Q3 2019 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to that Primo Water's third quarter 2019 conference call.

At this time, all participants are in listen only mode.

After the speaker presentation, there will be a question and answer session.

Good question during the session you need to press star one on your telephone.

Please be advised at today's conference is being recorded.

If you require any further assistance please press star zero.

Well I like to hand, the conference over to your speakers today Madeline cattle.

Mr Relations. Thank you. Please go ahead.

Good afternoon, and welcome to Primo Water's third quarter 2019 conference call on the call with me today, our season pass lead independent director, Billy Prim, Executive Chairman and interim President and CEO , David Miller, Chief Financial Officer.

By now everyone should have access never lease that went out this afternoon at approximate four of five PM Eastern time, if he's got refused to take this press release. It is available on the Investor Relations section Primo water's website at Www Pima water Dot com.

This call is being webcast a replay will be available on the company's that's correct.

Before we begin we would like to remind everyone that the prepared remarks contain forward looking statements, including financial guidance and management may make additional forward looking statements in response to your question.

Forward looking statements should be considered within the meaning of looks like most securities laws and regulations regarding such statements.

Many factors could cause actual results could differ materially from these forward looking statements and he can give no assurance that the accuracy and primo water assumes no obligation to update them.

We encourage participants to carefully read the section on forward looking statements included in the press release issued this afternoon and it all document that Primo water files with the FCC.

I will now turn the call over to student kit.

Thank you Matt one good afternoon, everyone and thank you for joining us on today's call.

I've served as an independent director Primo water for five and a half is.

And earlier this year was acquired the lead independent director.

The board were responsible for representing all of our shareholders and appointing and holding accountable to executive leadership team as Primo water.

This quarter's results, which will discuss more fully in a moment and to reduce the outlook for the balance of the year. The board determined that it was time to replace the C.

So as we announced today that Shan is no longer with the company.

The board has appointed Billy proud to serve as interim CEO until our search for new CEO is complete.

The only with Primo water sounder.

Our CEO and has been serving as executive chairman for the past two and a half year.

So I understand the business its goals and people will enable us move transition.

More deeply appreciate it always willingness to take on this assignments.

Several months ago as part of our succession planning process boarding gauge the global executive search firm to develop a C O profile and began looking at Canada to lead the company.

We did not have a definitive timeframe for identifying and hiring and they see us but the process is well underway and we're committed to moving swiftly so deliberately.

The only is not a candidate for the permanent jobs and upon the appointment of a new CEO . The board anticipates that they will give up his executive function and become the non executive chairman of the board.

Over the past two years.

The board has taken a number of sets to get feedback from our shareholders and enhance primo water's corporate governance.

As part of our ongoing process, we're working with a leading board recruiting firm evaluate the composition of our board and help us identify potential director candidates.

Process has included outreach to many of our large shareholders and on behalf of the board I want. Thank those of you set of provided us with thoughts on our board composition as well as specific Canada.

We appreciate your input and welcome additional feedback from shareholders.

With that I'd like turn the call ever dealt with them.

Thank you Susan good afternoon, everyone.

I will provide some high level remarks about the state of the business and then asked David meals artsy abode covered the specific quarter.

Our outlook.

I started this business 15 years ago with a vacant for about purified drinking water to family in an environmentally and socially responsible way.

In 2000, T.N., we were approximately 45 million dollar business that was basically breakeven at the adjusted EBITDA.

In five years ago in 2014, we had over 100, Megan and net sales and approximately 13 million in adjusted EBITDA.

Today, we believe we are on our way to generating well not worth 300, Megan and net sales and more than 50, Megan and adjusted EBITDA in 2019.

Our clean environmentally responsible drinking water can be found in more than 45000 locations, including inside and outside some of the largest retailers in the country.

Every day families drink, our water and don't have to rely upon the aging municipal water systems and declining tap water quality.

Our business and our values are aligned with two major consumer trends health and wellness and sustainability.

We're convinced we have a bright future.

Although our recent Bottomline performance has fallen short of our expectations. We are proud of the strong and consistent sales growth. We have demonstrated and believe we can quickly return to producing the cash flow and earnings we all expect.

