SodaStream (NASDAQ:SODA) this week announced strong third-quarter earnings that paired accelerating sales growth with increased profitability. The at-home carbonated beverage machine specialist also raised its outlook in response to the healthy demand it is seeing from retailers heading into the holiday season.

Here's a look at how the headline numbers held up against the prior-year quarter:

 Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$140 million

$124 million

13%

Net income

$20 million

$15 million

32%

EPS

$0.87

$0.69

26%

Data source: SodaStream.

What happened this quarter?

SodaStream's revenue and profit momentum continued gaining steam as the company logged increased product sales and higher average selling prices even as costs trended lower. The company saw weaker growth from the U.S. region, but that shift was more than offset by big gains in Western Europe and Asia.

A woman drinks sparkling water from a glass.

Image source: Getty Images.

Highlights of the quarter included:

  • Sales growth sped up to a 13% pace from 10% in the second quarter. The improvement was almost entirely due to gains outside of the United States, with especially strong results coming from Germany, Japan, Canada, and Australia.
  • SodaStream sold 8% more sparkling water machines compared to a 35% spike last quarter. Flavor sales continued dropping while carbon dioxide canister refill sales, an important indicator of customer engagement, rose 9%.
  • Gross profit margin leaped to 53.5% of sales from 51.8% due to a rising sales base and increased sales of higher priced products.
  • A drop in advertising spending helped push operating expenses lower and so operating income improved to 16.5% of sales from 14.9%.
  • Cash flow held steady at $26 million as cash holdings improved to $137 million from $57 million at the start of the year.

What management had to say

"We achieved record profitability in the third quarter fueled by broad based growth in many of our markets combined with significant gross margin expansion," CEO Daniel Birnbaum said in a press release. "Our product, marketing and distribution strategies aimed at building a global sparkling water franchise continued to gain traction during the quarter as evidenced by the increase in gas refill units to an all-time record 8.4 million in the third quarter," he continued.

Birnbaum said that the canister refill sales number was particularly encouraging, since it confirms the company's progress at "expanding household penetration through new customer acquisition and better retention of existing users."

Looking forward

That rising market share likely factored into management's improving expectations for the year. Birnbaum and his team now see sales growing 13% to $536 million in 2017, compared to the high single-digit range they originally predicted back in February.

SodaStream appears set to cash in on those gains, too. Earnings are on pace to rise 40% for the full year to $2.90 per share, which would set an annual record for the company even though sales remain below the high-water mark it set back in 2013. SodaStream may not be selling as many machines and flavorings today, but its business is far more profitable and showing signs of healthy growth as we approach the holiday shopping season.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of SodaStream. The Motley Fool has a disclosure policy.