PRMW - Earnings call transcript Q1 2022

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Operator

Good morning. My name is Pam, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Primo Water Corporation's First Quarter 2022 Earnings Conference Call [Operator Instructions]. I would now like to turn the conference call over to Mr. Jon Kathol, Vice President of Investor Relations. ahead. go Please

Jon Kathol

The securities and except measures law. materially and of the financial Wells, announcement and these on discussed statements being differ other comparable is company's accompanied update Officer, be any Tom Water be first data performance. considered Financial concerning when the statements at connection I conference release measures section All call morning's website Primo call included call report These company's quarter earnings XX-K for www.primowatercorp.com. quarterly annual A financial Executive at Investor This GAAP, filings and statements during forward-looking Eastern most and released statements, Harrington, earnings could XXXX Chief Chief Jay end earnings am on undertakes company's should on weeks. the of to webcast by Welcome with statements the estimated Relations and statements contains Web cautionary accordance actual by two in reports for the Primo's operational Officer. with is quarter in are earlier Corporation's a safe currently performance call. site non-GAAP in future with in the this Time. capable am including XX:XX press Primo's participants or later contained and This of Form company's Primo's is in on in conference being applicable from expressly the duty morning Form required the forward-looking disclaimers no and harbor this with live these company regulators. will the reconciliation The to the no www.primowatercorp.com as than first call available listen-only will there statements, company's mode. playback XX-Q

segment today's call greater discussion. to detail deck outlook Tom review now included strategic on start offer XXXX the by Primo's www.primowatercorp.com call of quarter a Jay of progress I'll to quarter designed high level initiatives. back this throughout As long-term you our have our part level performance we second and over on performance a first call, Tom Then, online review Tom. assist call of a handing quarter before at first our Q&A. year view conference our to will was With full will to that and our providing and in the turn discuss and provide the the ahead that, will

Tom Harrington

good the our Jon, you, quite QX and Thank and start with morning, results. I everyone. to XXXX pleased am

Exchange wane Mountain again the to to of strong challenges As in and businesses the pandemic to to premium double-digit to growth driven on of achieved begins and In team confident I'm the once the Ukraine. especially spring in remain quarter, inflation current impact growth Valley, customer environment, deliver satisfaction our revenue we brand. have and unprecedented Water to commitment everyone's with safety, pleased and the the continued the and short-term growth ability customer long-term the outlook. our and teams inflationary proud and of both our we efforts adapt we as water our the robust responded in cost by deliver America's particularly and war demand, first continue sparkling presented on Direct by

to which increase Water organic XXXX the of for base strategy our addition. global of Customer improved and This rates, acquisitions through through customers $X.X customer quarter. Our retention increased and million QX Direct tuck-in to customer X.X% customer versus increased XX.X%. Exchange base XXX,XXX an was

beverages category household the well tap penetration and on return increase increasing $XX growing shift top large U.S. tailwinds, environmentally as responsible execution growth opportunity remain demand sweetened focused an mentioned million our through consumer bottle is As and and be based as households quality. our last to continues for water remains X perspective. including sugary water the category I residential on X the gallon of estimated razor/razorblade from to bottle We products, opportunity quarter, water growth documented increased a significant incremental away as from with of model. priority and sales concerns gallon X has for The potential X our on

to While sell-through Water the the activity, first ocean points X.X% retail QX, quarter in more sequential volume Dispenser the tariffs less XXXX. increase consumers QX of of declined during and higher segment because a XXX,XXX freight, cost promotional by than and elevated price of dispensers versus of in resulted driven

to in customer we base. to new increased and a through expect distribution from promotional business Dispenser customer the As see activity penetration existing and of wins growth the ocean moderate, our our costs increased return freight benefit

an example, dispenser shipments QX. new at beginning with recently business Costco As gained in we

to overall We the in pricing pricing, pricing experience, and by we products, inflation continue in acts, higher organic address March, costs. for first in To customer improved point customer Despite pricing each inflationary high the of experience revenue FX cost EBITDA fuel products for the Currently, by in two revenue, experienced increased by we consolidated Direct us as gain the benefits in costs $XXX that million. will was North in to on XX% are to increased organic In million confidence Consolidated higher-than-forecast plastic we driven basis, realized XX% these approximately retail Water again, several the to including continued growth Consolidated to and January for improvement across our $XXX QX, adjusted by outlook expense volume during neutral and in we and Exchange driven adjusted second of invest million, organic XX% revenue evidenced and categories, retention gives $XX response and the executed at full approaching the EBITDA elevated customer our that improved revenue time. demand actions quarter, the XXXX rates, quarter. led have the actions improved single-use to our by freight. And a to $XXX and our in demand XX%. and XX% grew double-digits implemented business operating growth labor, QX. guidance was expected up and The the of believe higher XXXX in customer pricing headwinds, higher of we retention and business. costs cover XX% America long-term up be revenue million. excluding the costs continue single-digit an our