The exchange and dispenser businesses continue to perform extremely well dispenser sales increased 53% over the prior year in exchange sales were up nearly 13% on the back of same store sales unit growth of more than 18%.

And refill the indoor location to show road, and our outdoor locations, which had been challenging are showing signs of a turnaround.

From where I see it the biggest issue. We have had is the speed of the turnaround at the retail business as well as certain higher than expected costs that impacted our gross margins and adjusted EBITDA.

For many years, we were known for our predictable sales and adjusted EBITDA right.

We have struggled in recent quarters.

We plan to return to be a company with the consistency we have shown in the past.

We will do a better job controlling element in our cost structure and properly got our investors on our sales and earnings trajectory I.

I know, we will identify new leader for the company who shares these goals between now and then my goal is to direct are very capable people to control our cost grow our locations and continue the growth trajectory in sales, while we improved our gross margin.

And adjusted EBITDA.

The results from this past quarter, our instructive and should give us all optimism net sales were strong in our exchange business. For example, this quarter was that Phil consecutive quarter of double digit same store sales unit growth and we have had 30 straight quarters of same store.

Sale unit growth of greater than 6%.

Our dispenser sales grew significantly setting up more household as future water customers.

In addition, our Walmart indoor refill sales grew by over 7% for the quarter.

So the indications of the future continued growth are in place.

We need to continue to drive improvements in the refill business the location count was down 7% over the past 12 months.

We need to grow the number of locations and improve our service.

To help us with location growth, we're excited to welcome Harrison Dean as our new Vice President of sales.

After an extensive extensive national search we are pleased to have Harrison own our team with his more than 20 years of retail sales leadership experience.

He joins us from anymore in rug Doctor, where he demonstrated the ability to grow brands through retail location expansion.

Harrison also brings a strong understanding of running a kiosk business using generally underutilized space at a retailer, including working with the current retailers signals generating programs that ensure retailer retention while aggressively expanding.

Locations.

Primo has every hallmark of a great business, we have a large and unique market presence and we are helping consumers made important personal and family goals of providing purified drinking water in an environmentally friendly way.

Consumer backlash against poor tap water quality and disposable single serve plastic bottles continued to gain national national headlines.

We remain well positioned to benefit from the macro trends and believe we're well positioned for growth.

Sales trends are positive and we now have an acute focus on better managing the controllable aspects of our business such that we can return to a more predictable margin profit and cash flow business with that I'd like to turn the call over to David Mills are.

Yes.

Thank you Billy.

Today, I will review our financial results for the quarter, and then discuss our outlook for the remainder of the year.

Finally, I will turn the call back over to believe for closing remarks to start we utilize non-GAAP financial measures to assist investors and better understanding our operating results.

A reconciliation of each is included in our press release, which is available on our website.

Turning to our results for the third quarter.

Sales were 87 million at the high end of our expectations driven by an acceleration in our dispenser and exchange segments.

Sales adjusted to exclude the ice assets sold in June of 2019 increased 10.5 person.

As I will describe in a moment, we did not achieve our guidance for adjusted EBITDA.

[noise] dispenser sales for the quarter were 18.3 million, an increase of 53.1% over the prior year and significantly ahead of our expectations.

We continue to experience a high level of retailer demand, which is driven primarily by record sell through as retailers replenish inventories as well the timing of shipments related to retailers preparing for the fourth quarter promotions.

Exchange sales increased 12.7% to a record 24.2 million well ahead of our expectations.

Driven primarily by U.S. exchange same store unit growth of 18.3%.

The same store unit growth was the result of continued in store marketing initiatives.

Including the IR see program and the new display signage at Walmart and other retailers such as lows recruitment.

The new San Angelo is driving impressive growth in locations that have been installed for years.

We anticipate adding the new signage to over a thousand additional locations over the next three quarters.

Rebuild sales for the quarter were 44.5 million and below our expectations.

The strong monthly positive trends in refill that had accelerated late in the second quarter unexpectedly slowed in the third quarter before rebounding late in the period.

Missing the peak seasonal months of July and August .

Despite this adjusted sales from rebuild which excludes the ice business were down 1.8% compared to the prior year.

This is a significant sequential improvement over Q2 in Q1, which were down 4.5% and 7% respectively.

Most of the change in refill sales is the result of the lower location count.

