Q2 2021 Primo Water Corp (MISSISSAUGA) Earnings Call
2 of the Primo water Corporation's second quarter 2021 results conference call. After the Speakers' remarks, there will be a question and answer session. If you'd like to ask the question. During this time simply press Star then the number 1 of your telephone keypad, if you'd like to withdraw your question. Please press star followed by 2.
Thank you I'll now turn the call over to John <unk>, Vice President of Investor Relations. Please go ahead.
Welcome to Primo Water Corporation second quarter 2021 earnings Conference call. All participants are currently in listen only mode. This call will end no later than 11 o'clock a M eastern time.
The call is being webcast live on <unk> website at Www Dot Primo water Corp, Dot com and will be available for a playback there for 2 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 the cautionary statements of disclaimers contained in the Safe Harbor statements 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 securities regulators.
The company's actual performance could differ materially from these statements and the company undertakes no duty to update these forward looking statements, except as 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. When the data is capable of being estimated as income.
The company's second quarter earnings announcement released earlier this morning or on the Investor Relations section of the company's website at Www Dot Primo water Corp Dot com.
I am of company by Tom Harrington pretty most Chief Executive Officer, Jay Wells pretty most chief financial Officer as a part of this conference call. We have included a deck online at Www Dot Primo water Corp Dot com.
That was designed to assist you throughout our discussion Tom we will start today's call by providing a high level review of the second quarter and our progress on the strategic initiatives, then Jay will discuss our second quarter financial performance in greater detail provide an update of ongoing synergy work and offer our outlook for the third.
Quarter and the full year 2021 before handing the call back to Tom to provide a long term view ahead of Q&A.
With that I will now turn the call over to Tom.
Thank you John and good morning, everyone.
Our second quarter financial results continue to demonstrate the strength of our pure play of water offering as our performance for the quarter exceeded our forecast 1 of the most important benefits of our shift to a pure play water company has been the more predictable reliable top line, coupled with a highly variable cost.
Sure contributing to consistent adjusted EBITDA margin expansion and consistent adjusted EBITDA growth.
Revenue of $526 million grew 15% compared to prior year and adjusted EBITDA of $100 million.
Improved by 21%.
I am pleased with both our second quarter results as well as our financial performance during the first half of the year.
The topline momentum we continue to experience.
Along with our focus on the long term growth drivers of our business positions.
Positioned to build upon these results during the remainder of this year and beyond.
I want to once again, thank all of our associates for their continued execution and dedication to our customers as they adopt the purpose of inspiring healthier lives through better quality of water.
The trends, we experienced from our residential consumers and now of improving results from our commercial and <unk> customer base.
Through the second quarter.
We remain encouraged by the ongoing strong demand from our residential consumers.
As the new customers, we signed up during the initial months of the pandemic.
Moving to be very sticky high quality customers.
Consumption levels from our commercial and <unk> customer base continues to gradually recover in direct correlation with restrictions across our footprint.
This validates our belief that there is not a 1 for 1 trade off in demand between these customers.
It also means that further improvement from our commercial and B to b of customer base should be incremental to our strong financial performance.
Our confidence that most of the new residential customers that started the service early on during the pandemic will remain loyal primo customers as evidenced by our global coal or quit rate, which improved 50 basis points to 17, 3% during the second quarter.
Our quit rate has remained on the downward trend over the last several quarters as our investments in the customer experience and customer facing tools are yielding significant improvements.
In North America revenue from our residential consumers grew by 3% during the second quarter.
Our North American commercial <unk> revenue was up 22%.
As we are seeing steady progress on the lifting of restrictions across the channel.
Our expectation for the performance from these customers to continue to improve going forward is supported by the fact that our customer base is weighted towards small businesses not large office spaces.
And all the rest of World segment.
Total revenue increased 39% for the quarter.
Revenue from residential consumers was up 43%.
Revenue from commercial would be the big customers was up 36%.
The performance of the award of direct commercial and B to B customer base remains tied to the relative level of restrictions or consumer mobility and each of the countries we serve.
We continue to work towards an efficient and low cost rollout of our products and services for residential consumption in Europe.
To further diversify our customer base and better balance of the customer mix.
A key highlight in the rest of World segment is the measure of of organic cooler adds in the quarter.
When coupled with an improved the cooler quick rate, we're beginning to see the benefits from our ongoing efforts to improve operating performance in this region.
As we have discussed in past quarters.
We believe our existing footprint.
And knowledge of the water services market in Europe leaves us in a great position to capture the revenue opportunities we have identified.
Globally.
Our customer base grew to over $2.6 million in the second quarter.
As I mentioned last quarter, the addressable 3 and 5 gallon market of U S. Residential households alone is estimated to be between $22 million to $29 million and growing.
Our water dispenser sales provide an important entry point to access these households, and capitalize all of our for our recurring razor razor blade revenue model, our internal research indicate that amount of last year's North American dispenser sell through sales of 1 million units, 60% of the respondents.
None of the category, 30% of replacing the previous dispenser and the remaining 10% of adding an additional dispenser to an existing of secondary residence.
Are those likely to become a future of dispenser household research indicates their consumption preference as 45 per cent for water direct 30% prefer water exchange and 25% pre part of quarter refill.
We should continue to capture our fair share of this growth as the.
For our model remains 1 of our strategic advantages.
The residential opportunity for increased penetration of 3 and 5 gallon returnable water sales is now.
<unk> always focusing on increasing household penetration across residences that use other water formats that may be more likely to switch from tap water or complement their existing service.
The 3 and 5 gallon returnable category has 2 to 3 times the market potential versus today's installed base.
