Q1 2020 Earnings Call

May 7, 2020

Operator 3: Welcome to Primo Water Corporation's Q1 2020 Earnings Conference Call. All participants are currently in listen-only mode. This call will end no later than 11:00AM Eastern Time. The call is being webcast live on Primo's website at www.primowatercorp.com and will be available for playback there for two weeks. This conference call contains forward-looking statements, including statements concerning the company's future financial and operational performance. These statements should be considered in connection with cautionary statements and disclaimers contained in the safe harbor statement in this morning's earnings press release and the company's annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission.

Your line until they can be placed on old. Thank you for your patience. Please continue.

[music].

Operator: Welcome to Primo Water Corporation's Q1 2020 Earnings Conference Call. All participants are currently in listen-only mode. This call will end no later than 11:00AM Eastern Time. The call is being webcast live on Primo's website at www.primowatercorp.com and will be available for playback there for two weeks.

All participants are currently in listen only mode. This call will and no later than 11 am eastern time.

Call is being webcast live on problem I was the website at www dot from a water core dot com and will be available for playback there for two weeks.

This conference call contains forward looking statements, including statements concerning the company's future financial and operations performance. These statements should be considered in connection with cautionary statement and disclaimers contained in the Safe Harbor statement and this morning's earnings press release and.

Operator: This conference call contains forward-looking statements, including statements concerning the company's future financial and operational performance. These statements should be considered in connection with cautionary statements and disclaimers contained in the safe harbor statement in this morning's earnings press release and the company's annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission.

The company's annual report on form 10-K, and quarterly reports on form 10-Q, and other filings with Securities regulations. The Companys actual performance could differ materially from these statements and the company undertakes no duty to update these fording statements itself.

Operator 3: The company's actual performance could differ materially from these statements, and the company undertakes no duty to update these forward statements except expressly required by applicable law. A reconciliation of any non-GAAP financial measures discussed during the call with the most comparable measures in accordance with GAAP is included in the company's Q1 earnings announcement released earlier this morning, or on the investor relations section of the company's website at www.primowatercorp.com. I will now turn the call over to Ryan Coleman of Alpha IR, Primo's investor relations service provider.

Operator: The company's actual performance could differ materially from these statements, and the company undertakes no duty to update these forward statements except expressly required by applicable law.

Expressly required.

Applicable law.

Reconciliation as any non-GAAP financial measures discussed during the call with the most comparable measures in accordance with GE 80 is included in the company's first quarter earnings announcement.

Operator: A reconciliation of any non-GAAP financial measures discussed during the call with the most comparable measures in accordance with GAAP is included in the company's Q1 earnings announcement released earlier this morning, or on the investor relations section of the company's website at www.primowatercorp.com. I will now turn the call over to Ryan Coleman of Alpha IR, Primo's investor relations service provider.

At least earlier this morning are on the Investor Relations section of the company's website at Www Dot com a water core dot com I'll now turn the call over to Brian Coleman Alpha IR promised investors relations service provider.

Good morning, and thank you for joining our call today. Unfortunately, accompanied by Tom Harrington re most chief Executive Officer, and Jay well Remotes, Chief Financial Officer as a part of this conference call. We have included the dock online Www Dot Umo watercourse dot com.

Ryan Coleman: Good morning, and thank you for joining our call. Today, I'm virtually accompanied by Tom Harrington, Primo's Chief Executive Officer, and Jay Wells, Primo's Chief Financial Officer. As a part of this conference call, we have included a deck online at www.primowatercorp.com that was designed to assist you throughout our discussion. Tom will start today's call with an update on the business impact of the ongoing pandemic and the actions we are taking in response. Jay will discuss our Q1 consolidated financial performance, our liquidity and cost containment efforts, and our H1 2020 expectations before handing the call back to Tom to provide a long-term view on the company ahead of Q&A. As a reminder, we sold our S&D Coffee & Tea business at the end of February, and as a result, this business has been classified within discontinued operations.

On to assist you threw out or.

Almost for today's call with an update on the business impact of the ongoing.

Ryan Coleman: Tom will start today's call with an update on the business impact of the ongoing pandemic and the actions we are taking in response. Jay will discuss our Q1 consolidated financial performance, our liquidity and cost containment efforts, and our H1 2020 expectations before handing the call back to Tom to provide a long-term view on the company ahead of Q&A.

The actions we are taking.

And Jay will discuss the first quarter consolidated financial performance, our liquidity and cost containment efforts and the first step 2020 expectations before handing the call back to Tom to provide a long term view on the company had a few.

As a reminder, we sold our SMB coffee and tea business at the end of February and as a result, this isn't something classified within discontinued operations.

Ryan Coleman: As a reminder, we sold our S&D Coffee & Tea business at the end of February, and as a result, this business has been classified within discontinued operations. At the beginning of March, we acquired Primo Water Corporation, which included assuming the Primo name as well as the Primo ticker.

Mark We acquired Primo Water Corporation, which included assuming the premium that's what wasn't remote.

Ryan Coleman: At the beginning of March, we acquired Primo Water Corporation, which included assuming the Primo name as well as the Primo ticker. Within our prepared remarks, we will be discussing our continued operations, which will incorporate the legacy Primo business for the month of March, as well as exclude the S&D business. With that, let me turn the call over to Tom.

Then ill prepared remarks, we'll be discussing our continued operations, which will incorporate legacy primo business for the month, Mark as well as exclude the SMB.

Ryan Coleman: Within our prepared remarks, we will be discussing our continued operations, which will incorporate the legacy Primo business for the month of March, as well as exclude the S&D business. With that, let me turn the call over to Tom.

With that let me turn the call over to Tom.

Thank you Brian good morning, everyone.

Tom Harrington: Thank you, Ryan, and good morning, everyone. I would like to begin by extending my well wishes to all of you. I sincerely hope everyone is safe and healthy. As it relates to the safety of our associates and customers, we've undertaken enhanced social distancing guidelines, implemented deeply staggered employee shifts, provided gloves, masks, and sanitizers, and offered work from home options where possible, including in a number of our customer care centers. In addition, we've created international crisis management teams who are working together to ensure that our team members are operating in safe and secure environments, and that we are implementing and updating our operations for the latest safety recommendations from the CDC and the WHO. As a result, our teams continue to work to service our customers safely across our entire operation.

I would like to begin by extending my wishes Oh.

I sincerely hope everyone is safe and healthy.

As it relates to the safety of Barr associates and customers, we've undertaken in hand, social distancing guidelines implemented deep.

The aggregate employee ships.

Provided gloves, Maskin Sanitizers and offered work from home options, where possible, including in a number about customer care soon.

In addition, we've created international crisis management team.

Tom Harrington: In addition, we've created international crisis management teams who are working together to ensure that our team members are operating in safe and secure environments, and that we are implementing and updating our operations for the latest safety recommendations from the CDC and the WHO. As a result, our teams continue to work to service our customers safely across our entire operation.

Working together to ensure that our team members operating and safe and secure environment.

We are implementing and updating our operations the latest safety recommendations from the CDC and though.

As a result.

Our teams continue to work to service our customers safely across our entire operation.

I cannot think like teammates or not.

Tom Harrington: I cannot thank our teammates enough for their efforts as we work to provide an essential product to customers across our 21-country footprint. Many things in the world have changed, but one thing has remained constant, and that is the desire for our customers to continue to receive safe, high quality drinking water from our team. We've continued to deliver millions of gallons of water, and we're proud of the commitment that we've seen from our associates. Moving to our Q1. I'm pleased that our results were ahead of our expectations, including a 1-month contribution from the legacy Primo business that we acquired at the beginning of March. Our consolidated revenue from continuing operations was 11% higher than last year, and adjusted EBITDA was up 31%.

Their efforts as we work to provide an essential product to customers across our 21 country footprint.

Many things in a world have changed the one thing is remain constant and now that the desire for our customers continue to receive say high quality drinking water from our team.

We've continued to deliver millions of gallons of water.

Tom Harrington: We've continued to deliver millions of gallons of water, and we're proud of the commitment that we've seen from our associates. Moving to our Q1. I'm pleased that our results were ahead of our expectations, including a 1-month contribution from the legacy Primo business that we acquired at the beginning of March. Our consolidated revenue from continuing operations was 11% higher than last year, and adjusted EBITDA was up 31%.

And we're proud of the commitment that we've seen from our associates.

Moving to oppose core.

I'm pleased that our result or head of our expectations.

Including a one month contribution from the legacy Primo business that we acquired at the beginning of March our consolidated revenue from continuing operations was 11% higher than last year.

Adjusted EBITDA was up 31%.

Excluding our divested businesses, our adjusted EBITDA margin was 14.8%.

Tom Harrington: Excluding our divested businesses, our adjusted EBITDA margin was 14.8%, a 200 basis point improvement versus prior year, and representative of our pure play water business ability to leverage growth into margin expansion. Underlying the strong consolidated performance, our North American Water Solutions business revenue was up 9%, and adjusted EBITDA was up 37% compared to Q1 of 2019, which excludes any contribution from the legacy Primo business we acquired at the beginning of March. In March, the legacy Primo business drove a 37% increase in revenue and a 96% increase in adjusted EBITDA on a pro forma basis, led by the significant increase in retail sales experienced across the US market in our Water Exchange business.

200 basis point improvement versus prior year.

And representative about pure play war business' ability to leverage grow into margin expansion.

Underlying the strong consolidated performance.

Tom Harrington: Underlying the strong consolidated performance, our North American Water Solutions business revenue was up 9%, and adjusted EBITDA was up 37% compared to Q1 of 2019, which excludes any contribution from the legacy Primo business we acquired at the beginning of March.

Our north American water solutions business.

The new was up 9%.

And adjusted EBITDA was up 37% compared to the first quarter of 2019, which excludes any contribution from the legacy Primo business, we acquired at the beginning of March.

In March.

Tom Harrington: In March, the legacy Primo business drove a 37% increase in revenue and a 96% increase in adjusted EBITDA on a pro forma basis, led by the significant increase in retail sales experienced across the US market in our Water Exchange business.

Legacy Primo business drove a 37% increase in revenue and the 96% increase in adjusted EBITDA on a pro forma basis.

By the significant increase in retail sales.

Experience of course, the U.S. market, you know water exchange business.

As you might expect.

Tom Harrington: As you might expect, our European water direct business was negatively impacted by the pandemic, where we experienced closures of commercial customer locations earlier and more broadly than in North America. Our Eden division, whose European operations represent approximately 20% of overall company revenues, increased revenue by 1% with the benefit of tuck-ins, while adjusted EBITDA was down $4 million in Q1. Our performance in the first two months of Q1 was solid and tracking in line with our expectations, and in several cases, better. Our ongoing investments in the customer experience are beginning to pay off, with retention rates increasing in North America, resulting in a historically low dispenser churn rate, where we achieved a 260 basis point improvement compared to prior year.

