PRMW - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Primo Water Third Quarter 2018 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to Madeleine Kettle [ph].

begin. may You

Unidentified Company Representative

welcome conference and Water's quarter third Good to earnings call. XXXX afternoon, Primo

call are Time. By On Executive me approximately that with the today afternoon this David have the at Chief went should out Officer; pm Matt Mills, Financial everyone Officer. Eastern now, X:XX accessed release and Chief Sheehan,

will www.primowater.com. the portion of replay Primo If you press available today's and Relations received be is release, it webcast, website company's Investor at This the have not is call being available website. on on Water's a

meaning Before actual forward-looking that in we and laws management forward-looking results these financial remind questions. statements, considered cause begin, we such of regarding statements factors would from regulations the could statements and to response like to statements, the Many the to everyone forward-looking applicable may guidance, materially forward-looking be The contain Water and securities prepared additional press differ now statements. your we make SEC. documents obligation Primo remarks forward-looking Water this no their Primo them. should assurance included to section including Matt of can and in I'd And afternoon the give issued that files encourage like the to over in And the to carefully assumes CEO, the turn Sheehan. call statements with update on read Water's no release We participants all Primo accuracy. within to

Matthew Sheehan

our quarterly an afternoon, Good joining and and to thank results Madeleine. everyone, review on for Thanks, our you update business. us

provide which of our believe David an on initiatives. then continued provide on detail our matter, adjusted will And believe as on Canada. we across you will results issues more a a explanation well the we guidance. detailed an For of what give update is the long-term -- some update summary the will to the U.S. with quarter and EBITDA; as provide quarter; Refill operational of our a upside, be call growth update today, of impacted I the exciting water financial short-term what tap which finally,

brief of quarterly a with our begin results. Let's overview

our million in at what and $XX.X First, were is by decline temporary Dispensers, in results line with both we better-than-expected sales Exchange a offset Refill. by we in expectations believe led

led growth were Florida everyday of the as of such states that occurred the XXXX. tough first once a XX.X% that in compared to Texas. again yet quarter growth for X.X% of efforts, yet will U.S. actually another prior X.X% unit based sales inflection our promotion Exchange, another still impressive growth household and and in significant same-store Secondly, heavy-volume the year year drive in due strong comp July marking posted same-store the accelerated creation by an to in less August in the of marketing on unit and half rate the XX%, to successful facing greater activation prior when September's as was but the hurricanes connection. and business

third quarter X% growth. quarter XXth plus unit marked of same-store The consecutive the

headwinds by Third, XX% units created to year by unit compared prior of sales XX% the XXX,XXX recent to over the led despite increased dispenser environment. the tariff sell-through growth

control outdoor and related Refill. us and given $X in to the uptime when our issue, has The revenue let within compared that coin of was marketing mostly additional was accelerate me QX well as the penetration, business the investments Refill, into With decrease we believe ironically primarily Refill the into prior is million in is approximately the solution year. well future We the $XX.X directly summary to below decrease high-level and this which in insight units. in result a of dive to Lastly, connectivity confidence adjusted EBITDA of results million, as decline growth. issue an future our to made revenue expectations, our household mind, growth

into the details. get Let's

we showed that you second for consumers locations based time, our to XX,XXX At the we the As accretion proposition pricing positive we outdoor that a still pricing significant our look be The alternatives. over to we testing business, of Refill increased a increase pricing we $X.XX Glacier changes. at other of we majority increase, on will coin U.S. in done know, believed price a as the business. specifically a along analysis solid test had with prior the believe and quarter, value the offer at at versus year,

a to primary analyze decline: volume than we data, QX uncovered and believe of of QX expected the drop cause the downtime. with visibility machine higher As a we was lack the we what

also explain. In service increase me efficiency to Let our to steps network. made the Refill optimize we important second some quarter, and

implemented new we system. XX-year-old handheld technology, First, replacing

Roadnet Bear Secondly, returns. we the a able Omnitracs business service we a optimize few to implemented when of technology. these as Using long-term to we things Refill service, pieces technology to were two will cost in bring routing reroute new savings rerouting. significant volume consider believe to which completely frequencies to mind related foundation, still the the

locations the We to Glacier service frequency by that determined the each business majority model believe volume. First, service service equally associated frequencies should machine. regard previous be with rather with of treated than in volume any

service, very many were with predominantly rerouting. an data outdoor Secondly, at was the others, necessary. exposed business With we expanded time looked were apparent. filled that indicating however to those before and as and two bags at coin our cash that That we outdoor issue, locations servicing was execute service of downtime rerouting, decided coin percentage facts, the rerouting of underlying in it the several along coin not a at we small the collection before cash locations,

we real Further, retailer previous the and only calls to frequency schedule on As that increased issue. the time visibility to down machine the have volume, machines, downtime. In visibility historic notice the words, other an consumer not the relied the high-frequency correctly. high masked optimized be we the the without based of issue. down was learn, or or model, frequency as days number a service to historically to machine Without expensive on capped come when we service any operating could Glacier moved

machine to QX X we that mechanical impact affecting action downtime days bill are primary what as to the but In issues. XX And do scheduled machine the malfunctions; we volumes. to confident other event. to we to a of XX% factors: historically impacted our down with historically go XX frequency to jams; words, of be are more arrive coin the on from we as X days learn we as per stats said, down but between to put QX to analysis. times and the context QX, days several Unfortunately, machines the for downtime. the and identified failures; also, have X across service XX each this of average positively down the per machines business. to by that have losing a much can during amount been take revenue approximately other cause until can service. that X All we uncovered close Glacier Let and increased in extended some full year per much time we month coin we Downtime All be outdoor XX believe we of believe as quickly a collector machines significantly estimate that believe in, rerouting bit By unknowingly, a many We normal time. me is not annually. that extending

fix just to that is is plan underway. growth our not fact, capture In lost from but to plan sales. underlying already this the And

immediate two, down plan steps. improve Our two we begun term, steps reduce scheduled key performance; response service long-term the action several one, days continue has and visibility immediate faster increased to and with and already focal taking In have points: time. through

that we to Improved reduced team maintenance on service routes track monitoring. downtime. scheduled directly performance, have allows real performance system Tableau time linked using implemented better First, normal are our a To execution help focused preventative is service we or maintenance. management recently preventative of the software

are field adding bases to roles make new sure covering timely. we all we are Second,

