Executive Summary

Q2 2025 delivered solid margin execution but operational disruptions drove a reset of full‑year guidance; revenue was $1.73B with adjusted diluted EPS of $0.36, while Adjusted EBITDA rose 42% YoY to $366.7M and margin held at 21.2% .
Results missed S&P Global consensus on revenue and EPS as integration‑related delivery issues, a tornado‑damaged Texas facility, tariff‑driven dispenser softness, and the OCS wind‑down weighed on the top line; management expects service levels normalizing by late September .
Guidance was lowered: comparable net sales growth to flat–1% (from 3–5%), Adjusted EBITDA to ~$1.5B, and Adjusted FCF to $740–$760M; synergy capture targets of $200M in 2025 and $300M in 2026 were reaffirmed .
Capital returns remain a pillar: a new $250M share repurchase authorization and a $0.10/share quarterly dividend were announced, framing a potential support for the equity as integration stabilizes .

What Went Well and What Went Wrong

What Went Well
- Premium brands momentum: Net sales in premium water rose 44.2% YoY in Q2; distribution expanded at Walmart and across channels; new Mountain Valley facility (mid‑2026) aims to unlock supply constraints .
- Margins resilient despite disruptions: Adjusted EBITDA increased to $366.7M; margin expanded 160 bps YoY to 21.2% (flat QoQ) as synergy capture continued .
- Retail share acceleration exiting quarter: Management highlighted July retail scan outperformance and five consecutive weeks of share gains; retail points of distribution grew >10% in Q2 .
- “We expect to be back to normal by the end of September… well positioned to deliver growth, improve margins, and generate strong cash flow” — CEO Robbert Rietbroek .
What Went Wrong
- Service disruptions from accelerated integration: 40 facilities closed in Q2 (48 since merger), SAP and handheld rollouts, and route consolidation caused delivery misses; daily service rate temporarily fell below 80% in May before recovering to ~92% recently .
- Weather and event impacts: Hawkins, TX tornado cut Q2 net sales by ~$26M; tariff uncertainty reduced dispenser sell‑in by ~$10M; OCS wind‑down reduced ~$6M in Q2 and is a ~$27M FY headwind .
- Guidance cut reflects recovery costs and lower retail/category softness in key geographies, slowing the top‑line trajectory versus original plan .

Financial Results

Overall performance versus prior quarters

Metric	Q4 2024	Q1 2025	Q2 2025
Net Sales ($USD Billions)	$1.397	$1.614	$1.730
Adjusted EBITDA ($USD Millions)	$254.8	$341.5	$366.7
Adjusted EBITDA Margin %	18.2%	21.2%	21.2%
Net Income from Continuing Ops ($USD Millions)	$(153.9)	$34.7	$30.5
Diluted EPS (GAAP)	$(0.49)	$0.09	$0.08
Adjusted Diluted EPS	$0.13	$0.29	$0.36
Free Cash Flow ($USD Millions)	$36.1	$(30.7)	$83.4
Adjusted Free Cash Flow ($USD Millions)	$171.8	$54.7	$169.7

Estimate comparison (S&P Global consensus)

Metric	Q2 2025 Actual	Q2 2025 Consensus	Surprise
Revenue ($USD Billions)	$1.730	$1.815*	MISS
Adjusted Diluted EPS	$0.36	$0.414*	MISS
EBITDA ($USD Millions)	307.8*	421.5*	MISS (note differing definition)

Notes: S&P Global consensus and “actual” items are shown with an asterisk; Values retrieved from S&P Global. Company‑reported Adjusted EBITDA (non‑GAAP) was $366.7M ; S&P’s EBITDA construct may not match company non‑GAAP.

Select KPIs and items

KPI / Item	Q2 2025	Commentary
Premium water net sales growth	+44.2% YoY	Strength in Mountain Valley and Saratoga; capacity expansion underway
Exchange business growth (1H)	+14%	Volume-driven
Refill business growth (1H)	~+8%	Stable execution
Hawkins, TX tornado impact	~$26M sales headwind	Facility restarted; repairs to be covered largely by insurance
Dispenser business tariff impact	~$10M in Q2	Retail sell‑in uncertainty
OCS (office coffee) exit	~$6M drag in Q2; ~$27M FY headwind	Strategic simplification
Direct delivery daily service rate	<80% in May; ~92% recently; aiming 95%+ by late Q3	Recovery underway

Additional P&L/Cash items

Gross margin 31.3% vs 32.7% YoY (mix and merger‑related) .
Net cash from ops: $155.0M; capex/intangibles $71.6M; Adjusted FCF $169.7M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Comparable Net Sales Growth	FY 2025	3%–5% (Q4 guide)	Flat–1%	Lowered
Adjusted EBITDA	FY 2025	$1.60B–$1.628B	~ $1.50B (22.2% margin implied)	Lowered
Adjusted Free Cash Flow	FY 2025	$790M–$810M	$740M–$760M	Lowered
Capex (growth + maintenance)	2025–2026	~4% of comparable net sales	~4% (maintained)	Maintained
Synergy capture	2025 / 2026	$200M / $300M	$200M / $300M reaffirmed	Maintained
Dividend	Ongoing	$0.10/share declared (May)	$0.10/share declared for Sept 4, 2025	Maintained
Share repurchase	FY 2025	—	New $250M authorization	New program

