Primo Water Announces First Quarter 2024 Results and Declares Quarterly Dividend
May 09, 2024
- Results exceeded high end of Q1 Revenue and Adjusted EBITDA guidance
- Revenue of
$452 million , increased 9.6%, including 8.3% organic growth - Gross margin of 64.4%, increased 160 bps, and net income increased to
$19 million - Adjusted EBITDA of
$94 million , increased 24.2%, and Adjusted EBITDA margin of 20.8%, increased 250 bps - Increases full-year 2024 Revenue and Adjusted EBITDA outlook
- Increases full-year 2024 Adjusted Free Cash Flow outlook to between
$175 million and$185 million , an increase of$5 million
“This quarter we exceeded the high end of our guidance for revenue and Adjusted EBITDA. Our balanced and broad-based channel performance in the first quarter enables us to raise our revenue, Adjusted EBITDA and Adjusted free cash flow outlook for the 2024 fiscal year,” said
“Volume performance continues to exceed expectations and underscores the efforts of our associates to deliver our high-quality water solutions in the large and growing water category. Our focus on delivering exceptional customer service, being the water solutions partner of choice, and operational excellence is driving growth and delivering value creation,” continued
(Unless stated otherwise, all first quarter 2024 comparisons are relative to the first quarter of 2023; all information is in
FIRST QUARTER HIGHLIGHTS – CONTINUING OPERATIONS
- Revenue increased 9.6% to
$452 million compared to$413 million driven by revenue growth consisting of 5.1% volume and 4.5% pricing. Organic growth was 8.3% for the quarter. Revenue growth by channel includes 9% in Water Direct / Water Exchange, 11% in Water Refill / Water Filtration and 57% in Other Water, which is primarilyMountain Valley Spring water sold at retail. - Gross profit increased 12% to
$291 million compared to$259 million . Gross margin increased 160 bps to 64.4% compared to 62.8%, driven by pricing initiatives, increased volume and operating efficiencies. - SG&A expenses increased 6% to
$249 million compared to$235 million . The increase was driven by higher selling and operating costs including delivery commissions that supported volume and revenue growth. - Reported net income and net income per diluted share were
$19 million and$0.12 , 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$31 million and$0.19 , respectively, compared to$11 million and$0.07 , respectively. - Adjusted EBITDA increased 24% to
$94 million compared to$76 million , driven primarily by pricing initiatives, customer demand and effective expense management. Adjusted EBITDA margin was 20.8%, compared to 18.3%. - Net cash provided by operating activities of
$63 million , less$39 million of capital expenditures and additions to intangible assets, resulted in$24 million of free cash flow, or$28 million of adjusted free cash flow (adjusting for the items set forth on Exhibit 6), compared to adjusted free cash flow of$(11.0) million in the prior year.
For the Three Months Ended | |||||
(USD $M unless otherwise noted) | Y/Y Change | ||||
Revenue, net | $ 452.0 | $ 412.5 | 9.6 % | ||
Net income from continuing operations | $ 18.7 | $ 3.2 | $ 15.5 | ||
Net income from continuing operations per diluted share | $ 0.12 | $ 0.02 | $ 0.10 | ||
Adjusted net income from continuing operations | $ 30.5 | $ 11.2 | $ 19.3 | ||
Adjusted net income from continuing operations per diluted share | $ 0.19 | $ 0.07 | $ 0.12 | ||
Adjusted EBITDA | $ 93.9 | $ 75.6 | 24.2 % | ||
Adjusted EBITDA margin % | 20.8 % | 18.3 % | 250 bps |
OUTLOOK
- The Company is increasing its full year 2024 revenue target to between
$1.855 billion and$1.885 billion and its full year 2024 Adjusted EBITDA target to between$410 million and$430 million . Full-year 2024 Adjusted Free Cash Flow from continuing operations is forecasted to be between$175 million and$185 million , an increase of$5 million . Primo Water is targeting the following results from continuing operations for the second quarter and full year 2024:
Q2 2024 Range | FY 2024 Range | |||
($ in millions) | Low | High | Low | High |
Revenue | ||||
Adjusted EBITDA | ||||
Cash Taxes | ||||
Cash Interest, Net | ||||
Cap-Ex | ~ 7% of Revenue + | |||
Adj. Free Cash Flow |
FIRST QUARTER 2024 RESULTS CONFERENCE CALL
International: (416) 764-8659
Conference ID: 37820861
This is a live, listen-only dial-in telephone line.
