Primo Water Corporation (NYSE: PRMW) (TSX: PRMW), a leading provider of water direct to consumers and water filtration services in North America and Europe as well as a leading provider of water dispensers, purified bottled water, and self-service refill drinking water in the U.S. and Canada, today announced its results for the second quarter ended June 27, 2020.
(Unless stated otherwise, all 2020 comparisons are relative to the comparable period in 2019; all information is in U.S. dollars.)
SECOND QUARTER HIGHLIGHTS – CONTINUING OPERATIONS
- Revenue increased to $457 million compared to $456 million (increased by 1% excluding the impact of foreign exchange).
- As a result of the impact COVID-19 had on the Company's operations, notably in Europe and Canada, as well as higher overall discount rates, the Company recorded a pre-tax non-cash impairment charge of approximately $115 million related to goodwill and certain intangible assets. As a result, reported net loss and net loss per diluted share were $132 million and $0.82, respectively, compared to reported net income and net income per diluted share of $3 million and $0.02, respectively. Adjusted net income and adjusted net income per diluted share were $13 million and $0.08, respectively, compared to adjusted net income and adjusted net income per diluted share of $17 million and $0.12, respectively.
- Adjusted EBITDA increased 10% to $83 million compared to $75 million and adjusted EBITDA margin increased by 170 basis points.
- The Company returned approximately $10 million to shareowners through quarterly dividends.
"Our second quarter results came in ahead of our revised expectations as we responded swiftly to rapidly changing market conditions," commented Tom Harrington, Primo's Chief Executive Officer. "Our variable cost structure allowed us to quickly reduce spending, while strong growth in our Water Direct/Exchange residential customer base and our Water Refill business, coupled with steadily improving performance from our commercial customers, drove 170 basis points of EBITDA margin improvement in the quarter compared to the prior year. I am incredibly proud of how all of our Primo associates have responded to this crisis and for their commitment to providing our customers with high quality drinking water whenever, wherever, and however they want it."
SECOND QUARTER GLOBAL PERFORMANCE – CONTINUING OPERATIONS
- Revenue increased to $457 million compared to $456 million (increased by 1% excluding the impact of foreign exchange), as the benefit from the legacy Primo acquisition was offset by lower revenue from our Water Direct commercial customer base in North America and Rest of World (ROW). Revenue growth by channel is tabulated below:
- Gross profit decreased 35% to $49 million driven primarily by decreased volume in our Water Direct commercial customer base and coffee services business.
- SG&A expenses decreased 7% to $60 million primarily driven by cost reduction initiatives enacted in our European business. Costs related to COVID-19 were approximately $8 million. On a pro forma basis, adjusted for COVID-19 related costs, SG&A decreased 19%.
- Operating income decreased to $(127) million compared to $9 million, driven by the impairment charge of approximately $114 million. Adjusted EBITDA decreased by 53% to $12 million driven by decreased volume in our Water Direct commercial customer base and coffee services business.
THIRD QUARTER 2020 REVENUE AND ADJUSTED EBITDA OUTLOOK
Primo is targeting third quarter 2020 consolidated revenue from continuing operations of approximately $480 to $500 million excluding the impact of foreign exchange as well as adjusted EBITDA of $100 to $105 million. The targets include the legacy Primo business and exclude S&D Coffee and Tea which is included in discontinued operations.
SHARE REPURCHASE PROGRAM
On December 11, 2019, Primo's Board of Directors approved a share repurchase program for up to $50 million of our outstanding common shares over a 12-month period commencing on December 16, 2019.
Primo did not repurchase any outstanding shares during the second quarter of 2020 under its share repurchase program.
During the quarter, roughly 20,000 shares totaling approximately $0.2 million were withheld to satisfy employees' tax obligations related to share-based awards.
There can be no assurance as to the precise number of shares, if any, that will be repurchased under the share repurchase program in the future, or the aggregate dollar amount of the shares to be purchased in future periods. Primo may discontinue purchases at any time, subject to compliance with applicable regulatory requirements. Shares purchased pursuant to the share repurchase program were subsequently cancelled.
ABOUT PRIMO WATER CORPORATION
Primo Water Corporation is a leading pure-play water solutions provider in North America, Europe and Israel 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 major retailers and online at various price points or leased to customers. 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 commercial businesses. Through its Water Exchange and Water Refill businesses, Primo offers pre-filled and reusable containers at over 13,000 locations and water refill units at approximately 22,000 locations, respectively. Primo also offers water filtration units across its 21-country footprint representing a top five position.
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.