At quarter end, we had 7% fewer refill locations than a year ago.

That said, our adjusted sales per location have increased as productivity of our footprint is higher today than it was in the past.

In the quarter the average adjusted sales per location improved 4.7 per cent compared to the prior year.

This is a strong improvement over Q2 in Q1 s.

Which were down 0.3% and 4.5% respectively.

Not surprisingly we are focused on increasing the number of locations to provide additional scale to the business.

Overall during the quarter, we added approximately 1000 locations led by the exchange installations at Albertsons.

More importantly in refill, we were able to significantly reduce the impact of retail churn and closures as our net locations were flat from last quarter. As result of our sales teams efforts and the completion of a small regional acquisition.

Excluding the acquisition locations declined by approximately 100 in the quarter.

Which is a vast improvement compared to the decline of approximately 900 locations in the first half of the year of which over one third were due to store closures.

The refill acquisition had the regional business with over 135 highly productive locations in the southwest.

And brings a standalone kiosk refill model as well as new national customer accounts.

Our outdoor machines are generally located on a sidewalk of a retailer. However, these standalone kiosks are located in the parking lot of a retailer shopping center or gas stations.

Standalone kiosks.

Tend to produce more sales and volumes than our traditional outdoor retail locations.

Our gross margin for the quarter was 25.6% compared to 28.7% in the prior year.

The decrease was partly due to a higher mix of dispenser sales, which represented 21% of total sales compared to 14.6% in the prior year.

[noise] dispenser gross margin for the quarter decreased 3.5% from 5.2% as a result changes in product and customer mix.

Exchange gross margin was 29.8% compared to 31.1 person in the prior year gross margin in the current quarter was primarily impacted by the continued acceleration.

Yeah, RC redemptions as well as customer mix.

While the IR see program is impacting margins in the near term, we believe that it will continue to drive topline growth in the future.

Refill gross margin for the quarter decreased to 32.4% from 33.4%, mainly due to the lower than expected sales in the quarter as well as the incremental costs associated with addressing the machine downtime.

Yesterday adjusted to exclude noncash stock based compensation decreased to 7 million from 7.3 million or as a percent of sales decreased to 8.1% compared to 9% to the prior year.

Adjusted EBITDA was 15.4 million compared to 16.2 million. The decrease was primarily due to the lower volumes and margins in refill and continued acceleration in IR see redemptions, resulting in lower exchange margins.

As I mentioned the trends in the refill business our positive however, they are behind or original estimated timing.

This lag had a significant negative implications on the volumes and margins compared to our expectations.

Looking at the statement of cash flows for the first nine months of the year.

Our cash flow provided by operations was $23.1 million compared to 23.8 million in 2018.

Capital expenditures increased to 20.9 million from 15.6 million.

Primarily the result of the rollout of around 1000, new exchange locations.

The installation of credit card readers in the first half of the year and the new in store exchange signage and displays.

We continue to expect capital expenditures for the full year to be in the range of 24 to 26 million.

In addition, we used approximately 6.4 million in cash for the acquisition mentioned earlier.

Our leverage ratio at the end of the quarter was 3.9 times and we continue to expect it to decrease going forward.

Turning to our outlook, we're adjusting our outlook to address the results and trends of the third quarter and the continued investments in promotional activities that we believe are important to fuel future growth.

With these factors combined we now expect sales for the full year of 312 to 316 billion and adjusted EBITDA of 50 to 52 million.

Looking at the fourth quarter, we expect sales to be 75.7 million to 79.7 million.

And adjusted EBITDA to be 11.5 billion to 13.5 million.

With that I will turn the call over to Billy for closing remarks.

Thanks, David going forward the team Primo water remains confident and focused on improving sales at existing locations and location expansion.

We believe our same store sales and location focus will continue to drive the long term growth and dispensers exchange indoor refill and same sustainable growth and outdoor rigs do I.

I would like to thank the team for their dedication and significant efforts, we remain focused on driving growth and value for consumers retailers employees and shareholders with that I'd like to open up the line for questions operator.

Ladies and gentlemen, if you have a question at this time. Please press Star then one and you touched on telephone. If your question has been answered and you'd like to move yourself from the Q. Please press the pound key our first question comes from the line of John Anderson from William Blair. Your question. Please.

