PRMW - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Primo Water Corporation’s First Quarter 2019 Financial Results Conference Call. [Operator Instructions] Also as a reminder, this conference call may be recorded. At this time, I’d like to turn the call over to your host, Madeleine Kettle of ICR.

Madeleine Kettle

Good afternoon, and welcome to Primo Water’s First Quarter 2019 Earnings Conference Call.

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

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

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

Matt Sheehan

quarter Thanks, Madeleine. results. first us Good our afternoon, everyone, review and joining thank you to for

forward. financial tap water update face results the initiatives. and today, give progress the provide will key more consumers will a discuss call going issues quarter I the David detail continued our day of provide our outlook For and summary each for on a finally on then quarter,

progress our on Let’s metrics. start and brief results with on a key financial overview

for unit and revenue with our quarter quarter, were of original the In adjusted sell-through was we Dispensers, $XX consecutive quarter million For of line an guidance units, XXX,XXX ahead of to $X.X Friday million. quarter growth significantly saw This rate EBITDA better-than-expected of The fifth orders U.S. levels temporary increased the and with driven exchange to enhanced in to growth date. in is consecutive again XX.X%. marketing Refill, consumer dispensers we of same-store event retail the accelerated and sell-through, overall pre-tariff demand to in Black initiatives. tariff our X%-plus late of the retail since growth With prices quarter, unit increased leading the on and increased same-store made the exclusion growth March. expectations. of return am in the have by our has water XXXX. progress been other dispenser I pleased with connectivity we In XXth

indoor provide with on both reiterate continue strong to expect be in as tap of to credit status of do shortly. in that for that we we will it cost. will families business the many see foreseeable tap provide are impacting locations, water a relates performance our our convenient the so key We on our future, believe moving and great the continue mind to in summary driver homes quality improve to low that We it before on telemetry and it’s track our installations. With I reader refill to more initiatives, details card to locations. both And outdoor water and their a degrading and see as is water families. not important

their Great the source More and for U.S. drinking are in water. Lakes Here XX people a few count just examples. as a million the Canada than on

an Tap still and all increased residents to sewer other increase infrastructure taxes. in on cities the quickly upgrades water a water increased may burden inconsistencies pension Chicago attack expense, expenses not have deficits, is in previously like while which seen have felt facing With like an significant and becoming quality.

half than X dealing the increase issues. is million support in that over infrastructure the consideration of increases used as well under aging with Detroit, occupies in infrastructure also to the Similar controversial today quality state with and California an in water deals city residents, an that currently are tax less Additionally, city. while challenges

Prevention ripple the substances Disease Disease Registry it initiation Lastly, here. and human Agency announced exposure was drinking Control regulatory Substances water the a on teaming and to increase PFAS from will just through the health with study of Toxic recently and for that beginning to channels, drinking The is study PFAS that awareness water. multisite confirms of effects only Center in for the to the through conduct

to improve increase consumers, consumption at drives wellness. continue All-in their XX% growth when these home. consumption, the in looking water consumer the we XX% solution for as them accelerate, As well bring Primo offering families consistently to quality surveys the home. we greater their pure using on report media very remains continue in an educate the and tap water issues proposition value household best than that helping offer, to while to a to quality the for for of problem change water our health of is awareness positioned long-term Primo behavioral doubling our More

update I will our key five provide an initiatives key on across Moving our on, strategies.

First, grow household penetration.

connectivity to of water. dispensers our Second, our improve

sales. cost same-store to serve. Fifth, increase optimizing foster engaged teams. Fourth, our Third, highly

penetration. let’s First at look household

more of to sell-through reducing our With which ahead growing and or to connectivity We expected both promotions. provide are price half in sell-through as increased performance quarter, than The last sell-through retail, and quarter. market the par lifted opportunity the dispenser utilized additional to a year, accounted sell-through. increased be on Walmart and the we sell-through leader dispenser was our approximately spot retailers business. This back we near the consumer propelled level growth seemed unit immediate sales continue across in focus the to they sites. in-store clear and of prices dispenser in which rollback for enhanced this E-commerce a dispensers a of E-commerce at e-commerce orders in unlikely our dispenser improving increasing XXX% and continues building through the our of expectations. with the water. enhance reduction signage experience on-shelf our our with even and bright relationships. on are a growth, Along our in XX% and retailers the saw consumer sell-through midway key sell-in increase

reminder, again like sites the as a XX% nearly the and sell-through. As XXX% brick-and-mortar the Primo-controlled as our e-commerce exceeded once includes primowater.com retail accounted well partners. sites e-commerce Amazon.com for year-over-year this Primo-controlled sites and of growth quarter in of

consumer We continue out and learn to their the remain further we a build build can insights. about tighter to focused experience on initiative to this connection more so

way our completely is improved it and our focus, purpose a Given Not that only consumer modern more for experience. new leads mobile-friendly impactful e-commerce is more a website also increased and, and brand, an enhanced platform. and This website an our in strategy new to a provides we’ve to navigate, highlights experience. Shopify importantly, launched products e-commerce most integrated and evolution utilizing easier an