The which in market into demand. can within turnover, technicians, floaters Refill be These vacations, service did first issues we is adding previously business. is Primo's spikes inserted or something cover to a floater

utilize may increase frequency time certain addition, real In ensure in to machine of markets we we have visibility. merchandisers visits until the we

outdoor including to are several directly, there seeing status. taking, we Third, are we improved steps XX,XXX-plus in we already which many coin underway. scheduled allow us To efforts with we all machine mind, are The of the machines. service are into consumers with to technology above testing are results technology already Long-term, September most and more October. that of the cashless installation payment are engage accelerating and of of notifications of nearing will importantly, end start the the

faster the will time notification bring give to We that While modern business, believe visibility reduction demand the machines machines in to will this and technology payment downtime. drive the not methods telemetry are brings real this us that operating. it when will also consumers

time getting root currently As we the installing real the not issues visibility already past. are we into this the cause in technology, we had have that of are

the service technicians a sales, to we payment which today, the have automated we the the if salesforce.com installation with utilizing by coin install XXXX and high-volume time Along be a and have over XXXX, by majority the coin-operated end the In units, all will reduction of we days expect to X,XXX remaining rollout, already in will down will installations prioritizing response potential revenue. and complete and of cashless at them, an to locations as QX time. already are to cycle This lead improved the service developed to the rollout units, installed year-end the X,XXX reducing of to help alerts, price. aggregate of not a machines As the service cover of directly outdoor go service higher sooner. lost

in that at telemetry times. In level since should the Refill flat our business. grown the we piece frequency the and optimized mostly digits. what long-term is to fact, our And acquisition Wal-Mart full believe growth then, the Refill at type of and growth mid-single of low that XXXX, core Culligan similar response business, which declining. of which to our Post-acquisition, of is implemented to We has of be business constantly in was time -- Refill our is this service

business. the fact on of additional in this we not more machines, place Lastly, and compared when for the due core learned that our at time to a economics higher ice. that the acquired selling This will Through of Refill Refill offering provide complexity service lot, volume the put and long-term both is is believe impacted and Combining causes apparent less with was decisions attractive, a ice and we shortly. right we've was our which it time with service will the duration David routes other operation. details small ice those a deliver downtime the significantly back, machines. calls Stepping to benefit it had analysis and assets. each the I are a the be frankly, we Primo ice initiatives will expected for Glacier,

out various However, long-term, the projections. impact reduce the of has business days, much rolled this the spacing believe below just and previously has days in Refill our the the I initiatives sequencing any I that actually could not in certainly better. but been significantly per and, believe upside not have issue uncovered to of XX been downtime, the we XX Glacier historical occurrence. in not from can XX and to X we

we impact of see the in to masking to issue expect positive we downtime -- Finally, quarters. this we expected also a two believe last see was pricing

in recover but a second -- a will XXXX, Refill business I iron of half Refill believe our in this out, technology with half We volume future, near all the it over and could relatively that could of this couple bring business. expect long-term run new to the by on will to new volume with strong XXXX marketing full when mid-single-digit take operating we'll bring the We Refill quarters growth see business us expect as growth we first combined put new the that rate to the of plans on a this business. the

sales; economics; strategies: five second, water; Moving and fourth, of improve grow drive teams. same-store household highly third, on foster our which initiatives, to dispensers penetration; engaged connectivity key our unit are key first, focused to on our fifth, increase

of a just handful are Here notable initiatives.

tariffs, at which look of again demand dispenser a we we As in strength demand will online. even moment. continues, in-store or sell-through saw both a impact discuss of our more sell-through and with detail consumer The Dispensers, we of strong the in

including represents XX% in still initiatives growth, based Amazon. the in our an a on portion was retailers, assortment e-commerce specifically focus quarter small unit on of Our deeper volume across a E-commerce to consumers of our to a level have dispenser will sales, overall their for we at this directly dispenser grow continue shipped a but home. an believe and opportunity to great is elevated

will sell-through of believe While strong. ability impact begin a tariffs, due our which to I of at remains to the water water in end to did slowing program, see free Primo grow with we we households some the the QX moment discuss

with reduce future Additionally, seeking the we Trade we have alternative of filed contrary for for Representative, options the which product could and exemption are U.S. tariff office award, impact. simultaneously

manage We tax to more operating long-term is on continue to the tariffs trade may ways value have and of customer worth believe impact our any investable the highly as investigate we our margins. than

water We sell-through are from we have again program, Heading making the to connectivity. may with to of the confidence they the as increased challenged, also our selling more recommendation into Black due Friday to do in QX, everyday prior retailers benefit but sales. success current be year same water growth our prices

of This Black promotions Memorial both it connect dispenser Wal-Mart. accelerated Exchange program Primo we blade the Exchange value of at a Wal-Mart, the of seen of when in purchased growth. on impact outside and only allows that consumers packages This our all in invest razor at strategy sell-through helps to receive in a Wal-Mart long-term Black with coupon on dispenser or places Exchange, seen Based purchase. have Friday free and and water the at Friday not have consumers, in our the we coupon Day everyday at resulted redeemable Lowe's a Day an instant we of elevates to proposition time to razor at such in dispenser. as bottle have the with Memorial the decided along and IRC trends As success past year-to-date

quarter. create In addition, growth Exchange. unit water experienced to additional during long-term or home unboxing the greater the driving same-store our at consumer receives either Exchange will connection the is we good and believe for coupons Refill during experience, this We the

Wal-Mart in now In addition, Friday exceeding Black the at the saw everyday connectivity is we IRC what promotion.

everyday to have through are XXXX. expanding locations and we strategy about Exchange increase to opportunities with this new growth Exchange IRC drive all signage will CD new in in in Additionally, in conjunction our drives into signage XXXX and this our the growth the only These excitement unit continue believe the signage and, Exchange. business. future completed Wal-Mart investments at rollout Exchange We awareness same-store

several growth have discussed and service initiatives above Refill We in enhancements over earlier. the and technology

into one reasons. for to excited quarter, last the brand are Refill, we brand. one forward Primo mentioned brand we of a moving as in with I'm First, move host us

our testing showed that alone First, brand did drive not Glacier consumer demand.