Oh, good afternoon, everybody [noise].

Billy.

A question for you to start.

You know as the board goes through the process of looking for a new CEO I'm I'm wondering if.

I think more thanks, it makes sense to also.

Pursue order book into strategic alternatives for the business. This big a dual track a kind of process.

Yeah. Thank you Jon good good today again.

The board is focused on.

Oh really finding the right person to lead this company in the direction that we're headed we believe that.

The trajectory of sales.

Great in almost every aspect of our business there are some.

Things and maybe in the outdoor refill but.

We've got to get our cost and unexpected.

Surprises under control from a cost standpoint, then our.

Business will be stabilized and we think will be shareholders will be rewarded for it in that way.

Okay.

So if you mentioned earlier that you know 2019 should be a year, where you deliver more than $300 million in sales and more than 50 billion EBITDA.

Which applies you know implies an upper teen kind of EBITDA margin.

The look forward and think about the business you know it kind of 400 million in revenue.

No. That's no a couple of years from now through your but you think about the business, maybe 350 $400 million in revenue.

What kind of EBITDA margin.

You know in aggregate or do you think would would try to.

Would meet your kind of criteria of.

Cost containment operating business.

You know.

Penetration with marketing, but do you see that longer term goal.

Yes, yes. It's good question then it's important we we've said for some time this should be a 20% EBITDA margin business. So as we grow sales that could get even north of 20, but when when you're talking about a two two years out we should be in a 20%.

EBITDA margin business, and actually said be today than weren't for some of the the surprises we've gotten in exchange and dispensers.

Well in limited in rebuilt the the I guess the declines in refill over the last year I could really impacted EBITDA margins. We continue to believe EBITDA margins, John could be the 20% to 22% long term, but you know through some of the controlling the cost a little bit better improving margins in.

In exchange and then refill it and refill as it continues to improve and turnaround we could see.

The gradual improvement over time getting to that 20% margin by the time, we get to the numbers you're talking about.

Okay.

Can I ask it just a couple more.

The exchange business.

You know the same store comps for the unit comps have been has been terrific as you pointed out and I think getting stronger.

The gross margin.

No continues that kind of the other direction and.

I'm trying to kind of square the two and having a hard time doing that I I understand that.

The Rcs are part of that.

You know at what point do you kind of revisit the IR see it and say you know is this.

Is this are we really getting to kind of a return on investment that we're looking for their understand it's driving topline, but it doesn't seem to be delivering.

From a margin standpoint in that part of the business how should we think about that.

Yeah, you're right John is billing in.

We believe it's done a good job of driving.

Blind stemming good job of driving margin for retailers, but it hasn't driven the margins at primo should be expecting.

And.

You will see that change going into 2020, you probably can't see much of it this quarter because commitments have been made in certain places, but we believe we can do this justice affectively.

But a lot more efficiently that will grow that gross margin by the point or two that we've lost over the last year too.

Okay.

And last one last one for me the.

The refill business.

I wasn't sure if I heard could you.

Tell us what the volume.

Formats wasn't refill I guess ex obviously the ice.

The ice sale and then.

If you were thinking about when that gets this could inflect and it kind of neutral or positive volume growth, what's what's the new thinking on timing there. Thank you.

Sure sure I'll take the first part on the total volumes were down.

Oh, just around 3% on a volume aspect when you when you factor out ice and look at revenues being down 1.8% on a comparable basis, that's a dramatic improvement over the last couple of quarters.

We believe the trends were so we saw late in the third quarter. If those can continue into the fourth quarter you could start to see.

That kind of flatten out and then getting into 2020 will be flat out in the comparable basis, and possibly growing somewhat as we add locations in which is really the biggest factor over a year ago.

That'll add on top of that.

Okay. Thanks, a lot everybody. Thanks. Good luck. Thanks, thanks, Thanks, Joe.

Your next question comes from the line that Amit Sharma from BMO capital. Your question. Please.

Hi, good afternoon, everyone.

Hey.

Good afternoon.

No.

<unk> billion, Susan can we can we go back to the CEO transition.

Can we talk about that a little bit more like Florida really precipitated that.

Change in direction.

You did talk about succession planning thing going on but they're just normal succession planning.