dynamic abandoned this dispensers Additionally, strategy cart to relates remarketing. and past. we’ve more to as of drive platform provide It our mentioned allows activity, pricing monitor real-time us price the in

seek the We will lower opportunities to selling price. continue average to

continue importantly, dispensers retail will for the equation, deals, we that to come shelf or, retailer on from more reduce increased believe efforts lead hesitate gross we make While reduction will margin to it side our to if more to we not space sell-through. of the

the and our are the sell-through to right this and We future for may We greater strategy conductivity, for additional business. are preparing is taking that now drive quarters. we long-term proactive margins which impact activity steps believe in gross

and, dispenser self-sanitization experience. years. that out follow a features the have dispenses of new couple but that Lastly, called we includes combines families the and also we Steps our water has high Check a quarter that all the water and introduced are consumer XX last not XXX how social a is for Dispenser. also doing traditional Primo Water our research baby quick along our accounts with dispenser hot dispenser preparation more importantly, only innovative technology features new of This over quality see that promotional and enjoying a First in been our degrees which has load to through this, media the products. the come maintain on-demand from need to of dispenser activity cold formula, bottom between The

The again the record when price to with dispenser led expansion to on paired an IRC of hitting Moving points, has levels. in once connectivity, success connectivity. program reduced our

pricing continued has higher-than-expected lift rollback that instant IRC in coupon redeemable we in redemptions the the a a QX. new has connectivity, late driven expansion the Walmart on introduced Primo saw levels quarter same-store dispenser packaging feature, mechanism dispenser pre-tariff the As that been and households. The catalytic has sales to and continued into key significant

same-store and the greater basis an we of this effect and businesses. higher with water. sell growth water dispensers compounding connectivity late both QX, a Beginning in time everyday that program on in our utilize plan our unit to retailers over other expect We

nearly have these was a we to of or the on all water dispensers. exchange also outside refill the indoor Historically, coupons at IRC package, either coupon of addition of redemption the the inside our best. free In for average, included

However, of a IRC refill. indoor as on seeing only redemptions we’re bridge the to continues now and also an connectivity to increase, inbox exchange our to increase but usage not

consumers water help these solution, happy initiatives. We are in-home understand to and coupon helping on their with and focused more easily we’re jumpstart choose journey their

grow continue connectivity, partners. omnichannel to solidify and and happening retail online at that true relationships relates our redemptions sell-through. This initiatives redemptions These core to a brick-and-mortar as purchases we’re as exists to continues well. online it retail we as our shape as Lastly, our successful excited e-commerce relationship are our from prove

Moving have on third from sales. our increased strategies, we our strategy, same-store several updates on share two first to

new noted, culmination at indoor activities working unit The into locations exchange with and Walmart. shine current through same-store in same-store driving our location to continue growth on to at well our said, retailers first dispenser our specifically time That same Refill. dive emphasize as as both our and expanding As connectivity the let’s footprint. refill we continues of while sales

in continue Refill. to make We strides

down For down sales volume with total the quarter, expected, by X%. as refill XX.X%, was

closures churn make in the price continue same-store we expected we is consolidation to face store as as retailer last increases. lost down declines to result year, downtime line Taking over XX%, churn which unit the a locations volume associated improve with of also the with as our into and issue, approximately competitors. account location While some progress were location well volumes and

that, to I’d Given insights planning do. what like done some what share we’re and we’ve to

with our our Let refill about which insights the business. some of indoor represent XX% approximately me of locations, refill Walmart start

tactics consumers couponing our to through have do discussed acquire ability marketing utilizing we strategy connectivity, our previously. First, the

signage drive line screens, Second, additional combination a of top volume. small increased and but lastly, growth also is marketing rates empty initiatives with along And marketing bottle the video these not volumes. as stock increase unit such driving improved growing initiatives only and can price

increase also we’ve seen line but into have positive not only indoor two growth. growth, In at top Walmart, we price fact, volume just quarters refill the achieved

believe locations. We pricing As aligns with a That that from give on indoor the this long-term can ways, to confidence performance, the grow we combination impact outdoor marketing past, outdoor have in locations. of strategy that said positive and in have outdoor unique while for mind, very can on we outdoor that in the outdoor let’s focus our our said, With locations. our and transition refill. the some continues us

revenue business. compared previously, both mentioned the to As we but the to year, continue and were to quarter down the make prior strides in volume improve

where the the markets better align to rerouting technicians a a Weather readers said, That and is the on year-over-year quarters. availability Credit the many or continues at created things dispatches. we from downtime. outdoor reduce is positive every providing the and the market market much over and have greater look price impact Refill provide our seen of revenue first past increase. locations to as service Let’s service locations, to needed indoor have a of impact of producing result many outdoor telemetry location to to positive equal, network Not The locations high-volume led have frees can decrease market. overall to our varies as of than information stand. card few

