PRMW.TO - Earnings call transcript Q4 2023

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Operator

Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primo Water Corporation's Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to Jon Kathol, Vice President, Investor Relations. Please go ahead.

Jon Kathol

Corporation's XXXX Water Conference Primo to Fourth Earnings Quarter Call. Welcome mode. are currently participants in All listen-only The webcast for is and call being will at Water's be primowatercorp.com website available there playing live back. on Primo financial contains forward-looking statements company's This conference and statements, performance. call operational concerning including the future Form contained morning's report should in on earnings with quarterly and company's annual disclaimers press Form filings statements safe XX-K harbor reports cautionary statements connection release and These the with statements on securities and be and considered other in XX-Q in this the regulators.

the differ measures actual on performance these from when company's expressly announcement the the measures A section The call Investor and of the except in any is capable during company included GAAP and statements, estimated, earnings no of could company's required with company's update materially fourth-quarter at to accordance morning of data these the law. with applicable being this financial reconciliation primowatercorp.com. the duty is statements, in website Relations by the earlier most released as undertakes non-GAAP comparable forward-looking discussed

We assist throughout discussion. deck website on have you our designed was also included that a to our

Financial Water's will to by am Rietbroek, I Hass, that, Executive now Robbert. With Primo Robbert David Officer; Chief turn accompanied the over Officer. I Chief call

Robbert Rietbroek

Fortune goods believe CEO including I I Procter XX of and of Primo year, and than this what pure-play Water everyone. you, consumer & years to water January be companies, company. at experience the bringing publicly I'm new part morning, Primo joined Kimberly-Clark, Gamble. in as Water only good of traded PepsiCo, leadership more XXX the of Thank you and John, excited premier to today speak a and to is

as their as to would For reporting in America, the of extend has past and personal thank warm Foods you Primo Water evident. of our Quaker years, like last call. General I retirement. would efforts also associates the dedicated like Board the let's Primo I North to CEO abundantly we gears all Manager is that, the be been of segment PepsiCo. for a and well tremendous served XXXX welcome including team pride recognized our wish years. for well-deserved a and their Senior all shift With Vice The his delivering and I should as predecessor, President to Water, He openness. strong a leader X Tom best and for for X thank of today's to guidance the his for Harrington as in topics results, him my hospitality

to I be capture delivery. and embedded outlook. growth where highlights review our some Then provide initial our questions. up outline priorities well we our observations your I'll Then then our been open wins, in transaction. After onboarding, which detail have or performance ongoing call back opportunity financial he and as We'll will I'll as completed greater of it cover further profitable to what David that, our XXXX must will the from including opportunities. my share recently developed have high-impact to enable strength

connected spent of last we in to I've and perception I study. of have valued year's next conferences attend to in the quality ago, events. weeks time forward to X and investor our as for I reviewing customers. days in with coming addition arriving Since also with and hearing look financial more several begin the community associates the members you months

resources, our company's opinion up learn assets, more the of that and growth opportunity set I've X for is I'm broad the areas. across about practices Primo had as to Water

the as four, our Specifically, fulfill a ability and support water growth distribution in our three, sustainability; fragmented, our the markets. large, one, of and our to water offerings; two, five, practices associates; and growing company North observations capabilities. highly American the and our breadth and potential brands; production scale These pure-play stewardship water our

and across Florida. They're we of first-hand talk embedded numerous associates. about and marketplace. our we passionate in the the our associates distribution sets do. communities in our branches that in let's associates offerings. They're the superior largest to serving met to weeks, Georgia, take associates our I service to and customer facilities providing believe us critical our California, while level serve which what where apart visiting our customer empower last markets our be some idea to a our with will observed X the live in of about I I've base First, customers. water In Texas, Continuing

us expanding our in constantly Direct North at highly impressive. our Water address an This the our scale business in partners or use our that quite is Water footprint, America drive array leading to we us Primo with differentiate broad direct-to-retail a I supply can allows breadth delivery can to serve solutions customers higher water efficiently. scale fragmented Second, retail allow believe to work of level provide in Leveraging of further rigor distribution. we to and diverse operating geographically marketplace. will a individual

locations Water locations. with solutions a from us directly renting Water it's refill Valley Mountain customers or water to X.X Way XX,XXX over Starting million through premium our spring whether one channels, dispenser Direct water, sell of buying XX,XXX at or refill water our Direct, connects water our or dispenser Both either of Water we dispensers, our have stations, Your platform by drive water exchange our are water. exchange XX,XXX XX,XXX online locations customers, retail over and that hydration to means consumption our recurring

filtration X in gallons in last Additionally, year. water our services of more billion water we These business. than than more aggregate sold customers service XXX,XXX growing

addressable growth market have additional we in channels. opportunity million of residential XX American households, an total for nearly commercial organic the North With and both

and support referrals, old-fashioned customer customer target our efforts and websites, door-knocking. grocery partnerships We prominent club connections major our with stores, quality and with in-store apps, stores. ongoing recruitment to mobile marketing through and direct-to-consumer retailers, customers We events,

to My initial key strategy. addition our and growth, impression In organic is integral our that long-term synergistic acquisitions is integrate core competency. M&A to successfully a to DNA ability our a part as of

retention have the solutions because and lifestyle. an customers high their of Our through as hydration research understand of services rates indicates that important accepted have part our M&A they acquired benefits

as a a legacy. goods long leader, history of recognize consumer brands I career our in portfolio have Third,