Glacier our in difference. fact, score XX brand the the a testing, stark XX, In consumer net promoter compared of of is score Primo to

Secondly, growing brands and difficult two is inefficient.

As the brands less razor sense not two blade make expensive much to invest and in model more is does we razor, continue marketing, efficient. simply

the in In charges associated and Glacier value brand, detail. I For David will am transition, in grow a excited to off which brand us it we help the quarter, only walk through not the write believe reasons, certain all more move strategy grow single-brand us but efficiently. these noncash into to will record with of did the connection with

are provide payment methods Second, but adding will real cashless consumers looking visibility into are we modern more performance, as importantly, machine that that for. technology payment time bring noted,

dispenser Many the In payment to brand can connectivity today Refill or at to used unable coin cashless this bring primary readers. of that by event by codes in promotions for a us that operate to cashless Further, to addition, payment, bills drive and cash been decrease one consumers holistic will coin testing and noncash our and single This allows we noncash as the with option and having sales machine reducing the low and past. the consumers the the we shows helps prefer a methods payment in of solution via a major allow the the have greater the Refill provide to technology, do cycle of increases business failure. options cash and method. same-store availability digital business even digits to a water

we two highlighting next red the the value national the at of rollout Lastly, complete screens and over quarters. of video in Refill the the to big sign, Wal-Mart expect addition Refill

test in on we concepts, also video We to signage in our Exchange machines. the continue screens such CD that out rolled as several outdoor points-of-sale

faced Times tap continue Moving here impact New uniquely is business for positioned Jersey, the our families see including over quality homes our key affordable Primo issues, alleviate to with reported. will concerns that believe significant right a as recently to however, in solution schools continue and York quality. term, water we to we positively well our initiatives, trends to be Carolina from in we families backyard Greensboro, The believe in to Newark, increasing New provide long and convenient continue Unfortunately, as North as water their

constantly will tap over quality they flip, we our to country With unfortunately to call As the beyond financial are grow, David turn here issues we said, in for water as far have consumers. results. and are this cover I the that,

David Mills

Thanks, and discuss everyone. results remainder and the then for our third I'll for quarter of good review Matt, outlook financial the our Today, afternoon, the year.

Following available To each press call in net and EBITDA our for is release Matt non-GAAP the of both assist on in investors closing reconciliation do financial of measures. operating issued my included I review, our back A earnings income, turn to which over adjusted are understanding results, this website. adjusted we remarks. afternoon provide and our will

to the results Turning our for quarter.

continue As our our see specifically Matt to on the of positive mentioned, marketing efforts business, impact we Exchange.

dispenser better-than-expected in third in Refill U.S. expectations, with by decline led for million, same-store sales. $XX.X unit accelerated discussed adjusted line For the quarter Exchange that impacted growth another were while of our results quarter Matt sales, were and the Sales in our EBITDA.

despite XX% strong the believe to continues experienced and with are shift sales demand leading that sales to continued dispenser due million, which Consumer the are driving to growth overall quarter and Looking we dispensers drive of fact sell-through our that $XX.X up a the positive strong trend, households to ahead in increase significantly XXXX. XXXX. of units, up up of at expectations water over XX.X% XX% the of This the in XXX,XXX sales, sales segments. over in dispenser timing were demand new We continued demand year-to-date. from our in for Dispenser the Exchange.

Turning to Exchange.

considering consecutive of This in hurricanes the see of sales million in a to quarter, impactful the two impact as U.S. unit growth. accelerated Exchange more the of significant to the the The were is of are strong third impressive which are continued hurricanes more hurricanes than for which than $XX.X same-store same-store unit XX.X%. Overall, the Exchange growth transaction. results the increased driven unit by price We higher initial-purchase Exchange X.X% the growth drove XXXX, XXXX much volume XXXX. per transactions, at quarter

Lastly, was million for detail. in outlined down sales experienced the quarter, primarily driven decrease to the X.X% that we related the in $XX.X Matt Refill the as issue, downtime service in quarter to were volume by

larger was Gross during Wal-Mart primarily compared margin the in prior Turning by for in margin. was overall XX.X% sales implemented to for year. mix the quarter prior the prior in during margin to XX.X% the The dispensers The the the portion tariffs of percentage acceleration year. shift the primarily quarter promotional XX.X% was the decrease the as the as put gross XX.X% place quarter. of was and Exchange a quarter the compared of we XX.X% dispenser activities, everyday of result the in the XX.X% gross is and for compared margin X.X%, Refill a IRCs in overall the quarter. impacted margin quarter product for to up year. that the mix made gross in the to impact sales. customer the margin Exchange Drilling gross into we details, saw was at

in Matt volume and we we As future the return resulting believe will improvements. discussed, the gross margin see

costs SG&A Overall, primarily in sales demonstrating by of decreased for partially business quarter, investments. in $X.X a to for Next, million in the increase promotional marketing SG&A as from our compensation, quarter stock-based an leverage the a continued percent model. due the to $X.X X% was million, and decrease offset

in the quarter full the statement. that as Moving significantly in expense quarter to prior a demonstrating million XXXX interest debt the income result refinancing of rates. was down compared lower came Interest year, for with $X.X $X.X the June the of million of savings

the in Matt totaling last decided This the to Refill. book estimated mentioned call, As to Glacier we on value. value charges resulted discontinue the brand to fair $XX.X our non-cash in quarterly million reduce