absorbed include of locations some face and we significant since some at for consolidation of than in competition price, locations these rather market share aggressive do term has Amazon. the has regional This downtime been have of retailers the work by performance While some necessarily we we local optimization, begun. compete closures refill already below country, that, many Retail With negative as term our as with likes continue competition have competitors approach which price The the outdoor overall average. and of as long as This have with near in to market nationally. pricing a Walmart isn’t in volume. perform our well will our increased impacted be market as a more our do across markets. and will or us, high-volume price of more

to we we those I’d doing. done are you what what and Given update insights, like on have

marketing and equipment, improvements investments operations, strategy machine and lovers main technology, Our pricing, locations. six across includes

with start Let’s technology.

giving we about visibility providing As all installation an mentioned, to card us and our for credit significantly improved our readers while business, enhanced is water. of pay telemetry the consumers way intelligence and their

track automatic provides our We with recognize installation dispatching faster. helping is issues and of The original machine be on to continue much technology respond schedule. and us

reduce predictive downtime dynamic the technology of this and see before routing, opportunities than to the to impressive machines two are brings as days we scheduling, that others. several X/X days continue such We several scratching with technology strongly among in seven technology. the that surface We believe just the power maintenance rather ahead

machines we’re to timeframe. pricing our real in to it relates and activities as sales of of operations, tests, weather will technology, in allow us able a impact consumer in monitor the marketing shorter This time. monitor near to Lastly, usage

the us what Moving fix and on only we machine when downtime. the down, not a down It the have greater maintenance is respond telemetry what The caused to helps part sourcing system detailed our we to equipment right of helping on machine This The strategy. proactive that now helping knowledge our information receive they equipment. is machines. be can trucks or a exactly than and from more up. on their know show ensure have parts getting data more do but machine are on to just that technicians is us

being to is have our important driving led prior simple. machines the outlets. just being is beginning power down as learned unplugged have installation It unknown being this from us In the impactful the to these many either insights to associates, the For to other time various upgrading problem public the Using insights end reader. are example, machine. and our cut investigating equipment cases off few housings, information, sound the a this our and credit placed to common card hardwire store mechanisms simply coin may a of that source. by machines sump many and we pumps of electrical near we or filter are previously But Other higher bill examples.

Moving on to operations.

to gain During this process, continue insights operations. on we

have changes results, news. of the drive telemetry continue we time our is leading Specifically, as we enough improvements the routing to have focus added better business. we we the and pricing good not to we That that were on had which in routing in and with cause metrics the analyze said, that the found will decline, believe

ways at dynamically responsive dispatches We’re looking allowing use more the technicians, new technology-enabled to service. to them be some to route to is which

as to we’ve Lastly, relates inconsistencies noticed significant training. technician it

the training All an servicing. center for and developed visit a be have they’ll our corporate in detailed training new technicians onboarding our new to the program Winston-Salem, equipment near We technician training. office training improve technical center more on

ongoing training. We onboarding and into time, put employee continue the will we increase to investment energy the new and

drive performance to Lastly, technicians. our our performance, to improve incentives we continue to

Moving pricing. on to

increase the in quarters, behind opportunity. last we initially our us was As our it in a or an strategy several the many also now, some as worked competition that over $X.XX clear, With increase pricing pricing the used locations. markets, however, outdoor time across as tolerate we consumers the not locations. see did can discussed well, that It’s several

increase In single consumers. local will we competitiveness as us This price our market. leader that competitive moved pricing pricing below others, centralized order reducing consistent some represent operate to is optimizing back be to price. in of best back prices or by Given we have some a to have volume. combination allows win knowledge per-gallon begun with In significant market that, our prices the markets, a that going to we in markets while a strategy market management believe we forward. the We original

Next, on the marketing front.

media. digital of spectrum drive We Primo enhancing a using conversation changing are brand refill around deploying forms these to the mainly to greater outdoor of in markets and tactics the awareness,

While the are across outdoor we that time locations. dispensers, indoor we almost limited solely meaningful to activities the addressing was have in first last truly increased spend our be in way. over a will year, refill This store, exchange and spend marketing refill

just our will across time markets, these other initiatives high-volume and have markets. in We begun learning’s over the apply

will financial in markets. discussed we the we a locations Primo these believe anticipate profitable brand a to be long increased spending have and in the the in we have business we outdoor we in We impact, will begin As may run. locations. past, will as more marketing tests transitioning high-volume successful on in short-term the the outdoor scale result but This

very with believe the on occurring focus of with terms our more much are the said, be business. we will markets. key and in to retailer in economics Lastly, drivers same-store unit leaning in that consolidation we select sales market, still locations, locations the expansion in That

know initiatives, these we be weather which that In decline will believe of greater way, continue and Either in the this differently to across QX. to sales of refill the weather. could the to various market level. country, action Where quite drive influence, but can more mindful on a levers, our our volume addition be case we plans decline operational weather allows a we to locations to perform the by marketing and in geographies was as was tailor pricing accelerate if more us presents tied certain parts influenced

created Given as the are few enhanced we challenges, one business a to we’ll core much and operating with recent one business reduced very in the a of have consumer all efficiencies we stronger that, already just we We’ve ago. and a And processes. different bought building years many experience. the address refill an continue than costs

