that just the U.S. launch this year or do you plan to make global rollout at some point this year also?

Daniel Birnbaum

No, it's going to be a global rollout. We are building up capacity to be able to service other markets. But we want to give the U.S. being at that is such a strategic market in Hungary for innovation, we want to get the first shot as the allocations. As we buildup capacity, we'll be launching it elsewhere, in Canada, in Western European markets, in Australia, I would say that we will have about 90% of our markets will have launched one touch during 2018.

Pablo Zuanic

Okay. And one last one. So Daniel, I'm sorry to ask you again stock compensation, obviously guidance increase there on that front. Are you getting a lot of questions in terms of particularly your stock sales, your options, I guess you're doing a great job running the company, I know maybe running you're performing so well, right, all these 600 options that have been granted to you sold in between $60 and $70 a share price falling on close one country now with these results. Just I think it would help for investors, could you just give us some context and I know it's a bit of a personal question but you are the CEO, you have obviously painted very positive outlook for the company and here we have the CEO divesting most of its equity stakes and options in the company. If you can comment on that. And again sorry for the question but it's something I thought of asking you? Thanks.

Daniel Birnbaum

No, it's okay. Now, Pablo, I'll send you to have a conversation about my portfolio with my wife. But at the end of the day, within three, we don't insider trades, we don't trade on the stock of our own company, that's too sensitive. What we do is we do have 10b5 plan in place well an advance transactions and that's what happened here. We had 10b5 plan for me and other managers and perhaps directors. As a stock was hitting different price threshold, there were transactions that happen. And I'm happy that I still have a nice holding in the company shares right now. I'm very happy for that. I feel bad some of my transactions happened in the past but you can't control them because once you put the 10b5 plan in place you know just change it as you go. So all the transactions happened as part of 10b5 plan and then that's hitting on. I'm happy that I also I bought shares that I win.

In 2017, I bought twice in the open market. Once in June, I believe 20,000 shares and then again in November 8,000 shares and I'm a buyer. So just keep on tracking and you'll see how much I believe in this company.

Pablo Zuanic

Okay. One last one for Dannie. Donnie, so just to be clear the guidance on the stock compensation was increased from 9 million to 12 million, right. But you'll not know exactly a number until after the AGM still after the awards are agreed sometime after the summer. Is that correct or you really know that that's a number 12 million.

Daniel Erdreich

Don't know. That's correct.

Pablo Zuanic

You won't know yet until after the summer, correct?

Daniel Erdreich

Yeah.

Pablo Zuanic

Okay. All right. Thank you very much. Thanks, very helpful.

Daniel Birnbaum

Thanks, Pablo.

Operator

And that does conclude our question-and-answer session for today. I'd now like to turn the call back over to management for any additional or closing remarks.

Daniel Birnbaum

Thanks Matt. I wanted to say thank you everyone for participating in the call this morning. And I look forward to speaking with you and our second quarter call in August. Have a great day.

Operator

And that does conclude our call for today. Thank you for your participation. You may now disconnect.