and Water declined less As freight the of spike Dispenser referenced segment earlier, during activity, experienced quarter. by ocean higher promotional tariffs price the driven retail the points in and because costs

moderate, expect ocean we container return in to rates to growth dispenser business. As freight our

the generates provide consumers for to where category revenue our bottle the sales key The a in mentioned part I sales we dispenser can our water water point as recurring on enter As organic strategies. behavior of razor/razorblade water past, go-to-market purchase model. recurring water capitalize

respondents to As We Water XX% XX% the this prefer XX% as water are Water fair share and a growth should gain our reminder, remains Exchange prefer new of our model continue our that indicates category, Water XX% strategic our of advantages. surveyed approximately Refill. to of internal research Direct, one far from razor-razorblade

XX% call traffic. January, softness BXB supplemental channel demonstration in of remember frame. resulting what in the is decline a included on You chart in data the some clear shows January roughly reduced December, titled the our in and December X, mobility It retail to foot some in visits January A our Page swoon and traffic locations. time illustrated that will from presentation of recreation of foot experienced likely

As with U.S. we suspected, corresponds here omicron timing the variant of the rates increased in the

We've meet of current the the the of effects seen to demand. start to retail have omicron to these visits eased, as have rebound we diverse Fortunately, BXB the added diligently base. presentation continue mix and to on of view we work our variant levels our BXB customer analysis X deck Page the American supplemental provides an that customer of a of North base of

XX no X and growth shows our revenue Direct it Valley concentration customer business. that growth on Direct count A in selling of Importantly, in key Water our gains increases gallon Mountain e-commerce we the our consistent Exchange, premium average drivers price revenue. X on bottles, Slide Customer have in our of several Water appreciable and demonstrates and areas. recap

We route to service continue customer experience. improve enhancing operations to our the invest in metrics,

our the in near intention customer outweigh benefits long-term XX% believe any We and customer increasing targeted currently investments. short-term and than We in the experience delivery more levels are staffed route staffing improving of U.S. the are

on governance of our from environmental, first the been step next priorities As our water governance we protect to it relates our working position ESG, data our formalizing targets on new focused environmental to to and ESG structure, plan sustainability. journey. on company. this report commitment elevating drinking enhancing quarter, represents social across our ways responsibility establishing Later initial our our publish finding collection The on in remained report. We've in by we efforts quality and manage our in honor the to environment the and

the As water bottle last in exit pace our announced November, single-use retail the strategy, on completely of we by We business this part to the step more North remain water of ESG category our a America. planned end bottled major the focus environmentally in is enhancing to quarter, million bottles returnable of ecosystem. eliminating This a approximately from the second business. on XXX ability friendly, exit

combat their reusability returnable gallon recyclability. bottles alternative attractive and an and based X the of Our plastic to provide X on waste challenge

revenue Russia Russia. and been Over business exposure as the In recorded Ukraine, our EBITDA. in in well asked we've as business last approximately $X $XX war our million months, million adjusted the approximately to about in of business few our of XXXX,

have to the to complete We exit the exit decided XX course over of next expect to XX Russia this days. and

countries in homes, are as and to of influx I in they to from our times. appreciation their to citizens the work Ukraine help we're displaced of we exit in we in Ukrainian providing hosting efforts these extend ours and will to in very manage NGO refugees water associates like as they to of other difficult supply homeland. in own Poland Russia, their European from our Poland business Eastern to continue several my would the associates profoundly and are those the humanitarian proud As

for call greater the end our conflict. first detail. Ukraine, to thoughts and review are the to over Jay the to people now Our results I'd like with to a speedy we in quarter hope of turn

Jay Wells

million. you, Consolidated everyone. our and million first results. revenue good $XXX $XXX to quarter with to Thank consolidated Tom, compared XX% morning, increased Starting

the $XX December has quarter. traffic organic largely growth the These XX% in by foot Water Excluding and was in omicron reduced second our Adjusted BXB of single-use the increased for the variant, were bottle to driven grew volume Direct as we XX% and American growth of to the our our exit caused a exchange water Rebound businesses, EBITDA XX%. Total rebound saw and gains of million. which business, and quarter. revenue January. into early by refill suffer effects revenue foreign from continued plastic impact Exchange North

profitability. drove demand the discussed, growth pricing Tom As effects strong actions, of volume and

we full the achieving substantial physicians now XX% of more have During made progress route levels quarter, than in our and delivery stacking bills.