Exchange. in growth unit same-store to retail from Moving

successful quarters we’ve X%, same-store XX.X% QX growth. driving unit XX.X% the in gains This business significant growth in the last delivered this several year. initiatives of With exceeding another growth There to in quarter same-store increase been another our of able Exchange drive unit year. follows rate maintain and XX our into of inflection to continue We strength. are We business.

tremendous Exchange the all to encouraged expand this in its throughout nearly is growth at continue completed double same-store success, second the comp. that First, Improvement, locations. has business signage outside record we XXXX, CD underway we while CD at track Home key total elevated the the impact A out signage This by to Based by just We and of in is rollout very compound an exchange unit of having of which our CD as Walmart remain comp key Lowe’s Walmart our everyday that in we the across business retailers. Walmart. our a effect at inflection at on initiative other led drove our growth, rolling to we’ll IRC of capacity expansion presence of initiative the expand almost year.

Given earlier our marketing before, in successful been mentioned we growth To the two past beginning of we’re the months unit and of to our capacity have success increasing existing over we growth, that support locations. typical summer earlier. initiatives see years at

change While similar retail very expand activities, hundred the our throughout of benefit an an the a remainder hope to across XXXX. from several overall of rack greater, We counts additional performs location if than will display not to these existing capacity not store location. new locations

to to drive new efficiencies. we Lastly, continue utilize technologies

results. to action to lines intelligence at to artificial allowed With scanned retail. continue take X and expansion opportunity scan, our Just with detail will to to growth recently I the David the we business help enhance next turn our us photos an us This to key cover optimize of our project business. score see and over our steps capacity a in presence critical to brand at call financial key to that, paired firm retailer and

David Mills

each then I call to financial included for off, A To results Thanks, website. our the will outlook the of for start year. utilize in Matt earnings over assist the our I turn Matt. financial quarter to afternoon’s is available our and will understanding income non-GAAP EBITDA release, back closing this Today we the for adjusted measures, then our adjusted discuss in remainder operating remarks. do reconciliation on and review which is net results. of investors

to results. Turning our

initiatives to make that start driving the continue are We to are and with pleased many the business, progress good on our year.

line, and top demand million. of expectations, $XX Dispenser expectations our in were quarter in the Exchange quarter were driven On for for growth in sales the at sales better-than-expected ahead $XX.X by with million, the our line Dispensers.

prices With higher-than-expected drove tariff, exclusion retail the of orders. the lower retail

was XXX,XXX lower In totaling impact primarily were dispenser addition, fewer in the sales by the weather. quarter. issue, locations the of and decrease the the for drove $XX.X The X% quarter the from sell-through, prices Refill year million. downtime driven units prior

rollout have the will we continue issue. mentioned, credit card to progress made lot Matt on of a the of technology downtime the that As improve

retailer headwinds the However, we contraction related quarter did in prior year. the versus to see some

to the struggle Walmart last and in dollar a consolidation were while large down closures. As are down basis with background, smaller That of Amazon, were approximately total to a compete said, independent XX.X%, XX%. the over couple in volumes and the on years retailers driving same-store of number of drug addition channels store volumes

declines in As previously we the expect we with demonstrates progress we volumes returning increase, to that levels. noted high digits, believe single we and expected make to volume mid-to have this the in did continue price

Free Exchange. drive X%. initiatives, Water and the other XXXX, the Building households. marketing to same-store an segment program or specifically and were new increase sales $XX.X Walmart, and retailers, at sales Walmart The display of to new at continues Exchange results of grow in-store Turning improved million strong upon signage

water Primo exchange we not we while that U.S. that and the will free sales accelerated units, will the households quarter, are believe IRC, revenue the in units, For the the become compounding included new long term. again same-store total see in effect mind or and as Keep same-store producing our over consumers to XX.X%.

gross XX.X% to XX.X%. the for margin compared Overall quarter, Turning to gross margins. was

gross down we with proactively at as retailers pricing. quarter to on-shelf for was Dispenser the look segments, we compared drive to the work X.X% margin As XX.X%

was to XX.X% from and we’ve continue we in year downtime discussed lower and Exchange. Exchange turn, we new believe for that change to is are to believe incremental which Refill to for in in result XX.X% operating as costs quarter XX.X% compared the continue margins households. gross related growth sell-through and, issue the the a in related to Gross We on-shelf drive investment as margin volume last pricing lower quarter to Dispensers increase primarily of the a driving driving making Free in decreased lowering margin Water margin in gross is the quarter. The gross the XX.X% both the program, ago. will

SG&A and Next, $X.X for primarily million The to promotional increase marketing as the due costs increased quarter to as from well is costs $XX.X million. non-cash stock-based compensation.