In fact, it's for in of the reasons Primo one my lead interest Water. to coming

beloved Mountain wellness health Our of with direct-to-consumer are and include water XX the marketing, communication, These own as other with shining and agua.com, of even customer Springs, more some MyWater+ retail connection our and XXXX brands Sparkletts. that long-standing connectivity. back Hinkley domain of customers. with I and names America's portfolio amazing of of XXXX most our a brands app, right and benefit combination as assets XXXX brands. with far like the examples believe we Dating Valley, that We products have and enables beverage with the access potential water.com, to be consumers. mobile and with brand impactful our

unique I truly being accountability. our a aspect and the love company company's good sustainability, of commitment Fourth, is our of to environment. our stewards to commitment ESG,

For example, the reducing plastic in environment.

and and achieve large-format strategy loop the can One protect as stream. to of many support greenhouse and By on ongoing we on is and priorities: sourcing change journey. impacts our reusing First, associates business To responsibly; we close processing our investors second, from the integrating for we work as planet bottles our plastic an management; By bottles water replaces environmental the X,XXX continue our gas bottles, in entering thank sourcing plastic waste. inhabit. circular our as through we this, dedication waste recycling responsibly, are help reducing climate their aim single-use third, their continued economy models. all emissions X hard focused We sustainability our that principles for and we implementing

a operations, us population supply reach North grown the within of area manufacturing relates put majority in fifth of observation our inorganic The which the growth. America. The significantly network over combination of footprint of and years to the organic vast of has and through chain

customers suites America. expansive better sets to North our investing distribution us optimize distribution footprint new reach production our across physical see includes efficient planning. production technology to opportunity capabilities, support While meet customers, to efficiencies, terms to our apart operating this and of improve and in more This and existing needs. assets, our I serve ability customers' in network

a of more each discuss in bit me Let detail. these

our and and see ensuring our improves our First, manufacturing in efficiency well-being best It the technology action I bottling waste, Angeles. practices. for located is enhanced facilities, had production the to line growth associates Los we term in to further this at of facility and and safety the bottling continue recently This safety robotics. opportunity our reduces production, and delivering automate doubles the through associates nearly largest remarkable. over through upgrade the long new

this of We X by of lines locations end have various installed will at year. these the

are Second, important fleet and upgrades what do. an of part we enhancements

or new repair maintenance improved the out recycling replacing of state benefiting our vehicles propane-powered continual fleet from increasing and fleets. with primary and from portion a in and friendly and lower and them delivery are transition our We own oldest this of environmentally costs efficiency

invested sales efficiency, to the capital. I generate as of like overall embed processes part can working and to experience. of marketing our reduce forecasting production precision efforts planning effort areas data us. things and that customer and growth Third, I'm part are of the tools planning, improving excited as contacts salesforce.com we do we organization, operational broader a take real-time hope you digitization intelligence known to Tagetik, our increase us can like return why as tools leveraging part information artificial front about also allow improve and in throughout These potential analytics in employing for are capital the on of customer S&OP, and will like and utilizing understand cost,

results to in contribution thank of again, and capable once our the and that support would results We review call David of greater have to I all excellent benefit Water And associates to resources detail our the that over business. will for the XXXX our our I combination turn a like now performance outlook. financial all stakeholders. delivering unique to of associates, their and are Primo assets, provide

David Hass

Thanks, all you like of Water Robbert. On welcome the would I Associates, team. Primo to to behalf

XX-month our leverage cash remain of closing repaid EBITDA international represents revolver likely the Upon we million approximately pleased of QX a proceeds X.Xx we trailing X.Xx. net net $XXX that of December Longer balance $XXX transaction an of of multiple transaction, the to of adjusted we XX sale which to year. last quarter, Highlights ratio include saw report XXx announced valuation all-cash for gross I attractive expected the of leverage As EBITDA. expect in million, the quarter, completed am outstanding of assets in European term, significant on price, sale these business. resulting the closed earlier under portion you an a purchase ratio approximately our the this flow premium of as our adjusted businesses. last

our balance balance of on repayment and $XXX the cash revolver our million $XXX credit. under revolver, flow million with sheet letters million of of we standby supporting the After of the the $XXX have availability revolver,

of previous Additionally, on the million first occur top repurchase sell incremental aggregate businesses, an EMEA plan Israel, our Board our United $XX in the million. that an for execute the to authorized Foods our the the we This as share transactions and program includes is United XXXX remainder Portugal. the $XX million business in in authorization water deal the several of in and Kingdom will of Kingdom, and of international water $XX which businesses coffee

our a a from of enterprise base than customers completion million. business transaction includes sell begun the more water-direct businesses, At $X.X the European pivot water-direct North the that over of have to American-focused we million to customer X.X global a of

to providing the European on our are these To results, are combined XXXX, results. the now the reported businesses new in a will transition of a operations, from in sale be both a such Water for clarity or basis, I exhibits which into provide as discontinued QX XXXX the business our and actively they reminder, remain go-forward discontinued sold. in addition our specifically the and breakdown will to full-year until operations will press release, performance base, for Primo investor address and aggregate. in of and As continuing we go-forward

key X and Beginning our on cash on a like results In a $X.XX flow million, free revenue with into financial of recent performance all adjusted of XXXX, X would provide XXXX adjusted to guidance. going Slide achievements combined our million, quick greater EBITDA before our delivered financial of most of guidance. billion, exceeding basis, $XXX we detail on X, $XXX I and highlight

