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Company issues third quarter guidance and raises full year revenue and Adjusted EBITDA guidance

TAMPA, Fla. , Aug. 11, 2022 /PRNewswire/ - Primo Water Corporation (NYSE: PRMW) (TSX: PRMW) (the "Company" or "Primo"), a leading provider of sustainable drinking water solutions in North America and Europe , today announced its results for the second quarter ended July 2, 2022 .

(Unless stated otherwise, all second quarter 2022 comparisons are relative to the second quarter of 2021; all information is in U.S. dollars.)

For the Three Months Ended

(in millions of U.S. dollars, except per share amounts, percentages and bps)

Net loss per diluted share

Adjusted net income per diluted share

"I am very pleased with our revenue and adjusted EBITDA growth in the second quarter, accentuating a solid first-half performance that puts us on pace to exceed our previous full-year 2022 targets. Our results were driven by improved pricing, volume, and customer growth. Our pricing actions and operational performance give us the confidence to increase our 2022 outlook to 12% to 14% revenue growth (adjusted for the exit of the single-use bottled water retail business in North America ) and Adjusted EBITDA to between $415 million and $425 million dollars , despite a challenging Euro devaluation, unprecedented inflationary environment and the exit of our business in Russia . As we continue to transform and reshape Primo, we are a fundamentally stronger business than ever before. Our strategy is working as evidenced by our first half 2022 performance and we remain confident in our ability to achieve our long-term 2024 outlook of high single-digit organic revenue growth with Adjusted EBITDA approaching $525 million dollars ," said Tom Harrington , Primo's Chief Executive Officer. 

"We are pleased that Primo's cash flow and balance sheet enable us to simultaneously return value to shareholders through regular quarterly dividends, as well as an opportunistic share repurchase program of $100 million dollars , while at the same time continuing to invest in internal and external opportunities that will further strengthen our operations and drive long-term growth," said Mr. Harrington. 

Primo is targeting the following results from continuing operations for the third quarter and full year 2022:

1Adjusted for the exit of North America single-use retail bottled water business and including revenue from 2021 tuck-in acquisitions. Assumes current FX rates.

SECOND QUARTER 2022 RESULTS CONFERENCE CALL

Primo will host a conference call, to be simultaneously webcast, on Thursday, August 11, 2022 , at 10:00 a.m. Eastern Time . A question-and-answer session will follow management's presentation. To participate, please call the following numbers: 

North America : (888) 664-6392 International: (416) 764-8659 Conference ID: 75198085 This is a live, listen-only dial-in telephone line.

A slide presentation and live audio webcast will be available through Primo's website at https://www.primowatercorp.com. The earnings conference call will be recorded and archived for playback on the investor relations section of the website for a period of two weeks following the event.

For the Three Months Ended

(in millions of U.S. dollars)

Less: Single-use retail bottled water business in North America

Adjusted revenue excluding foreign exchange impact

SECOND QUARTER REPORTING SEGMENT PERFORMANCE

During the second quarter the Company realigned certain of its businesses previously included in the Rest of World segment (now renamed "Europe") between the Europe reporting segment and the Other category. The Company's two reporting segments are now North America and Europe . Segment reporting results have been recast to reflect these changes for all periods presented.

For the Three Months Ended

(in millions of U.S. dollars)

Less: Single-use retail bottled water business in North America

Adjusted revenue excluding foreign exchange impact

For the Three Months Ended

(in millions of U.S. dollars)

Revenue excluding foreign exchange impact

Primo Water Corporation is a leading pure-play water solutions provider in North America and Europe and generates approximately $2.1 billion in annual revenue. Primo operates largely under a recurring razor/razorblade revenue model. The razor in Primo's revenue model is its industry leading line-up of sleek and innovative water dispensers, which are sold through retailers and online at various price points. The dispensers help increase household penetration which drives recurring purchases of Primo's razorblade offering. Primo's razorblade offering is comprised of Water Direct, Water Exchange, and Water Refill. Through its Water Direct business, Primo delivers sustainable hydration solutions across its 21-country footprint direct to the customer's door, whether at home or to businesses. Through its Water Exchange and Water Refill businesses, Primo offers pre-filled and reusable containers at approximately 14,000 locations, water dispenser sales at approximately 9,000 locations and water refill units at approximately 24,000 locations, respectively. Primo also offers water filtration units across its 21-country footprint.