Our European Award a direct business was negatively impacted by the pandemic.

We experienced closings of commercial customer locations earlier and more broadly than in North America.

Our Eaton Division.

Tom Harrington: Our Eden division, whose European operations represent approximately 20% of overall company revenues, increased revenue by 1% with the benefit of tuck-ins, while adjusted EBITDA was down $4 million in Q1. Our performance in the first two months of Q1 was solid and tracking in line with our expectations, and in several cases, better.

European operations represent approximately 20% of overall company revenues increased revenue by 1%.

The benefit of talking while adjusted EBITDA was down $4 million in Q1.

Our performance in the first two months of Q1 was solid and tracking in line with our expectation and several cases better.

Our ongoing investments in the customer experience are beginning to pay off.

Tom Harrington: Our ongoing investments in the customer experience are beginning to pay off, with retention rates increasing in North America, resulting in a historically low dispenser churn rate, where we achieved a 260 basis point improvement compared to prior year.

Good retention rate, increasing in North America, resulting in a historically low distance in churn rate, where we achieved a 260 basis points improvement compared to prior year.

Our focus on delivering the hydration solutions, our customers one along with a great customer experience is working as it and as reflected in our reduce churn rate.

Tom Harrington: Our focus on delivering the hydration solutions our customers want, along with a great customer experience, is working and is reflected in our reduced churn rate. We achieved our 5% top-line growth expectation. Adjusted EBITDA was above expectations, and our EBITDA margin grew as a result of volume leverage as well as efficiency initiatives the company executed. We were in excellent position to meet or exceed both internal and external expectations for 2020. Importantly, the underlying performance of the business is a strong indicator that our strategic decision to transition to a pure play water company is the correct path forward. We moved into a period of uncertainty. As many European countries made the difficult decision to lock down, all but those businesses identified as essential services closed in several countries in compliance with local government mandates.

We achieved a 5% topline growth expectation adjusted EBITDA was above expectations in our EBITDA margin grew as a result, the volume leverage as well as efficiency initiatives the company executed.

We weren't excellent position to meet or exceed both internal and external expectations for 2020.

Tom Harrington: We were in excellent position to meet or exceed both internal and external expectations for 2020. Importantly, the underlying performance of the business is a strong indicator that our strategic decision to transition to a pure play water company is the correct path forward. We moved into a period of uncertainty. As many European countries made the difficult decision to lock down, all but those businesses identified as essential services closed in several countries in compliance with local government mandates.

Importantly, the underlying performance of the business is a strong indicator that our strategic decision to transition to a pure play water company is that correct path forward.

We then moved into a period of uncertainty.

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As many European countries made the difficult decision to lock down.

All but those businesses identified as essential services closed in several countries in compliance with local government mandates.

These actions negatively impacted adjusted EBITDA of our European business in Q1.

Tom Harrington: These actions negatively impacted the adjusted EBITDA of our European business in Q1. The effects of the pandemic have been nothing like a recession from the speed of change perspective. We felt the impact over the course of 10 to 12 days rather than a more gradual slowdown typical of a downturn of 2 to 3 quarters. Management has taken the necessary cost actions, although it certainly takes more than 10 to 12 days to fully implement, particularly considering the various employee legislation and work councils across our footprint. Jay will provide more color on the actions that we implemented during his prepared comments. While managing through the revenue pressure within our commercial customer base, we do see many opportunities with the at-home consumer across our Water Direct, Water Refill, water dispenser, and Water Exchange solutions.

Yes, that's a pandemic have been nothing like the recession from the speed of change perspective.

We felt the impact over the course of 10 to 12 days rather than a more gradual slowdown typical of a downturn of two to three quarters.

Management has taken a necessary cost actions.

Tom Harrington: Management has taken the necessary cost actions, although it certainly takes more than 10 to 12 days to fully implement, particularly considering the various employee legislation and work councils across our footprint. Jay will provide more color on the actions that we implemented during his prepared comments.

Oh, it's certainly takes more than 10 to 12 days to fully implement particularly considering the various employee legislation and work councils quotes on footprint.

Jay will provide more color on the actions that we implemented during his prepared comments.

While managing through the revenue pressure within our commercial customer base, we do see many opportunities will be at home consume because I want a direct water refill wanting to Spencer and water exchange solutions.

Tom Harrington: While managing through the revenue pressure within our commercial customer base, we do see many opportunities with the at-home consumer across our Water Direct, Water Refill, water dispenser, and Water Exchange solutions.

As people about social distancing guidelines no contact home delivery law products has become more important and will likely increase in importance to consumers.

Tom Harrington: As people adopt social distancing guidelines, no-contact home delivery of our products has become more important and will likely increase in importance to consumers. One of the best examples we see developing is in our program with a large e-commerce retailer. The customer decided to suspend all home service offerings except for our bottled water service. A decision we understand was based on customer demand and their request for water delivery. We're currently offering water delivery through this retailer in parts of Georgia, Florida, Texas, and Connecticut, and expect to extend the program across our US footprint. As consumer behavior continues to change as a result of the coronavirus, we expect that no-contact home delivery and e-commerce capabilities will be vitally important. We are well-positioned and prepared to meet these changing consumer demands and to participate fully in the growth these channels will likely provide.

One of the best examples we see developing isn't a program with a large ecommerce retailers.

The customer decided to suspend all home service offerings, except for a bottled water service.

A decision we understand was based on customer demand and their request of water delivery.

We're currently offering water delivery through this retailer imports of Georgia, Florida, Texas, and Connecticut, and expect to extend the program across a U.S. footprint.

Tom Harrington: We're currently offering water delivery through this retailer in parts of Georgia, Florida, Texas, and Connecticut, and expect to extend the program across our US footprint. As consumer behavior continues to change as a result of the coronavirus, we expect that no-contact home delivery and e-commerce capabilities will be vitally important. We are well-positioned and prepared to meet these changing consumer demands and to participate fully in the growth these channels will likely provide.

As consumer behavior continues to change as a result of the Corona virus.

We expect that no contact home delivery.

And ecommerce capabilities will be vitally important.

We are well positioned and prepared to meet these changing consumer demand and to participate fully in the growth. These channels will likely provide.

We're pleased with the efforts, we've executed, but they're not custard customer experience initiatives.

Tom Harrington: We're pleased with the efforts we've executed within our customer experience initiatives, including updates to our website, the initial release of our mobile app, the extension of the mobile app across the US this week, and our ongoing efforts to reach consumers with our product offerings whenever, wherever, and however they want it. In addition to expanding our e-commerce programs, we will accelerate two core growth initiatives. The first is to increase our penetration of the European residential base, and the second is to expand our water refill, water exchange, and water dispenser for our model, the current razor blade revenue model to Europe. As a leader in pure play water solutions, we believe that we are uniquely positioned to successfully implement these initiatives as a result of our technical know-how, our dispensing equipment expertise, and our footprint.

Including updates to our website.

The initial release about mobile App.

The extension of the mobile lots of course, the U.S. This week.

Our ongoing efforts to reach consumers with our product offerings whenever wherever and however, they want it.

In addition to expanding our ecommerce programs, we will accelerate to core growth initiatives.

Tom Harrington: In addition to expanding our e-commerce programs, we will accelerate two core growth initiatives. The first is to increase our penetration of the European residential base, and the second is to expand our water refill, water exchange, and water dispenser for our model, the current razor blade revenue model to Europe. As a leader in pure play water solutions, we believe that we are uniquely positioned to successfully implement these initiatives as a result of our technical know-how, our dispensing equipment expertise, and our footprint.

Sorry.

The increase our penetration of European residential base and the second is to expand a water refill watered teenage awarded the Spencer for our model recurring razor razor blade revenue model to your.

As a leader in pure play water solutions. He believes that we are uniquely position to successfully implement these initiatives as a result of our technical know how.

Dispensing equipment expertise and our footprint.

These actions will provide us with future profitable growth and better balance within our customer mix of course, our European business.

Tom Harrington: These actions will provide us with future profitable growth and better balance within our customer mix across our European business. We, like many of you who are following the governmental mandates closely, are beginning to see encouraging signs as local governments in both Europe and North America are implementing early stages of return to work plans. As we move past this crisis, we expect to deliver margin expansion and drive increased organic growth as a leader in pure play water solutions. Our transformation and the strong business momentum we carried into 2020 have simply been delayed by this unexpected and unprecedented event. The fundamentals of our business are strong, and there are long-term industry tailwinds and consumer behavior trends that we expect will benefit our pure play water business model.

We like many of you a following the government mandates closely are beginning to see encouraging signs as local governments in both Europe and North America are implementing early stages of return to work plans.

As we move past this crisis.

Tom Harrington: As we move past this crisis, we expect to deliver margin expansion and drive increased organic growth as a leader in pure play water solutions. Our transformation and the strong business momentum we carried into 2020 have simply been delayed by this unexpected and unprecedented event. The fundamentals of our business are strong, and there are long-term industry tailwinds and consumer behavior trends that we expect will benefit our pure play water business model.

We expect to deliver margin expansion and drive increased organic growth as a leader in pure play water solutions.

Our transformation.

Drawn business momentum we carried into 2020.

Have simply been delayed by this unexpected an unprecedented event.

The fundamentals about business was strong.

And there are long term industry, tailwinds and consumer behaviour trends that we expect will benefit our pure play water business Bob.

We remain equally confident in the opportunity to provide sustainable hydration solutions to a growing customer base and positioning the company for continued growth.

Tom Harrington: We remain equally confident in the opportunity to provide sustainable hydration solutions to a growing customer base and positioning the company for continued growth while ensuring we deliver long-term shareholder value. Before my closing remarks and opening a call for your questions, I'd like to turn the call over to Jay, who will elaborate more on our performance, our cost reduction initiatives, our capital expenditure expectations, as well as our strong liquidity position. Jay?

While ensuring we deliver long term shareholder value.

Before my closing remarks.

An opening the call for your question I'd like to turn the call over to Jay will elaborate more on outperformance of cost reduction initiatives, our capital expenditure expectations as well as our strong liquidity position Jay.

Thank you Tom and good morning, everyone.

Jay Wells: Thank you, Tom, and good morning, everyone. Starting with the first quarter, we began the year with another quarter of strong top-line performance as consolidated revenue from continuing operations was up 11%, including a one-month contribution from the Primo acquisition. If you exclude the revenue contribution from the Primo acquisition, revenue was up 6% compared to Q1 2019. The revenue growth was driven by customer and volume growth, as well as improved pricing dynamics within our Water Direct business. Adjusted EBITDA from continuing operations was $70.4 million, a 31% increase from the first quarter of 2019, and adjusted EBITDA margin was 14.8%, an improvement of 200 basis points compared to last year. One month of operations of the legacy Primo business contributed $7.3 million of adjusted EBITDA in the quarter.