For presentation helps results continuing operations. break and the out each the item, financial between discontinued

pleased our very generation. with financial free performance, are adjusted with combined including year-over-year in First, margin we the results EBITDA significant and our overall improvement cash record adjusted flow

our that, XXXX revenue remaining transition fourth their focus discontinued last, clarity in for profile we and the me to the stronger profile of sale operations, and $XX excited approximately detail. EBITDA of XXXX remain financial financial into Second, solely forward And approximately financial within adjusted our North aggregate $XXX going operations, businesses both held million a within continuing the America. future much on have performance for full-year full was provide about success year With for let more a quarter million. with bit the within

fourth and to adjusted $XXX $XXX increasing million, discontinued combined adjusted continuing The increasing results XX% our included to XX% quarter of million, XX.X%. EBITDA margins of revenue EBITDA with operations

The of normalized with to $XXX align EBITDA revenue adjusted to fourth which $XX million, XX.X%. X% go-forward million, our EBITDA and included adjusted quarter increasing margin results continuing operations, increasing businesses, our X% of

$XXX billion, to the and XXXX, to EBITDA results our For discontinued combined EBITDA XX.X%. XX% adjusted of of margins $X.XX full X% included the continuing million, increasing and operations increasing revenue adjusted year

impact revenue excludes the in year. North in increased exit the our exit foreign million. water flow was of of free retail revenue exchange, for Normalized from Combined $XXX bottled the Excluding adjusted cash America normalized business the single-use the X% business and Russia.

included million with to For the EBITDA year our the EBITDA full margins $X.X $XXX increasing increasing revenue results to adjusted adjusted billion, XX% of X% continuing of operations XXXX, XX.X%.

X% strong foreign exchange, Direct continued impact the a revenue X% and increase of in the X% price Exchange for Excluding year, increase growth the by operations, X% Water a and in revenue the our normalized business Dispenser unit refill of wholesale had in relatively increase elimination XX% we Within volume. prices and due primarily on channel. of decline Water a in increased expected offset year-over-year basis. and an revenue tariffs sales water lower our related to the to with filtration This dispenser steady driven in

water During XXX,XXX in X our approximately through units dispenser selling XXXX, sell-through QX. million was units with

business water of dispensers commercial the blade and predictable our approaches and through model dispensers the to retail Direct customers and partners of Solutions the rental water razor in revenue Both selling in contribute business and our and of recurring Water X approaches growth enable Our includes online. residential razor, sale Water to growth.

growth have e-commerce. visibility We connectivity where solutions we the and have higher into our our the connectivity on retail water through focused brick-and-mortar greater been to particularly where partners, within is than

refund government As water under category from discussed but our initiated. reclassified the process XX% was a previously and import calls, in previous U.S. tariff dispenser was year was a last

manner refunds have We the the as recorded in same the original transactions.

of related Of in the end approximately the Water. the $X.X to refunds. XXXX, $X.X is approximately interest we approximately is $XXX,XXX million to adjusted million, related Through $X.X retail, tariff for tariff as have with balance water the to the million water dispensers received $X.X dispensers million the to we year-end CapEx of rent and income reflected Primo paid value, that to sold EBITDA related residual

reflected discuss in Through cash million is year-end, we approximately our will $X.X that free a adjusted flow moment. in

automated or metrics, driver possible, operational into in a and our the manner in North continues QX units tool X% increased long-term short XXXX. route route and profitability optimization to In X% America, to day QX of and full to is our customers As rates. of in efficient result OTIF our improving per to further compared per on-time commitment continues improved our we to than ability experience compared yield most XXXX critical serve both the approximately customer the of look revenue increased per to more The route ARO efficiencies.

service leverage per more route. Our customers evident with becoming scale and as volume are more we higher

XX%, Water of higher retention to XXXX. Additionally, than the increased last Direct quarter in fourth North America customer approximately slightly quarter

business the optimize million our our activity. and which distribution bolster generated Taxes of be XXXX proceeds ongoing The Irvine, estimates. deployment. cash cash will our our network, sale further on California $XX cash in for on of the balance XXXX. the we any part property, This not active our in quarter, at end sold or in proceeds sheet have available due property are reflected tax and net of to did is capital XXXX sale fourth operating in As this efforts

cash adjusted free to flow. Shifting

previous receipts capital, XXXX working continuing improved $XXX totaled and $XXX year capital million, driven increased tariff operations earnings, incremental combined million, discontinued expenditures. by for guidance outpacing Our lower full and of our

million, the million $XXX of cash million. adjusted $XXX Within $XX contributed operations operations was free continuing combined flow discontinued approximately and

our will moment. a We adjusted cash in discuss XXXX outlook free flow

results XXXX earnings guidance, our transition slides. of a financial guidance quarter a for XXXX's been we what operations as continuing Discontinued operations or to I in our by provided our Water. any will into to the As as appendix forward strictly be XXXX supplemental has bridge outlook, reminder, not will of be refer new help table the covered Primo

and be We $XXX guidance to million. between million continuing are forecasting operations $XXX revenue first-quarter for