Where are you in fact thinking Oh CEO transition for sometime now.

Yes. This is Jason.

We we were and terms of the in terms of the transition it's really as we said about.

The company not performing to expectations.

That the board had.

For operating performance and as Bill has referenced some yes.

Some of the controllable aspects of that.

We have not made a made decision to make a change until.

Until the quarter and that the.

The performance in this quarter, but from a but certainly from a planning standpoint working with.

Working with a search firm too.

To define a profile and and began working for Canada.

As part of our succession planning process, it's something that we had done.

And on debts isn't as you as you think about.

Shifting gears over four months aspect of it.

What's what's an ideal candidate it looks like from from Primos perspective.

I'll I'll share a little better thought and bill if you want to add any so certainly feel free to do so we will the board has worked with the.

When I start from two to define a profile.

We're not sharing the specifications around that at this point.

Certainly welcome input from from many of our shareholders around that as well.

Yes.

And then.

Ideally.

How long will this process stake.

We're well underway, we don't have a specific timeline, but we are.

Our moving quickly to add to identify and maritime Canada.

Got it.

And then about the business.

A couple of clarifications David.

The acquisition did did contribute in the corner if it did how much was that.

Well it was we closed that acquisition probably late in the quarter late last third of the quarter. So it was a overall immaterial to the quarter.

It was positive from a revenue obviously in August as well as a margin standpoint, but just marginally at the end of the quarter.

And what isn't expected to contribute for the full year on both EBITDA and sales.

It'll be it's a smaller like said small regional tuck in it will be smaller, but it will be positive to the overall business.

Got it and then I'm really as we think about some of the Controllables that you talked about that'd be may not have been delivering I'm wondering what are the top couple of things that come to mind that could be easily the bars as you know through the next quarter cordoned off for that.

Uh huh.

Well I think the controls are in each one of the business segments, but as you.

As you run marketing programs and exchange and dispensers.

We need to understand the costs going in and be able to forecast those set so that we're not surprising ourselves and investors at the end of the quarter would be.

Some of the same site in retail it is.

It is really just locations guys were were down 1.8% in revenue, but were down 7% and locations there needs to be a real focus own retaining and expanding.

Number locations.

And building on that and that surprising the or getting surprise or the cost is that the dollar cost that is surprising or the lack of left from bad Daddys surprising.

Yes, I'll take a little bit of that I mean, I think from a you know as we looked at the IR see for example, we look at historical averages of redemption rates in these types of programs.

Frankly, our program has far outperformed any of the data we had originally looked at in viewed this offender.

And then that data from quarter to quarter has continued to accelerate that redemption rate that we've been seeing either.

Secondly, even from Q2 to Q3.

As Billy talked about EDA as we get towards the end of year, we were planning for Promotionals into 2020, we need to re look at that program with our retailers and make sure. It's cost effective for US just as it is for the retailer.

I think the biggest part of the change over the last quarter last several quarters.

Just to be clear and I'm trying to trying to make sure that I understand what does that mean that you asked the retailer to share in the cost of Diane see like how else could it be better for you.

I think they are see just one component costs and surprises that we've had there.

Without getting too far down into weeds, but when we have the unexpected chargebacks and costs.

From retailers because programs weren't executed the way we expect it doesn't have the when we put programs in place.

On it.

Thanks, so much I'll get back into queue. Thank you.

Good day.

Thank you aren't next question comes from the lined up Mike, but dusky from Barrington Research. Your question. Please.

Hi, guys.

So just sort of stepping back to the.

Sure deal one of the things that you guys thought could be.

Really big opportunity, particularly over the course 234 years out which went out in that.

Timeframe was that this idea of cross selling and building locations through cross selling and I guess.

First do you still think that opportunity is as big as you thought it was you know when when the deal with first.

Close a few years ago and second.

What do you what do you if it is what what do you do to sort of get that going thanks.

Yeah, Mike good to say the yes, we do believe it's a it's a big opportunity. It is there frankly, we haven't had the right people and ride places that skewed it I.

I think Harrison Dean as we announced today is the start of that.

I think there are several other open positions the you'll see us feeling and.

And then thirdly, it's putting the right programs in their hands to to go out and sell those things. So we do believe it's a nice opportunity.