For excluding a on annualized sales, compared percent the compensation, we X% to was Long-term as believe quarter, to of XX.X%. overall in SG&A, to basis non-cash leverage range. XX.X% XX% an can stock-based continue SG&A that the we

However, quarter. quarter promotion will marketing from fluctuate and investments to

per Moving a down a expense interest net quarter, GAAP was the loss or income million. to or statement, per On $X.XX net share, for was compared per for comparable of share. or $X.X $X.XX $XXX,XXX $X.X the share. basis million basis, a quarter million On $X.X income compared adjusted share, compared to per million $X.XX to net had or we the of $X.X $XXX,XXX income $X.XX

million to million ago. For year adjusted was a the $X.X $XX.X EBITDA quarter, compared

New We Turning to planning $XX.X million cash. in Year Chinese the growth to Dispenser holiday. million as to accelerating Inventories in business well the as quarter order with support ended the around our e-commerce the increased in $X.X balance sheet.

a was the up ago, completed million Overall, year forward, the slightly year X.Xx but from levels XXXX. year we down to expect $XXX Going X.Xx, a leverage decline ago. as experienced a million result Total of significantly which June inventories in from was $XXX.X ratio down our back XXXX. in of is approximately end, from we the refinancing debt to debt December

$XXX,XXX, cash capital, working primarily cash the operations changes was of in by used flows, our inventories. at statement flow Looking in driven

credit in the in but As new displays half signage. increased to million, $X.X half in-store negative neutral. of of capital and and for the the exchange primarily to second the be readers positive year rollout overall we year, in previous Capital expenditures from expect working of the result $X.X and year the of years, card million the first

Moving outlook to the our quarter. second for

to to $XX.X million, and of We continue and the and adjusted million in expect $XX.X IRC $XX.X accelerate we the million of net in be Refill, sales to Dispenser range promotions. EBITDA expect million as in the margins, range investments expand to $XX.X

coupon range full and the the more year. to redemption in success guidance, the of rates growth reduce $XXX confidence but higher-than-expected both are which term. and that expect our Dispensers, and gross e-commerce, top near Refill, the now investments sales incremental to driven in $XXX in confident upon sales, This now top progress, term our million. we Turning Based is drive e-commerce margins million are our gross by in lower line specifically result we line advance growth to the in increasing In will Refill near margins. in

EBITDA Matt in With $XX call to growth, we range that see such items training the top of As are be with long-term over will adjusted that, Matt include investments initiatives I year marketing will for and When these term near remarks. full in-store line million now mentioned, and to back as merchandising. on combining pressure investments these of million. the to turn driving the expect closing the the $XX acceleration

Matt Sheehan

David. Thanks,

that, outdoor As of each indoor we reflect both core them. along Refill, businesses, distinct with in Dispensers, Exchange our we doing on thank team, purpose. That very growth and our open refill Dispenser our and between indoor building our are retailers just our for our With other across I’d to I refill to businesses. and outdoor, focus continue Exchange the In like in confident when loyalty their of like and Operator? our remain in line have continued each I’d of as done questions. I approach. partners improvement growing our our for before we mind, well locations, and our to locations. businesses and on are support bridges

Operator

Research. Instructions] ahead. first from from Our comes Mike Petusky [Operator Please question Barrington go

Mike Petusky

know here are have for to terms of to guess, I I optimization of at about mean are Refill just deterioration? we like is call and to gross gross in what what two, David, do of based going terms in in margins pricing – the does next on But kind the QX actually you that XX% quarter or XX% So as means think talking in point? the XX% to you guys margins let’s – that strategy done I unfurl you seasonally low. that assessment it this

David Mills

Hey, of Mike. roughly the locations. in anticipate total pricing optimization we the It’s David. Currently X%

negative, impact the about. the Refill be just slightly to will magnitude margins talking not on overall you’re So gross

Mike Petusky

think XX% Do to be able then? you’ll to margins Okay. on you hold gross

David Mills

Yes, do. we do. We

Mike Petusky

– EBITDA terms the it the QX. year, based almost generation certainly Okay. looks cadence have what’s And And in is a you’re QX, of flip. at your giving guess higher behind your guidance for true? really like assumptions QX? that going on to would And I And recent years, would that assume would like just in Great. be typically then B, have is strong the I wondering, historically, QX guess A, of you least what I’m look to to that it is than the

David Mills

A is seeing shift things, we acceleration QX business. of not in timing, But we’re just the a a we saw Yes. growth growth in lot really it’s Mike. QX the in few dispensers, in talked some the in past, is, overall of e-commerce.

location half have be, about sales is year. overall. So a on sight an percentage we’re seeing the much of going impact latter more dispenser of much going the drive as the we And a some stronger of better then that’ll forward. also, of strength in call, line Matt to there, talked believe to which higher And we growth

