Sparkling water is in high demand these days, and people seem to enjoy producing it for their own consumption. That's one of the takeaways from beverage machine maker SodaStream's (NASDAQ:SODA) surprisingly strong first-quarter earnings report, which spurred an upgraded full-year outlook on both the top and bottom lines.

More on management's brightening forecast in a moment. First, here's how the latest results stacked up against the prior-year period.

SodaStream earnings: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change


$144 million

$115 million


Net income

$18.6 million

$14.7 million






Data source: SodaStream financial filings.

What happened with SodaStream this quarter?

Revenue growth accelerated from the holiday quarter to again outstrip management's forecast. Sodastream benefited from high global demand for its machines, while continued gains in its canister refill sales showed that existing customers are remaining active users.

Highlights of the quarter included:

  • Sales growth improved to a 25% pace from 20% in the prior quarter. These gains were powered by healthy growth in the U.S., Canada, Germany, and China. Exchange rate shifts also lifted reported results by contributing about $12 million of the $28 million sales increase.
  • SodaStream sold 2% fewer machines during the quarter, which represents a dramatic slowdown from the holiday quarter's 25% spike. However, much of that decline came from a shift in the company's sales model in France. Excluding that country, machine sales were up 9%.
  • Carbon dioxide canister refills rose 9%.
  • Gross profit margin expanded to 55.2% of sales from 52.7%.
  • Marketing spending held steady as a percentage of sales and other expenses rose slightly. As a result, operating income improved to $21 million, or 14.8% of revenue, from $15.9 million, or 13.8% of revenue, a year ago.
  • Operating cash flow dove to $7 million from $29 million, mainly due to an inventory buildup tied to the company's acquisition of its French distributor.

What management had to say

"There were several positive takeaways from our start to the year," CEO Daniel Birnbaum said in a press release. "We delivered our ninth consecutive quarter of double-digit revenue growth, expanded gross margins by 250 basis points, and posted a significant increase in profitability," he continued.

A woman drinks sparkling water.

Image source: Getty Images.

Management also highlighted the shift to a direct sales model in France, which they believe will deliver faster share gains in this large market. "We are very excited by our current momentum and believe we are well positioned to capitalize on the many global growth opportunities," executives summarized.

Looking forward

Management's new 2018 forecast reflects that growing optimism. Birnbaum and his team now see sales rising by about 15%, compared to their prior 12% target. Hitting that upgraded figure would mean an acceleration over last year's expansion pace and the best revenue result since the company started its risky strategic shift away from soda and toward sparkling water in 2015.

Profits should rise at an even faster pace, with operating income now set to jump 15% instead of the 10% that executives first targeted. That growth would translate into an 8% increase in earnings per share rather than the 5% uptick SodaStream had predicted just three months ago.

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