I would just add I'd like you know we had albertsons is probably the top cross selling opportunity when we when we bought glacier and.

We took a little while to get there, but we were successful in winning that business and then as we talked last quarter, we thought it would take a.

A couple of quarters to roll it out but through the team's efforts in Alberta, giving us a go ahead for all locations, we were able to roll that entire.

Business out of just under thousand locations in a matter of weeks at the end of the quarter. So.

I think that's just a good example of what we can do when we get the go ahead from a retail.

That's great.

On a.

Outdoor refill obviously.

Cited July and August softness I guess one.

Can you speak to what you what if anything you learned.

Essentially why that happened and then.

Good good Q4, or Q1 wins, the positive comp coming in that in that business. Thanks.

Yes, good question, Mike So unfortunately, though the trends we're seeing in second quarter.

Really just flattened out and stopped in the first part of third quarter, we missed kind of the peak months.

In this business from a seasonality standpoint.

What we saw in September and early indications in October is that worst out now even with the location counts that Billy mentioned being down we're we're seeing positive signs in the business overall.

We believe Vito going forward that if we can continue those trends through the operational improvements.

Location stabilization like we saw last quarter, and then improvements with Harrison onboard.

You should maybe by the first quarter of next year start to see.

Marshall marginal improvements are comps on a comp basis.

Okay, but not you're not you're not calling that for Q4.

No I believe we're trying to be.

Boy described we're taking a conservative view of a little bit only on Q4 to make sure that we we've got.

Positive at the end of the quarter, we want to make sure we see that throughout the rest of this quarter.

Okay, I, just I just want to try to clarify and maybe maybe maybe it's clear and I just didnt track with it are you guys pulling back on me.

The IR see program and in 2020 or are you discontinue it or.

You just clarify exactly what you're saying about change you're going to make there.

Yeah.

Now I'll take that the OS RC program has been very successful and we do see continuing that.

While we want to be able to do is to be able to to work with retailers to forecast exactly what that cost is going to be in how we're going to share. So no. We will continue it and I think we'll have a good grass to give you what 2020 use them look like for that problem.

Okay, Great just just last one David I didn't catch how much revenue was associated with that little acquisition you guys didn't Q3.

In Q3 was it was it was immaterial we haven't shared the number it was obviously, but I mean annualize that business how much revenue.

It's I would say, it's under 5 million Okay alright.

Basis, Okay perfect. Thanks, guys.

Thank you. Our next question comes on the line of Kara Anderson from B. Riley FBR. Your question. Please.

Hi, good afternoon.

[laughter] Sarah.

So I guess I, just kind of wanted to ask about the EBITDA outlook for the fourth quarter. It looks like you know you're really to get a better reduction on EBITDA in the for Q, then kind of the Miss in the third quarter.

Talked about some of the surprise cost just hoping you can elaborate on what's driving that down in fourth quarter.

Well I would say the most part I mean, the big as far as probably the refill trend what we saw in Q3, which was significantly behind where we anticipated kind of running that into through Q4.

The piracy cost the Billy mentioned in the redemption rates being exceedingly higher than than we had originally forecasted in expected.

Those costs as well and then there's.

Some other other pieces here their margins that's impacting margins in exchange, but to say those are the I think two largest pieces.

Hello.

And the dispenser revenue is pretty meaningful in the quarter now you talked about kind of filling that before promotions in the fourth quarter on what some of that timing did that surprise you were expecting some of that in the fourth quarter and then the second part of the defense. Your question is how much did the home depot season.

Add a in the quarter.

The there was some timing shift between Q4 Q2 based on that promotional schedules that we were seeing in Q4.

That was under $1 million.

Okay. Just just about 600000 are so much.

The majority of the surprise was just the growth in the orders related to the two promotions or the several promotions we're doing a live in the fourth quarter. The retailer orders were higher than we anticipated.

Based on the sell through it in demand were seeing you'll basically in Q2 in Q3, we've had two successive or cequent sequential record quarters of consumer demand that we're having to replenish that at the same time were.

We're seeing higher levels of promotional activity or orders related to that promotional activity based on that.

And the second part of my question was around home Depot I think you added a dispenser skews to home depot recently, just curious if any of that was tied to the addition of home depot.