XX% costs seen water associated cost to have business, offset materials We business. additional on are in captured us North transportation ocean of we freight, are the that enable major deliver costs people areas of quarter we to pressures be for pricing first bottled soon growth staffing our to single-use higher have with offset by in that price the our our cost included costs, continued and of the the other target The The investments making increases year. accompanied inflationary America these exited were increased we X% incremental actions revenue increased labor. confident have our in to-date. buckets taken enough will to The and

level increased $XXX million. segment $XXX North for compared our to million to the Turning to revenue performance America X% quarter.

XX% and foreign by Excluding Organic driven XX%, the driven our businesses. revenue the EBITDA X% exit was increase America the growth mix and XX%, Exchange North growth Water business, in by water to Direct million. plastic exchange Exchange volume price single-use in increased revenue businesses. impact increased our from of $XX refill within Direct of XX% and Water increase by a and from bottled Adjusted

demonstrating XX%. was by the Revenue exchange, Rest to of increase segment in our driven Rest multi-country, excluding World All the foreign customers. the growth increased and revenue segment. Turning BXB on benefit of by model. The showed of by XX% residential multi-channel million, our increased of channels World impact both increases, to $XXX

in is to beginning X% We performance which investments return in $XX million from are partially work to our marketing as for Europe of balance to Adjusted beginning and higher from increased EBITDA revenues mix. with segment Europeans pandemic was to customer the further by of and are and returning diversify base customers in the work. Rest recover Rest business, pleased of World the our to commercial to the World of businesses benefit offset the customer sales better residential

QX cost in our freight demand full inflation increased offset to with year strong is materials. in to to off price in With and labor, resulted costs. outlook. respect in and a QX increases strong start QX Turning increases customer and to EBITDA, Revenue good has and adjusted fuel, was

We headwinds. price these offset are take we but cost windows can it cost of result in to may confident increases, short-term

are foundation the we requires that focusing addition, for on In growth future year. us to in This this foundation laying growth. long-term in invest

$XXX available And will of $XX and our we continuing we from headwind based expect $X lap million. have said in today, range to business of between to quarter and as EBITDA the be a we operations $XXX business. $XXX adjusted million. of from this revenue one-time as us Finally, the XXX be consolidated that exit the million to of that adjusted revenue second Russia in million information and million of EBITDA With on the creates

For X% and exit million. XX%. X% Adjusted single-use and is revenue is North of XXXX, to X% XXXX adjusted year the we $XXX to growth organic to to growth water EBITDA be full be the business, expect XXX for revenue between American overall expected be projected to the retail

business of the of on mentioned, of $XXX the exit million, be retail expect adjusted the quarter. revenue for expect In single-use these products to product second XXXX, move the exit quickly. by EBITDA. line revenue XXXX Tom to category accounted American approximately $XX now still effect continues As of North We about We with minimal to the end this this million. water

Valley, vehicles our creating in supports and investments products in the million margin $XX and Leading driving November, dispenser is places in expenditure like initiatives margin reduces plans include Angeles well the last and Day Investment customer initiatives of reduce incremental to in as year, Los operational web a spending to which as around used growth. increased support and water fleet innovation, by spring an of CapEx solutions dispenser being expenditures as figures e-commerce innovations support discussed million. as rollout well being growth our to of leading include Water+, efficiencies expect demand expansion. expansion. support excellence. during $XXX and taxes, outlook, and approximately water Calgary. as to our our Mountain cash production million usage future ESG outlook to and to growth $XX includes emissions mobile offerings including refill Investment of to differentiation and as grow Key also both shop, funded execute strategy, and customer multi-year expense, digital Installation of and interest sustainable we management. delivery My will EBITDA our software and increases our leading update EBITDA The such For logistics which Investment and support support our new that global in adjusted will sources, our we which capital Investor of XXXX supply These EBITDA growth chain equipment revenue base. capital incremental app,

yesterday, Directors dividend $X.XX authorized quarterly of of our share. Board common per As we a announced