While costs flows costs, future covered capital the them seasonal with they to we of associated revolving cash our will usage primarily we of so incur manage rebranding, credit. are plan operating line through and

the Matt a In potential connection $XX million sales of between addition, mentioned, value assets, million operation have book related and annual margins to approximately value. In selling reduce have the estimated of charge we $X a and we of recorded be as ice which million with sale, XX%. the fair will assets and their EBITDA $X.X to non-cash

$XX.X million quarter, share growth For we sales or dispenser XX%. On believe we third investments, primarily volume the a of Adjusted long-term was EBITDA increase year. million to $X.X or $XX.X in net in and the or $X.XX an million net had Also was million the Refill compared earlier. such share made of impacted income diluted as over quarter, the compared $X.X prior prior million mentioned decrease XXXX pricing to Adjusted as have in the proactive we quarter compared a loss year. benefits. $X.XX will comparable that in net income adjusted EBITDA diluted in to the IRC and per basis, million per $XX the of by of $X.X was

our is Now ended quarter let's times outstanding which ratio XXth. the of from of year-end in to end from June times million, million at leverage total At the at cash, $XXX.X X.XX X.XX is down and times, which X.X of debt the over sheet. balance million down XXXX. the quarter, improved turn to the $X.X We end at $XXX.X with

is in million. million, investing from doubled of compared cash flow Looking The while the the more year. free primarily to to at activities second debt the decrease flow, in trust investing cash million $X.X redemption which the as million the used to connection prior than nine due excludes and in impact the quarter first other from additions the securities operations with flows intangible cash activities Free Glacier from flow cash refinancing $XX.X preferred flow of significantly months in statement to $XX.X of for increased $XX.X as Cash year. $XX.X well refinancing. to decreased from cash of the negative million flow the

outlook million sales our of $XXX year. the the to as range will $XXX expect believe million the Turning for remainder business. Dispensers we continue to the now to of We in growth the in Exchange and drive

For Refill, approximately full now the range the of closing shortfall million we to expect adjusted $XX to million. the that, account year will to associated connectivity. and fourth in downtime similar to well million labor third top-line in With takes investments of and the growth largely $XX water the quarter that shortfall over of EBITDA, sell-through technology to the believe reduce dispenser initiatives Refill range estimated into acceleration for of a and through I $X we million be as Matt drive remarks. turn $X call with marketing as will continue to long-term quarter

Matthew Sheehan

for a third busy was The important quarter and quarter us.

show of IRC drive the a very This and growth strong Exchange our of sell-through more continued just growth. we to through model beginning everyday We our Exchange of a Dispensers impact water. long-term also connected will same-store power believe program the that unit shows impressive the to

to technology-driven us Refill service a perspective, technology from the about a excited business. Refill business into learned I'm and a also get lot and We

and to record Overall, across our lights a track thing improving operations, we have and incremental same expand capture entire of here. the very our do drive to plan I'm bright business. excited the and We growth

to continued team, questions. and like of significant consumer, I backs. thank retailers value partners shareholders. our remain employees, loyal drive a business With to at and our we our for ability in support I'd our tailwinds healthy their like and clients investable open the for confident our purpose. very Operator? loyalty Lastly, a have for that, and and core line our industry to consumers, I'd

Operator

question Amit comes Our BMO first of line from Capital Instructions] of Markets. [Operator the Sharma

Your line is now open.

Amit Sharma

afternoon, everyone. Good Hi.

Matthew Sheehan

Hey, Amit.

David Mills

Amit. Hi,

Amit Sharma

Refill Matt, that difficulties at in business something hindsight, think price the do the looked from that just business Or increases? difficult of being before have operated? could too the been you implemented some how was you the in is to see perhaps,

Matthew Sheehan

initiatives have I see -- sequenced our not Frankly we think issue. we better, this underlying our price did Amit. could downtime though,

frankly, we So of could would've we I have done didn't that the see at can't had visibility have though, had we we hindsight them technology In pricing, blip if re-sequenced resequenced, because that. because say the and all. wouldn't before we

hindsight that's So talking though.

Amit Sharma

nice Refill. I make All a credit right. heard right. of to rolling as want that machines And technology know for time the line sure out card to from I perspective, this

those So when offset pricing machines of additional you do locations, the card machines? additional to implement in expect those costs the you outdoor credit take to

Matthew Sheehan

No, back. no. Amit, with upside No, the so -- let me step

just So method. e-payment there's two pieces in a of upside benefit for the cashless consumer payment. There's more the

benefit serve -- today. have we just consumer. that same growth, single-digit seen growth. have with a strategy single to That's the That's drive We pricing low-digit

we chain assumes addition, is an of that increased downtime. In supply though. have which None and more benefit, reduction telemetry increase of pricing

Amit Sharma

of the maybe From the volume the for the margin us And business. deleverage? help much how get pricing that benefit you a much side last on gross up flat quarter? relatively it. Refill perspective How sense Got actually in of from showed of Can the is a of one me. the

David Mills

Yes, Amit, this David. is

volume question. the obviously good a dramatically. impacted margins by Refill, in Yes, So the

As past, in fairly that we business. we've a in the infrastructure talked fixed have

of that significantly So is masked expansion quarter. experienced by as obviously Pricing the volume in impact the the downtime margins. we included we during there, have declines, on obviously

forward, come the margins comes back back future, the at significantly Going we see we better. more fix it, look that to we to to the machines, as this -- and as in downtime expect volume we would issue volume and bring will levels

Matthew Sheehan

I add. mean, I'll just

when can think think we where we close to can that of you we'll in in scratch margins in -- future, that XX% plays the part. I a at A business. relatively about point near big XX volume business, lot be fixed-cost

we gross about business. margins good in that So very feel

Amit Sharma

right? of did say XX,XXX one. that machines pricing, Matt, last taken majority And outdoor the you have

Matthew Sheehan

Yes.