Mike Petusky

thanks. got all that’s All now right, for I

Operator

comes question Markets. Sharma Amit BMO from next from Capital Our

Amit Sharm

impact? it and quarter forward? quarter four-point everyone. a alleviated bigger rate, modeling good questions, for, from run Couple impact one in Or retailer of consolidation that then Hi, just a is the the good in volume, going something the Dave, that that is afternoon of

David Mills

Yes.

long I term, of the retailer contraction, dollar think drug see channels smaller some I specifically we’ll some and in and think the the independents. over still

we’ve lot we’ll year, think I the still seen in over a term. last near but see the some

Amit Sharm

was I to similar magnitude? of just say going the not

David Mills

mean what’s going I Well, in hard retail. happen it’s predict to to

terms been where Whether on we’re sales of a puts at trade some closures. on, differential modeling of point, I this that the think a But lot not everything are impact see else if and tough. the rate more the change significant the goes the retailers, we between in closures. we pressure year’s from the or same-store and of last today could

Matt Sheehan

our this over of Matt. happening right keep we focus, through lot Amit, issues so in it to them are make a a is obviously short sure as can think that. that given this sales QX focus high-hitting Refill. locations. going we term, in locations, the right business our while same-store back But of Exchange lot well. will is in the of we had comps past the not on revenue grow that, now we pare grow direction. the It’s reason We’ve are time can in we because some very And our not seen The through

I it. think strategy that’s So through to over our grow time right

Amit Sharm

for in about think pretty Dave, sales? of That sense. SG&A, still still number? But year, percent then XX-ish quarter. And the Is this should elevated makes right we full the the

David Mills

year That’s should that number. correct, but around right the still the fluctuate over It’ll from be quarter-to-quarter, we mark.

Amit Sharm

and that growth do. to do investment, highlight the margins that growth You the right get the as making EBITDA pretty you to potentially this really benefit of Got investment a you’re and the or a dig What the Can and are then, or near whether you really also Primo’s potentially little is, right? you well. I guidance, out case from does That’s as thing XXXX, quarter the that term about is that clear it. on And bit? making want and impact of Matt, XXXX it into Right? you’re second look for for is talk XXXX? what it the laying investment EBITDA want to I convincing to

Matt Sheehan

couple a take go then back. we I’ll examples, can Yes,

you specifically. refill one one give me Let

was, kind the inconsistencies hiring refill and, and something technicians of hiring well, throwing and to markets out not the were of just saw we one missed really but we of them straight doing new frankly, job a we good training. So fast

is not model can Now now. that cost our say we’re for one But that set up in technicians that success. lower has a

more here that half example actually better where to behalf accretive morning when at do understand absolutely who the who trained I this is seen think machines. benefit. folks right and refill. in be our a an is So hit on on for an understand fix it purpose. have hour entire go. purpose-driven, on that’s talk long-term how met myself. extra week street That technicians with That’s them way we’re our to the educated a people But to today have for That’s a our have training more cost growth, to hard is immediate We before. model, now consumers long-term going and and an that of we cost it’s absolutely you our absolutely seven believe We to corporate. in you heart than the office them

we can done to good And to in we’re growth short-term well. could And ways really similar we IRC, But launched IRC that benefit then them. and all redemption they there dispensers it inflecting other that found drag better. some slightly continue think and about retailers from into that the water can are we’re do Walmart. we we said, is On also mind at to we just acquisition this, the lean as we’ve consumers. have We rate operate take things that such models improve who We different, the us. is at have seen this. where for All Keep going absolutely this Walmart. on

benefit. two hits, that our absolute Does obviously are help? those things are near-term So decisions that of long-term examples

Amit Sharm

growth is points? or to in does beyond does point Like that topped phase by once investment If I does. new this growth three what or you could It two at Refill move or four, looking take all? it to know, we this one let’s the that. look investment three were needle a mid-single-digit in to two farther like XXXX? the step don’t does Or I If for it say, than

Matt Sheehan

it think does move I the needle.

to or that, it But amazing refill. think present think the single as the time. take we say digits move to three our we I We it five five, to love mid-to two price business. water can strategy, it comparison I even mind the over and in could is alternatives other high into what in refine keep

on better outdoor refill media We done social job never or branding. a We’ve of do have to top of our locations. external

beyond, So all and increase believe grow just can business a still we it will percent. term XXXX growth five-plus or point maybe that we by the do But into two. that long that, that of believe rate,

ever frankly, we’d have Nobody’s even I’ll just And have And do. So we’re do we what it, as it done it. well. would business. it operating the in indoor ever Anybody around of really we in We’ve do growth truly outdoor Amit. try the sort believe to or exchange. of think But great because And increase rate. space, nobody’s a about, refill only some, do thing, done investment, We’ve to talked it. we story well dispensers. the that’s some going some call marketing one love we’ve We’ve strategy in to marketed wrapped in machines. this other the competition done it it

of pour over. And there the some will about outdoor then business. lessons Some those are similarities

to the our to have But tweak we We believe ability strategy. the business. market do