Day, As can increased our and discussed during as our November our growth annual generation in fund free as dividend. well our growth Investor cash increase an outlook flow

over another dividend [$X Other aspects to Our a in dividend deployment and include $X.XX increase step-up dividend path dollars] our another in M&A. shareholders the million XXXX by increase includes returned to share in The multi-year in quarterly XXXX. capital continuing in an in XXXX. tuck-in incremental our per of XXXX,

on pipeline and front to in remained executing For of tuck-in $XX of us. the we million tuck-ins million XXXX, target $XX of robust to continue focused opportunities

in changed. XXXX. for not growth organic long-term confident We outlook our outlook Our remain has

revenue organic XX% margins million, the annualized EBITDA to are forecasting ROIC high and of XX%. $XXX XX%, to targeted growth, approaching than adjusted EBITDA Tom. adjusted of of percentage $X.XX greater leverage now turn will less EPS I net to call adjusted than $X.XX We share, X.Xx single-digit per back

Tom Harrington

Jay. Thanks,

platform. differentiated Your Water executing Looking ahead, on focused on Way we remain

leverage drive the of made range from of revenue expected retail the single-use is will XX% to XXXX, in revenue adjusting be X% for including acquisitions to We the to in the revenue tuck-in pure-play model our and XXXX. growth to Organic business the X%. growth during water exit North American X% water plastic of

prioritize to on in remained understanding leveraging our the focused to audiences to customer new by things continue the We we content them. segment customer journey and all digital, right the to experience data products provide and

pace their new Our current on empowered products strategy whenever, in the the they later our will on and want new also destination the manage our enhance features and future this Water ability format new We're customers go, with experience accelerate to to e-commerce however will obtaining be easily Way fully Your year wherever direct-to-consumer to and sales. our the dispenser embrace launch accounts them. with Primo purchasing that

best commitment set Our customers. for the acceleration digital to to solutions provide our initiatives our tone to the

We alkaline model of have of trend geographies. bottles dispensers the growth Alkaline in of sale Plus Plus, through Plus new top number the the as pH certain and in globally. water Water X levels at launch water will is water the been continue with Primo our a brand, has to Primo time razor-razorblade for products. bottling portfolio sold execute our Interest line encouraging. level and Direct currently driving our sold growing growth U.S. in existing very of is Water customers X.X for available complements gallon of alkaline a Primo

rack could distribution lead We X,XXX have incremental exchange of that more places. than a to pipeline Plus Primo

toward the beverage our growth prospects share healthy paying consumers tailwinds up additional category continues refill major hydration structural gaining XXXX. refill. in are the net efforts at more of and wellness We've thematic support our XXXX category. locations driving of such in partnered install broader X,XXX in retailer off health new and Supporting machines solutions. are as with Our areas to and to that a are The other initiatives to

is products water addition, in for services. growth a the world parts of perception the source our expected tap Tap documented, In all supports declining future. the of and is municipal of foreseeable as drinking quality the well water continue of the decline to to which primary

$XXX we expect XXX and our adjusted consolidated be million, revenue noted, Jay be and EBITDA quarter As $XXX to for and our between to second XXX between million.

revenue acquisitions XXXX, in adjusting demand BXB business improving the mobility. forecast to of from workers continue For and their residential as North the as continue X% see America we the to bottled year including tuck-in both XX%, we of the retail water revenue single-use XXXX, for exit the consumers the growth to full made sectors are increasing during and and

to We to targets, are M&A maintaining like to the year. forecasting I'd our strong across be call to EBITDA adjusted over to serve $XXX also associates Primo move remainder which customers. Jon the to again, XXX efforts execute will a between for thank million. we expect and Once the of I business turn us their tireless during pipeline Water of to With the our the that, Q&A. back We're

Jon Kathol

Thanks, Tom.

During Q&A, first. for of question as possible, as and we one can you many you. follow-up to for the please would Thank from one limit of questions. a line open the ask ensure hear for we Operator,

Operator

Kevin Your from Instructions] comes Grundy first question [Operator Jefferies. with

Kevin Grundy

for pricing, pick and wanted your on up could. if I shift then the to I to year outlook

just strong what a solid with first just despite the maintain respect to second? your the start outlook, on So your appears revenue first, quarter and and EBITDA the to comment year to the be for guidance to decision maybe

Tom Harrington

EBITDA revenue first growth, margin quarter, expansion. the growth, Clearly, we're pleased with

a rock carrying early. that it's beginning, but into solid it's we and QX, So see

we headwind changing for the I decisions think So bit would wings important effect go. our under we'd $X note while XX next exit million of we're get guidance And to our any about Russia, short-term we not in to to the the and little of where well guidance the that announced also it's make before like EBITDA.