A slide presentation and live audio webcast will be available through
FIRST QUARTER PERFORMANCE – CONTINUING OPERATIONS
Revenue growth by channel is tabulated below:
For the Three Months Ended | |||||||
(in millions of | $ Change | % Change | |||||
Revenue, net | |||||||
Water Direct/Water Exchange | $ 339.4 | $ 312.4 | $ 27.0 | 8.6 % | |||
Water Refill/Water Filtration | 58.0 | 52.2 | $ 5.8 | 11.1 % | |||
Other Water | 17.7 | 11.3 | $ 6.4 | 56.6 % | |||
Water Dispensers | 16.8 | 12.7 | $ 4.1 | 32.3 % | |||
Other | 20.1 | 23.9 | $ (3.8) | (15.9) % | |||
Revenue, net as reported | $ 452.0 | $ 412.5 | $ 39.5 | 9.6 % |
QUARTERLY DIVIDEND
SHARE REPURCHASE PROGRAM
During the first quarter,
The actual timing, manner, number, and value of shares repurchased under the program will be determined by management at its discretion and will depend on a number of factors, including the market price of
ABOUT
Non-GAAP Measures
To supplement its reporting of financial measures determined in accordance with
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
Factors that could cause actual results to differ materially from those described in this press release include, among others: financial condition and results of operations;
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
Website: www.primowatercorp.com
EXHIBIT 1 | |||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
(in millions of | |||
Unaudited | |||
For the Three Months Ended | |||
Revenue, net | $ 452.0 | $ 412.5 | |
Cost of sales | 160.7 | 153.5 | |
Gross profit | 291.3 | 259.0 | |
Selling, general and administrative expenses | 249.4 | 234.6 | |
Loss on disposal of property, plant and equipment, net | 1.5 | 1.3 | |
Acquisition and integration expenses | 5.3 | 1.7 | |
Gain on sale of property | (0.5) | — | |
Operating income | 35.6 | 21.4 | |
Other income, net | (2.6) | (0.3) | |
Interest expense, net | 10.0 | 18.2 | |
Income from continuing operations before income taxes | 28.2 | 3.5 | |
Income tax expense | 9.5 | 0.3 | |
Net income from continuing operations | $ 18.7 | $ 3.2 | |
Net income from discontinued operations, net of income taxes | 6.3 | 2.6 | |
Net income | $ 25.0 | $ 5.8 | |
Net income per common share | |||
Basic: | |||
Continuing operations | $ 0.12 | $ 0.02 | |
Discontinued operations | $ 0.04 | $ 0.02 | |
Net income | $ 0.16 | $ 0.04 | |
Diluted: | |||
Continuing operations | $ 0.12 | $ 0.02 | |
Discontinued operations | $ 0.04 | $ 0.02 | |
Net income | $ 0.16 | $ 0.04 | |
Weighted-average common shares outstanding (in thousands) | |||
Basic | 159,573 | 159,726 | |
Diluted | 160,449 | 160,781 |
EXHIBIT 2 | |||
CONSOLIDATED BALANCE SHEETS | |||
(in millions of | |||
Unaudited | |||
ASSETS | |||
Current assets | |||
Cash and cash equivalents | $ 498.3 | $ 507.9 | |
Accounts receivable, net of allowance of | 161.3 | 156.0 | |
Inventories | 46.3 | 47.3 | |
Prepaid expenses and other current assets | 26.3 | 26.0 | |
Current assets of discontinued operations | 125.9 | 128.7 | |
Total current assets | 858.1 | 865.9 | |
Property, plant and equipment, net | 546.5 | 556.5 | |
Operating lease right-of-use-assets | 139.2 | 136.0 | |
1,004.7 | 1,004.6 | ||
Intangible assets, net | 709.1 | 714.2 | |