Starting with the first quarter, we began the year with another quarter of strong topline performance.

Consolidated revenue from continuing operations was up 11%, including a one month contribution from the pre more acquisition.

If you exclude the revenue contribution from the Primo acquisition.

Got it was up 6% compared to Q1 thousand inviting.

Jay Wells: The revenue growth was driven by customer and volume growth, as well as improved pricing dynamics within our Water Direct business. Adjusted EBITDA from continuing operations was $70.4 million, a 31% increase from the first quarter of 2019, and adjusted EBITDA margin was 14.8%, an improvement of 200 basis points compared to last year. One month of operations of the legacy Primo business contributed $7.3 million of adjusted EBITDA in the quarter.

Adjusted EBITDA from continuing operations was $70.4 million, a 31% increase from the first quarter of 2019, and adjusted EBITDA margin was 14.8% an improvement of 200 basis points compared to last year.

One month of operation for the legacy Primo business contributed $7.3 million of adjusted EBITDA in the quarter.

Excluding that contribution adjusted EBITDA was $63.1 billion and 18% increase compared to Q1 2019.

Jay Wells: Excluding that contribution, adjusted EBITDA was $63.1 million, an 18% increase compared to Q1 2019. The increase in adjusted EBITDA was driven by strong customer growth, volume growth, better pricing, as well as tuck-in acquisitions and the benefit of operational leverage. The first two months of the first quarter saw solid performance that met or exceeded our expectations. Our new pure play water business and operations were off to as strong of a start as we could have hoped. Over the next three weeks or in March, we saw good performance in our North American operations. We ended the month with our direct customer base reaching 1.8 million for the first time ever, fueled by residential customer growth. On the other end of the spectrum, our European operations came under pressure as a result of COVID-19 closures.

The increase adjusted EBITDA was driven by strong customer growth.

Volume growth better pricing as well as tuck in acquisitions and the benefit of operational leverage.

The first two month of the first quarter saw solid performance that met or exceeded our expectations.

Our new pure play water business and operations, we're off to a strong up and start as we could have hoped.

Jay Wells: Our new pure play water business and operations were off to as strong of a start as we could have hoped. Over the next three weeks or in March, we saw good performance in our North American operations. We ended the month with our direct customer base reaching 1.8 million for the first time ever, fueled by residential customer growth. On the other end of the spectrum, our European operations came under pressure as a result of COVID-19 closures.

Over the next three weeks or in March we saw good performance at our North American operation.

We ended the month with our direct customer base, reaching 1.8 billion, but the first time ever fueled by residential customer growth.

On the other after the spectrum, our European operations came under pressure as result of Cobot 19 closures.

Jay Wells: Please remember, approximately 80% of our total revenue is generated outside of Europe. In the first three weeks of April, revenue from our commercial customers came under pressure as North America began to issue stay-at-home orders. Over the last couple of weeks, we have seen trends start to improve as businesses have started to reopen, both in the US and Europe. As a reminder, roughly 60% of our total $2.1 billion of revenue is generated from our residential customer base or the at-home consumer. Our North American residential customer base has increased by high single digits, with residential returnable volume up over 20% during this period. In addition, we continue to see solid growth within our legacy Primo Exchange business, which was also up over 20%.

The first three weeks of April revenue from our commercial customers came under pressure as North America gas issue stay at home orders.

But over the last couple of weeks, we've seen trends start to improve as businesses have started to riocan both in the U.S. Angela.

As a reminder, roughly 60% of our total $2.1 billion like revenue is generated from our residential customer base for the at home consumer.

Jay Wells: As a reminder, roughly 60% of our total $2.1 billion of revenue is generated from our residential customer base or the at-home consumer. Our North American residential customer base has increased by high single digits, with residential returnable volume up over 20% during this period. In addition, we continue to see solid growth within our legacy Primo Exchange business, which was also up over 20%.

North American residential customer base has increased by high single digits residential returnable volume up over 20% during this period.

In addition, we continued to see solid growth within our legacy Primo exchange business, which was also up over 20%.

Offset the revenue pressures caused by the crisis cost containment efforts became a key focus.

Jay Wells: To offset the revenue pressures caused by the crisis, cost containment efforts became a key focus. I think it is important to reiterate that we benefit from a highly variable cost structure that enables us to react to changing business conditions. Most of our operating costs fall within route delivery, sales, marketing, and back office. In other words, it is largely labor cost, and we have reduced headcount by over 20% over the last couple of weeks. As far as production costs are concerned, in Europe, we source roughly two-thirds of our finished goods water products from third-party co-packers. As a result, our production costs in Europe are also largely variable. We scaled back on all discretionary spending, such as marketing and sales expenditures. We paused our capital spending plans in markets where we have seen the sharpest drop in demand, particularly with commercial customers in Western Europe.

I think it is important to reiterate that we benefit from a highly variable cost structure that enables us to react to changing business conditions.

Most of all operating costs fall with them about delivery sales marketing and back office in other words. It is largely labor costs, and we have reduced headcount by over 20% over the last couple of weeks.

As far as production costs are concerned and Europe, we source roughly two thirds of our finished goods water products from third party co Packers.

Jay Wells: As far as production costs are concerned, in Europe, we source roughly two-thirds of our finished goods water products from third-party co-packers. As a result, our production costs in Europe are also largely variable. We scaled back on all discretionary spending, such as marketing and sales expenditures. We paused our capital spending plans in markets where we have seen the sharpest drop in demand, particularly with commercial customers in Western Europe.

As a result, our production cost and you're also largely variable.

Scaled back on all discretionary spending such as marketing and sales expenditures.

We bought our capital spending plans in markets, where we have seen the sharpest drop and the bad, particularly with commercial customers and Western Europe.

Capital expenditure plans for our residential or at home consumer which includes residential water direct customers as well as our legacy pretty much business.

Jay Wells: Capital expenditure plans for our residential or at-home consumer, which includes residential Water Direct customers as well as our legacy Primo business, remain unchanged as demand remains healthy and growing in these areas. Turning to our liquidity position and the health of our balance sheet, we ended Q1 with a cash balance of over $100 million and available net borrowing capacity on our cash flow revolver of just over $200 million for a combined total liquidity position of around $300 million. During Q2, in an abundance of caution, we borrowed approximately $170 million on our cash flow revolver in order to move the liquidity from a revolver to our balance sheet. We do not currently expect to utilize these funds, but wanted to ensure we secured the liquidity given the uncertainty associated with the crisis.

Name I'd change as demand remains healthy and growing and these areas.

Turning to our liquidity position and the health of our balance sheet. You ended the first quarter with a cash balance of over $100 million and available borrowing capacity on our cash flow ballpark of just over $200 million.

Jay Wells: Turning to our liquidity position and the health of our balance sheet, we ended Q1 with a cash balance of over $100 million and available net borrowing capacity on our cash flow revolver of just over $200 million for a combined total liquidity position of around $300 million. During Q2, in an abundance of caution, we borrowed approximately $170 million on our cash flow revolver in order to move the liquidity from a revolver to our balance sheet.

For a combined total liquidity position of around $300 million.

During the second quarter in an abundance of caution we borrowed approximately $170 million on our cash flow revolver in order to move the liquidity from over to our balance sheet.

We do not currently expect utilize these funds, but wanted to ensure we secured the liquidity given the uncertainty associated with the prices.

Jay Wells: We do not currently expect to utilize these funds, but wanted to ensure we secured the liquidity given the uncertainty associated with the crisis.

We ended the first quarter with a pro forma last 12 month that leverage ratio of around 3.4 times.

Jay Wells: We ended Q1 with a pro forma last twelve-month net leverage ratio of around 3.4 times and continue to target a post-synergy net leverage ratio of 3.0 times. On that note, we still expect to capture $7.5 million of cost synergies in 2020, $17.5 million in 2021, and $10 million in 2022, for a total of $35 million. Most of our synergy capture will come from G&A and back-office functions such as finance, credit and collections, as well as such areas as customer care centers, and public company costs. That means we have a clear line of sight into these cost reductions, and they are firmly within our control. These efforts have already been put into action and are progressing well.

We continue to target a post synergy net leverage ratio of 3.0 times on that note, we still expect to capture $7.5 million the cost synergies and 2020.

$18.5 million and 2021.

$10 million and 2022 for a total of $35 million.

Most of our synergy capture will come from GSK and back office functions, such as finance rather than collections as well as such areas as customer care centers and public company costs.

Jay Wells: Most of our synergy capture will come from G&A and back-office functions such as finance, credit and collections, as well as such areas as customer care centers, and public company costs. That means we have a clear line of sight into these cost reductions, and they are firmly within our control. These efforts have already been put into action and are progressing well.

That means we have a clear line of sight into these cost reductions and they are firmly within our control. These efforts have already been put into action and are progressing well.

From a capital allocation perspective, we will continue to take a balanced approach and closely monitor our priorities and 2020.

Jay Wells: From a capital allocation perspective, we will continue to take a balanced approach and closely monitor our priorities in 2020. As part of our efforts to preserve cash, we have placed a temporary hold on our share repurchase activity. Although in Q1, we did repurchase approximately $25 million of stock under our share purchase program and $7 million of stock related to satisfying employees' tax obligations on share-based awards. We remain committed to paying our quarterly dividend, and we believe we are in a unique position to capitalize on the current environment and our search for quality M&A opportunities that fit within our existing model. We do not, however, have plans to execute on any tuck-in acquisitions in the next couple of months given the current travel restrictions.

As part of our efforts to preserve cash we have placed a temporary hold on our share repurchase activity. Although in Q1, we did repurchase approximately $25 million of stock under our share repurchase program and $7 million much softer related to satisfy employees tax obligations.

I'm sure based awards.

We remain committed to pay in our quarterly dividend and we believe we are in a unique position to capitalize on the current environment and our search for quality M&A opportunities that fit within our existing model.

Jay Wells: We remain committed to paying our quarterly dividend, and we believe we are in a unique position to capitalize on the current environment and our search for quality M&A opportunities that fit within our existing model. We do not, however, have plans to execute on any tuck-in acquisitions in the next couple of months given the current travel restrictions.

We do not however have plans to execute on any tuck in acquisitions and the next couple of months given the current travel restrictions.

In looking at our debt other than our cash flow revolver, our debt as long term in nature, whether outstanding debt balances not due until 2024 or thereafter.