We operations the million million EBITDA between XX% and expect margin QX from adjusted an XXX point $XX margin be EBITDA basis adjusted represents $XX improvement The implied for period. with XX%. year-ago continuing adjusted a EBITDA to of

to full in $X.XX year continuing X% forecast billion revenue XXXX operations, For to and the revenue the be of X%. of projected range is billion, $X.XX with growth between

with be XX.X% and We acquisitions across may EBITDA figure at XXXX tuck-in guidance occur water-direct an adjusted implied EBITDA includes Neither of expect between $XXX million $XXX midpoint. to that year. adjusted the million margin full-year the

We of guidance incremental are approximately guidance revenue CapEx. of range, forecasting an XXXX our CapEx $XX.X X% million strategic of plus

$XX is last $XX.X the previously American North growth million program XXXX represents As our of strategic investment the a year million within amount and for announced previously our communicated XXXX. reminder, the

XXXX. expect X% to approximately of return total We of revenue our CapEx in spend

driving This building our efficiency production XXXX lines, to distribution, signage Full-year growth initiatives approximately of cash losses operating product or have million Key million of and water NOLs reducing to through more driving XXXX include existing $XX the fleet, fleet million. net approximately are funded NOLs, XXXX. filtration utilization taxes expected which productivity, and we of friendly net our refill and accelerating organic be waste units. improve from a to environmentally growth available our expanding in U.S. increasing dispenser CapEx private $XX branding of plan be for U.S. XX anticipates to installing innovation high-efficiency digitization, and and our with refreshed

amount $XX in per year to 'XX million XXXX expect of million approximately We be NOLs XXXX. in available $XX and the through

which For approximately interest of -- year-over-year in senior to rates million dates maturity a on approximately contemplated our proceeds basis million in reduction with year-over-year of tied interest we the is items: our no low-interest facilities approximately currently of very million do a X X revolver European primarily our revolver. withdrawal our XXXX, expect full-year which $XX interest income debt anticipate We our to the first, our from received second, of in is The on expense, on drawing flow by we be and XXXX. is flow usage XXXX, interest unused to with expense cash and cash expense cash note fees earn our X.X% XXXX interest ability of reduction $XX $XX not offset from sales. will

take to if could Additionally, we the steps or environment will macro any reduced income rates related but throughout to yield Fed market interest XXXX experience income bank maximize available decisions. decline rate opportunities

currently higher the toward end XXXX. during of be ranges historical expect tuck-ins We to M&A

our XXXX. those health opportunities $XXX strengthen cash business of us commitment are was assets free sale cash opportunistic operations. Our free simultaneously in of the share tied and quarterly external dividends our continuing for long-term million figure adjusted generation also that operations. to continuing with free in capacity flow between the flow these drive the while and outlook we regular internal from million targets held balance This our and to and and represents replace solely sheet operations cash of discontinued cash and This and that growth. adjusted forecasting to value will enable model, invest sold Combining along core all further $XXX through our to return cash in our flow adjusted factors, to repurchases shareholders flow

the following each X timing uncertainty been to with not The have included our in items discrete guidance XXXX due outcome. and

government independently program, announced a our benefits from uncertain basis of And Board process; dividend yesterday, quarterly refund rate a targeting second, Additionally, an $XX refunds the million due step-up to our with which consecutive improvement that, the per with third the of on discontinued with over run I XXXX; timing from our third, to $XX our benefits a very increase authorized our XXXX. of repurchase are additional to First, the from prospects the of closing, Robbert. Water. optimization across continue continues by will sale increase we previously last ending performance the XX% tariff in share increased quarterly of future multiyear business the With will call Share Directors of per operations. authorization of be operations, of of stock financial our from continuing which common reflected $X.XX repurchases continuing year, path $X.XX turn repurchased respect the the across million the dividend share, program, dividend common will the Primo now year. and operations And we for In back XXXX. to pleased share

Robbert Rietbroek

Thanks, With David. preview that, our must-win priorities. let me now

we're Over an the initiatives progress on making and the overview of our focus we deliver each will next of the these provide to that specific goals. quarters, support areas several

is provide the organic goal superior The first across consumed growth customer to to base experience net solutions. and units water our customer with yield must-win a

the gallons solutions. on driving will hydration growth We unit of increasing of our and high-value customers delivered annual number and focus

to our net organic is us. have deliver to frictionless reach consistent a base. path that easy must realize include delivering this us for a it Activities where in customer business potential, experience, we full increasing order with end-to-end our to I toward do

touch be enhancing including order in our points customer water.com shop, to water the a solutions. many shop learn, will our you consumer can buy to of where improve within website experience, aspects and one-stop We upgrading

experience customer a version with providing chat with be and will capabilities our app, and and water.com, consistent enhancements the social XX/X customer-centric empowering digitizing MyWater+ voice, We approach. embedded center to mobile our of

locations We across the of must-win solutions or like one to water numerous consumer is direct-to-consumer meet end our delivery refill preferred exchange second or with channels The the our retail to partner. stations. be partners