Other long-term assets, net | 16.9 | 20.2 | |
Long-term assets of discontinued operations | 225.2 | 225.6 | |
Total assets | $ 3,499.7 | $ 3,523.0 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Current maturities of long-term debt | $ 14.3 | $ 14.2 | |
Accounts payable and accrued liabilities | 260.5 | 276.4 | |
Current operating lease obligations | 25.1 | 25.6 | |
Current liabilities of discontinued operations | 102.1 | 109.9 | |
Total current liabilities | 402.0 | 426.1 | |
Long-term debt | 1,255.0 | 1,270.8 | |
Operating lease obligations | 126.5 | 124.0 | |
Deferred tax liabilities | 145.7 | 144.2 | |
Other long-term liabilities | 75.8 | 64.4 | |
Long-term liabilities of discontinued operations | 51.0 | 52.2 | |
Total liabilities | 2,056.0 | 2,081.7 | |
Equity | |||
Common shares, no par value – 159,707,056 ( | 1,296.4 | 1,288.6 | |
Additional paid-in capital | 85.4 | 90.6 | |
Retained earnings | 173.2 | 167.2 | |
Accumulated other comprehensive loss | (111.3) | (105.1) | |
1,443.7 | 1,441.3 | ||
Total liabilities and equity | $ 3,499.7 | $ 3,523.0 |
EXHIBIT 3 | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(in millions of | |||
Unaudited | |||
For the Three Months Ended | |||
Cash flows from operating activities of continuing operations: | |||
Net income | $ 25.0 | $ 5.8 | |
Net income from discontinued operations, net of income taxes | 6.3 | 2.6 | |
Net income from continuing operations | 18.7 | 3.2 | |
Adjustments to reconcile net income from continuing operations to cash flows | |||
Depreciation and amortization | 48.2 | 47.1 | |
Amortization of financing fees | 0.8 | 0.8 | |
Share-based compensation expense | 3.0 | 2.0 | |
Provision for deferred income taxes | 1.9 | 1.1 | |
Loss on disposal of property, plant and equipment, net | 1.5 | 1.3 | |
Gain on sale of property | (0.5) | — | |
Other non-cash items | (4.6) | (2.0) | |
Change in operating assets and liabilities, net of acquisitions: | |||
Accounts receivable | (6.0) | 3.8 | |
Inventories | 1.2 | 2.1 | |
Prepaid expenses and other current assets | (3.4) | (2.3) | |
Other assets | (0.5) | (0.1) | |
Accounts payable and accrued liabilities and other liabilities | 3.1 | (26.7) | |
Net cash provided by operating activities of continuing operations | 63.4 | 30.3 | |
Cash flows from investing activities of continuing operations: | |||
Acquisitions, net of cash received | (4.1) | (7.4) | |
Additions to property, plant and equipment | (37.6) | (42.2) | |
Additions to intangible assets | (2.3) | (2.0) | |
Proceeds from sale of property, plant and equipment | 0.1 | 0.1 | |
Proceeds from sale of property | 1.0 | — | |
Other investing activities | 2.7 | 0.8 | |
Net cash used in investing activities of continuing operations | (40.2) | (50.7) | |
Cash flows from financing activities of continuing operations: | |||
Payments of long-term debt | (2.8) | (3.2) | |
Proceeds from short-term borrowings | — | 61.0 | |
Payments on short-term borrowings | — | (33.2) | |
Issuance of common shares | 6.2 | 4.3 | |
Common shares repurchased and canceled | (11.1) | (19.3) | |
Dividends paid to common shareholders | (14.8) | (12.8) | |
Payment of contingent consideration for acquisitions | (0.7) | (0.8) | |
