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Primo Water Corp /CN/ (PRMW)·Q2 2024 Earnings Summary

Executive Summary

  • Revenue $485.0M (+7.6% YoY) and adjusted EBITDA $112.9M (+14.9% YoY) both exceeded the high end of Q2 guidance; adjusted EBITDA margin expanded 150 bps to 23.3% .
  • Full-year guidance raised: revenue to $1.87B–$1.89B (midpoint +$10M), adjusted EBITDA to $420M–$440M (midpoint +$10M), and adjusted FCF to $180M–$190M (+$5M midpoint) .
  • Q3 2024 outlook: revenue $485M–$495M and adjusted EBITDA $115M–$125M (implied margin ~24.5% at midpoint); management highlights continued margin expansion and free cash flow conversion .
  • Strategic catalysts: Mountain Valley retail revenue +86.6% YoY, broader “Water Your Way” growth across channels, moderated dispenser pricing (tariff removal) to drive category adoption, and pending BlueTriton merger (special dividend ~$0.82/share and ongoing $0.09 quarterly dividend) .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth and pricing/volume balance: Volume +3.1% and price +4.5% drove 7.6% revenue growth; organic growth contributed 6.6% .
  • Margin expansion and operational improvements: Gross margin 65.6% (+110 bps), adjusted EBITDA margin 23.3% (+150 bps), aided by OTIF improvements (94% Water Direct), refill uptime 98%, and better route efficiency (units/route/day +2%, revenue/route +5%) .
  • Premium product momentum: Mountain Valley retail revenue +86.6% YoY; management running glass bottling lines 24/7 and launching 16oz aluminum multi-packs across food retail and Water Direct .
    • “During the second quarter, we increased our Mountain Valley retail revenue by approximately 87% over the prior year.”
    • “Gross margin for the quarter increased 110 basis points to 65.6%.”

What Went Wrong

  • Water Dispensers softness: Revenue declined 21.0% YoY in Q2 (vol −16%, price down due to tariff elimination), though sell-through to end customers rose ~4% YoY and YTD sell-in volume remains up on better pricing/value .
  • GAAP bottom line modestly lower: Net income from continuing operations $13.3M (vs. $13.6M prior year), diluted EPS from continuing ops $0.08 (vs. $0.09 YoY), despite strong adjusted results .
  • Tariff refunds timing uncertainty: No refunds received in Q2 (cumulative ~$10.8M through Q1); management cannot predict timing, creating some variability vs. prior expectations .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Revenue ($USD Millions)$439.0 $452.0 $485.0
Adjusted EBITDA ($USD Millions)$95.0 $94.0 $112.9
Adjusted EBITDA Margin %21.6% 20.8% 23.3%
Diluted EPS - Continuing Ops ($USD)N/AN/A$0.08
Adjusted Diluted EPS ($USD)N/AN/A$0.26

Segment/channel revenue breakdown (Q2 2024 vs Q2 2023):

ChannelQ2 2023 Revenue ($M)Q2 2024 Revenue ($M)$ Change% Change
Water Direct/Water Exchange$342.9 $368.2 $25.3 7.4%
Water Refill/Water Filtration$55.4 $61.8 $6.4 11.6%
Other Water (primarily Mountain Valley retail/on-premise)$11.9 $22.2 $10.3 86.6%
Water Dispensers$16.7 $13.2 $(3.5) (21.0%)
Other$23.7 $19.6 $(4.1) (17.3%)
Total Revenue$450.6 $485.0 $34.4 7.6%

Key KPIs trajectory:

KPIQ4 2023Q1 2024Q2 2024
OTIF (Water Direct)N/A93% 94%
Refill machine uptimeN/A97% 98%
Units per route per day (YoY)+5% +5% +2%
Revenue per route (YoY)+8% +8% +5%
Water Direct retention~85% ~85% ~86%
Dispenser sell-through (units)264,000 222,000 ~260,000
Price/Volume mix (companywide)N/APrice +4.5%, Vol +5.1% Price +4.5%, Vol +3.1%
Cash & equivalents (cont. ops)N/A~$498M (company cash; incl. discontinued ~$522M) $603.3M (cont. ops cash)
Net leverage (TTM)~2.1x (post sale, early Q1) ~2.0x ~1.6x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q3 2024N/A$485–$495 New
Adjusted EBITDA ($M)Q3 2024N/A$115–$125 New
Revenue ($B)FY 2024$1.855–$1.885 $1.87–$1.89 Raised
Adjusted EBITDA ($M)FY 2024$410–$430 $420–$440 Raised
Adjusted Free Cash Flow ($M)FY 2024$175–$185 $180–$190 Raised
Cash Taxes ($M)FY 2024$30–$40 $35–$45 Raised
Net Cash Interest ($M)FY 2024$30–$50 $25–$45 Lowered
CapexFY 2024~7% of revenue + $22.5M strategic ~7% of revenue + $22.5M strategic Maintained
Quarterly DividendOngoing$0.09/share (authorized) $0.09/share declared for Sep 5 payment Maintained/Declared
Special DividendPrior to merger closeN/A~$0.82/share planned, subject to board approval New
Share RepurchasesFY 2024Program active ($15.9M YTD pre-merger announcement) Suspended post merger announcement Suspended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023 and Q1 2024)Current Period (Q2 2024)Trend
Operational tech (ARO, routing)ARO delivering +5% units/route and +8% revenue/route (Q4); rolling out “ARO 2.0” (Q1) Continued efficiency: +2% units/route/day, +5% revenue/route; weekend delivery schedules; improved service metrics Improving but moderating QoQ
Supply chain/serviceRefill uptime 97%; OTIF 93% (Q1) Refill uptime 98%; OTIF 94%; faster service response Improving
Tariffs/macroDispensers reclassified; tariff refunds $8.2M through 2023; $2.6M received in Q1; moderation in wholesale prices No refunds in Q2; cumulative ~$10.8M through Q2; lower dispenser pricing supports category adoption Refund timing uncertain; pricing beneficial
Product performance (Mountain Valley)+57% retail revenue YoY in Q1; expanding glass/aluminum +86.6% YoY retail/on-premise; 24/7 glass lines; 16oz aluminum multi-pack launch Strong acceleration
Regional/customer mixNA-focused pivot; balanced residential/commercial ~50/50 residential/commercial; growth broad-based across NA Stable/balanced
Regulatory/legal (BlueTriton)N/AHSR filed 7/2; Canadian filing 7/9; preliminary proxy filed; special dividend plan Advancing approvals
Sustainability2023 report forthcoming (Q1) Sustainability report released Sept 2024; stewardship emphasis (document listed); Ongoing

