Primo Water Corporation (NASDAQ:PRMW) Q3 2018 Earnings Conference Call Transcript

Nov 06, 2018 • 04:30 pm ET

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Primo Water Corporation (NASDAQ:PRMW) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Primo Water Third Quarter 2018 Financial Results Conference Call. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to turn the conference over to Madeleine Kettle. You may begin.

Executive
Madeleine Kettle

Good afternoon, and welcome to Primo Water's third quarter 2018 earnings conference call. On the call with me today are Matt Sheehan, CEO; and David Mills, CFO.

By now, everyone should have accessed the release that went out this afternoon at approximately 4:05 p.m. Eastern time. If you have not received today's press release, it is available on the Investor Relations portion of Primo Water's website at www.primowater.com. This call is being webcast, and a replay will be available on the company's website.

(Forward-Looking Cautionary Statements)

And I'd now like to turn the call over to Primo Water's CEO, Matt Sheehan.

Executive
Matthew Sheehan

Thanks, Madeleine. Good afternoon, everyone, and thank you for joining us to review our quarterly results and an update on our business. For our call today, I will give a summary of the quarter; provide a detailed explanation of what we believe is a short-term operational Refill matter, which what we believe will be -- with long-term upside, which impacted adjusted EBITDA; update you on some of our exciting growth initiatives; and finally, provide an update on the continued tap water issues across the U.S. and Canada. David will then provide more detail on the financial results of the quarter as well as an update to our guidance.

Let's begin with a brief overview of our quarterly results. First, we were in line with our sales expectations at $81.8 million, led by better than expected results in both Exchange and Dispensers, offset by what we believe is a temporary decline in Refill. Secondly, sales were led by yet another strong quarter in U.S. Exchange, as same-store unit growth accelerated, once again, to 10.4% compared to 6.2% in the prior year and 9.6% for the first half of 2018. July and August actually posted same-store unit growth of 12%, marking yet another inflection in the business based on our successful marketing efforts, such as the activation of an everyday promotion that will drive greater household creation and connection.

September's growth rate was less, but still impressive when facing a tough comp due to the significant hurricanes that occurred in the prior year in the heavy-volume states of Florida and Texas. The third quarter marked the 26th consecutive quarter of 6%-plus same-store unit growth.

Third, dispenser sales increased over 13%, led by sell-through unit growth of 10% to 187,000 units compared to the prior year despite the headwinds created by the recent tariff environment.

Lastly, adjusted EBITDA was $16.2 million, which was below our expectations, primarily the results of the revenue decrease in Refill as well as additional marketing investments we made