Jay Wells: In looking at our debt, other than our cash flow revolver, our debt is long-term in nature, with our outstanding debt balances not due until 2024 or thereafter, as our senior notes first maturity date is 1 July 2024. In looking at our covenants, we are comfortable with how our business is operating in this environment and our ability to continue to have ample coverage. As part of the ongoing oversight of our business, we have performed multiple worst-case stress test analysis on our operations, including the impact to our business if the crisis extended through the end of 2020. Even under these circumstances, we would be cash flow positive and continue to be in compliance with our covenants. As I noted during our Investor Day, the main debt covenant that we watch is a minimum interest coverage of 3 to 1, adjusted EBITDA to interest.

As our senior notes first maturity date is July 120, 24, and looking at our covenants. We are comfortable with how our business is operating in this environment and our ability to continue to have ample coverage.

As part of the ongoing oversight of our business. We have performed multiple worst case stress tests analysis on our operations, including the impact to our business the crisis extended through the end of 2020.

Jay Wells: As part of the ongoing oversight of our business, we have performed multiple worst-case stress test analysis on our operations, including the impact to our business if the crisis extended through the end of 2020. Even under these circumstances, we would be cash flow positive and continue to be in compliance with our covenants. As I noted during our Investor Day, the main debt covenant that we watch is a minimum interest coverage of 3 to 1, adjusted EBITDA to interest.

And even under these circumstances, we wouldn't be cash flow positive and continued to be in compliance with our covenants.

As I noted during our Investor day, the names that covenant that we watch as a minimum interest coverage of three to one adjusted EBITDA to interest.

At the end of the first quarter on a last 12 month pro forma basis, we had coverage in excess of 4.5 times and you had become even more confident of our ability to manage through this prices as we have seen a number up markets begin to reopen across our footprint.

Jay Wells: At the end of Q1, on a last 12-month pro forma basis, we had coverage in excess of 4.5 times, and we have become even more confident on our ability to manage through this crisis as we have seen a number of markets begin to reopen across our footprint. As a quick summary, in looking out to the rest of 2020, overall, we are pleased with our Q1 performance and the strong underlying trends of our core businesses. As we move into Q2, macroeconomic conditions continue to be impacted by the pandemic. Nonetheless, we are very confident that we possess the balance sheet strength, variable cost structure, access to liquidity, and skilled management teams necessary to successfully navigate this business environment. Looking ahead, we currently expect Q2 consolidated revenue from continuing operations to be flat to slightly down.

As a quick summary, and looking out to the rest of 2020 overall, we're pleased with our first quarter performance and the strong underlying trends of our core businesses.

As we move into the second quarter macroeconomic conditions continue to be impacted by the pandemic.

Jay Wells: As we move into Q2, macroeconomic conditions continue to be impacted by the pandemic. Nonetheless, we are very confident that we possess the balance sheet strength, variable cost structure, access to liquidity, and skilled management teams necessary to successfully navigate this business environment. Looking ahead, we currently expect Q2 consolidated revenue from continuing operations to be flat to slightly down.

Nonetheless, we are very confident that we think that's the balance sheet strength.

Wearable cost structure access to liquidity and skilled management teams necessary to successfully navigate this business environments.

Looking ahead, we currently expect second quarter consolidated revenue from continuing operations to be flat to slightly down.

We would expect revenues in the second quarter to be between 430 million and $450 million.

Jay Wells: We would expect revenues in Q2 to be between $430 million and $450 million. On a consolidated basis, we have taken a conservative position and modeled our water business down 8% to 10% as the increase in residential customer demand are mitigating some of the pressure within the commercial channel. Water filtration down 3% to 5%, and coffee services down 60+% as it is a commercially driven channel resulting in an overall decline for the quarter on a pro forma basis of around 15%. We now believe our H1 adjusted EBITDA will be roughly $140 million, an improvement to what we provided during our investor webcast in March, thanks to a strong Q1 and contribution from the legacy Primo business, as well as our operating expense reductions.

On a consolidated basis, you're taking a conservative position and bottles or water business down 8% to 10% as the increase in residential customer demand are mitigating some of the pressure within the commercial channel.

Water filtration sound, 3% to 5%.

Jay Wells: Water filtration down 3% to 5%, and coffee services down 60+% as it is a commercially driven channel resulting in an overall decline for the quarter on a pro forma basis of around 15%. We now believe our H1 adjusted EBITDA will be roughly $140 million, an improvement to what we provided during our investor webcast in March, thanks to a strong Q1 and contribution from the legacy Primo business, as well as our operating expense reductions.

And coffee services down 60, plus percent. That's it is a commercially driven channel, resulting in an overall decline for the quarter on a pro forma basis of around 15%.

We now believe a first half adjusted EBITDA will be roughly a $140 million an improvement what we provided during our investor webcast in March thanks to a strong first quarter and contribution from the legacy Primo business as well as our operating expense reductions.

From a Q2 perspective that would result in adjusted EBITDA of approximately $70 million.

Jay Wells: From a Q2 perspective, that would result in adjusted EBITDA of approximately $70 million. Our estimates were developed using the assumption that most business closures would continue throughout Q2. However, we are starting to see trends that are better than what we forecasted, and that is why we believe we will be at roughly $140 million of adjusted EBITDA for H1 2020. As we think about the full year, we will wait until our Q2 results call before providing specific guidance beyond H1 of the year.

Our estimates were developed using the assumption that most disclosures with continued throughout Q2. However, we are starting to see trends that are better than what we forecasted and that is why we believe we will be at roughly $140 million of adjusted EBITDA for the first half of Twentytwenty.

Jay Wells: However, we are starting to see trends that are better than what we forecasted, and that is why we believe we will be at roughly $140 million of adjusted EBITDA for H1 2020. As we think about the full year, we will wait until our Q2 results call before providing specific guidance beyond H1 of the year.

As we think about the full year, we will wait until our second quarter results call before providing specific guidance beyond the first half of the year.

Once we move past this crisis remain confident in our long term expectations, a 5% revenue growth.

Jay Wells: Once we move past this crisis, we remain confident in our long-term expectations of 5% revenue growth, 20 to 30 basis points of EBITDA margin expansion per year, $35 million of cost synergies to be realized through 2022, $12 to $15 million of annual organic adjusted EBITDA growth, as well as $5 to $10 million of additional EBITDA annually from accretive tuck-in acquisitions. Although we would not expect to see our business deliver on the 5% top line growth in the H2 of the year, we should benefit as we come out of the crisis as it relates to adjusted EBITDA and EBITDA margin expansion due to the cost initiatives and operational changes that we have made that will benefit us as consumers get back to work. As a result, we should be able to move back to our long-term EBITDA growth algorithm at some point this year.

20 to 30 basis points of EBITDA margin expansion per year.

$35 million of cost synergies to be realized through 2022.

$12 million to $15 million of annual organic adjusted EBITDA growth as well as $5 million to $10 million of additional EBITDA annually from accretive tuck in acquisitions.

Although we would not expect to see our business to deliver on the 5% topline growth and the back half of the or we should benefit as we come out of the crisis as it relates to adjusted EBITDA and EBITDA margin expansion.

Jay Wells: Although we would not expect to see our business deliver on the 5% top line growth in the H2 of the year, we should benefit as we come out of the crisis as it relates to adjusted EBITDA and EBITDA margin expansion due to the cost initiatives and operational changes that we have made that will benefit us as consumers get back to work.

Cost initiatives and operational changes that we have made that will benefit us as consumers get back to one.

As a result, we should be able to move back to our long term EBITDA growth algorithm at some point this year.

Jay Wells: As a result, we should be able to move back to our long-term EBITDA growth algorithm at some point this year. I will now turn the call back to Tom.

I will now turn the call back to Tom.

Jay Wells: I will now turn the call back to Tom.

Thanks Jay.

Tom Harrington: Thanks, Jay. As you just heard Jay cover, we performed well in Q1 and are in a strong liquidity position and are confident that our highly variable cost structure allows us to generate free cash flow and the flexibility to respond quickly to changing demand dynamics across the markets we serve. As we enter Q2, we're especially focused on a handful of key priorities. Above all, we will prioritize the health and safety of all of our associates and customers. We will continue to invest in our residential water direct markets as we are seeing considerable growth in these channels as consumers adapt to the current environment. We plan to accelerate our extension of our water refill, water exchange, and water dispenser businesses in Europe. We will continue to evaluate our cost structure, seeking to identify additional non-core cost reductions in response to changing market dynamics to enhance margins.

But you just heard Jake cover.

We performed well in Q1.

In order and a strong liquidity position and are confident that are highly variable cost structure allows us to generate free cash flow and the flexibility to respond quickly to changing demand dynamics across the markets we serve.

As we entered the second quarter.

Tom Harrington: As we enter Q2, we're especially focused on a handful of key priorities. Above all, we will prioritize the health and safety of all of our associates and customers. We will continue to invest in our residential water direct markets as we are seeing considerable growth in these channels as consumers adapt to the current environment.

Especially focused on a handful of key priorities.

But wall he will prioritize the health and safety of all of our associates and customers.

We will continue to invest in our residential water direct markets as we are seeing considerable growth in these channels as consumers adapt to the current environment.

Tom Harrington: We plan to accelerate our extension of our water refill, water exchange, and water dispenser businesses in Europe. We will continue to evaluate our cost structure, seeking to identify additional non-core cost reductions in response to changing market dynamics to enhance margins.

We plan to accelerate our extension of our water refill Warren exchange and water dispenser businesses in Europe.

We will continue to evaluate our cost structure picking do identify additional non core cost reductions.

In response to changing market dynamics to enhance margins and.

We'll continue to manage our free cash flow expecting generates sufficient free cash flow.

Tom Harrington: We'll continue to manage our free cash flow, expecting to generate sufficient free cash flow to fund our stable dividend and highly synergistic tuck-in acquisitions while maintaining compliance with our credit agreements and covenants. As Jay noted, we expect our consolidated Q2 revenue from continuing operations to be flat to slightly down year-over-year and expect to finish H1 of the year with adjusted EBITDA of approximately $140 million. Market conditions are changing by the day, and we view these forecasts as fluid targets. We will continue to offer as much transparency as conditions allow. The crisis is unprecedented, and at the same time, it has placed our business in the center of an essential need for the consumers and customers that we serve, and that is providing quality, safe, healthy hydration to customers whenever, wherever, and however they want it.

Fund our stable dividend.

And highly synergistic tuck in acquisitions, while maintaining compliance with our credit agreement and covenants.

As Jay noted.

Tom Harrington: As Jay noted, we expect our consolidated Q2 revenue from continuing operations to be flat to slightly down year-over-year and expect to finish H1 of the year with adjusted EBITDA of approximately $140 million. Market conditions are changing by the day, and we view these forecasts as fluid targets. We will continue to offer as much transparency as conditions allow.

We expect our consolidated Q2 revenue from continuing operations be flat to slightly down year over year.