Other financing activities | — | (2.5) | |
Net cash used in financing activities of continuing operations | (23.2) | (6.5) | |
Cash flows from discontinued operations: | |||
Net cash provided by operating activities from discontinued operations | 0.8 | 4.0 | |
Net cash used in investing activities from discontinued operations | (5.6) | (10.8) | |
Net cash provided by financing activities from discontinued operations | 0.1 | 6.8 | |
Net cash (used in) provided by discontinued operations | (4.7) | — | |
Effect of exchange rate changes on cash | (0.5) | 0.8 | |
Net decrease in cash, cash equivalents and restricted cash | (5.2) | (26.1) | |
Cash and cash equivalents and restricted cash, beginning of period | 530.5 | 122.6 | |
Cash and cash equivalents and restricted cash, end of period | $ 525.3 | $ 96.5 | |
Cash and cash equivalents and restricted cash from discontinued operations, end of period | 27.0 | 40.4 | |
Cash and cash equivalents and restricted cash of continuing operations, end of period | $ 498.3 | $ 56.1 |
EXHIBIT 4 | ||||||
SEGMENT INFORMATION | ||||||
(in millions of | ||||||
Unaudited | ||||||
For the Three Months Ended | ||||||
Other | Total | |||||
Revenue, net | ||||||
Water Direct/Water Exchange | $ 339.4 | $ — | $ 339.4 | |||
Water Refill/Water Filtration | 58.0 | — | 58.0 | |||
Other Water | 17.7 | — | 17.7 | |||
Water Dispensers | 16.8 | — | 16.8 | |||
Other | 19.7 | 0.4 | 20.1 | |||
Total | $ 451.6 | $ 0.4 | $ 452.0 | |||
Gross profit | $ 291.1 | $ 0.2 | $ 291.3 | |||
Gross Margin % | 64.5 % | 50.0 % | 64.4 % | |||
Selling, general and administrative expenses | $ 238.1 | $ 11.3 | $ 249.4 | |||
SG&A % of Revenue1 | 52.7 % | NM | 55.2 % | |||
Operating income (loss) | $ 51.4 | $ (15.8) | $ 35.6 | |||
Depreciation and amortization | $ 47.8 | $ 0.4 | $ 48.2 | |||
For the Three Months Ended | ||||||
Other | Total | |||||
Revenue, net | ||||||
Water Direct/Water Exchange | $ 312.4 | $ — | $ 312.4 | |||
Water Refill/Water Filtration | 52.2 | — | 52.2 | |||
Other Water | 11.3 | — | 11.3 | |||
Water Dispensers | 12.7 | — | 12.7 | |||
Other | 23.7 | 0.2 | 23.9 | |||
Total | $ 412.3 | $ 0.2 | $ 412.5 | |||
Gross profit | $ 258.8 | $ 0.2 | $ 259.0 | |||
Gross margin % | 62.8 % | 100.0 % | 62.8 % | |||
Selling, general and administrative expenses | $ 221.1 | $ 13.5 | $ 234.6 | |||
SG&A % of revenue1 | 53.6 % | NM | 56.9 % | |||
Operating income (loss) | $ 34.7 | $ (13.3) | $ 21.4 | |||
Depreciation and amortization | $ 46.8 | $ 0.3 | $ 47.1 | |||
____________________________ | ||||||
1 “NM” defined as not meaningful |
EXHIBIT 5 | |||
SUPPLEMENTARY INFORMATION – NON-GAAP – EARNINGS BEFORE | |||
(EBITDA) | |||
(in millions of | |||
Unaudited | |||
For the Three Months Ended | |||
Net income from continuing operations | $ 18.7 | $ 3.2 | |
Interest expense, net | 10.0 | 18.2 | |
Income tax expense | 9.5 | 0.3 | |
Depreciation and amortization | 48.2 | 47.1 | |
EBITDA | $ 86.4 | $ 68.8 | |
Acquisition and integration costs (a) | 5.3 | 1.7 | |
Share-based compensation costs (b) | 3.0 | 2.0 | |
Foreign exchange and other gains, net (c) | (1.9) | (0.2) | |
Loss on disposal of property, plant and equipment, net (d) | 1.5 | 1.3 | |
