Primo Water Corporation (NASDAQ:PRMW) Q2 2020 Earnings Conference Call - Final Transcript

Aug 06, 2020 • 10:00 am ET


Primo Water Corporation (NASDAQ:PRMW) Q2 2020 Earnings Conference Call - Final Transcript


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Tom Harrington

it's delivered direct to their door, through our 5-gallon exchange program or at one of our self-service refill stations, we're working to bring healthy hydration to people whenever, wherever, and however they want it.

Before I review our current plan, and Jay reviews the financial performance in greater detail, I wanted to share my perspective on our performance for the quarter. While the pandemic has certainly had an impact on our revenue and adjusted EBITDA for the quarter, the company performed better than we expected in terms of revenue, which was approximately 2% better and adjusted EBITDA, which was approximately 14% better.

Our leadership teams reacted swiftly for the top-line pressures largely created from our commercial customer base and the coffee service businesses and flexed our cost structure to deliver 170 basis point improvement in adjusted EBITDA margin. We benefited from the highly variable nature of our cost structure, and our ability to act swiftly and decisively.

Our teams have, despite COVID-19, made excellent progress on synergy capture as we recorded approximately $4 million year-to-date. We generated approximately $51 million of adjusted free cash flow in Q2, a result of better-than-expected adjusted EBITDA, well-managed working capital, and the timing of cash interest payments.

Unfortunately, principally driven by the impact of the coronavirus, we did take an impairment charge of approximately $115 million, largely on our European operations. Jay will discuss this in more detail later in our prepared comments.

Our liquidity is in good shape and has improved in Q2, and we remain confident in our ability to fund the needs of the business, including our staple dividend and highly synergistic tuck-in acquisitions. While the pandemic has presented an obvious set of unique and meaningful challenges, I remain confident that we will return to our historical growth algorithm on adjusted EBITDA later this year despite a slower recovery in terms of revenue growth.

Our commitment to our customers and to executing against our pure-play water strategy is yielding resilient financial results despite a difficult operating environment.

Shifting to a recap of our current actions. While we've not seen a big bounce back, we are encouraged as we are seeing businesses in many states and numerous countries cautiously reopen. We're encouraged that the worst of the crisis may be behind us. We continue to focus on the long-term drivers of our future growth, ensuring that the fundamentals of our business remain strong. We're also reviewing how the pandemic is changing the way we serve our customers and are adapting accordingly.

We believe that changing consumer behavior may create new and lasting opportunities for our business, many of them are long-term positives.

For example, consumer sheltering in place is accelerating water consumption at home, and assuming the elevated levels of work from home and cocooning through and after the pandemic, we would anticipate further growth from our residential customer base and at-home consumers, who use our Water Exchange or Water Refill solutions.

Another example is the increased use of online ordering and