Drivers of the cut (company detail): Hawkins tornado (~~$26M), dispenser tariffs (~~$16M FY), OCS wind‑down (~$27M FY), direct delivery service disruptions (~140 bps of the remaining guidance reduction), and weather‑related retail softness (~110 bps) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24 and Q1’25)	Current Period (Q2’25)	Trend
Integration & Synergies	Raised total synergy target to $300M (2026); $200M in 2025; integration ahead of schedule	On track; ~$20M synergies captured in Q2, ~$60M YTD; annualized actions ~$140M; disruptions from speed of integration	Mixed: synergy intact, execution disruptions
Service Levels (Direct Delivery)	Emphasis on customer service as must‑win	DSR fell <80% in May; ~92% now; target 95%+ by Sept end	Improving from a low
Premium Portfolio	Strength highlighted; growth and distribution expansion	+44.2% net sales; new Mountain Valley line; SARATOGA capacity; strong retail sell‑through	Strengthening
Supply Chain/Weather Events	Stable backdrop post‑merger	Tornado materially impacted Ozarka/Pure Life; retail weather softness in NE in late spring	Temporary headwinds
Tariffs/Dispensers	Not a focal headwind earlier	Tariff uncertainty hit dispenser sell‑in (~$10M in Q2; ~$16M FY)	New headwind
Tech platform migration	NA	SAP migration and handheld rollout largely complete for key branches; further conversions planned with enhanced training; app consolidation underway	Executing with lessons learned
Capital returns	Dividend set at $0.10	Added $250M buyback; liquidity ~$1B (cash + undrawn revolver)	Increasing capital return capacity

Management Commentary

“Due to these integration disruptions during the later part of Q2, and our reinvestment to correct the issues, we are revising full year 2025 Net Sales growth, Adjusted EBITDA, and Adjusted Free Cash Flow guidance… and remain confident in our long‑term growth algorithm.” — CEO Robbert Rietbroek .
“We expect to be past the majority of the challenges come September… Our business model is resilient and is well positioned to deliver growth, improve margins, and generate strong cash flow… with the new $250M share repurchase program.” — CEO .
“We actioned another $20 million of synergies within the quarter… on pace to achieve approximately $200 million of in‑year synergy capture… with the remaining $100 million coming in 2026.” — CFO David Hass .
“At the end of the second quarter, our net leverage ratio was 3.44x… total liquidity approximately $1.0 billion.” — CFO .

Q&A Highlights

Integration pace and normalization: 48 facilities closed to date; ~11 more planned across September/February/March phases; DSR now ~92% and targeting 95%+ by end‑September; service rate temporarily fell below 80% in May .
Revenue walk and residual impact: Dispensers (~~$10M) and OCS (~~$6M) plus tornado impact left ~ $13M residual direct‑delivery decline; recovery expected to continue through Q3 with stronger exit velocity into Q4 .
Tech transitions risk: Migration from Oracle to SAP with handheld upgrades; enhanced training informed by first‑wave learnings; app consolidation underway; further handheld/iPhone transition possible over ~2 years .
Customer retention: Elevated “quits” in June/July lagged prior service issues; digital acquisition is outperforming and expected to offset as service stabilizes .
Long‑term targets: 25% EBITDA margin objective by 2027 and ~$1B FCF remain intact, aided by synergy retention, pricing harmonization potential in 2026, and capital structure optimization .

Estimates Context

Q2 2025 vs S&P Global consensus: Revenue $1.730B vs $1.815B* (MISS); Adjusted EPS $0.36 vs $0.414* (MISS). EBITDA definition differs: company Adjusted EBITDA $366.7M vs S&P EBITDA consensus $421.5M* and S&P EBITDA actual 307.8M* .
Q1 2025 was closer to plan: revenue $1.614B vs $1.620B*; adjusted EPS $0.29 vs $0.234* (beat) .
Guidance reset implies sell‑side estimate cuts across revenue and EBITDA for 2H, with a recovery trajectory baked into Q4 (service normalization); mix tailwinds from premium brands and synergy capture could support margin stabilization.
Asterisk denotes Values retrieved from S&P Global.

Key Takeaways for Investors

Integration recovery roadmap is the core near‑term narrative; management expects service normalization by end‑September and improving exit velocity into Q4 .
Guidance reset largely quantifies one‑off headwinds (tornado, tariffs, OCS exit) and integration friction; synergy capture remains on track, preserving medium‑term margin and FCF targets .
Premium brands and retail share momentum are bright spots; capacity additions (Mountain Valley/Saratoga) should sustain growth and mix benefits into 2026 .
Balance sheet/liquidity provide downside protection; $250M buyback plus the dividend can help support TSR as operations stabilize .
Watch July/August retail scan trends and direct‑delivery DSR progression toward 95%+ as high‑frequency indicators of recovery .
Estimate risk skews to 2H recalibration; upside hinges on faster service normalization, premium supply catch‑up, and limited incremental disruption during remaining tech conversions .
Medium‑term thesis: 3–5% organic growth algorithm, 25% EBITDA margin by 2027, and ~$1B FCF potential remain credible if integration stabilization holds and pricing harmonization is executed in 2026 .

Primo Brands Corp (PRMB)·Q2 2025 Earnings Summary