Amit Sharma

have you right is taken, for taken that where you machines ones the the pricing? still a have the Off gallon $X.XX average

Matthew Sheehan

Yes, we it $X.XX. moved only

Amit Sharma

that the my is of number? the right X% But across that competitors, still is number is your that subset locations? you're harmonizing either Right. the will or XX,XXX machines that you take indoor pricing still machines XX,XXX with point right as Or where

Matthew Sheehan

outdoor Right, in at the we're this majority $X.XX. units, only so of up moving Again, approach first those is the XX,XXX that's locations.

As small that's And which optimize we're know, by doing. that and small market. said to you over to we're obviously market we as about going time, start

in the Secondly, indoor but increased our majority separately in we -- indoor have of locations. in pricing QX our here

are those issues. Make But be yes, can will optimizing markets. think $X.XX sure separate of that about that. of so question, Yet, we the outdoor, we clear on percentages I'm to on your small XX,XXX. majority And to go resetting as it the

Amit? got that, You

Amit Sharma

Yes, view the sure increase. average those your wanted price that this to view is going there didn't the to that -- no the for for no, change take quarter I that make pricing in you number machines what your set opportunities were just in happen of on change

Matthew Sheehan

perspective No, got here just pricing to is more attractive Amit, my frankly, us.

done. have knowing of this see think I anymore, we volume, volume don't out all we as -- Without given been a we thought downtime As didn't decline. issue, we've we analysis did that QX, the might came that at we pricing. looked

I'm So will the more that business. be pricing to positive accretive

Amit Sharma

it, Got thank so you much.

Matthew Sheehan

Amit. Thanks,

Operator

Our of line Petusky the next comes Mike Barrington of from question Research.

open. now is line Your

Michael Petusky

questions. A couple of guys. Hey,

everyday the you really going not really promotion had the when do a were now Friday on with but the Black with missed have on something still still table? Wal-Mart? you know explaining strategy Or you do may I that -- successful at I Wal-Mart, year. going Friday Are you are last them to -- So is Black for and to this

Matthew Sheehan

Yes, year, frankly, let's, of is it. Mike, when looked the insights Friday one wait the of Black Black had at we Friday success we last to not till do

pulled everyday across we've in Wal-Mart. So that into an strategy --

which earlier And much so day for do We'd -- don't was promotion had had benefit. year. real the this engine that clearly rather IRCs, was that in wait start which insight year, to we the three the

call that share with publicly. want we Friday But that don't retailers are this a at again water don't Black an a do are planning we didn't we deciding can't wait. everyday helps our IRC year. Does of proposition from when We tactic a so -- drive value get. -- it solution or believe the be be free the And perspective, help? have to event that plans on of that solution consumer water promotional That connected that We I to tactic. what other should they not Wal-Mart connectivity should to

Michael Petusky

absolutely. Yes,

Wal-Mart's event So going it Black other fair? but forward. with you does move do sound like to Friday, or retailers, different animal an just you're as Is that a events

Matthew Sheehan

business. a really was lot awareness Yes, Black but be our into We modeling will for learn we though, want what of how and stores Friday kind with we event purposes. impact, Black everyday magnitude. are make on this we excited I big the a are -- lot don't an -- much what that understand Friday have the of we've to just little a believe drilling sure leaning of I year that Frankly learned at taking into so again. Friday about just more from That careful Black a that

David Mills

just Mike, to add fact. additional and Yes, one

the IRC actually during at is our connectivity what results program Black experienced the of analyze we Wal-Mart, in excess Friday. we As of

So the connectivity either as of what as Dispenser Friday far beyond had together. huge Water we Black the and success

Michael Petusky

in All days? I revelation underperforming you right, locations. on they wonder share the on if Or where news some thoughts few at closing impact? Have guys are you can that just of great. Lowe’s looked you the have then guys the can do that last you comment Okay. And out

Matthew Sheehan

It in we expect an don't way. in performing. any and to We all. those majority impact any point your that any was Canada have meaningful are presence the it in expected to and stores low have in did yet, major of U.S. are, The at not not stores

Michael Petusky

you Okay. I of on opens wouldn't up And then, you the you're cashless the really to fine-tuning mean, wanted bring assume you to that or then but to to up technology that the price if locations sort $X.XX outdoor I Refill this? potentially open $X.XX $X.XX. $X.XX, or not the going

Matthew Sheehan

plan, Our -- frankly, we but not flexibility in our more future that's Mike. the right now, with have might price,

would to frankly, payment planning you get this we more franchise, allow there but and that's perspective. now. we strategy stick right something people flexibility, our some technology If We from welcome It communicate. are will, into if on would you pricing the be does more that in our not the use plan to a future,

David Mills

thing in will other point. one be being versus Mike, machine, credit at increments there And, trying as taken the it $X.XX long card as different model to cash is Yes. at the have price to in this separately a

Michael Petusky

I'll loud, out and this finish thinking with thought. Just

something out if using and incent less credit on me less might cash, card just essentially jams using essentially $X.XX coin you discount or You could but that's and thinking get priced and the coin card the more people avoid just jams, the people you loud. the

Matthew Sheehan

for keep It's thinking talked good idea we've Mike, loud. a about sure. something out

just Keep for benefit but So great, so there for of have cash perspective, idea. a consumer lot it to the not is e-payment from an us, handling great a coming.