No I mean of home depot, we added the one skew in the second quarter towards into the second quarter and that those orders initially took place in the second quarter. This this quarter would be just replenishment orders of that when skew.

So not not material overall to the quarter when compared to the other businesses the retailers.

Okay and then one last question for me did you break out how much albertsons companies locations added to the corner.

We did not but I can I can tell you exchange sales, even without albertsons would be.

Over 10%. So we were 12.7 with albertsons and we'd be probably be around 10.7% with without without the which is on a comparable basis.

Got it thank you.

Thank you.

Thank you. Our next question comes in a line of Mike Grondahl from Northland Capital. Your question. Please.

Hi, Michael on for Mike Thanks for taking the question.

Maybe first just on the other one.

And if there's anything do you commerce kinda zones.

Amazon and companies or.

No.

Nothing new from an E Commerce standpoint, where we continue to focus and grow the Amazon in our own web sites.

But at this quarter is probably a little bit less as a percent of the total we were right around 15% of ecommerce sales compared to total dispenser sales.

And that was just driven by the retailer orders to get.

Supply in the stores for the fourth quarter promotions.

Got it and then maybe just one quick clarifying one that's small tuck in acquisition is that all exchange or is that a mix of.

It's a it's whatever said refill it so it's a small regional refill player in the southwest.

Okay. Thanks.

Thank you thanks.

Thank you.

And our next question is a follow up from a line of Amit Sharma from BMO capital. Your question. Please.

Yeah, Hi think it sounds like for taking the follow up David can you clarify a couple of things for us.

Sales force ramp up so as you think about location.

People going forward I, maybe tried to be a little more aggressive at that.

Can you talk about like are you, adding more sales as it already being put in place or how should we think about that as you go forward.

You're talking about the sales team the sales a group that Harrison's building out his team now yep. Okay. We yeah. We brought on 'em up several I think in the last two buttons. He may have maybe two to maybe three positions that remain open.

We think those would be filled in the next couple of months.

How many total RV, adding.

Total will be around five or six in it when we say sales people. These are more regional salespeople and.

They will be throughout.

The southwest in some of the northeast.

Throughout the country.

They will also be supplemented and met with.

We use we use brokers and other.

Teams to help us reach some of the smaller independent players.

And the downtime issue. It says in the press release that was the reason for gross margin refill.

I thought that was all sort of gone is it still lingering on.

Well the I think what we talked about was the margins in refill were impacted by two things, obviously lower volumes with the fixed cost nature of the business, but also the incremental costs associated with implementing the technology and the other other pieces to keep downtime in in check.

Improved downtime is the technology or the downtime issue is I would say in really good shape. Our average days down is less than two days now.

So the team is doing a great job of getting to the equipment and getting it back up and running.

But the costs to whether it's the credit card readers or other incremental cost to get people to the machines.

Was higher than we anticipated so it's those incremental costs to keep the downtime issue in check or improving.

And that will remain a headwind for at least next couple of quarters.

Those are some of the things that you know as we as we look at the cost structure.

That was really talks about things that are we haven't been.

Good at maybe predicting are controlling those are some of the things were looking at as or better way to do it and it's still ensure that we maintain the downtime at the appropriate levels or as as best as possible. So yeah I think of overtime, we will see improvements in retail margins related to that but also related to volumes coming back in than locations as we bring that something where there was.

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I had been they lost from for me, but you know obviously the location sales or sales per location is ramping up pretty nicely in the refill can you just remind us one more time.

That's right location universe in your mind and how much of that is still left as you look at your network.

Yeah there's.

There are certainly a lot of opportunity in both exchange and refill.

And as I've said, many times before I come from Blue Rhino, where it's important to be convenient to the masses I think our businesses are very much the same and blue Rhino, we had more than 50000 locations.

We're now closed nowhere close to 50000 locations.

In exchange or refill. So we will put a heavy emphasis on growing our location count, but also making sure that we're putting the at the right locations that were spending our capital under right location and I think we can do that.

Thank you and this does conclude the question and answer session of today's program I'd like to hand, the program back to management for any further remarks.

I just want to thank everyone for.

Your your interest and Primo water and we look forward to speaking to you on the next call. Thank you.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.