Management Commentary

  • “Total revenue of $485 million increased 7.6%, consisting of volume growth of 3.1% and pricing growth of 4.5%… Adjusted EBITDA was $113 million, up 15%… adjusted EBITDA margin was 23.3%.” — CEO Robbert Rietbroek .
  • “Gross margin for the quarter increased 110 basis points to 65.6%… Adjusted EBITDA margins increased to 23.3%, up 150 basis points year-over-year.” — CFO David Hass .
  • “We are forecasting third quarter revenue guidance to be between $485 million and $495 million… and full year 2024 adjusted EBITDA to be between $420 million and $440 million… adjusted free cash flow… between $180 million and $190 million.” — CFO David Hass .
  • “We intend to issue a special dividend of approximately $0.82 per common share… Subsequent to the announcement, we have suspended share repurchases.” — CFO David Hass .
  • “During the second quarter, we increased our Mountain Valley retail revenue by approximately 87% over the prior year… running all three of our glass bottling lines 24-7.” — CEO Robbert Rietbroek .

Q&A Highlights

  • Growth balance and momentum: Management emphasized balanced growth (volume +3.1%, price +4.5%), organic contribution +6.6%, with efficiency gains underpinning margin expansion .
  • BlueTriton merger rationale and status: Management framed the combination as “compelling,” diversifying formats/channels; regulatory filings submitted, prelim proxy filed; special dividend planned; quarterly dividend increased to $0.09 .
  • Dispensers and tariffs: Dispensers sell-through +4% YoY; wholesale prices lower post-tariff removal; no new tariff refunds in Q2; cumulative ~$10.8M through Q2 .
  • Balance sheet and FCF: Net leverage ~1.6x; cash ~$603M (cont. ops); adjusted FCF raised to $180M–$190M .
  • Ongoing optimization: Business optimization program tracking to $20M run-rate savings by YE 2024; $4M actions in 1H24 (annualizing to ~$8M on 2025 run-rate) .

Estimates Context

  • S&P Global consensus estimates were unavailable due to a CIQ mapping limitation for PRMW at the time of retrieval. As a result, comparisons vs. Street EPS/revenue estimates for Q2 2024 could not be shown (Values typically retrieved from S&P Global).*

Key Takeaways for Investors

  • Primo delivered a high-quality beat with revenue $485.0M and adjusted EBITDA $112.9M, both above the high end of Q2 guidance; margin expansion to 23.3% and gross margin to 65.6% highlight operating leverage .
  • Guidance raised across revenue, EBITDA, and FCF for FY 2024; Q3 outlook implies further margin expansion (~24.5% midpoint) and sustained volume/pricing mix .
  • Premium Mountain Valley continues to outperform (+86.6% YoY retail/on-premise), supported by capacity additions and aluminum single-serve format, providing a premium growth engine .
  • Dispensers revenue decline (−21% YoY) reflects lower wholesale pricing post-tariff removal; however, sell-through growth and improved consumer value should support future customer adds into the “razor-razorblade” model .
  • Strong balance sheet (cash ~$603M; net leverage ~1.6x) and improved FCF conversion underpin the raised FCF outlook; interest expense guidance lowered given interest income on cash .
  • BlueTriton merger progress (HSR/Canadian filings, prelim proxy) plus a planned ~$0.82/share special dividend and $0.09 quarterly dividend provide near-term shareholder return catalysts ahead of closing .
  • Watch for execution on the $20M business optimization run-rate by YE 2024, continued service metrics improvement, and tariff refund timing—each can influence margins and cash generation trajectory .