Michael Petusky

thanks. right, All

Operator

from Our of Grondahl Mike Securities. next question comes Northland

is Your line open. now

Michael Grondahl

going you're do of around out? kind kind of worked Yes, guys. to kinks When fully arms your you Refill think have, these and,

Matthew Sheehan

Mike, near The was near we're the -- here over the certainly analysis issue the coming QX into pretty end last sure that a weeks of QX, we late and today. sitting into few it. the understand of went lot revelation

So fix say It arms I from time will around knowledge it. perspective, it. some a that take to us our would are

are through are to make those of walked of technology the really going And and It's the respond have QX to to this this the next and through we smart, formula installing ground not by day these of machines. early can aggressive, this That installed in overnight. end will today we're that model technology, to on way but does year. tech we we getting it We're service going already installed be we sure rollout visibility learn gaining frankly, cashless we're our every fully already be we do and happen downtime. we that As we better. innings We're said, us, have going today better. but believe X,XXX the for increased

that work we're going we're it's So fully which better getting know to our that issue, would get pretty we confident optimizing it. day, But out, say and but we this two sure, to QX, is take to single really technology. good at I some every better the but do, use through at we'll for have is rolled and service step that one,

Michael Grondahl

in something know by year-end, said if Can and you revenue a about the you And I of have cashless that you covered, or clarify the don't you'll majority said, revenue. readers just X,XXX a of that? chunk

Matthew Sheehan

right. readers. put in It's be heard locations of X,XXX revenue the a You we the our covered it which telemetry will by majority

Michael Grondahl

of some also then to consumer up automated And kind you service it. testing about of Got alerts and talked the that, notifications. following consumer kind

do I walk explain, alert basically then consumer quicker, just tech down the can gets he you notify Just respond a a when that through mean machine you quicker? to that. a go is guess, somehow and can that machine us and

Matthew Sheehan

Yes, yes.

let picture -- I'm to Mike, and a the pre post for going here, paint So me a second. do little

been X technician now you machine We in you and QX anytime knows, So in it in in down, error Hence into we I'll yesterday's that's happening are Frankly, years. this. is showed time time of alert is had drastic this down something historic it it when saw retailer when until or at QX. to though a the time, for know up. any it we're to visibility telemetry an spiked us an days today, What's cashless XX% that a human and about machine. goes any business we model, down. why of is That's The found out we so with minute excited that why posted from that take doesn't and the difference machine. technology send historic a say where have is on downtime we we did And the not no up went call showed XX we a machine. consumer a only would or

something machine, just as malfunction days about gets alerts going of if possible. knows it, or on call to And as take of a days. so That this the a or triggered fast mean coin to I whether tech it's working that occurs, make sure jam out sensitivity is are that we that I'll it cycle.

And big so that us. for a deal is

pause frankly, impactful me consumer and are so to why that and get technology, understand, how but about I'll you help does positive Let this? we

Michael Grondahl

optimal the that do a you up days three, Like Yes, think to follow-up being you it two, as does. do is of to can go? four? then number realistically, where going And you -- where end

Matthew Sheehan

down The long then of machine and overall sure formula down down. drive you two how times to you that One How preventative many maintenance two things. to occurrences, so formula. have is go it pieces have want make the is, you this stays will

where ropes reduce then sure part machine preventative really to jump we're let's will go go We're a our down. That amount make talking the really, So good. get of let's down, our will is, That's times really strategy are maintenance. of second point when quick. it formula that the is, going two average really, world-class the does And to. on

both sides that So we have do to formula. of

and it If let's you we to machine, down stay to we four for X will a XX as go two average two for per four days, on it it month that's break average of will down, down that, down days half to can the goes second machine. a That's can think it assume three -- to get a happens. down it times, we still times to that four when we think get revenue we a said,

don't is. all excited to to And we like and are so, don't at don't miss And when is this, frankly like upside like that this, this this actually look the little have see. like we we a hiccups, that's we we to -- but we about blip

did in answer business, we to upside days, all can you days that's and we four in always three frankly nor in the ever we short X to projections. been to even that that is, and the take So give that we business think our didn't XX has see that bring

Michael Grondahl

one that's it, And Got helpful. Matt. more,

at it's a Exchange, whether convergence or On sales of XX.X%, obviously those overall Office But closing sales Kmarts strong When You're less, do more Depots. there? see number same-store we the When really converge? the X.X%. accelerating. and really, do numbers

Matthew Sheehan

of a able still would generally seeing lot different good like I in doing predict believe are be sure I to in to some and can. compression continue at ways. I'm We be Mike, retail. to mean, not but there's you're retail, even it Lowe's, they going to I

ago, be compression there's between we've because for those retail can I of in we to a importantly, while grow we So continue this environment gap believe a said, Most always think going to two. as all business to a why perspective. a a It's on locations. about there's We year location be gap number a of our same-store same-store a is going think while we said our efforts from target not for sales. of

David Mills

Yes, Mike, add to that. on and just to

business. you look a it was in Exchange the comp QX, if at So tough

we price the two in purchase initial high-volume the are what hurricanes, the hurricanes And which double really significant we almost through us. and XXXX, Exchange. at an states in of are transactions, for in Florida saw Texas call As strong, growth

-- driving or that was strong made at a really up after But the in time just significantly Black significantly that and of of you impact comp to with QX into units are when business, we go over Friday but XXXX and difficult was, in saw with -- made those event, why and your quarter are initial Exchange, QX I purchase I X%. guess, for delta QX kind think we a come everyday quarter. back transactions. dollars of a saw that third while, year in as the So We higher the think forward line the may XXXX of because you the the this of but see little RC exaggerated going the growth the little

Michael Grondahl

it. Got

Okay, guys. thank you,

Matthew Sheehan

Mike. Thanks,

Operator

line Mark Street of Argento next the question comes Our Capital. Lake from with

is Your open. now line

Mark Argento

Thanks taking my question. for guys. Hey,

the down downtime. and kind investments, drill little a to the bit wanted on the spend of incremental more Just breakdown between marketing

I quantified, delta for the script, let's believe the impact help it, EBITDA in just relative I understand to, better $X think the you million us downtime maybe you full year? call could the the but