America. to we our or embrace call their Lowe's, we Depot, Your Primo We what preferred Simply Water customers' with want prominent present penetration Water resulting meaningful put, of and offering our an of North all be Home all solutions to partnering business volume; across to both of our partner. increase our aspects The meet Way. grocery suppliers business, have and retailers as presence an chains concept Walmart, These and across throughout including other well needs our opportunity increased like planning as stretches partnerships top-tier budgets household water relationships connectivity creating Costco, joint We each customers. to associates, and portfolio.

enriching these win partnerships Sustaining opportunity here. companies, same the means for we successfully can and see long in done the haul. I I've this other seen and

customers The through Water the program to and we ensuring business third offer an the and only continuing well-being, win operating must excellence, overall to is highest organizational and continue our optimization as focused that team productivity previously on associates' delivering ideal The enhance organically to is product safety exceptional cost our will specifically while efficiently experience. to we the operational that and have delivering scale guarantee Primo service grow also acquisitions. system not serve, quality lower and announced but our structure

We have clear run we delivering to $XX committed rate year-end XXXX. million annual of the plan, savings remain and a by

In outlook continued for success. are closing, a a along our profile growth long-term financial flexibility strong compelling foundation with improved and

back over turn Q&A. the the We are call our focused embracing Jon organization. the energy that, must renewed With and for I'll on to deeply wins in

Jon Kathol

Robbert. Thanks,

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

Operator

you. question-and-answer Ladies we Thank session. now the [Operator Instructions]. gentlemen, and will begin

Modi first The from RBC at comes Capital question Markets. Nick

Nik Modi

be great with Thank you. going work to welcome. And forward. Robbert, It'd you

prior fresh momentum sense So your question first Quaker, PepsiCo, guidance the at a if be that's just those you've And look will, then the organizations experience any leveraged a all to second or question. the in the practices you of conservative. does the into is having believe bit follow-up, best at you experiences at organizations a I a business, So Primo? the wanted to with at given just eyes, you from get had pair from

wanted context you that. So get David or I to just any on from

Robbert Rietbroek

Yes.

we practices for think have Direct be across growth should first and and think are question, they of And So company. that to as Water exchange about that business. say great ourselves priorities, opportunities And I growth by I've refill would retail best growth that seen need underpinned that best terms is X thank Nick, the based our key you, To I question. on before. what practices, we in a

really us exceptional bottled put our water.com website one that business The which some or more consumer experience, adjust because that we water orders, be less experience. people in water for means part means may heart what or app, schedules, customer are experience. big addition is a a an to every their of place or first or for to our ask our with at one the jugs, has needs to contact the anyone do. the really of And frictionless superior is all That that associates of

every experience really experience. associate So experience, exceptional is product every an of think

practice. So that would be a best

from customer The we consumer, and the of a I When would choice. a have our partner ourselves all and our And associates, I really winning is best these last business say that's as is partners in many definitely of thinking are center And critical. the where my retail the live we exchange retail the that serve And excellence. the are partners, would had second the partnerships roles. communities put model. our really in we growth experiencing previous on several in the I've rapid we of phone, the say, And with person this weeks couple currently they're them incredibly conversations. third, retail practice important. of notion the of the one stock, where of at really or do, investment met the owners operational specifically the for community, of we you

in, demand of accuracy getting lot clear and very day is time products our a quality and making on the growth. the full signals, route automated of on planning, delivery, the of have getting our and we clear Asia a to Forecast referred out Nick sure there procurement, being critical critical. dispensers mix Transportation earlier right David day we really on of source out that forecast as what the optimization, and be driver production will right right,

I had quarter, growth, a To X% the question, X% strong second X% of part the fourth really question. was your understand We pricing. growth unit and

to revenue of strong and X% the look we're and of price with other projection that. we're in a revenue you is to at the see beverage year. because the the for midpoint X%, pricing seeing include the out But unit and growth going slap out and in volume. into to contrast are there growth, If M&A the forecasting units, who year patient this half. run companies definitely a X.X% tuck-ins. note approach X/X X% that that in $X.XX important do midpoint reductions We $X.XX taking billion, any of not XXXX, leading at some of refill of a it's that second numbers the And with on this will primarily majority higher position of billion you is the pricing in this little beginning does X% It's the

Operator

comes question CJS. at The Moore from next Dan

Dan Moore

Primo it what capabilities what This us talk you little can be your and little Justin capital on in attracted given that? bring and margin, growth, strengths background like a that for allocation, can can you whether the is a appreciate more line the outlook, tell enhance that the about bit something top I Dan. opportunity you about operations, at to Robbert, Perhaps beginning.