And expected finished the first half of the year with adjusted EBITDA of approximately $140 million market conditions are changing by the day.

And we view these forecasts as fluid targets.

But we will continue to offer as much transparency as conditions allow.

The crisis is unprecedented.

Tom Harrington: The crisis is unprecedented, and at the same time, it has placed our business in the center of an essential need for the consumers and customers that we serve, and that is providing quality, safe, healthy hydration to customers whenever, wherever, and however they want it.

And at the same time it is placed on business in the center of an essential need for the consumers and customers that we serve and that is providing quality they healthy hydration customers whenever wherever and however, they want it.

Our team is committed to not only serving our customer base, but we've developed plans to expand our solutions across our footprint over the coming years.

Tom Harrington: Our team is committed to not only serving our customer base, but we've developed plans to expand our solutions across our footprint over the coming years. Over the longer term, we remain optimistic about the new and improved operating model that our pure play water strategy enables. Under normal circumstances, we would expect our business to grow its top line by around 5%. Excluding synergies, our pure play water business is expected to drive 20 to 30 basis points of EBITDA margin expansion per year. I'm optimistic that this growth algorithm will be enhanced with the expansion of our products and services over the coming years. As we look to the H2 of the year, it will be difficult to get back to our 5% top line growth overnight or in a single quarter.

Over the longer term, we remain optimistic about the new and improved operating model that a pure play water strategy enables.

Under normal circumstances, we would expect gold business to grow its topline by around 5%.

Tom Harrington: Under normal circumstances, we would expect our business to grow its top line by around 5%. Excluding synergies, our pure play water business is expected to drive 20 to 30 basis points of EBITDA margin expansion per year. I'm optimistic that this growth algorithm will be enhanced with the expansion of our products and services over the coming years. As we look to the H2 of the year, it will be difficult to get back to our 5% top line growth overnight or in a single quarter.

And excluding synergies.

I will pure play awarded business is expected to drive 20 to 30 basis points of EBITDA margin expansion per year.

I'm optimistic that this growth algorithm will be enhanced with the expansion of our products and services over the coming here.

As we look to the back half for the year.

It will be difficult to get back to a 5% topline growth overnight, we're in a single quarter, but with the significant operational changes we have made throughout our business I don't see why we would not work back for long term algorithm as it relates to adjusted EBITDA growth in the back half of the year.

Tom Harrington: With the significant operational changes we have made throughout our business, I don't see why we would not work back to our long-term algorithm as it relates to adjusted EBITDA growth in the back half of the year in terms of both organic EBITDA growth and tuck-in EBITDA growth. I believe that we will remain cash flow positive this year, providing the cash to support our dividend and execute highly synergistic tuck-in acquisitions when the time is right. Clearly, we continue to believe in our improved financial profile, the improvements in our customer experience, our customer for life philosophy, and our continuing drive to improve average customer lives and retention rates across the business.

In terms of both organic EBITDA growth and tuck ins even Doug.

I believe that we will remain cash flow positive this year provide any cash to support our dividend.

Tom Harrington: I believe that we will remain cash flow positive this year, providing the cash to support our dividend and execute highly synergistic tuck-in acquisitions when the time is right. Clearly, we continue to believe in our improved financial profile, the improvements in our customer experience, our customer for life philosophy, and our continuing drive to improve average customer lives and retention rates across the business.

And execute highly synergistic tuck in acquisitions when the time is right.

Clearly we continue to believe in our improved financial profile.

The improvements in our customer experience.

Our customer for life philosophy, and our continuing drive to improve average customer lives and retention rates across the business.

When you look beyond the on certain near term environment.

Tom Harrington: When you look beyond the uncertain near-term environment, it should be clear to see why we are optimistic about the opportunities that lie ahead for our business and, in turn, the value creation that we will generate for all stakeholders. Under our pure play model, we are the North American market leader in direct-to-consumer water service, water refill, water exchange, water dispenser sales, and a top five player in the water filtration category. In addition, we will remain the market leader in direct delivery water in Europe, as well as a top five player in the European water filtration category, and we look forward to bringing our 4R razor-razor blade model to Europe. Before moving to Q&A, I wanted to take a moment to thank all of our associates.

It should be clear to see why we are optimistic about the opportunities that lie ahead for our business and in turn the value creation that we will generate for all stakeholders.

Under our pure play model, we all the North American market leader in direct to consumer water service water refill water exchange.

Turning to spend through sales and a top five player in the water filtration category.

In addition, we will remain the market leading to a direct delivery water in Europe.

Tom Harrington: In addition, we will remain the market leader in direct delivery water in Europe, as well as a top five player in the European water filtration category, and we look forward to bringing our 4R razor-razor blade model to Europe. Before moving to Q&A, I wanted to take a moment to thank all of our associates.

Well as a top five player in European water filtration category, and we look forward to bringing all four razor razor blade model to Europe.

Before moving to culinary.

I wanted to take a moment the bank all Barr associates.

Each day I continue to grow more impressed by our team and the selflessness They show our valued customers in an unprecedented environment.

Tom Harrington: Each day, I continue to grow more impressed by our team and the selflessness they show our valued customers in an unprecedented environment. We're incredibly lucky here at Primo to have such a dedicated workforce. We will now turn the call back to Ryan to move us to Q&A.

We're incredibly lucky here, a premium god, such a dedicated workforce.

We will now I'll turn the call Dr., Brian to move us documenting.

[noise], thanks, Tom or in the queue and eight to ensure we can hear from as many of you as possible you would ask for a limit of one question and one follow up per person. Thank you for your cooperation operator, Please open up the life of course.

Ryan Coleman: Thanks, Tom. During the Q&A, to ensure we can hear from as many of you as possible, we would ask for a limit of one question and one follow-up per person. Thank you for your cooperation. Operator, please open up the line for questions.

At this time, if he would like to ask a question.

Operator 4: At this time, if you would like to ask a question, press star and the number one on your telephone keypad. Press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Derek Lessard.

Operator: At this time, if you would like to ask a question, press star and the number one on your telephone keypad. Press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Derek Lessard.

Star and the number one on your telephone keypad, that's star followed by the number one on your telephone keypad, well posture, just a moment to compile the culinary roster.

Your first question comes from a line of Derrick lots of right.

Other.

Good morning, Dark Tom Ajay here.

Tom Harrington: Hello, Derek. Good morning, Derek. Tom and Jay here.

Jay Wells: Hello, Derek.

Tom Harrington: Good morning, Derek. Tom and Jay here.

The last three or the started I isn't me can you hear me yeah, yeah. Okay.

Derek Lessard: Lessard? Is it me? Can you hear me?

Tom Harrington: Yeah, it's you. You're first, Derek. You're talking to Primo.

[laughter] dark away [laughter], when you're talking to final [laughter] exactly.

Jay Wells: [crosstalk] and you're talking to Primo.

Derek Lessard: Exactly. I was wondering if you can maybe just talk about the top line for a second, obviously very strong performance. I know you did point to increased pricing. I was just wondering if you could talk about how you're able to get pricing through given the economic backdrop. Secondly, how much of the strength would you attribute to client restocking?

[laughter] I was wondering if you can maybe just talk about the topline for a second obviously very strong performance. So I know you did point to increase pricing I was just wondering if you could talk about how you're able to get pricing through given the economic backdrop and and secondly, how much of this strength, which you.

Attribute to pantry stocking.

Yeah. It's a good question two questions actually.

Jay Wells: Yeah, it's a good question. Two questions actually. If you think about our business, normal course in the Water Direct business in the first couple of months, and we were quite pleased, and we shared some of those numbers pre-COVID, if you will. That continued in place, normal course, that would include pricing. We have not stopped pricing through, particularly on our residential customers. Obviously, there's some commercial customers closed down. You know, there was likely, for sure, some stockpiling, particularly as each of the shutdown stay-at-home orders occurred. Didn't all happen at the same time, depends on where you were. As those stay-at-home orders were extended, any of the stockpile that went in, either through our legacy Primo business through Water Exchange or direct from the Water Direct business, the at-home consumer finished the product.

So if you think about our business normal course in the water direct business in the first couple of months and we were quite pleased than we'd shared some of those numbers pre cove. It if you will.

So that continued in place normal course that would include pricing.

We have not stopped pricing through particularly in a residential customers. Obviously, there's some commercial customers close down.

Jay Wells: Obviously, there's some commercial customers closed down. You know, there was likely, for sure, some stockpiling, particularly as each of the shutdown stay-at-home orders occurred. Didn't all happen at the same time, depends on where you were. As those stay-at-home orders were extended, any of the stockpile that went in, either through our legacy Primo business through Water Exchange or direct from the Water Direct business, the at-home consumer finished the product.

And you know there was likely.

Sure some stockpiling, particularly as each of the shutdown stay at home waters incurred Didnt all happened at the same time depends on where you were up but as those stay at home orders were extended.

Any of the stockpile that when we went in either through off legacy Primo business through exchange your direct from the water direct business the at home consumer.

Finished a product because in April is I think we said in our prepared remarks, we continue to experience 20 point 20, plus percent growth in both residential and Primo business, which says that there's a normal flow through a border is hitting the stockpiling is behind us.

Jay Wells: Because in April, as I think we said in our prepared remarks, we continue to experience 20%+ growth in both residential and the Primo business, which says that there's a normal flow through of orders and that stockpiling is behind us.

Okay. Thanks for that I'm hopeful and maybe one last one for me to Q2 from a seasonality point of view is typically stronger for your guys. So.

Derek Lessard: Okay. Thanks for that. Helpful. Maybe one last one from me before I queue. Q2 from a seasonality point of view is typically stronger for you guys. Maybe if you could just help me frame that with the slightly lower expected revenue sequentially.

Derek Lessard: Okay. Thanks for that. Helpful. Maybe one last one from me before I requeue. Q2 from a seasonality point of view is typically stronger for you guys. Maybe if you could just help me frame that with the slightly lower expected revenue sequentially.

Maybe if you could just help me frame that with the slightly more except that Robert your sequentially.

[laughter] he has not yet yeah. I mean, you really you, yes, Q2 to actually get into the summer season is normally a stronger month and you know I set forth some of our forecasts expectations.

Jay Wells: You want?

Tom Harrington: Yeah, go ahead, Jay.

Jay Wells: Yeah. I mean, really, yes, Q2 as we get into the summer season is normally a stronger month. You know, I set forth some of our forecast expectations, you know, that we based our forecast model on. You know, please keep in mind it's, you know, we are being conservative in our projections. Let's, you know, not get over-optimistic on the top line and make sure we're taking enough cost out to maintain our profitability and our liquidity. You know, looking at April, for example, I just got a flash from our North America business, which is our largest business.