our to spite of So we'll decision. deliver guidance, continue despite that in

your we're continued be the it, April, a So off and to business, in of with that's days has to I and where pleased want start, into we first to guess we it sit. But terrific quite the couple point, that. is

Kevin Grundy

pricing. just to then And pivoting

pricing took January I in comment was, you think March. and in the

then couple elasticity far, a is to couple of X.X% the maybe although should increase the ability just here? seemingly areas so So good, price the so environment the inflationary Observations the the just on currently broadly, given on, round, touch magnitude year-over-year. the first a to so least results. And on you from could early, pricing, questions of or far, worsen which in view of CPI, relative take at with additional the

Tom Harrington

it take best over rate, Exchange our on of in stickiness both that The I'll across measure to have Direct number good at retention us the and our if for piece Water a customers and XX.X% we're I'll flip correct. Jay. business seeing our is and then I

you on delivery, good a year. our that to look I in both growth growth route with BXB of then is terms service, which it's that our place revenue you we've forward. sticking, the think want Jay, is versus And if spot to we're says been Gale double-digit staffed XX.X% our is they're frankly, business, So important in we best prior which we ability can as that since do -- very the investments everywhere before be move good any variant, to us we that pricing pretty any And guess so indication that pretty solid a us best commitments and customer, sticking much at to is with color in properly that which add? the us. -- our which gives is we're on our we sticking, on a in and residential staff customers sign deliver are growth, confidence

Jay Wells

prepared I little my I talked a think, remarks. bit on

at of related you in up XX% that the If Direct America North to exchange look is quarter, Water pricing. XX%

prices levers different as later, quarter, the we So the diesel our price saw quarter. that pull talk on ESC will increased during in our you magnitude. increase, increases, two more fee, you we earlier products, we took give price the our pricing to delivery in the to about we have When continue certain rise

our billing they different took items we two products. of line tranches, though different even on So were

Operator

JPMorgan. with Andrea Teixeira from comes question next Your

Andrea Teixeira

looks like it's My early seeing probably can quarter-to-date, you related wondering if if you're how you good out, improvement. residential. in vein, against parse the anything, And It price you're seeing point more but to commercial tell, that if had is on very you've elasticity. out question as as to

If against between us residential, are you what you back a of a difference quarter-to-date? some little or give of commercial BXB there seeing and coming the of can bit clients kind even in

Tom Harrington

There's of there. a me that. a couple questions embedded take let And at shot

If then BXB to of terms our growing residential, in rate call of North a if revenue And in mid-double-digits went it, in both in both to you same went of, growth. business America, excess you double-digits. terms at is in of faster terms Europe, they're the about mid-single-digit, growth,

pleased, quite pegged gone we're So are the at and And has surcharges delivery fuel. our pricing energy price through. of generally remember,

those from spike us covers area. reason saw that we we the Hence, volatility at the beginning Ukraine the March it in in of price the once took the initiative another oil that of So -- conflict.

Jay Wells

whether prices, residential. different $XX, or you're a $XX, a small you're on whether customer business keep build average And in our mind,

structure. very similar billing billing very structures, type the consumption] So [volume and similar same of

pricing, if So BXB. And North those. retention growing across both seen taking America the taking it we're in in good or in and residential customer not focused Europe, and volume we've base good we're revenue on in just both our entire

So take. any pricing with the issues seeing not elasticity we

Tom Harrington

staffed at route essentially a think were XX%, important current point significant staffing fully one And we I and a operations right. where difference from our year levels ago before is Delta, is

much best learned year. have anything position, pointing of from last the we forward, better I'm in possible ton a tools in ahead staffed, in comes I'm the it, So if place, that I we event we're think

gives that deliver which confidence can enables our customers, continue to we So pricing us frankly power. that our

Andrea Teixeira

organic the follow-up a bit you and that on just comp have can on tough an little a I acknowledging If quarter-to-date basis.

were total organic? the comparisons you the company. mean, to I what's when year the were able should commentary that quarter? happened -- that cognizant your than be tracking XX% XX% of we something -- the Is in think I what in last first well achieve Or trying up quarter, you're is higher with you like about in

Tom Harrington

we're last if think solid looked at No, QX I rock cycling, last you year, year.