Robbert Rietbroek

me And I've companies question. very of had placed I water. some Everybody I at is goods consumer Justin. in the long the privileged. what drinks one years sector. world. been I've and health product when working wellness Water career for of for you, -- the that opportunity, the best things that Thank fact a squarely Thanks the Primo inspired XX Sure. is in looked the the

at you if other generation and consumers, fact, any less more beverages drink them. younger look In they than water before

In addition a the to industry sustainability around and sustainable this most may be a company one the that, is that strong record ESG. companies track in with of

single-use the sell, For into X,XXX plastic every systems. in going we bottles into save river jug or that ocean, we landfill going from

I view a a see top that to points me part opportunity line also a a group be and sustainability. here, -- As built future, we leaders of incredible company Justin. inspires at margin capital, look with was I to around the see that great by to your of

last the single-use more expensive, that with experienced, a macroeconomic have that consumer packs. you and lot bottled inflation the in years the about case water and think products environment If couple includes we've of become all of

or more So high whether get get delivered direct or alternative than you you to from station with our is it's exchange get and it been the retail affordable a refill relative ever the products, before it it to you from the go quality. outlet

which large sparkling. very Valley, a segment are also We business, water part growing still a is of Mountain and both and with in play Margins the premium water great.

of business, really assets, and productivity both all exchange seen benefiting productivity. automation, You've probably we having from are XXX use capital our use gross a deploy drive the the you those digitization. that When same last we look same has we increased by expanded robotics, things, branches. trucks, really basis That's to all about the direct and the same And year. of delivery points and margin better at productivity,

So the I think future. for well really we're positioned

your you thank Justin, for question.

Dan Moore

then one if may. there. more, color And the I appreciate I

macro the mentioned You environment.

wondering how cost business inflation just overall? view does the your So macro affect the environment of in

Robbert Rietbroek

Yes, it's question. great a

that the 'XX, pricing our low inflation will which have take as of in of to means So sector inflation elasticity the seeing couple offset single-digit water, last to forecast is value that. well And not the given consumer goods years, positioned. really the for we we're the compounded much we given over

post of in for terms call So us great. it, I let's think the is macro inflation, environment environment inflation,

I interest a I that's but Justin. would David the say, what later talk can more rate bit think about little situation

Dan Moore

I the forward working you. answers you. and appreciate Thank to with look

Operator

Andrea JPMorgan. comes Teixeira from The from question next

Drew Levine

Andrea. Levine Robbert, for This and congratulations Drew welcome. on is

ask So guidance. the EBITDA I to on wanted

on a I you around leverage or the And M&A how growth it's out then to X% call cadence translate Can taking think cost basis, overhead. of sort of EBITDA areas M&A see into the the of where you about, the the pipeline one, X% X% to, maybe including like-for-like you're the as and X% through it, thinking optimization about of growth. look the talk probably in not you 'XX? tuck

Robbert Rietbroek

continuing Well, the margin year, them. at Last with and is operations in million million Drew. how $XXX asked a I'll to you, margin. take EBITDA of XX.X% from that XX.X% million midpoint. those $XXX $XXX.X was order you projection Thank

we're continue And rightsizing. And So already. achieved that and our and that I a would reducing going of referred back $XX and margin productivity we expand run million think margins. have the to the cadence of represent like EBITDA in that to The we'll a investments. the on at, we've that to to year. do cost one XX through basis Angeles gross automation end drivers And the other points the by expansion. production looking productivity, there's internal identified reorganizations that's to we're reducing and earlier, inefficiencies, the With Los rate, regards

scale really So will benefit margin truly case. leverage from our in gross

grow we both Drew. around. trucks be that utilization we're we delivery, most exchange, think own of question, I refill water, assets, your we or premium to own of there. answers the production the just that hope I whether and wells cover seeing direct better Yes, that drive I've As tried questions that facilities, your

Drew Levine

of I point super line addition EBITDA volume. Yes, it leverage, you in well. top on seem as on for the giving some does that extent, helpful. to on is said, the top up conservative like you as thank the pricing Yes. outlook, guess ongoing the X.X% the line the guidance the being half the in what's following kind embedded -- guidance, But to

that of a guidance couple Obviously, coming the or years, target the over aspiration. about think went inflationary the high of you past environment organic was and As the through over more ahead of was years. pricing high you're previously single-digit couple pretty growth sort of given that next off a looking

just business. As through inflationary maybe excites environment? achieve being you went growth your 'XX, look But in past about years coming organic talk what single-digit a -- able high you confidence about you normalized can the to in more the you in