You know that we based our forecast model on please keep in mind. It's you know we are being conservative in our projections, let's let's.

Not get over optimistic on the topline and make sure we're taking enough cost out to maintain our profitability in our liquidity.

But you know looking at April for example, I just got a flash from our North America business, which is our largest business you know their revenue came in 5% better than forecast.

Jay Wells: You know, their revenue came in 5% better than forecast, and so did their EBITDA, and that's why, you know, we're now saying that, you know, we're comfortable with $140 million of EBITDA in H1. You know, being very conservative on the top line in our forecast in order that we're taking the right amount of cost. If we over-deliver on the top line, as we did in April with North America, we'll over-deliver on the bottom line.

And so did their EBITDA and that's why we're now say that you know we're comfortable with 140 million of EBITDA in the first half of the or so it will be very concerned on the topline and a forecast in order that we're taking the right amount of cost and if we over deliver on the topline as we did in April with with North America, where over deliver on the bottom line.

Yeah, Derrick I think you know hopefully you see a track record that says what were consistently meeting and beating by a little over the last few quarters. So.

Tom Harrington: Yeah, Derek, I think, you know, hopefully you see a track record that says, we're consistently meeting and beating by a little over the last few quarters. Also being conservative because this thing changes every day, so it's a combination of our confidence that we'll do what we say at a minimum.

Also being conservative because distinct changes every day. So it's a combination of our confidence that we'll do what we said at a minimum.

Thanks for that gentlemen, and congrats on a great quarter.

Derek Lessard: Thanks for that, gentlemen. Congrats on a great quarter.

[noise] X darker.

Tom Harrington: Thanks, Derek.

Your next question from inline I've Peter.

Operator 2: Thanks, Derek.

Jay Wells: Thanks, Derek.

Operator 2: Your next question comes from the line of Peter.

Jay Wells: Your next question comes from the line of Peter.

[laughter].

Hello, Peter.

Hey, good morning, guys and congrats on a great quarter [laughter].

Tom Harrington: Hello, Peter.

[Analyst]: Hey, good morning, guys, and congrats on a great quarter. Hope you and your families are safe and healthy.

[Analyst 1]: Hey, good morning, guys, and congrats on a great quarter. Hope you and your families are safe and healthy.

[laughter] your families are safe.

Thank you they are.

[laughter] for just a just quickly just more housekeeping. The Q2 revenue guide of 432 to 450 million include the impact of FX or would it.

Tom Harrington: Thank you. They are.

[Analyst]: Good. Just quickly, just more of a housekeeping. Does the Q2 revenue guide of $430 to 450 million include the impact of FX or exclude it?

[Analyst 1]: Just quickly, just more of a housekeeping. Does the Q2 revenue guide of $430 to 450 million include the impact of FX or exclude it?

Yeah. Overall, you know, we're not thinking a lot of ramifications on FX. So there is no FX built there at maximum could we see another half a percent of FX headwinds, but at the right. Now you look in the quarter that we just closed FX had very little effect in our forecast has to say.

Jay Wells: Yeah. Overall, you know, we're not seeing a lot of ramifications on FX, so there is no FX built in. You know, at maximum, could we see another half a percent of FX headwind? But at the, you know, right now, you look in the quarter that we just closed, FX had, you know, very little effect, and our forecast has the same.

Okay. That's helpful and then Tom I I just was hoping you could elaborate on your second half comments.

[Analyst]: Okay. That's helpful. Then, Tom, I just was hoping you could elaborate on your H2 comments. I just wanna make sure I kinda heard this right, but you don't expect revenue to get back to mid-single digit growth, but, you know, some of the cost actions you've taken, you do anticipate a return to mid-single digit EBITDA growth in the H2 of the year. Did I hear that right?

[Analyst 1]: Okay. That's helpful. Then, Tom, I just was hoping you could elaborate on your H2 comments. I just wanna make sure I kinda heard this right, but you don't expect revenue to get back to mid-single digit growth, but, you know, some of the cost actions you've taken, you do anticipate a return to mid-single digit EBITDA growth in the H2 of the year. Did I hear that right?

I wish I kind of heard this right you don't expect revenue to get back to mid single digit but.

Some of the cost actions you've taken as you do we're anticipating a return to mid single digit EBITDA growth for the back half of your did I hear that right.

Good.

So you know we took a we didn't get them done as I said and 10 or 12 days, but we've essentially in less than four weeks executed operating expense cuts that enable us to get back to the EBITDA algorithm and expect to expand on margins and then frankly.

Tom Harrington: You did.

[Analyst]: Okay

[Analyst 1]: Okay

Tom Harrington: you know, we didn't get them done, as I said, in 10 to 12 days, but we've essentially, in less than 4 weeks, executed operating expense cuts that enable us to get back to the EBITDA algorithm and expect to expand our margins. Then frankly, as it recovers, which, you know, we see some signs of hope coming back as people reopen country by country, segment by segment, that we'll be judicious on managing the cost and the revenue on a go-forward basis to make sure that we frankly get the spread and return to, in short order, you know, sometime before the year is out, to our normal EBITDA algorithm.

Tom Harrington: We didn't get them done, as I said, in 10 to 12 days, but we've essentially, in less than 4 weeks, executed operating expense cuts that enable us to get back to the EBITDA algorithm and expect to expand our margins.

As it recovers, which you know we see some some signs of hope coming back as people reopened country by country segment by segment that will be judicious on managing the cost and the revenue on a go forward basis to make sure that we frankly get the spread and return to in short order.

Tom Harrington: Then frankly, as it recovers, which, you know, we see some signs of hope coming back as people reopen country by country, segment by segment, that we'll be judicious on managing the cost and the revenue on a go-forward basis to make sure that we frankly get the spread and return to, in short order, you know, sometime before the year is out, to our normal EBITDA algorithm.

There you know sometime before the year adapt to our normal EBITDA algorithm.

Okay. That's all I just quickly I mean.

[Analyst]: Okay. That's all. I just quickly, I mean, I think there's kind of been some confusion just in terms of what the right pro forma bases are for, some, you know, for Q1, for Q2, but maybe just, you know, high level, what is the kind of right base to be working off of for the H2 of this year?

[Analyst 1]: Okay. That's all. I just quickly, I mean, I think there's kind of been some confusion just in terms of what the right pro forma bases are for, some, you know, for Q1, for Q2, but maybe just, you know, high level, what is the kind of right base to be working off of for the H2 of this year?

I think there's kind of thing some confusion just in terms of what the true right pro forma basis. Our for some you know for Q1 fixture, but maybe just high level, what does that kind of right basically working off of for the second half of this year.

For the second half of this year, Oh theater, throwing a little bit of a curve ball [laughter].

Jay Wells: For H2 of this year.

Jay Wells: For H2 of this year. Peter throwing a little bit of a curveball.

Tom Harrington: Okay.

Jay Wells: Oh.

Tom Harrington: Ah.

Jay Wells: Peter throwing a little bit of a curveball. Pro forma for H2.

[noise] pro forma for the second half of the year [noise].

Tom Harrington: Pro forma for H2. Yeah, actually, I don't have that handy. You know, we haven't provided any guidance on the H2 yet. You know, frankly, it's because it's such a fluid situation that, you know, as we get through Q2, we'll affirm what we do in terms of beating H1, and then have a much cleaner line of sight about what our expectations are country by country. You know, because it still changes. Largely positive, but there's a negative here or there too, frankly, in terms of delays of openings, right?

Yeah, we don't actually I don't have that handy and you know we haven't provided any guidance on its on the second half yet and frankly, it's because it's such a fluid situation that you know as we get through the second quarter. We'll we'll have we'll offer and what we do in terms of beating the half one and then have a much cleaner.

Tom Harrington: Yeah, actually, I don't have that handy. You know, we haven't provided any guidance on the H2 yet. You know, frankly, it's because it's such a fluid situation that, you know, as we get through Q2, we'll affirm what we do in terms of beating H1, and then have a much cleaner line of sight about what our expectations are country by country. You know, because it still changes. Largely positive, but there's a negative here or there too, frankly, in terms of delays of openings, right?

Line aside about what our expectations our country by country.

You know because it's still changes largely positive, but there's a negative here are there to frankly in terms of delays of openings right. So and we and we also have a couple of that's you know virtual events set up throughout the quarter and were provide updates on you know how we're seeing the recovery and a little bit more light on how we're seeing the back half of.

Jay Wells: We also have a couple events, you know, virtual events set up throughout the quarter, and we'll provide updates on, you know, how we're seeing the recovery and a little bit more light on how we're seeing the H2 as we get through this quarter.

Here as we get through this quarter.

No. My next question comes from the line of Daniel bore.

Operator 2: Your next question comes from the line of Daniel Moore.

Operator: Your next question comes from the line of Daniel Moore.

Good morning, gentlemen, thank you for the color and taking the questions.

Daniel Moore: Good morning, gentlemen. Thank you for the color and taking the questions.

Born again area.

Tom Harrington: Morning, Dan. How are you?

Well. Thank you maybe just in Europe, you know you, obviously talked about things starting to open back up there maybe just talk about the volume cadence we've seen thus far in Q2.

Daniel Moore: Very well, thank you. Maybe just in Europe, you know, you've obviously talked about things starting to open back up there. Maybe just talk about the volume cadence we've seen thus far in Q2. I know you provided a lot of color and a lot of numbers, so I'll have to go back to the transcript, and if you repeat them, I apologize. You know, where were volumes in April and what have you seen more recently in terms of those volume trends for the last couple of weeks? Thanks.

I know you provided a lot of color in a lot of number self go back to the transcript and if you're repeat them I apologize, but you know.

Kind of where we're volumes in April and what have you seen more recently in terms of those volume trends for the last couple of weeks. Thanks.

So you know we go back it shut off pretty quickly in middle of March.

Tom Harrington: You know, we go back, it shut off pretty quickly in middle of March, but it varied by country, right? The numbers I'll give you are an average of an average of an average over 18 countries, because they're not all the same. It's roughly 40% is how we're looking at it in our worst case forecast for Q2. You know, as an example, Sweden is normal course because they never really closed. Switzerland was the first country to creep back in to business. We see the trend bottom out. I don't wanna say trough, but I believe in the case of Switzerland, we probably hit the trough, and it looks like it wants to come back. Not meaningfully, but look, we watch the volumes every day, so we're pretty close to how they trend out.

But it varied by country right. So the numbers I'll give you are an average of an average of an average over 18 countries.

Because they're not all the same and it's roughly 40% is how we're looking at it in our fault works case forecast for Q2.

And you know as an example, Sweden is normal course, because I never really close.

Switzerland was the first country to creep back in.

The business and we see the trend bottom out.

