Mr. Robbert Rietbroek reports

PRIMO WATER REPORTS FULL-YEAR AND FOURTH QUARTER 2023 RESULTS

Primo Water Corp. has released its results for the full year and fourth quarter ended Dec. 30, 2023.

"I am pleased with our performance, as our associates provided excellent service to our customers and strong financial results for our shareholders. Our full-year 2023 results exceeded the midpoint of our guidance for revenue, adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] and adjusted free cash flow for the combined continuing and discontinued operations," said Robbert Rietbroek, chief executive officer.

Mr. Rietbroek continued: "Given the strength of our businesses, we expect our first quarter 2024 outlook from continuing operations for revenue to be between $435-million and $445-million and adjusted EBITDA to be between $85-million and $91-million. Full-year 2024 outlook from continuing operations for revenue is forecasted to be between $1.84-billion and $1.88-billion and adjusted EBITDA to be between $402-million and $422-million. Full-year 2024 adjusted free cash flow from continuing operations is forecasted to be between $170-million and $180-million. These forecasts reflect the successful execution of the previously announced transaction to sell a significant portion of our international businesses. We intend to use the gross proceeds of $575-million from the sale to pursue growth, both organically and through tuck-in M&A, reduce leverage, and return capital to shareholders via share repurchases and dividends. As we move through 2024, we will sell the remainder of the international businesses, further improving our balance sheet and North American focus as we execute our vision and effectively deploy capital.

"As the new CEO of Primo Water, I am excited to lead this premier, North American-focused, pure-play water company. Since joining in January, I have been engaging with our stakeholders and learning more about our company's assets, resources and practices. We have a strong platform for growth with a unique value proposition with our bulk offerings in the large and growing water market, which gives me confidence in our future," said Mr. Rietbroek.

Fiscal 2023 highlights -- continuing operations:

• Revenue from continuing operations increased 5 per cent to $1.8-billion compared with $1.7-billion driven by revenue growth of 8 per cent in water direct/water exchange and 18 per cent in water refill/water filtration, offset primarily by the exit from the single-use retail bottled water business in North America and the exit from Primo's Russian business.
• Gross margin from continuing operations increased 400 basis points to 64.2 per cent compared with 60.2 per cent.
• Reported net income from continuing operations and reported net income per diluted share were $64-million and 40 cents, respectively, compared with reported net income from continuing operations and net income per diluted share of $59-million and 36 cents, respectively. Adjusted net income from continuing operations and adjusted net income per diluted share were $100-million and 62 cents, respectively, compared with $87-million and 54 cents, respectively.
• Adjusted EBITDA from continuing operations increased 11 per cent to $381-million and adjusted EBITDA margin increased 120 bps to a record 21.5 per cent.

Unless stated otherwise, all fourth quarter 2023 comparisons are relative to the fourth quarter of 2022 and all fiscal year 2023 comparisons are relative to fiscal year 2022; all information is in U.S. dollars and, unless stated otherwise, is on a continuing operations basis.

Outlook

Primo Water is targeting the results noted herein from continuing operations for the first quarter and full year 2024.

Fourth quarter 2023 results conference call

Primo Water will host a conference call, to be simultaneously webcast, on Thursday, Feb. 22, 2024, at 10 a.m. Eastern Time. 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: 60390249

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

A slide presentation (including certain additional non-GAAP (generally accepted accounting principles) comparative measures for 2023, 2022 and 2021 on a continuing operations basis) 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.

Fiscal year performance -- continuing operations

Revenue increased 5 per cent to $1,772-million compared with $1,693-million driven by revenue growth of 8 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.

Gross profit increased 12 per cent to $1,137-million compared with $1,019-million. Gross margin increased 400 bps to 64.2 per cent compared with 60.2 per cent, driven by pricing initiatives, increased demand and operating efficiencies.

SG&A expenses increased 10 per cent to $976-million compared with $884-million. The increase was driven by higher selling and operating costs, including delivery commissions that supported volume and revenue growth.

Reported net income from continuing operations and net income per diluted share were $64-million and 40 cents, respectively, compared with reported net income from continuing operations and net income per diluted share of $59-million and 36 cents, respectively. Adjusted net income from continuing operations and adjusted net income per diluted share were $100-million and 62 cents, respectively, compared with $87-million and 54 cents, respectively.

Adjusted EBITDA increased 11 per cent to $381-million compared with $344-million, driven primarily by pricing initiatives, customer demand and operating efficiencies. Adjusted EBITDA margin was 21.5 per cent for the year, compared with 20.3 per cent.

Net cash provided by operating activities from continuing operations of $289-million, less $147-million of capital expenditures and additions to intangible assets, resulted in $142-million of free cash flow, or $158-million of adjusted free cash flow, compared with adjusted free cash flow of $85-million in the prior year.

Revenue increased 8 per cent to $439-million compared with $405-million in the prior quarter. The increase was driven by revenue growth of 8 per cent in water direct/water exchange and 15 per cent in water refill/water filtration, due primarily to pricing initiatives and increased demand for products and services from residential and business customers.

Gross profit increased 14 per cent to $284-million compared with $249-million. Gross margin increased 330 bps to 64.7 per cent compared with 61.4 per cent, driven by pricing initiatives, increased demand and operating efficiencies.

Selling, general and administrative expenses increased 13 per cent to $250-million compared with $221-million. The increase was driven by higher selling and operating costs, including delivery commissions that supported volume and revenue growth.

Reported net income from continuing operations and net income per diluted share were $13-million and eight cents, respectively, compared with reported net income from continuing operations and net income per diluted share of $35-million and $0.22, respectively. Adjusted net income and adjusted net income per diluted share were $19-million and 12 cents, respectively, compared with $21-million and 13 cents in the prior year.

Adjusted EBITDA increased 7 per cent to $95-million compared with $89-million, driven primarily by pricing initiatives, customer demand and effective expense management. Adjusted EBITDA margin was 21.6 per cent for the quarter, compared with 21.9 per cent.

Net cash provided by operating activities from continuing operations of $67-million, less $38-million of capital expenditures and additions to intangible assets, resulted in $29-million of free cash flow, or $37-million of adjusted free cash flow, compared with adjusted free cash flow of $31-million in the prior year.

Quarterly dividend

Primo Water announced that its board of directors declared a dividend of nine cents per share on common shares, payable in cash on March 25, 2024, to shareholders of record at the close of business on March 8, 2024.

Share repurchase program

During 2023, Primo Water repurchased approximately 1.4 million common shares for approximately $21-million. Effective upon the closing of the sale of a significant portion of Primo Water's international business, the share repurchase authorization was increased from $50-million to $75-million. Under the program, the company's common shares may be repurchased periodically in open market or privately negotiated transactions.

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 North America-focused pure-play water solutions provider that 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 10,900 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 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 the company'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 stations. Primo Water also offers water filtration units across North America.

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