Amit Sharm

No.

more I the investor all leads spending begrudge sales think the way have to even in seeing any machines, outdoor the for about I are you refill growth. now. you’re as will what test I as as as this think for That’s talking is long exchange there, we it indoor for accelerated don’t long and

Matt Sheehan

note IRR do on Everything Amit. other an Yes. we hurdle. is that, One

will work, X, small hit do see if don’t so pull and never XX, we’ll tests all tests small And that. that back. are we’ll even they the them you locations, XXX These at on

all So we stuff. continue a discipline IRR hurdle of this on

of lean do that more scale in record tests continue track some when work. we’ll they and So and

Amit Sharm

thank right, much. you so All

Operator

you. Thank

question from Our Kelly Please next Capital. ahead. Imperial go George from comes

George Kelly

thanks for questions. Hi, taking my guys

So talking how is investment a the first were an and of business. What’s the little what on branding, question previous bit just the refill outdoor timeline unification in that? for follow-up about with around doing more you the a big And it?

Matt Sheehan

talk can Yes, I’ll investment. give timing, and David

we’ll next this into said, we’ve that year throughout and year. do As

mid-to rebranding the on frankly, of faster rebrand. call by back But if commitment. haven’t we great we’ll see country. entire we be But of year’s done love it year, think process we’d a could accelerate some results, see we to we probably next probably our it’s If I So results. go to QX that. pulled And really

So do to talk economics? David, want you

David Mills

has million. really through focused mentioned, CapEx credit second the we years as between a to How been take million it’s this originally exchange. years. half into we go George, On million talked rebranding, it’ll $X.X out And more $XX Hey, half the you doing? it card over year on sure. in guidance, the And which up Yes, factored be $XX $X Matt couple And past, of million was year’s be readers to couple in somewhere the it. a it’ll as start And be it’ll spread first as and total. the will and

George Kelly

Okay.

question still Refill next just the business. Okay. then And on

lot quarterly the You gave a of some of issues. reasons for

top could Weather all you you Just what if surprised could quarter? rank guess few, them. rank the in if wondering you just things the I and you competition, order? listed, the

Matt Sheehan

Yes, George.

Coast hadn’t to And as had that’s probably now on a just an was that, yet. us But bigger beverage was and the I expected. we remarks. the comments lot like We’ve for country. somewhat retail business the a by time. the had been for you into than the the from We’ve in analyzing That companies certainly companies, about MSA’s that, and business. heard good it think of in understand and impact said, country across think West But analysis, that groupings years. frankly, to really weather hit when we of our you over the they’re some got couple It’s XX it’s top ton dug a a the the had, of our weather we’ve prepared of the market – frankly, sort MSAs one regional.

in weather put issues. and that But business. that’s had. Exchange can, credit that. to we for communicate more. consolidation into is seen I at it an the couple is the as the helpful believe do have watch a against in And frankly, promote the go we have and pace some some because why it potentially one covered And last that’s we was seen making with strategy to in we the the done, that – quarters, a But weather attrition. to continuing of drive card leaning that acquire we moving we those times And We’ve it to start can it we we That’s want a surprise, us think to we’ve same of seen demand. our is up, we’ve for marketing, benefit not California. we’re impact sure So continue work necessarily while, the even forward over

George Kelly

Okay.

Okay. me for And then last just exchange business. about the question

very programs successful had retailers other several You’ve at network. that And with you replicate quickly the wondering how in can Walmart.

Matt Sheehan

around of what here, lot if urgency expand. and to you we’ve imagine, Yes. learned There’s can a take

signage Walmart. is We’ve signage It package, that, couple across it completed signage CD rolling We of we last now Lowe’s all and Home years a an taking frankly, rolled that Improvement. that you will, if well. year. at So example, the worked out ago started testing

we all We the are by our well said complete nearly underway, and of of the in we’ll I believe exchange locations. be end year,

that’s So really well. an It went we where tested. example

results, the about them. and now it to retailers, all just seeing of You’re to take all going if we’re not

that’s one. So

now retailers tested, That talking the time. have have the tweaked, little rolled think shows another similar there take there only difference is and we’re that model IRCs. up we making as well. any a use not us can Walmart who all to and that retailers one and And again I both out we a IRC sure are water, with is dispensers

somebody buys we option, a when to out So ways have but a figure dispenser. similar different water to do free

and So from we Walmart, that have a expand elsewhere. those ones they’re into are the can really the worked at perspective marketing two business, leaning

thing is of have this basis, and getting do we the see we here capacity. more the growing we’re location to with about That measure faster talked ahead The demand location, is almost our we capacity. other we was down global. Anytime capacity the where store, at that than and

to fast exchange we as as across those, help? network. Does trying the entire So we’re that can all of three push