Tom Harrington: We see the trend bottom out. I don't wanna say trough, but I believe in the case of Switzerland, we probably hit the trough, and it looks like it wants to come back. Not meaningfully, but look, we watch the volumes every day, so we're pretty close to how they trend out.

I don't want to say trough, but I believe and the cases, Switzerland, we probably hit the Charleston, It looks like wants to come back not meeting play, but look we watch the volumes every day, so we're pretty close to how they turned out but the other side of the country like Spain, just extended for another 30 days there stay at home. So it's a balance of all of those.

Tom Harrington: The other side is a country like Spain just extended for another 30 days their stay at home. It's a balance of all of those. You know, the news, it sounds like the UK will make an announcement either Sunday or Monday. I don't know what that announcement will be. That'll certainly have an impact on a go forward. Hopefully that provides some color, average, it looks like it wants to improve versus that 40%, which we shared in our remarks.

You know that the news it sounds like the UK make an announcement either Sunday and Monday, I don't know what that announcement will be.

But that will certainly have an impact on a go forward. So hopefully that provide some color average you have an average of an average.

But it looks like it wants to improve versus that 40%, which we should know remark I think what's on.

Jay Wells: Yeah. I think with, you know, average Q2, we're forecasting revenue, US volume. That's a revenue number of about 40% down. You know, we Tom and I get together with these guys on a regular basis, weekly or more often, and everybody is at least meeting or trending a little bit above that, through April.

Average average Q2 were forecasting revenue you asked volume that's a revenue number about 40% down, but you know weve, Tom and I get together with these guys on a regular basis weekly or more often and everybody is at least meeting are trending a little bit above that through April.

Okay. So just to clarify that 40% or as a as a revenue forecast for Europe for Q2.

Daniel Moore: Okay. Just to clarify, that 40% is a revenue forecast for Europe for Q2, and April was around that level, a little worse than that?

In April was around that level, a little worse than that.

Overall, you know each each core month is a little different but I'd say the month of April they're trending a little bit better than average at the average Kevin talked about.

Jay Wells: Overall, you know, each month is a little different.

Jay Wells: Overall, you know, each month is a little different. Let's say the month of April, they're trending a little bit better than the average of the average. Tom talked about.

Daniel Moore: Yeah.

Jay Wells: Let's say the month of April, they're trending a little bit better than

Daniel Moore: Yeah

Jay Wells: the average of the average

Daniel Moore: Yep

Jay Wells: Tom talked about.

And that's I don't want to quote a greenshoe, but you know we're seeing some signs of life.

Tom Harrington: That's, I don't wanna call it a green shoot, but you know, we're seeing some signs of life that are better than what we had originally expected.

At a better than what we had originally expected.

Your next question comes from the line of Derrick Daily.

Operator 2: Your next question comes from the line of Derek Lessard.

Operator: Your next question comes from the line of Derek Dley.

Are there Anglo dark hey, guys. Good morning, Okay. Just a question just in terms of commercial and residential I'm sorry, I may have missed this just in light of the numbers that you guys have been speaking about but did you guys mentioned the difference in growth rates that we've seen there and maybe let's focus on North America for second.

Jay Wells: Hi, Derek.

Tom Harrington: Yeah. Hello, Derek.

Tom Harrington: Hello, Derek.

Derek Lessard: Hey, guys. Good morning. Okay, just a question just in terms of commercial and residential. Sorry, I may have missed this just in a lot of the numbers that you guys have been speaking about. Did you guys mention the difference in growth rates that we've seen there? Maybe let's focus on North America for a second.

Derek Dley: Hey, guys. Good morning. Okay, just a question just in terms of commercial and residential. Sorry, I may have missed this just in a lot of the numbers that you guys have been speaking about. Did you guys mention the difference in growth rates that we've seen there? Maybe let's focus on North America for a second.

No. We gave you a couple of numbers right. So what we've seen in our residential business in April was about a plus 20.

Tom Harrington: No. We gave you a couple of numbers, right? What we've seen in our residential business in April was about +20, and our legacy Primo Exchange business at about +20, which is what we've shared. Then you said North America, but in Europe it would be a little bit better than 40%. All those numbers are, the latter is on revenue, the others are on volume, the first two.

And our legacy Primo exchange business at about plus 20, which is what we've shared and then you said North America, but in Europe, It would be a little bit better than 40% on all those numbers are the latter is on revenue the others are on volumes.

The first two.

And that was sorry that was for April right.

Derek Lessard: Mm-hmm.

Derek Dley: Mm-hmm. Sorry, that was for April, right?

Tom Harrington: So-

Derek Lessard: Sorry, that was for April, right?

Yeah. That's the first few weeks of April you know bulk April.

Tom Harrington: Yeah, that's the, you know, first few weeks of April, you know, bulk of April.

Okay. So would that I give then again when we think about just read Asbury residential versus commercial split in North America.

Derek Lessard: Okay. Then again, when we think about just residential versus commercial split in North America, you know, where residential is, I believe, 60% of your business, 40% commercial, you know, are you seeing that residential growth offset the declines, I would assume, that you're seeing in commercial?

Derek Dley: Okay. Then again, when we think about just residential versus commercial split in North America, you know, where residential is, I believe, 60% of your business, 40% commercial, you know, are you seeing that residential growth offset the declines, I would assume, that you're seeing in commercial?

No were residential is I believe 60% of your business, 40% commercial.

Are you seeing that residential growth offset the declines I would assume that you're seeing in commercial.

Not good well, it's actually the opposite it's you know 55% commercial 45% residential is and we have the at home at Yeah, and then we have the at home or for Primo right and the residential growth is mitigating the impact on commercial.

Tom Harrington: Well, it's actually the opposite. It's, you know, 55% commercial, 45% residential is-

Jay Wells: We have the at home.

Tom Harrington: We have the at-home for Primo, right? The residential growth is mitigating the impact on commercial. I would say mitigate, not offset, but it continues to grow. We do get the benefit from the at-home consumer, which, you know, could be buying Water Refill, filling it themselves, or using the Water Exchange, which are ways for us to all counterbalancing the pressures from the commercial segment.

So I would say mitigate not offset.

But it continues to grow and then we do get the benefit they benefit from the at home consumer which is you know could be buying water refill filling it themselves or using the exchange model, which are ways for us the all counter balancing the pressures from the commercial.

Segment.

Does that give you the answer you're looking for there [noise].

Jay Wells: Did that give you the answer you're looking for, Derek? Overall, yes, commercial in North America is down. You net commercial against just the residential direct. It is a negative number, not as significant. In my prepared remarks, you know, I said overall our Water Direct business is down about 8% to 10%. That's a combination of the 40% in Europe that we've talked about, the growth in residential in North America we've talked about, and some offsetting decline in the commercial in North America. Your next question comes from the line of Mark Pidgey.

Overall, yes commercial in the North America is down your net commercial against just the residential direct it is a negative number not a significant and my prepared remarks, you know I said overall, our water direct business is down about 8% to 10%. That's a combination of the 40% in Europe that we've talked about the.

Jay Wells: That's a combination of the 40% in Europe that we've talked about, the growth in residential in North America we've talked about, and some offsetting decline in the commercial in North America.

Growth in residential and North America, we've talked about and some offsetting decline and the commercial in North America.

Operator: Your next question comes from the line of Mark Pidgey.

Your next question comes from the line up Mark PG.

Hey, good morning.

Mark Pidgey: Hey, good morning, guys.

[Analyst 2]: Hey, good morning, guys.

Hello.

So I just wanted to ask what the cost base you mentioned, the 20% I think roughly headcount reduction wonder if you can just give a bit more granularity in terms of the aspects of your business, where that was mostly weighted if it was mostly routes or mostly in admin and at the same time I guess, you know just more broadly like you've been invest.

Tom Harrington: Good morning.

Mark Pidgey: Hello. I just wanted to ask about the cost base. You mentioned the 20%, I think, roughly headcount reduction. Wondering if you can just give a bit more granularity in terms of the aspects of your business where that was mostly weighted, if it was mostly routes or mostly in admin. And at the same time, I guess, you know, just more broadly, like you've been investing in people over the course of the last, you know, couple of years. Could you just talk about how you balance that going forward as you know, you expect revenues to rebuild and stabilize over the course of the next few quarters?

[Analyst 2]: Hello. I just wanted to ask about the cost base. You mentioned the 20%, I think, roughly headcount reduction. Wondering if you can just give a bit more granularity in terms of the aspects of your business where that was mostly weighted, if it was mostly routes or mostly in admin.

[Analyst 2]: And at the same time, I guess, you know, just more broadly, like you've been investing in people over the course of the last, you know, couple of years. Could you just talk about how you balance that going forward as you know, you expect revenues to rebuild and stabilize over the course of the next few quarters?

And people over the course of the last couple of years did you just talked about how you balance that going forward is as you know you expect revenues to rebuild and stabilized over the course of the next few quarters.

Yeah. So.

Tom Harrington: Yeah. Twenty percent or so headcount reduction, it will vary by market. Where there's bigger revenue declines, we adjust more aggressively. It is a reduction in routes or consolidation of routes across the footprint because everything has been impacted. It would then have a domino effect into things like the warehouse. It would have an impact in production, right? Production could be headcount, could be overtime management, could be shift changes. If you think of the whole forward route side production, all of that has been affected. We have reduced administrative support and some of the G&A for sure, as we rightsize to the current realities of revenue.

Tom Harrington: Yeah. 20% or so headcount reduction, it will vary by market. Where there's bigger revenue declines, we adjust more aggressively. It is a reduction in routes or consolidation of routes across the footprint because everything has been impacted. It would then have a domino effect into things like the warehouse. It would have an impact in production, right?

20% or so head count reduction it will vary by market, So where there is a bigger revenue declines we adjust.

A more aggressively.

And it is a reduction in route.

For a consolidation of routes across the footprint because everything has been impacted it would then have a.

Domino effect into things like the warehouse.

I would have an impact in production.

Right and production could be head count could be overtime management could be shift changes.

Tom Harrington: Production could be headcount, could be overtime management, could be shift changes. If you think of the whole forward route side production, all of that has been affected. We have reduced administrative support and some of the G&A for sure, as we rightsize to the current realities of revenue.

So if you think of the whole forward route side production all of that has been affected we have reduced administrative support in some of the DNA for sure.

As we right size to the current realities of revenue and we have a reduced sales head count.

Tom Harrington: We have reduced sales headcount because if you think about, you know, if small commercial isn't open, it's not a terribly productive use of our finite resource to have salespeople knocking on doors that aren't open. As we think about go forward. Now alternatively, we are investing in online and the internet, so we see growth in online, no contact delivery. We also see some benefits on e-commerce, and that's all part of our go-forward plan, both in North America and on the other side. You know, the other thing that's important is in the US, as an example for those salespeople, it's a layoff and recall, right?

