Mr. Tom Harrington reports

PRIMO WATER ANNOUNCES STRONG SECOND QUARTER 2023 RESULTS AND INCREASES ANNUAL GUIDANCE

Primo Water Corp. has released its results for the second quarter ended July 1, 2023.

Unless stated otherwise, all second quarter 2023 comparisons are relative to the second quarter of 2022 and all information is in United States dollars.

Second quarter highlights:

• Revenue increased 4 per cent to $593-million compared with $571-million, driven by revenue growth of 7 per cent in water direct/water exchange and 18 per cent in water refill/water filtration, partially offset by the exit from the company's North America single-use bottled water retail business and the exit from the company's business in Russia.
• Reported net income and net income per diluted share were $21-million and 13 cents, respectively, compared with reported net loss and net loss per diluted share of $23-million and 14 cents, respectively. Adjusted net income and adjusted net income per diluted share were $39-million and 24 cents, respectively, compared with $33-million and 21 cents, respectively. Gross margin increased 390 bps (basis points) to 62.1 per cent compared with 58.2 per cent.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 13 per cent to $122-million and adjusted EBITDA margin increased 160 bps to 20.5 per cent.
• The company increases its full-year 2023 revenue target to between $2.32-billion and $2.36-billion, and increases its full-year 2023 adjusted EBITDA to between $460-million and $480-million. Adjusted free cash flow is forecasted to be approximately $150-million, an increase of $10-million.
• The company reaffirms its 2024 outlook for high-single-digit organic revenue growth and 2024 adjusted EBITDA approaching $530-million.

"We once again delivered strong revenue and earnings growth, driven by improved route density, network efficiencies and optimization, the benefits of our investments, and pricing. I am proud of the efforts of our team and their focus on improving the customer experience," said Tom Harrington, chief executive officer.

"Our second-quarter performance gives us confidence to increase our 2023 outlook to between $2.32-billion and $2.36-billion of revenue, and adjusted EBITDA to between $460-million and $480-million. Adjusted free cash flow is now forecasted to increase to approximately $150-million, an increase of $10-million. We are also reaffirming our 2024 outlook for high-single-digit organic revenue growth and adjusted EBITDA approaching $530-million," said Mr. Harrington.

Outlook

Primo Water is targeting the results shown in the associated table from continuing operations for the third-quarter and full-year 2023.

Second quarter 2023 results conference call

Primo Water will host a conference call, to be simultaneously webcast, on Thursday, Aug. 10, 2023, at 10 a.m. ET. A question-and-answer session will follow management's presentation. To participate, please call the following numbers:

North America:  888-664-6392

International:  416-764-8659

Conference ID:  73605034

This is a live, listen-only dial-in telephone line.

A slide presentation and live audio webcast will be available through Primo Water's website. The earnings conference call will be recorded and archived for playback on the investor relations section of the website for a period of two weeks following the event.

Second quarter global performance:

• Revenue increased 4 per cent to $593-million compared with $571-million. The increase was driven by revenue growth of 7 per cent in water direct/water exchange and 18 per cent in water refill/water filtration, due primarily to pricing initiatives, and increased demand for products and services from residential and business customers, partially offset by the exits from the company's North America single-use bottled water retail business and its business in Russia in the prior year. Revenue growth by channel is shown in the associated table.

• Gross profit increased 11 per cent to $368-million, compared with $332-million. Gross margin increased 390 bps to 62.1 per cent compared with 58.2 per cent, driven by pricing initiatives, increased demand and the exit from the single-use retail bottled water business in North America.
• SG&A (selling, general and administrative) expenses increased 9 per cent to $318-million, compared with $292-million. The increase was driven by higher selling and operating costs that supported volume and revenue growth, related primarily to labour costs increases and an increase in professional fees.
• Reported net income and net income per diluted share were $21-million and 13 cents, respectively, compared with reported net loss and net loss per diluted share of $23-million and 14 cents, respectively. Adjusted net income and adjusted net income per diluted share were $39-million and 24 cents, respectively, compared with $33-million and 21 cents, respectively, in the prior year.
• Adjusted EBITDA increased 13 per cent to $122-million, compared with $108-million, driven primarily by pricing initiatives, customer demand and effective expense management. Adjusted EBITDA margin was 20.5 per cent for the quarter, compared with 18.9 per cent.
• Net cash provided by operating activities of $77-million, less $39-million of capital expenditures and additions to intangible assets, resulted in $38-million of free cash flow, or $41-million of adjusted free cash flow (adjusting for the items set forth on exhibit 7), compared with adjusted free cash flow of $21-million in the prior year.

Second quarter reporting segment performance

North America:

• Revenue increased 3 per cent to $451-million, driven by revenue growth of 7 per cent in water direct/water exchange, and 17 per cent in water refill/water filtration driven by pricing initiatives, partially offset by the exit from the company's single-use bottled water retail business.

Europe:

• Revenue increased 12 per cent to $78-million (increased 9 per cent excluding the impact of foreign exchange) driven by pricing initiatives, increased demand for products and services from residential and business customers, and the favourable impact of foreign exchange rates, partially offset by the exit from the company's business in Russia.

Quarterly dividend

Primo Water announced that its board of directors has declared a dividend of eight U.S. cents per share on common shares, payable in cash on Sept. 7, 2023, to shareowners of record at the close of business on Aug. 24, 2023.

Share repurchase program

Primo Water also announced that its board of directors has authorized a new $50-million share repurchase program, which replaces the previously authorized share repurchase program that expires on Aug. 14, 2023. Under the program, the company's common shares may be repurchased periodically in open market or privately negotiated transactions through the facilities of the New York Stock Exchange.

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 Primo Water's common shares, general market and economic conditions, applicable law and other requirements, and other business considerations, provided, however, that the price per common share will not exceed the market price as at the date of acquisition (plus reasonable brokerage fees and commissions), in accordance with applicable securities laws and exchange rules.

About Primo Water Corp.

Primo Water is a leading pure-play water solutions provider in North America and Europe and generates approximately $2.2-billion in annual revenue. Primo Water operates largely under a recurring revenue model in the large-format water category (defined as three gallons or greater). This business strategy is commonly referred to as razor/razorblade because the initial sale of a product creates a base of users who frequently purchase complementary consumable products. The razor in Primo Water's revenue model is its industry-leading lineup of innovative water dispensers, which are sold through approximately 10,000 retail locations and on-line at various price points. The dispensers help increase household and business penetration, which drives recurring purchases of Primo Water's razorblade offering or water solutions. Primo Water's razorblade offering comprises water direct, water exchange and water refill. Through its water direct business, Primo Water delivers sustainable hydration solutions across its 21-country footprint direct to customers, whether at home or to businesses. Through its water exchange business, customers visit retail locations and purchase a prefilled bottle of water. Once consumed, empty bottles are exchanged at Primo Water's recycling centre displays, which provide a ticket that offers a discount toward the purchase of a new bottle. Water exchange is available in approximately 17,500 retail locations. Through its water refill business, customers refill empty bottles at approximately 23,500 self-service refill drinking water machines. Primo Water also offers water filtration units across its 21-country footprint.

Primo Water'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 Water 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.

We seek Safe Harbor.