QX good performance good basis. very We're on ago. a of So in year cycling a year-over-year a performance

the quarter. So I'm we through but positioning, like current way one-third the our of

here, we're So I confident, commitments, But our against ahead don't see position. myself out. in now, we'll turns want of to we're and and a how far it too very we'll good right get deliver

Operator

next comes Derek Lessard with from question Your TD Securities.

Derek Lessard

the in to quarter. some a jump of It integration big looks back adjustments that in expense. going EBITDA like the made Just you

was bigger of Just quarter for curious you in if guys. that terms just a tuck-ins

Jay Wells

I done. would say acquisitions, related we you're the to overall have really severance the type seeing acquisitions the of costs final larger

seeing You well eliminating over the at the would you're dual where in right complete staffing capture, are But say. it's our related seeing that that to as now some through, did of up year. we sit synergy wrapped Belgium, I we're and cost end say, the we've of some that running I would

say we've associated done. would little larger the through year, I costs with you're acquisitions seeing the that bit final but a more we have of So the

Derek Lessard

one how working like maybe balance it way. thinking home sounds but me for you're between And And return about it schedules, I sounds I permanent and to me. was from either more the you guys wondering guess agnostic are office -- like to more

Tom Harrington

correct. That is

home home, So our everybody on commercial chin have took through and on business, as from -- continues from when begun knows, it we the North business better the work similar, our as in we from we're work growth numbers pandemic sign to in which Retention in of improve is commercial not and the if grow. we our work seeing residential real we've a that news went to have residential. continues is America. mid-double-digit to from Good in Europe, benefited people home and

balance open the between and less changes, it let's balance current will pleased channels quite in as world we're work the of the home makes work So of what be. from office the to the

really So well we positioned. think we're

terms Our in count business roughly customer today is of XX-XX.

half our -- retention me, excuse -- So is Direct half the and about Water of but other resi, is half we're way business commercial.

So balance, of good we growth good have double-digit and we both. have

really we like where at. So we're

Derek Lessard

just the sort terms that Where Europe in in to are you mix? initiatives maybe to of follow-up a of And that. improve

Tom Harrington

articulated we year, residential good last -- had we So growth.

growth We despite residential continue our European the good good to business. war -- have in

seeing business. growth continued are that in residential We

our the We continue to sell number which We've e-commerce opened is of enhance gateway important that's is website. to because water dispensers, where a we which will shops, services.

So where we're are. quite pleased with we

and We that out and America. are couple in refreshed we or We'll in enhancements, in sites be XXXX, Europe into mobile new app investing sometime we last in app rolled of extending month are consolidating we those itself. Europe and our the in making North a

and mix de-risk of get continue better we those base in the together, think and will time are coming plan Europe. our to in components So all customer we over

Operator

next Doumet Your Scotiabank. from question George comes with

Unidentified Analyst

This calling behalf. Congrats George's the going the talk bit also, in moment? on And the pre-pandemic you is a the Europe forward compares quarter. at given Can to little like volume expectation does how about on level [Lamin] war?

Tom Harrington

I a question. faded missed of mind you bit. Do repeating half it? first little that the You

Unidentified Analyst

The volumes in Europe going forward. uncertainties given the

Tom Harrington

everyone don't disruption. direct nicely, in have Hungary all we sized in aware, any despite Ukraine. do quite We business performing the those as are have is So and businesses businesses good Poland and

perform. pleased those how with businesses we're So

two a If pre-pandemic, you basis over [indiscernible] year on growing, to higher look is ago. revenue our years two it back versus come it's

Jay Wells

a still soft. Our commercial little Europe is in business

Tom Harrington

stated to A business. offset little increase aggregated our the residential growing soft, but by objective -- of

that's to would have way the So fruition coming hoped. we

is aggregate commercial beginning there's we're -- that's in perform home, pleased you why to from work we also better. So with and business what Europe, see our quite in happening from benefit more

will We continue. expect that, frankly,

Jay Wells

the commercial where you mid-teens business versus return this over part point down in That's business at in worst seeing having are Europe is growth were two work I'd of part at are commercial say of more And Europe. if our -- time, containment only the now to over in Europe. years that you I look right more you just look we how ago, mid-single-digits and mean at countries down the XX%. at in

seeing very we're normalize a that in So over things good for of business the part return start Europe. as to

Unidentified Analyst

Also in mentioned on you call, last opportunities Europe. rightsizing

to well? opportunity waiting as are Can for you there. talk programs about You there end the less

Tom Harrington

Derek, And of with referenced, that as M&A we finished We XXXX. there some our rightsizing chatted work we some about Jay that are finalizing. in is

focus year. the the Europe to we're in to in things some obviously, business on want, we residential challenging and really, to largely. like as So on in the growth service we're largely we appropriate returns think business two levels investments beginning after And our in structure SG&A, now focus growth