Primo's water solutions expand consumer access to purified, spring, and mineral water to promote a healthier, more sustainable lifestyle while simultaneously reducing plastic waste and pollution. Primo is committed to its water stewardship standards and is proud to partner with the International Bottled Water Association (IBWA) in North America as well as with Watercoolers Europe (WE), which ensure strict adherence to safety, quality, sanitation and regulatory standards for the benefit of consumer protection.

Primo is headquartered in Tampa, Florida (USA). For more information, visit www.primowatercorp.com.

Non-GAAP Measures To supplement its reporting of financial measures determined in accordance with U.S. GAAP (Generally Accepted Accounting Principles), Primo utilizes certain non-GAAP financial measures.  Primo excludes from GAAP revenue the impact of foreign exchange and the impact of the now-exited small-format single-use retail bottled water business in North America to separate the impact of these items from Primo's results of operations.  Primo also utilizes Adjusted net income (loss), Adjusted net income (loss) per diluted share, Adjusted EBITDA and Adjusted EBITDA margin to separate the impact of certain items from the underlying business.  Because Primo uses these adjusted financial results in the management of its business, management believes this supplemental information is useful to investors for their independent evaluation and understanding of Primo's underlying business performance and the performance of its management.  Additionally, Primo supplements its reporting of net cash provided by (used in) operating activities from continuing operations determined in accordance with GAAP by excluding additions to property, plant and equipment and additions to intangible assets to present free cash flow, and by excluding the items identified on the exhibits hereto to present adjusted free cash flow, which management believes provides useful information to investors in assessing our performance, comparing Primo's performance to the performance of the Company's peer group and assessing the Company's ability to service debt and finance strategic opportunities, which include investing in Primo's business, making strategic acquisitions, paying dividends, and strengthening the balance sheet. With respect to the Company's expectations of its future performance, the Company's reconciliations of Q3 2022 and full year 2022 Adjusted EBITDA and 2024 Adjusted EBITDA are not available, as the Company is unable to quantify certain amounts to the degree of precision that would be required in the relevant GAAP measures without unreasonable effort. These items include taxes, interest costs that would occur if the Company issued debt, and costs to acquire and or sell a business if the Company executed such transactions, which could significantly affect our financial results. These items depend on highly variable factors and any such reconciliations would imply a degree of precision that would be confusing or misleading to investors. Primo expects the variability of these factors to have a significant, and potentially unpredictable, impact on the Company's future GAAP financial results. The non-GAAP financial measures described above are in addition to, and not meant to be considered superior to, or a substitute for, Primo's financial statements prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this earnings announcement reflect management's judgment of particular items, and may be different from, and therefore may not be comparable to, similarly titled measures reported by other companies.

Safe Harbor Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 conveying management's expectations as to the future based on plans, estimates and projections at the time Primo makes the statements. Forward-looking statements involve inherent risks and uncertainties and Primo cautions you that several important factors could cause actual results to differ materially from those contained in any such forward-looking statement. The forward-looking statements contained in this press release include, but are not limited to, statements related to the amount of shares that may be repurchased under the share repurchase program, future financial and operating trends and results (including Primo's outlook on third quarter and full year 2022 revenue and Adjusted EBITDA and Primo's multi-year growth algorithm), and related matters. The forward-looking statements are based on assumptions regarding management's current plans and estimates. Management believes these assumptions to be reasonable, but there is no assurance that they will prove to be accurate.