Because if you think about.

Small commercial isn't opened its not a terribly productive.

Use of our finite resource that salespeople knocking on doors that aren't hope.

As we think about go forward now Alternatively, we are investing in online any internet. So we see a growth in online no contact delivery. We also see some benefits on E Commerce and that's all part of our go forward plan both.

Tom Harrington: We also see some benefits on e-commerce, and that's all part of our go-forward plan, both in North America and on the other side. You know, the other thing that's important is in the US, as an example for those salespeople, it's a layoff and recall, right?

In North America and on the other side.

And then you know in <unk>. The other thing that's important is in the U.S. as an example for those sell people. It's a lay off and recall right. So we would you know as this comes back and well be prudent we would recall those folks and hopefully they'll come back on the payroll.

Tom Harrington: We would, you know, as this comes back and we'll be prudent, we would recall those folks, and hopefully, they'll come back on the payroll, so that we can ramp up appropriately when the time is right. That's really our approach. Of course, we're accelerating our investments in the Primo, legacy Primo platform, to see some opportunities in Europe.

So that we can ramp up appropriately when the time is right.

Ah So that's really our approach now of course, where we're accelerating our investments in the Primo legacy Primo platform.

The to see some opportunities in Europe.

Okay. That's helpful and then.

Mark Pidgey: Okay, that's helpful. Then, just, you know, in terms of energy costs and the lower oil price, I know you guys have the energy surcharge formula in your customer contracts. What sort of impact does a lower oil price have on your operating costs kind of going forward, maybe Q2 specific and then balance of the year?

[Analyst 2]: Okay, that's helpful. Then, just, you know, in terms of energy costs and the lower oil price, I know you guys have the energy surcharge formula in your customer contracts. What sort of impact does a lower oil price have on your operating costs kind of going forward, maybe Q2 specific and then balance of the year?

You know in terms of but in terms of energy costs in the lower oil price I know you guys have the energy surcharge formula in your customer contracts, the what's sort of impact.

Doesn't know what does the lower oil price out on your operating costs kind of going forward, maybe Q2 specific and learn and balance of the here.

Yeah. So oh, we haven't disgusted balance of the yet, but you know a Q2 will have a lower energy surcharge a portion of it because of course fueled the rest is a component.

Tom Harrington: Yeah. If we haven't discussed the balance of the year, but you know, in Q2, we'll have a lower energy surcharge or portion of it because fuel direct is a component of the energy surcharge. There are other inputs, and certainly, part of our operating costs would be reduced by the benefit of lower fuel costs, right? That's all in our, you know, forecast, if you will, for Q2. We'll also frankly drive a few less miles as we consolidate these routes on a net basis. There's some cost savings baked into our numbers.

Tom Harrington: Yeah. So far we haven't discussed the balance of the year, but you know, in Q2, we'll have a lower energy surcharge or portion of it because fuel direct is a component of the energy surcharge. There are other inputs, and certainly, part of our operating costs would be reduced by the benefit of lower fuel costs, right?

The energy surcharge or the other input and certainly part of our operating cost would be reduced by the benefit of lower fuel costs right and that's that's all in.

Tom Harrington: That's all in our, you know, forecast, if you will, for Q2. We'll also frankly drive a few less miles as we consolidate these routes on a net basis. There's some cost savings baked into our numbers.

Are you know forecast if you will for Q2.

Well. So we'll also frankly drive a few less miles as we consolidate these routes on that basis, though.

So there's some cost savings in baked into our numbers.

Okay. That's helpful guys. Thanks, all the best.

Mark Pidgey: Okay. That's helpful, guys. Thanks, and all the best.

[Analyst 2]: Okay. That's helpful, guys. Thanks, and all the best.

Yeah. Thanks Mark.

Tom Harrington: Yeah.

Jay Wells: Thank you.

Tom Harrington: Thanks, Mark.

Your next question comes from the line up Peter.

Jay Wells: Your next question comes from the line of Peter.

Hey, Thanks for taking the follow up I, just wanted to ask about future more I.

[Analyst]: Hey, thanks for taking the follow-up. I just wanted to ask about Q2 a little bit more. I know you mentioned the guidance reflects some conservatism and trends are above plan through April, but I think it'll be helpful to kind of understand what are you assuming from an operating environment standpoint and your plans for May and June, just, you know, as we think about things to look out for, you know, as we progress through the quarter. Thanks.

[Analyst 1]: Hey, thanks for taking the follow-up. I just wanted to ask about Q2 a little bit more. I know you mentioned the guidance reflects some conservatism and trends are above plan through April, but I think it'll be helpful to kind of understand what are you assuming from an operating environment standpoint and your plans for May and June, just, you know, as we think about things to look out for, you know, as we progress through the quarter. Thanks.

I know you mentioned the guidance reflects some conservatism in trends are above plan through April, but I think it'd be helpful to kind of understand what are you assuming from an operating environment standpoint, and your plans remain <unk>.

Think about things.

As we progress through the quarter. Thanks.

Okay.

Yeah, I mean, yeah, Peter as Tom said I think we've adjusted our cost structure that you know we're planning.

Tom Harrington: Yeah.

Jay Wells: Yeah. I mean, you know, Peter, as Tom said, I think we've adjusted our cost structure that, you know, we're planning even though we don't believe it, that, you know, this could be the new norm going forward. We've taken the cost out to maintain our profitability, to grow our profit under this current reduced revenue. We've done it in the right way, so more layoff recall. As we see the top line come back, we will start bringing the cost back. You know, within our model if the forecast, you know, is that we've taken a 15% decline in revenue top line, we've probably taken 20% of cost out in order to, you know, maintain our profitability.

Even though we don't believe it that you know this could be the new norm going forward. So we've taken the cost out to maintain our profitability to grow our profit under this current reduce revenue we've done it and the right way so more layoff recall, so as we see the topline come back we will start bringing the cost back but.

Jay Wells: As we see the top line come back, we will start bringing the cost back. You know, within our model if the forecast, you know, is that we've taken a 15% decline in revenue top line, we've probably taken 20% of cost out in order to, you know, maintain our profitability.

You know women in our model if if the forecast you know is that we've taken a a 15% decline in revenue top line, we've probably taken 20% of cost out in order to maintain our profitability and as we see the business come back as we see businesses reopen we will we will start adding.

Jay Wells: As we see the business come back, as we see businesses reopen, we will start adding back the cost that we have. We are gonna be very cautious as we do so to make sure we don't put cost back in when the crisis isn't fully over.

Back the cost that we have but we're going to be very cautious as we do so to make sure. We don't put costs backend when when the crisis isn't fully over.

Okay. That's helpful. Thanks.

[Analyst]: Okay. That's helpful. Thanks.

[Analyst 1]: Okay. That's helpful. Thanks.

Thanks Bill.

Your next question comes from the line of Daniel Moore.

Tom Harrington: Thanks, Peter.

Jay Wells: Your next question comes from the line of Daniel Moore.

Operator: Your next question comes from the line of Daniel Moore.

Hey, Dan. Thanks, first let me sneak one more interest in terms of capital allocation in the past you. You know you recession playbook has been to increase tuck ins versus internal marketing what would you need to see in terms of either revenue stabilization or leverage where would you need to get down to to be more comfortable in executing that playbook, a little bit more aggressively.

Daniel Moore: Hey, Dan.

Daniel Moore: Thanks for letting me sneak one more in. Just in terms of capital allocation, in the past, you know, your recession playbook has been to increase tuck-ins versus internal marketing. What would you need to see in terms of either revenue stabilization or leverage? Where would you need to get down to be more comfortable in executing that playbook a little bit more aggressively?

Daniel Moore: Leverage? Where would you need to get down to be more comfortable in executing that playbook a little bit more aggressively?

Yeah, I'll I'll answer the first part.

Tom Harrington: Yeah. I'll answer the first part. You know, right now we can't travel, so of course, we would be mindful of, you know, restrictions to do appropriate due diligence. We believe that similar to prior economic opportunities, be they macroeconomic or a downturn, that it'll take a couple of quarters, frankly, to flush out new opportunities that, you know, they'll and potentially, unfortunately, feel the pressures of this quarter and the next. We think there'll be a robust list of opportunities. We have an existing pipeline that, you know, we've held off on, frankly, right now because of those travel restrictions and, you know, the inability to appropriately diligence.

Right now we can't travel so of course, we would be mindful of you know restrictions to do appropriate due diligence, but we believe that similar to prior economic opportunity to be they macroeconomic or downturn.

That it'll take a couple of quarters frankly to to flush out new opportunities that you know they'll still and potentially unfortunately feel the pressures of this quarter and the next.

And then we think there'll be a robust list of opportunities and we have an existing pipeline.

Tom Harrington: We think there'll be a robust list of opportunities. We have an existing pipeline that, you know, we've held off on, frankly, right now because of those travel restrictions and, you know, the inability to appropriately diligence.

That you know we've held off on frankly, right now because of those travel restrictions and you know the inability to appropriately diligence and I think Jay in his prepared comments as we have the liquidity.

Tom Harrington: I think Jay, in his prepared comments, says we have the liquidity to execute against our original, you know, $40 to 60 million on a full year basis. We'd be hopeful that we'd ramp back up in Q3, Q4, dependent, right, on where we're at. We just wanna be smart and judicious about how we add that in Q3 and Q4. Okay. Thanks, Dan.

The executed against our original you know 40 to 60 million on a full year basis. So so we'd we'd be hopeful that we'd ramp back up in Q3 Q4 dependent.

Right on where we're at so we just want to be be smart and judicious about how we add that in Q3 in Q4.

Okay. Thanks, Dan [laughter] I'm, sorry, I didn't know <unk>. Thank you for the color that's very helpful. No worst [laughter].

Daniel Moore: Oh, sorry. I didn't know we're still on. Thank you for the color. That's very helpful.

Tom Harrington: Yeah, no worries. Yeah, apologize. A little odd stuff. Thanks, Dan.

Tom Harrington: Yeah, no worries. Yeah, apologize. A little odd stuff.

Oh jazz lot so [laughter] [laughter].

Jay Wells: Thanks, Dan.

[noise] wasn't meant more questions, we will move back to Ryan for closing remarks.

Operator 2: With no more questions, we will move back to Ryan for closing remarks.

Operator: With no more questions, we will move back to Ryan for closing remarks.

Thank you everyone for joining the call today. This will conclude primos first quarter call. Thanks for attending.

Ryan Coleman: Thank you everyone for joining the call today. This will conclude Primo's Q1 call. Thanks for attending.

This concludes today's conference call you may now disconnect.

Operator 2: This concludes today's conference call. You may now disconnect.

Operator: This concludes today's conference call. You may now disconnect.

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