Gain on sale of property (e) | (0.5) | — | |
Other adjustments, net (f) | 0.1 | 2.0 | |
Adjusted EBITDA | $ 93.9 | $ 75.6 | |
Revenue, net | $ 452.0 | $ 412.5 | |
Adjusted EBITDA margin % | 20.8 % | 18.3 % |
For the Three Months Ended | ||||
Location in Consolidated Statements of | ||||
(Unaudited) | ||||
(a) Acquisition and integration costs | Acquisition and integration expenses | $ 5.3 | $ 1.7 | |
(b) Share-based compensation costs | Selling, general and administrative expenses | 3.0 | 2.0 | |
(c) Foreign exchange and other gains, net | Other income, net | (1.9) | (0.2) | |
(d) Loss on disposal of property, plant and equipment, net | Loss on disposal of property, plant and equipment, net | 1.5 | 1.3 | |
(e) Gain on sale of property | Gain on sale of property | (0.5) | — | |
(f) Other adjustments, net | Other income, net | (0.7) | (0.2) | |
Selling, general and administrative expenses | 0.8 | 2.2 |
EXHIBIT 6 | |||
SUPPLEMENTARY INFORMATION – NON-GAAP – FREE CASH FLOW AND ADJUSTED FREE CASH FLOW | |||
(in millions of | |||
Unaudited | |||
For the Three Months Ended | |||
Net cash provided by operating activities of continuing operations | $ 63.4 | $ 30.3 | |
Less: Additions to property, plant, and equipment | (37.6) | (42.2) | |
Less: Additions to intangible assets | (2.3) | (2.0) | |
Free Cash Flow | $ 23.5 | $ (13.9) | |
Acquisition and integration cash costs | 2.4 | 2.5 | |
Cash costs related to additions to property, plant and equipment for integration of acquired entities | 0.4 | — | |
Tariffs refunds related to property, plant, and equipment | 2.1 | 0.4 | |
Adjusted Free Cash Flow | $ 28.4 | $ (11.0) |
EXHIBIT 7 | |||
SUPPLEMENTARY INFORMATION-NON-GAAP-ADJUSTED NET INCOME AND ADJUSTED EPS | |||
(in millions of | |||
Unaudited | |||
For the Three Months Ended | |||
Net income from continuing operations | $ 18.7 | $ 3.2 | |
Adjustments: | |||
Amortization expense of customer lists | 7.1 | 7.3 | |
Acquisition and integration costs | 5.3 | 1.7 | |
Share-based compensation costs | 3.0 | 2.0 | |
Foreign exchange and other (gains), net | (1.9) | (0.2) | |
Gain on sale of property | (0.5) | — | |
Other adjustments, net | 0.1 | 2.0 | |
Tax impact of adjustments (a) | (1.3) | (4.8) | |
Adjusted net income | $ 30.5 | $ 11.2 | |
Earnings Per Share (as reported) | |||
Net income from continuing operations | $ 18.7 | $ 3.2 | |
Basic EPS | $ 0.12 | $ 0.02 | |
Diluted EPS | $ 0.12 | $ 0.02 | |
Weighted average common shares outstanding (in thousands) | |||
Basic | 159,573 | 159,726 | |
Diluted | 160,449 | 160,781 | |
Adjusted Earnings Per Share (Non-GAAP) | |||
Adjusted net income from continuing operations (Non-GAAP) | $ 30.5 | $ 11.2 | |
Adjusted diluted EPS (Non-GAAP) | $ 0.19 | $ 0.07 | |
Weighted average common shares outstanding (in thousands) | |||
Basic | 159,573 | 159,726 | |
Diluted weighted average common shares outstanding (in thousands) (Non-GAAP) (b) | 160,449 | 160,781 |
(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) For the periods presented, the non-GAAP diluted weighted average common shares outstanding equaled the reported diluted weighted average common shares outstanding. |
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