Factors that could cause actual results to differ materially from those described in this press release include, among others: the impact of the spread of COVID-19, related government actions and Primo's strategy in response thereto on our business, financial condition and results of operations; Primo's ability to compete successfully in the markets in which it operates; fluctuations in commodity prices and Primo's ability to pass on increased costs to its customers or hedge against such rising costs, and the impact of those increased prices on its volumes; Primo's ability to maintain favorable arrangements and relationships with its suppliers; Primo's ability to manage its operations successfully; currency fluctuations that adversely affect the exchange between currencies including the U.S. dollar, the British pound sterling, the Euro and the Canadian dollar; the impact on Primo's financial results from uncertainty in the financial markets and other adverse changes in general economic conditions, including inflation and interest rates; any disruption to production at Primo's manufacturing facilities; Primo's ability to maintain access to its water sources; the impact of climate change on Primo's business; Primo's ability to protect its intellectual property; the seasonal nature of Primo's business and the effect of adverse weather conditions; the impact of national, regional and global events, including those of a political, economic, business and competitive nature; Primo's ability to fully realize the potential benefit of transactions or other strategic opportunities that it pursues; Primo's ability to realize cost synergies of its acquisitions due to integration difficulties and other challenges; Primo's exposure to intangible asset risk; Primo's ability to meet its obligations under its debt agreements, and risks of further increases to its indebtedness; Primo's ability to maintain compliance with the covenants and conditions under its debt agreements; fluctuations in interest rates, which could increase Primo's borrowing costs; Primo's ability to recruit, retain and integrate new management; Primo's ability to renew its collective bargaining agreements from time to time on satisfactory terms; compliance with product health and safety standards; liability for injury or illness caused by the consumption of contaminated products; liability and damage to Primo's reputation as a result of litigation or legal proceedings; changes in the legal and regulatory environment in which Primo operates; Primo's ability to adequately address the challenges and risks associated with its international operations and address difficulties in complying with laws and regulations including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010; the impact on Primo's tax obligations and effective tax rate arising from changes in local tax laws or countries adopting more aggressive interpretations of tax laws; disruptions in Primo's information systems; Primo's ability to securely maintain its customers' confidential or credit card information, or other private data relating to Primo's employees or the Company; Primo's ability to maintain its quarterly dividend; or credit rating changes.

The foregoing list of factors is not exhaustive. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Readers are urged to carefully review and consider the various disclosures, including but not limited to risk factors contained in Primo's Annual Report on Form 10-K and its quarterly reports on Form 10-Q, as well as other filings with the securities commissions. Primo does not undertake to update or revise any of these statements considering new information or future events, except as expressly required by applicable law. 

(in millions of U.S. dollars, except share and per share amounts)

For the Three Months Ended

For the Six Months Ended

Selling, general and administrative expenses

Loss on disposal of property, plant and equipment, net

Net loss per common share

Weighted average common shares outstanding (in thousands)

(in millions of U.S. dollars, except share amounts)

Accounts receivable, net of allowance of $22.7 ($20.8 as of January 1, 2022)

Prepaid expenses and other current assets

Property, plant and equipment, net

Current maturities of long-term debt

Accounts payable and accrued liabilities

Common shares, no par value -161,209,111 (January 1, 2022 - 160,732,552) shares issued

Total liabilities and shareholders' equity

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions of U.S. dollars)

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to cash flows from operating activities of continuing operations:

(Benefit) provision for deferred income taxes

Gain on sale of business

Loss on extinguishment of debt

Loss on disposal of property, plant and equipment, net

Change in operating assets and liabilities, net of acquisitions:

Prepaid expenses and other current assets

Accounts payable and accrued liabilities and other liabilities

Net cash provided by operating activities from continuing operations

Cash flows from investing activities of continuing operations:

Acquisitions, net of cash received

Additions to property, plant and equipment

Proceeds from sale of property, plant and equipment

Net cash used in investing activities from continuing operations

Cash flows from financing activities of continuing operations:

Premiums and costs paid upon extinguishment of long-term debt

Common shares repurchased and canceled

Dividends paid to common shareholders

Payment of deferred consideration for acquisitions

Net cash used in financing activities from continuing operations

Cash flows from discontinued operations:

Operating activities of discontinued operations

Investing activities of discontinued operations

Financing activities of discontinued operations

Net cash used in discontinued operations

Effect of exchange rate changes on cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash and cash equivalents and restricted cash, beginning of period

Cash and cash equivalents and restricted cash, end of period

Cash and cash equivalents and restricted cash:

Cash included in prepaid expenses and other current assets

(in millions of U.S. dollars, except percentage amounts)