Robbert Rietbroek

business, of our built really I'll of double-digit a at is net growing half in volume forecast more little we M&A, great The customer see in your half, which high the growth way is second that's back was Drew. included a which first there, that and on exchange not guidance. Yes, really also pace. demand on then accelerated bit an the organic our increased acceleration question and touch but in that's and we part question, the the pricing in the

about metric that, as this of that do to true the year as the weeks would who of slightly very customer this $XX M&A XX gallons we after on orders high sell. is, So the be one. number to what going in more a every we're of are opposed on going we're to driver There's commercial we tuck-ins. underlying million year I growth. somebody orders of think gallons and high continue on it's between impact were or customers, household be combination we And is identify of a we last that $XX customers. jugs forward value likely to X And the the be top call individual we're I unit that well. high acquire way any difference and our And because to -- going to about but big focused that we to a out to think growth of a or going year sales going we year, But also end as million versus on of a more going focus unit sold

have a full identified transactions. schedule We of

Operator

TD The comes next question from Derek at Cowen. Lessard

Derek Lessard

role. year have to quarter, on us maybe -- seems just in to from luck your of start ahead new Congrats you strong to I'm has and good expectations. guide Maybe could strong talk if walk in well come cash bottom hit just on free flow the through guidance. Street going that Robbert It cut the and the

capital well. and your curious assumptions of are what So on working just maybe the sort guide as mostly around

Robbert Rietbroek

adjusted cash in increased the let driver adjusted so capital million, grew along primary the versus year million significant cash growth But pass $XX.X some quarter with that before to flow in clarification. earnings for mean, spend. David flow the I a I additional the improvement. But Yes. me $XX.X improved quarter X same think free was to

David Hass

Yes.

EBITDA we free Derek, cash our flow. with were drive finishing a the that year guide, obviously strong that really increased was So contribution what outperforming pleased adjusted large the with of helped

you take Primo. head customer of to basis. really expectations volume the provided to each business the But the points achieve at of to end the able some focus and where we'll that end walk. usage the we looking then estimates exchange. the would $XXX on to at guide. some increases at million CapEx the the continue Robbert way we moderated of AR, as you'll to overall the enhancements activity. in how talked that filed, margin a $XXX kind cash nice that $X.X does had flow drive the contemplate QX, The all million capital both we're And be which basis activities when working operating again, get And operations year, is in yet really as XXXX have not the with bit with we of XXX start as to that's additional the into our CapEx XX-K the million. as XX year, outlook, flow and outcome. Second, you ability tax those year. nice about, a us expansion. organic Again, now, on when 'XX comes see has par of back of money versus that When operational to consolidated overall through and tailwind cash inventory X.X% within a again, of free points sort XXXX's EBITDA benefits into a the both see some continuing enhancement midpoint well provides, 'XX's greater year really, model in are well And small performance as scale That obviously, volume were tariff now double-digit into as where consideration, that's the might fully basis that midpoint control our we as transition reminder, the offsets the focus across the as that the increases that the to approximate finish of you little the toward And of to both

Derek Lessard

you've that with? capital still tailwinds be come of of you're working some enjoying the out to the just clear, David, quarter And

David Hass

And close here, Yes, that the our cash with have have to some target. dispenser sell-through a operations see in you'll lot work have we than $X we terms nice it, international coming then would cash in domestic challenges, sell our our of out are very cycle. again, our a million And as to conversion to been really more had. allows cycle managed a little to shine, you get conversion supply over of allowed channel, the through partners. to of cycle enhancements We've and retail side And continuing well that's of the correct. company That chain entity that into inventory. were remember, rapid whereas of the we the AR really benefit the tighter into us much

Derek Lessard

ramp of up top Okay. across of more about customer XXXX, through your talk then the That's maybe sort And just helpful. Costco line the base your the talk progress where sort just initiative in you and terms of maybe And just ended? specifically, us or there? could

Robbert Rietbroek

Yes.

and Costco it talk I'll back pass me first, David to Let then.

place all have So events with to the our that all it the David. will over staffed execute we at had critical and full 'XX program. look want program we we And Costco partner a significant that fully 'XX, to a Costco we execute. if across is in us And in a around we ramp-up in customers. recruitment pass new geographies for want to of I'll

David Hass

Yes.

the a a whereas been in Robbert Costco continuing the mentioned, the calendar year Water that Derek, we XXXX, side, in through going quarters QX that Again, our the came that is continue units last time in refill the several period. forward. retail of into And last we'll significant growth see to back retail And as price itself back and water business means impact is which And which that our again, X.X increase as have complementing we year, for transition we're of produce we rate showcases continues that well have at all now a volume turned that about side. a Water cut net would is entire cycled then as million folks both through health the nice in QX, for exchange, operations positive of year, health. through when the for normalizing as for benefit and that volume exhibiting now to consumer there ramp on Direct. health that things really strength on the X with you in finished X% we business, look consumers, mentioned year-over-year again, there, positive strong Direct where base saw customer first legs really, basis. run the the On the volume We lift a has

Water the value of the talked we customers bulk the an our We customer and great exchange different sort the our sides category. Direct, retail Robbert And at price environment. alternative between X will in about customer have where economic on provide premium then points in growth that expand. in sort providing refill And this of