George Kelly

Thank yes. you. does, It

Operator

Argento Mark from comes question Please from ahead. Lake go Street. next Our

Unidentified Analyst

John Mark. on Thank for my for taking is question. This you

bit. to wanted a new Just on touch products little

just in year? forward focus throughout product in new I’m relation the other of how as kind products your to curious the plan to investments putting quarter. going mentioned the You new of on in kind you guys much developing

Matt Sheehan

the question. for thanks John, Yes.

development Over been the call We’ve product into leaning mighty a this. we’ll we’ve definitely but last small, years, team. built couple

data build-out what going And last continue This there. year lot is a into or and look get launching research, in-home that you on products. First four Step. multiyear of year, we’re If we launched based to the a we use strategy to consumer development product testing call baby we’re to really

a time, have already out the for than this two at more we probably looking plan looking So first time out years that far.

and information then to using products. test design and consumer research We’re

us absolutely with So ago. continue situational, more for even in baby, large there’s that First the And years now we call shifts believe then dispensers, like bottom it, great Pet loader opportunities Steps or and that things we just like received on the and as to has as been Pet, to example that. Amazon. development very to And going we’re very up And well. ratchet well, high builds on the scores

the from So I and think that you’ll more future. of in us see more

Unidentified Analyst

as your of competition to customers Thank have gives pricing, helpful. guess And through comments some you that and optimize confidence able you’ll that go really what you to All right. lost kind on you. win of That’s I be those back pricing just based from on markets? competition. going in second, you forward

Matt Sheehan

because have confidence is of way The we our increase. they handled Yes. price the partially

And has lot. that loyal clearly. a from some are when and to who some of that came certainly customers have worked. increased, of are section matters So we And looking also a down, There’s for, we us. heard very value customers them them we’ve and

we’re mean we’re the have to in in just handled possible. by the – that the as price. a top down level. reverse learned we’re on local talking also We social lot And I Again, going that, some of this reduction adding just so targeted. It’s media. based on we’ve It’s And be not doing what way, street is think not a markets. very of locations. in, actually, competitors

going We’re be to rebranding.

story will be of help the We’re combination win help the other We those markets. and us marketing awareness, going in doing more back. lot a that customers to think all us get tell

Unidentified Analyst

guys. thanks Awesome,

Operator

Thank you.

comes Our Mike from Please from Securities. last Northland Grondahl ahead. go question

Mike Grondahl

volume you optimization. About affecting? that do up refill price the following think Just what of is your percent on

David Mills

volume of locations. bit would comparable, little it’s just maybe Of the a just a or market. X% locations, under higher. Yes. be higher around the It’s And volume probably

Matt Sheehan

or I location It’s than a meaningful, think it’s small but probably a but our anything percentage a that. like – at our losses that, were XX small not little bit locations. It’s of higher it’s

small That’s locations. And where are volume our so a of percent targeting. losses we’re really

Mike Grondahl

has And it. confident of Got the quarters. its for back growth refill How couple it. challenges half then you the Got a are kind year? refill had in in seeing of

Matt Sheehan

thinking love I about analogs. So

to retail some indoor also time container who’s a and outdoor, customer. get differences So their to refilling great a while are They’re willing own water. spend there between are customer they

of So and done a outdoor. from job. similarities perspective indoor that lot great a really We’ve there’s between

comped the was we’re just business fact, in frankly. years comped. In slightly energy even acquired to that Culligan flat more about that. always We’ve it we was business. when And down. now ago, to not from have story, a And never It we adding similar

do indoor with So in an commonality we what me, consumer, example done is and some that, for that’s and, in of exchange what we’ve the we’ve frankly, dispensers, done outdoor. in can

that’s research, consumer business technology nobody’s perspective. a really ever from branding Number two from So with is, a And making marketing, also attacked a one. this equipment. changes operations from and we’re

business fine is so machine. coin acceptor found in until being the should resourceful replaced lot And in you of our the frankly, mechanisms where enough. new idea not a fast I are, just a guess this put we bill

is lastly, and of this gone good. that the we know, that from we And also lot things data The where a convenient. all at And them. can It’s We’re finding locations where still appreciate really ahead offering great to anyway. really need get it’s like that they’re it. price consumers

long-term this We also challenges that done. we’re shakes that our to we business, challenges approach in we’re while a But about have it confidence add longer-term business. approach up. Mike, some about just and all transparently see. of shared very be this So nothing the open confidence get absolutely our you of we’ve It’s in to the trying hustling

Mike Grondahl

that’s. it, Got

Okay, thanks a lot.

Operator

to session. and this to CEO, At turn Matt like President the Sheehan, remarks. I’d time, Q&A for our concludes This call over closing

Matt Sheehan

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

Operator

conference. program. today’s concludes Thank you, gentlemen, ladies the and attending for This

disconnect. Good You day. all may

Primo Water (PRMW) 11 May 192019 Q1 Earnings call transcript