Jay Wells

And Europe, office along to has very progress, haven't back centralizing of Europe. the the historically, be Phase we a way Barcelona back good up decentralized thing office standed you because are other only is, X. in in we're this we well making very we're might and our been function And over to referring business

consolidation in has moved a later But have along on well. in basis back and in we'll countries We progressed move shop Europe this second and year. the very smaller

Operator

CJS Your next Securities. comes from Daniel with question Moore

Daniel Moore

in the Price quarter, took the obviously cost coverage price? was and there really just the EBITDA on impact good despite in pressures. inflation between Was given inflationary when you quarter measurable in any significant timing lag

Tom Harrington

reacted it of think in to pricing. we're adjustments the nimble. pretty and made the beginning the pandemic cost you I we've if And to included we went the past structure, that back to we

March that higher, as in happened, in on of prepared certainly, year-over-year in the comments, mentioned increase was we full lag will we get our ESC then but expect pretty a And price there. of bit impact have a that QX might close in be to So realization because obviously. delivery efforts second little a there been those when to

Jay Wells

look increases. pricing I think offset net-net-net, were if to you cost they our actions, at made

net-net-net, pricing seen. expect offset our the incremental bottom -- benefit our to I cost that it's cost pressures really to line, we've wouldn't So

Daniel Moore

the how and to are free capital thoughts relates And the then about cash talk expectations year maybe What just for of it flow? your for working remainder there?

Tom Harrington

at We have that elevated make decision we the we're sure bought pushing made we our stocked statement, you up early do was carrying dispenser that And and on inventory is free our sure will flow now. levels right see are we to want cash you If sales, dispensers. make razor. that look we to

We made to So inventory make buy year, push we're knowing want this going the to hard of make decision sure later we're forward the inventory to have we've we sales And year. we to buy the in dispenser want some that would sure the expect continue to the year. on through to in going I stock.

going say end at year, look same the] razorblade the make the see, sell statement to pressure really would key more to flow would see a so cash push you we sure that's razor, deals. that focus I have the at will we we're but the because [completed year, of that's one I expense, the throughout you if our at So the can

Daniel Moore

year? we looked like Maybe to last, light, guidance potential I cadence Any know the look it little M&A or the on of of activity still your was the rest a tuck-ins you reiterated color as target.

Tom Harrington

$XX at the number did we -- number year. remains target end a We executed $XX Our million, of of last the million.

right. So digest always those, we to want

up work don't do. Tuesday, we've on we bit of and show do little got just them a So to

year. So sure. will solid we XX as that ones we're of did we confident at between end focused and the year on we a the pipeline, for million But $XX get the we're have progresses the

Operator

Deutsche. Your question next with Steve comes from Powers

Steve Powers

inflation maybe relative if in success and other around I retention challenges about. was all spoken on the you maybe expand stories we've cost just environment, on hoping any could this associate wage just or inflation recruitment, top of

those of dynamics about the thinking over year? you're forward balance how dynamics, Just the of sort labor going

Tom Harrington

one strategic the and pretty part generally as better position Yes, support very call market, into That XXX% staffed year, and part the but customers. outcomes and they we're We've of focused the can of, properly spent end of of we're town the we the our it experience people, it, or we're from so of focused. and staffed across focused variant associate as very We've the is we get inflation. called that one our there's because the doesn't plan. referenced, care We progress, as let's well a get we trained in on route. arrival good through on take properly staff mean the of inflation. so part been that made retention then of on And XX.X% our Delta wage the company, every them

staffed, line. to business people. and got, bottom we on can challenge attract the closer make I focus, the customers we don't ones is the We wages -- the the want keep growing continue ensure that ultimately our probably that progress that servicing right we so of so and the have to is top adjusted to we're And now to call it challenge, a

Jay Wells

into say would we're any thing good hiring on it. our drivers, seat come one our the this we and we got predictive end we've a the those to waiting implemented see more up, through last model year of I implemented not to we trends we're as RSRs, ahead FDA year now, is roll for of that the hiring trends, the modeling based and will hire the out where historic looking at openings for first we're

at positions really what given us that's to time, well-executed really point ability get in of full So all hiring model. a the our this predictive -- is our