Matthew Sheehan

break of wrap So can some of it. here around Dave some overall downtime down me me, and again, financials let sort the just let

That's throughout the historically, business. revenue. mind, days downtime in month's to consistent XX day keep That's effectively X to down. four worth it's of occurrence, been two So when a

last knowing year, of looked at in much we us a couple month's frankly, run which rate over in you spike If a of quarters. QX of flat a without more than QX we rerouted, the kind that, were worth this pretty saw the When on got downtime. downtime we

the of us to So color that and do sort of math breaks you down want probably give micro just does. overall the financials? some that Dave, how about logistics

David Mills

of Yes, year-end made result miss the referring know sure. impacted at obviously guidance. third between which And with by revenue think EBITDA. you no but up to come significantly EBITDA and I quarter And it as Refill the Dispenser bridge the look the from of kind the significantly you're we sales,

numbers we full of but similar a had in at QX. That's businesses looked the our overall of As $X kind taking cost year, miss we shortage obviously, conservative we're seeing QX million EBITDA flowing $X view view. million, and through the a also I on pretty say, would

as will addition, there and include QX. which technology, that, and downtime that the some the rolling Refill those In investments hit we're investments, in and really labor could talked of Matt combination credit accelerating out drive to business reduce with costs, cards about, that, making are The in to manpower back costs volume. associated it bring that

business. to continue In QX -- what long-term accelerating those continue that to in obviously we're accelerate initiatives in going can are investments the to do. top-line that they marketing growth we've will drive we We addition, do seen see

the Refill million. about investments of marketing and the another is combination that So $X

Matthew Sheehan

one me David's Mark, thing comment. add And, just let to

are I all. think growth, what really shut and not we could investment at off we do going in the to is spigot here on do it

fix fix be we next approach. Exchange our of QX to and into but certainly more. Dispensers it. going business, even lean this too We're What Refill; that seeing Exchange. want are to that QX growth of down. We this and in we in in issue way We business lights the to Dispensers want many in is bright year, we in even the to that's are much slow so We rocket, we on Refill, through too do rock and to want when believe

Mark Argento

that’s helpful. Great, Good luck, guys.

Matthew Sheehan

Mark. Thanks,

Operator

of Our Anderson comes next the from line B. with question Kara Riley.

open. now Your is line

Kara Anderson

afternoon. good Hi,

Matthew Sheehan

Kara. Hi,

Kara Anderson

you were have answered to actually just EBITDA you Refill to So but about. the quarter? this in I most impact point, questions of did want talking at quantify Can the my from what jump back been

David Mills

probably a it Of was the million. $X million, $X majority of that

innov stack, with that was EBITDA. our impact, in Dispensers not come significantly What anticipated ahead obviously of we guidance. other The does

of the makes up that Wal-Mart opportunity the half. the pushing and at other that combination the the IRCs, IRCs, So accelerate to

Kara Anderson

quarter, about going And look side at think million the, the more when you think investment in $X fourth we as your Okay. that ongoing a should structure on cost is Refill of from out then the part I to a I it one-time that be nature called in here? being in or as investment

Matthew Sheehan

trying bit frankly is the little to fast as the we is there. telemetry people there's to a we're can. us. as trying to think I going market give a get do, of develop What that We're in blend visibility Kara,

we don't call the of us I'll that the -- So one-time right that don't efficiency see will, business will see that We that of is long-term get model. that they -- into some of more, it, sort hurting short-term away.

we have fact, believe we reach the even In gross telemetry that margins, the done us help improve past. the will margins that in gross

we're it of next So I invest couple to to we're quarters think reporting this that going people, is more on short-term. I'm sure not technology, we'd the sure call in track. one-time, make but in

David Mills

increases downtime side, Yes, and readers so. you on back in X four that, bringing it when technology they reducing our ROI I'd to just and -- from and -- positive, testing, XX, the up of I'd to the to cashless all shows factor only follow three in days, payment

Kara Anderson

you. Got it, thank

Operator

William question next of line of Blair. Jon the our comes from Andersen And

open. Your line is now

Jon Andersen

Hey. Good everybody. afternoon,

Matthew Sheehan

Jon. Hey,

David Mills

Jon. Hi,

Jon Andersen

that decision the Wal-Mart. was kind if to jointly that could talk you an about a made? IRC that of year that seeing Was better about ask the in bit And somebody you to wanted Black IRC, earlier that little you're pushing I than with Were Friday a lift a that return think what everyday that them shift with a from the ago. actually made saw you're I or comment is direction? seeing program you

could talk it. would appreciate about a I So that if little you more

Matthew Sheehan

just we walked Jon. excited we think we Friday. do that were and business connectivity. the three they awareness through what mind, Friday, of get outside until did we we've Again reduced inside model Exchange razor-razorblade quarters of of in box the Keep people every in when been Black increased growing home. couple then our the When box, and this increased that pricing on a day. Yes, about excited One formula. we a by really Black for called really get coupon analyzed everyone business to was coupon We were the it results the I overall ago part was, which the years, wouldn't Dispensers, could is

that the So for Friday. Black a given revelation was us

water a frankly, day. IRC year. we real not water it my make is water don't year, we we, in perspective, so at connectivity I the and believe get promotion Black that let's because just everyday than throughout decided wait that outside QX So model Thanksgiving better let's drive through add really said, Last our benefit that promotion getting did just mean, we from all not forward wait came bring Wal-Mart. done. huge any are because Friday get every a now to We and on that coupon the should Frankly, a connectivity. we to from for