For the Three Months Ended July 2, 2022

SG&A % of revenue

For the Three Months Ended July 3, 2021

SG&A % of revenue

For the Six Months Ended July 2, 2022

Selling, general and administrative expenses

SG&A % of Revenue

For the Six Months Ended July 3, 2021

Selling, general and administrative expenses

SG&A % of Revenue

SUPPLEMENTARY INFORMATION - NON-GAAP - ANALYSIS OF REVENUE AND GROSS PROFIT BY REPORTING SEGMENT

(in millions of U.S. dollars, except percentage amounts)

For the Three Months Ended July 2, 2022

Impact of foreign exchange (a)

Percentage change in revenue excluding foreign exchange

For the Six Months Ended July 2, 2022

Impact of foreign exchange (a)

Percentage change in revenue excluding foreign exchange

For the Three Months Ended July 2, 2022

Impact of foreign exchange (a)

Percentage change in gross profit

Percentage change in gross profit excluding foreign exchange

For the Six Months Ended July 2, 2022

Impact of foreign exchange (a)

Percentage change in gross profit

Percentage change in gross profit excluding foreign exchange

(a) Impact of foreign exchange is the difference between the current period revenue and gross profit translated utilizing the current period average foreign exchange rates less the current period revenue and gross profit translated utilizing the prior period average foreign exchange rates.

SUPPLEMENTARY INFORMATION - NON-GAAP - EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION & AMORTIZATION

(in millions of U.S. dollars, except percentage amounts)

For the Three Months Ended

For the Six Months Ended

Acquisition and integration costs (a)

Foreign exchange and other losses (gains), net (e)

Loss on disposal of property, plant and equipment, net (f)

Loss on extinguishment of long-term debt (g)

For the Six Months Ended

Location in Consolidated Statements of Operations

(a) Acquisition and integration costs

Selling, general and administrative expenses

Selling, general and administrative expenses

(e) Foreign exchange and other losses (gains), net

(f) Loss on disposal of property, plant and equipment, net

Loss on disposal of property, plant and equipment, net

(g) Loss on extinguishment of long-term debt

Selling, general and administrative expenses

SUPPLEMENTARY INFORMATION - NON-GAAP - FREE CASH FLOW AND ADJUSTED FREE CASH FLOW

(in millions of U.S. dollars)

For the Three Months Ended

Net cash provided by operating activities from continuing operations

Less:  Additions to property, plant, and equipment

Less:  Additions to intangible assets (a)

Acquisition and integration cash costs

Deferred payroll tax related cash costs - government programs

For the Six Months Ended

Net cash provided by operating activities from continuing operations

Less:  Additions to property, plant, and equipment

Less:  Additions to intangible assets (a)

Acquisition and integration cash costs

Deferred payroll tax related cash costs - government programs

a) Prior period has been recast to include additions to intangible assets

SUPPLEMENTARY INFORMATION-NON-GAAP-ADJUSTED NET INCOME AND ADJUSTED EPS

(in millions of U.S. dollars, except share amounts)

For the Three Months Ended

For the Six Months Ended

Amortization expense of customer lists

Foreign exchange and other losses (gains), net

Loss on extinguishment of long-term debt

Tax impact of adjustments (a)

Earnings Per Share (as reported)

Weighted average common shares outstanding (in thousands)

Adjusted Earnings Per Share (Non-GAAP)

Diluted weighted average common shares outstanding (in thousands) (Non-GAAP) (b)

(a) The tax effect for adjusted net income is based upon an analysis of the statutory tax treatment and the applicable tax rate for the jurisdiction in which the pre-tax adjusting items incurred and for which realization of the resulting tax benefit (if any) is expected. A reduced or 0% tax rate is applied to jurisdictions where we do not expect to realize a tax benefit due to a history of operating losses or other factors resulting in a valuation allowance related to deferred tax assets.

(b) Includes the impact of dilutive securities of 745 and 896 for the three and six months ended July 2, 2022 and 1,536 and 1,722 for the three and six months ended July 3, 2021, respectively.  These dilutive securities were excluded from GAAP diluted weighted average common shares outstanding due to net loss from continuing operations reported in those periods.

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