Derek Lessard

QX, last down, one maybe these XX the me got work initiatives one all but Absolutely year-over-year And there. American bps for is was it, let's on call you've the in good in margin go. EBITDA particular, efficiency North on

there. overhead helpful. in and corporate just -- also And there I that the color questions be I assume any So asking -- you're including would I'm

if should forward? be I was we modeling what So curious going

David Hass

to across platform. the it is question. that you decline we gets on Most have -- does repatriation level, full rate at by is related point absorb of like the would be what each allocated points. QX provided the talked to end to in expansion in starting you to folks is bright, to But our our you When QX's the year exhibit again quarter 'XX, our our November that we've both And overhead ramp distributed of margin. to businesses. see basis if of with then to program a I'd to scale. you how Robbert where EBITDA the the see XXX rationalize great again, in exhibits in is of what the immediately you of our And operations see direct to It the the EBITDA, -- XX Yes, drive those show that the to been That that talk see basis of page to help full global prior would would in that's the as some reduce that bps, announced overall shared there. we will, what XXXX that you about continuing of business guide costs, ability overhead sale, mentioned have sort year. optimization of have international previously will about services been for

Operator

Zamparo John from comes CIBC. question from next The

John Zamparo

route referred to over $XX is savings there next separate remaining to AR in Questions or to on clear, just completely and to be And the say is few the on million anything it years? frame can business opportunity to? you optimization, the incremental optimization you

David Hass

thanks. David. John, is is. Yes, It This

comes that of out basis. would is outcome X,XXX gaining Direct a natural be ceiling, the that side on comes or ARO water a natural There reminder, the that growth the business So a the through a either model is but average business from roughly inside the exchange our retail Water route route a of growth volumetric relationships. as that,

be Again, are should sort a demand the to a bring at on it of in that while the should it But as this have it route-by-route below million sort that branch. opportunities we does necessarily about network that of working communities branch natural seeking more more contemplated always toward our in lower of we're anything we're And basis ceiling, $XX the where or there these have mean. looking So sort the of mean. always end we again, to might of toward be par and is. is connections optimization optimization not that

John Zamparo

it. Got

debt And then helpful. is follow-up my That's target. Okay. the on

I but the have dividend true especially for the in committed you increase, than for accounts the the you've currently, want especially buyback, businesses You're accounts factor there, sub-X.Xx. higher you outlook for proceeds leverage to and net you conservative at what higher that to provides leverage some that guess that seeing that's to for be meaningfully relative 'XX when selling.

into you're that number. else what X.Xx baking wondering I'm So

David Hass

Yes. a hope below. I guess said maybe better we it that's ceiling is should remain be long-term to

will to acquire of things, its sort tuck-in what synergizes be might EBITDA immediate of in larger We XXXX start this second that EBITDA first we will the back down a have sort backwards. year, and the then as cash obviously, year in needs water walking direct including But that go no out, on anniversary. anniversary come of and

kind within be that time the the improve anticipate the of of we we towards leverage. stuff back X.X, no steps -- great just So do balance were little a that's sheet, to to more at we've outlook really just would But giving sort done great really obviously, this the folks of steps year, and it and taking to play like at longer-term we'd there. keep heading

Operator

next from James. question The from Pavel Raymond comes Molchanov

Pavel Molchanov

Going are need geographies the it's you but there feel market? like additional Obviously, North within of the opportunistic, to you help M&A to kind America always back some where any topic. penetrate

Robbert Rietbroek

good Yes, a question. very that's Pavel, very,

operators We across nation current footprint. our to sell have complementary the family-owned ready usually are that identified to geographically businesses, highly

list serve overlaying in. that there's places of even new certain certain So within a new So we're branches, in for companies within and driving we need we're it's have water But geographies definitely service for we but currently also what their to are preferred definitely owner-operated, now. where in a certain And far, areas footprint multiyear an pre-identified a we cities to growing are some existing as miles customers we too population wouldn't identified we new is we that's the the relationships have go of states existing looking we may trends, just with of looking with going branch, base. that buyer then with, well trends, geographic be branches states, our do in middle of buy are is combination, to open go improving that right direct there branch really, but certain that the customer at that network right? migration XX are within

Pavel Molchanov

helpful. That's

paradoxically do than the market there the between just European the stock multiple to buyback Bearing given American mind, higher maybe leverage Following today the accelerate buyback the is business. at even on at the sold a and up, the opportunity in which share which trades private? is spread the public an further, North you multiple business that

David Hass

Yes. Thanks.

been were 'XX. million. have that has deploy able evergreen Our authorization, to and of an authorization sort We to usage across approach as share $X increase million $XX in as mentioned, so of new the approximately that to end that 'XX. of then far

payment the Again, we future considering consciously at at Board looking quarter discussions always there. enhanced obviously and what's opportunities is best But is annualized at Part to depending with sort us year with capital are do our the year. our we I where step pipeline deployment. direct dividend and a that this of to and to year. talked of understand up M&A question, this actively on XX% Board every we've about it increase Our our consistently was across each but $X.XX look the

Operator

Thank There no closing I the Robbert comments. you. are turn will further for now over back call to questions.

Robbert Rietbroek

attending in Water. today's Well, and thank call for interest you continued all for your Primo

you tools I'm win. we team. The overall, to started have And excited I part be on. right Primo is path to As of the the tell, to Water build the hope can one

are joining along and events. you upcoming to work forward at look lot exciting in journey, team, to committed and ahead meeting a Thank many with our us, level. have I next of to taking of us water I our Primo for We you Water the of

Operator

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

Primo Water (PRMW) 22 Feb 242023 Q4 Earnings call transcript