And four us, lean thinking. ask this number to investability. going bottles lean that years, a going that shift five when when to a long we to the we're up razor-razorblade. consumer, a that which makes about with stick of that's has much you in lot So have as We're we continue of on running consumers value they lot promotion, XX sense of frankly, into how into keeps to and can. as just The

have Black The period. in and do it's better every was, since and connectivity we it we redeemed we about compared the day. at that judged connectivity. good it of the was IRC coupon as as that you even to we when Friday, day, second redemption is point people said What We've that Black percentage at Friday, the it done have seen every

they sure they in that that a gross to a don't they on get value XX% and home single water. family. they relates for us water. and proposition we our margins we and So We don't to lot to XX% really how the walk know We backwards. they Once is more, it invest with consumer a walking sell as with will good that for to run realize pressure their backwards. going drank that realize them that a sure out see just a they while dispenser and entire want home of because short-term walk don't want in the every bit, We wee the they level, this is making away -- make consumers wait convenient it

pause question. there if me answer let that helped the So

Jon Andersen

Yes, no, for Refill that's really minute. helpful. a Coming back to

$X have we of quarter, downtime the of look then addressed magnitude again the you obviously, quarter I'm impact the thinking we ongoing we million the start issue, in the and the cashless of I of in the kind second about quarter, technology duration issues? some to kind through extent, are of, see and XXXX, XXXX? As million should in understand Refill. just QX, out a until you $X half the you and QX middle And guess, a of get here within of experiencing fourth to be the that up, trying normalize kind until of headwind the

Matthew Sheehan

feel the view. my in free give jump on David, strategic me to Let numbers. you

a though, telemetry there, have on we people the believe, learning. reduce with in downtime. out action are along better put piece to we're are or QX there the I begin every I We to as and going putting conservative to in that we learnings to number today, we that think we want out with put consistently, that Jon, we're front. that we'll be going improve get

said, projection growth. just to we for the we of you trying going our found impact is this, with That of going on to think We're in We're find that just be quickly well. and believe I supply will growth down be, trim majority I that. diminish oftentimes impact chains. safe frankly, So fairly that all to we're will in that QX, our covered by QX. QX through already revenue will on the conservative and And have

QX again, Keep sort in did business we QX find, So decrease next for think a I of revenue last this and than more worth was, we has of QX. any more growth mind, waiting year we will of any month's we just found with up capture. in can year that in operating what been QX that believe, will make that we will and --

in So to I make we will QX, start will up more that for decline think capture it's QX than any make And frankly, think QX in we up QX. for going which to it. and and

Jon Andersen

mentioned half opportunity; you because point time can more cashless mentioned whereby kind I specific it's through several steps uncovering run more again me remind technology. them, you to Can high-level helpful. through you you you've you've just place, people, technology, if know Could an mentioned are year again, the to you've you step infrastructure-wise one That's of through have been but that put Omnitracs, the you've to of just get second what dragged next here, revenue. people, accomplish, in times the Refill

Matthew Sheehan

Sure. take in, this me probably, a Yes, let of couple bite-sized pieces.

we technology the need in is today. all say would place I first, So

in Now today. the telemetry have place installing, not but technology machines, all the is are installed we around at we our hands the

step me Let back.

that the already with in getting We've Omnitracs into lot a better there we're the routing more We best Tableau, that about usage the handhelds put We business software That's more It's than that aged. with Salesforce.com. frankly, have technicians' is. handheld just better a in with we more reporting was software. very smarter replaced, getting business. Roadnet hands and put the put and system old place, --

we're we because so to a going bit as we to plug driving we in we And very machines Jon, to real hands. visibility handheld world-class learning all to visibility the get fast. our and insights the routing, to smartphones, the and field. And it, and it our rest technology now, will that has with our Salesforce of have of technology now learn. time we use have and to that have how team All time always need the just communication is have take do within implement you right little now the can't say real I along it'll it Tableau

that technology are all business we We a really this next in of Refill once that confident QX much all going is faster, by to stronger get make year. though us better,

it all Really confident of the quarters. coming going in out what other have we couple We're looks the like along So next it today. learn to place end.

Jon Andersen

selling helpful. can what that's your cetera? The about does the then, ones. Great, if transition A of quick timing, how quickly And Ice one talk there operation, couple happen? to you brand, that expectations for et are

Matthew Sheehan

Yes.

a to media benefit. this they're we when of On mass Glacier you But marketing. any into foundation the went want benefit. of make market, at you sure that for technology really that and And lot will to the website of and this, of have to of machines is going will great that have learning in the service to type to of out. and this couple marketing to any thought step Glacier I'm on get locations, take check the And announce to projections and just get is brand our want a unfortunately, media Primo our we a We that never years side, I This years. going do out of our because going take Frankly, though any any really servicing we're was do accordingly. decision in all not lot again, excited do, transition our couple of as and a is to CapEx with any the business. think you about the you market a our really roll in of we us also, sure the the given roll make of that real our power focus

we're put end an that. going to So to

I Refill will certainly think benefit.

have was machines, But the On the core now, we have for and a were The a a not when Refill-only route. Refill into the for of us, Ice for ice quarters we really to that Refill, been come downtime that assessing basically is reasons. a it far couple dug glaring. conclusion routes and host issue it of that had on offering off

have finish. much that piece goes good both, machines and as that a equipment Refill and of complicated, We longer have well. is down that manage more really That takes often Refill, than good technicians runs the but stays refill frankly, of performance lot time the to really -- frankly, was Ice more that technicians of diluting down

basically to hope potential on that quarter We are have divesture announcing we'll this in how to the sell next targets we we the and are next today, quarter, -- the So business. completed. talking to

Jon Andersen

the for Good all thanks Okay, everybody. color, luck.

Matthew Sheehan

Thanks, Jon.

David Mills

Jon. Thanks,

Operator

further hand I'd I'm showing to back Sheehan questions no to remarks. And time. closing any for like over the Matt at this call

Matthew Sheehan

Water. for Thank great in Primo interest and participation you night. Have a call on today's

Operator

gentlemen, does today's Ladies conference. you and in thank participating That for conclude today's program.

have a disconnect. day. great all may You Everyone,

Primo Water (PRMW) 11 Nov 182018 Q3 Earnings call transcript