Operator

from comes John CIBC. Zamparo question next Your with

John Zamparo

and increase? ask on in e-commerce? price can rates price If or more retention the whether see on sign I by increase or you any pricing one divergence any the Did change BXB there March is versus elasticity. residential up channel, And January it's even customer

Tom Harrington

seeing not it, through let's inside or call across, We're changes any sign-ups Direct. retention meaningful customers Water

which but And We indicators. are to from follow one the that. that from pleased for us our we call is center, will we're as move we're retention QX. with where So of to we with QX best obviously perspective quite a pleased

a seeing seeing So Difficulty] up. delivery flurry not not a losses people We're on customers. we're about [Technical seeing flurry calls of of fee. We're signing of not

relates investments made to of frankly, the it a an retention. So associate is outcome we've digital. going and benefit also be enhancements It's And a an we're we outcome that pretty of It's that. on of to the we think in mobile good experience web. spot on made that

$X benefits do And to month $X And there's earlier we the other if are hydration that of for and want. a not do those water people things customer a or point, closing and course, you to right about experience. or do is we in you other all all terms things we to drinking for tailwinds high-quality Jay's enhancing to So the better fleet. if bill see us incremental get healthy we anyway of people and the

John Zamparo

follow-up my is organic then on And growth. the

I not you versus the if QX get 'XX. it minus if XX.X% have in QX but forma do, pro listed see X%. available. year-over-year. You that wanted case to share noisy handy, year? or in you you X% just can I'm have you But last minus around was sure It number

Jay Wells

on I can to last last follow now. number what number handy be right was? that I you're what asking, that have year's QX Is don't one. year's up

John Zamparo

Yes, we can follow-up later.

Tom Harrington

pandemic. pandemic, was Yes, full that no

Jay Wells

exactly. Yes,

well of the I with -- in lapping pandemic that's were and know pandemic, we XXXX So QX QX. still were no we

follow-up head, the my number yes, doing But off So of top a don't John. negative I handy, have but right. can that that. we does sound

Operator

Derek question Genuity. comes next from Your Canaccord with Dley

Derek Dley

in questions. this One, sounds it sort mean, by margin? order tends two lines? Direct like other that margin press -- you kind commentary release and then well business of one just I to call rank lines got carry the higher on on a I've of as based business the can the the your Water than

Jay Wells

margin… Derek, or you're EBITDA talking margin, gross right, And

Derek Dley

down to would EBITDA, that If walk better. you be can it

Jay Wells

could -- that's depreciation, let's Direct, little let's a gross is at it look you look because Water I at gross start I and EBITDA there, -- exclude with would how viable. mean margin. we from down, if margin it. work bit is I very

high on Water XX% touching quarters Direct business. XX% You're our in the some at

much filtration it with they're When our compare other versus lines, at we're a or project. smaller So not business, you margin. selling strong you lines, manufacturing if look definitely our a

gross but in our So where routes. it we is SG&A margin, down have also good has

You spend units. we're it because depreciation, in on that or amortized

The have on low So margin very we've that about of gross a margin. lines we gross we're businesses. good exiting retail our talked business that many very

our XX% gross Direct does a and what business, high coffee happy business, run, such but very selling type coffee, other, margin Water again, I margin. lower like Our that as said,

Tom Harrington

Water business, of whether is, it's products, consumer's dispenser hand, our Exchange, is Refill. dispenser the razor. Water Direct, the can standout so razor one we from the water -- that The sales that Water the get to in benefit want in And we

well, go retail price, -- holy proverbial our them Exchange XX% of come will the going to to be would razor/razorblade. ground, to right, want to in outlier Direct, go your the get because to XX% business, Water they homes EBITDA, that's and XX% are and them will and and the that So we frankly, lowest one because sell gross, it at terms possible in of

Derek Dley

And a was one to the late I sir, call. more, little

million already Just that on the gave any mentioned side. update believe tariff $X quarter, you you or it, million CapEx $X it you the reimbursement wondering just side if on around the have I on and last was perhaps COGS

Tom Harrington

the others. We in forecast hands it. It's of don't

out. it comes, if in it's performance. any guidance but government ultimate So forecasting of or current their our decision it nowhere that comes, on let U.S. the turns make where We'll

Operator

are at further no there Please Kathol, time. Mr. this questions proceed.

Tom Harrington

you for Thank Pam. concludes This you, attending. call. quarter your Primo's results all first Thank

Operator

lines. you great Ladies call and your gentlemen, this day. you ask that and participating concludes for for thank a disconnect your We Have conference please today.

Primo Water (PRMW) 12 May 222022 Q1 Earnings call transcript