Our goal is to educate consumers on the purchase journey from dispenser first the 3 and 5 gallon of water.
As it relates to our efforts in ESG, we remain focused on elevating our leadership position on the environmental issues and finding new ways to honor our commitment to clean water and sustainability.
Last year, we achieved carbon neutrality in the U S water operations.
European water business has been carbon neutral for 9 consecutive years in December we became the first company to have the spring water source certified under the alliance for water stewardship standards and we ended the second in January.
We expect to certify the 2 additional locations in 2021.
And last quarter, we introduced our latest sustainability goal of becoming 100% carbon neutral in our global operations.
Operations by the end of this year.
Under the umbrella of the ESG I'm also pleased to announce that we have named <unk> Barnes Selby achieved diversity and inclusion officer share.
He most recently served as the vice President of the government Affairs, and ESG, where she did tremendous work to advance our ESG leadership position.
I am confident she is the leader for this new role and I'm excited for her future successes in this critical focus of ours.
We are currently recruiting for a leader to continue our go forward ESG efforts.
From a governance perspective yesterday, we announced the appointment of our channel arch, saying to the Primo Water Corporation board of directors.
This thing will be an independent director and serve as a member of the human resources and compensation Committee of the board.
She has extensive human resources and talent management experience with the global focus and brings a wealth of proven executive leadership and is an excellent complement to our existing board skill set we welcome arch for the team.
Our second quarter and first half financial results.
Old with our steady and growing confidence in our pure play of water model has driven our decision to again raise our full year adjusted EBITDA outlook by $10 million to now range between 390 and $400 million.
We expect to grow organic revenue by approximately 6%.
Plus the additional revenue growth from our tuck in M&A strategy.
We're also reiterating our plan to be at the higher end of the $40 million to $60 million range of M&A investment in 2021.
I'd like to turn the call over to Jay.
Of the financial results in greater detail.
Thank you Tom and good morning, everyone.
Starting with our second quarter consolidated results revenue increased 15% to $526 million compared to $457 million.
Excluding the impact of foreign exchange revenue increased by 12%.
The games for largely driven by our water direct and exchange businesses, partially offset by declines in our water refill and water dispenser channels.
We continue to experience increased revenue from residential consumers with growth of 9% in the quarter.
North American residential revenue was up 3% and the rest of the World segment residential revenue was up 43%.
Our global commercial <unk> revenue was also strong with 26% growth.
North American commercial <unk> revenue was up 22%, while the rest of the world commercial <unk> revenue was up 36%.
Adjusted EBITDA increased 21% to $100 million compared to $83 million. The increase was driven by demand for products and services from residential consumers improve commercial and b to b demand increase.
The increase pricing.
Continued operating leverage improvements and ongoing synergy realization or.
Just the EBITDA margin increased by 80 basis points for 18, 9%.
SG&A expenses increased 5% to $260 million compared to $247 million.
The increase was the result of incremental selling and operating costs, which supports the organic volume growth and we will continue to tightly manage our demonstrated highly variable cost structure.
Turning to our segment level performance for the quarter in North America revenue increased 9% for $397 million compared to $364 million.
Excluding the impact of foreign exchange revenue increased by 8%.
The increase was driven by strong volumes and increased pricing in our water direct business, partially offset by lower revenue from our water refill and water dispenser channels.
Adjusted EBITDA increased 10% for $85 million due to increased revenue driven by higher pricing continued operating leverage improvements and ongoing synergy realization.
Turning to our rest of World segment revenue increased by 39% to of $129 million.
Excluding the favorable impact of foreign exchange revenue increased by 28%.
The increase was driven by growth in residential consumers and a continued return of our commercial <unk> business.
Adjusted EBITDA in the segment increased to 103% to $21 million as volumes improved across all channels, resulting in improved operating leverage.
Turning to our liquidity position and balance sheet, we ended the quarter with the cash balance of $114 million and available net borrowing capacity on our cash flow revolver of $159 million.
For a combined total liquidity position of $273 million.
Our net leverage ratio is 3.4 times, we are targeting a net leverage ratio of less than 3.0 times.
Turning to the synergies we continue to make good progress on the synergy capture work and remain well ahead of the schedule. We provided at the time of the legacy Primo acquisition.
After realizing roughly $18 million of cost synergies in 2020, we realized another $7 million in the first quarter of 2021 and approximately another $5 million in the second quarter.
We expect to realize $1 million to $2 million per quarter for the balance of 2021.
And the remainder of 2022.
We have completed all actions needed to realize the expected benefit of $35 million from synergies.
As Tom said, we are pleased with our second quarter results and the strength of our residential business.
Many of our commercial customers are still grappling with how to fully reopen.
But we're starting to see more active commercial <unk> customers, albeit still consuming that less than pre pandemic levels as the.
Bye bye local capacity restrictions and delayed reopening.
Looking to the third quarter based on the information we have available to us as of today. We currently expect consolidated revenue from continuing operations to be between $550 million and $560 million.
We also expect that our third quarter adjusted EBITDA will be in the range of 112 to 1 <unk>.
$18 million.
For the full year of 2021 revenue is now projected to grow organically by approximately 6% and we are raising our outlook for adjusted EBITDA by $10 million to now between 390 and $400 million.
We also expect around $15 million of cash taxes.
$68 million of interest as well as capital expenditures of around $135 million.
Turning to Capex deployment, we purchased roughly 800000 shares for $13 million during the second quarter as part of our $50 million share repurchase program.
Yesterday, our board of directors authorized a quarterly dividend of <unk> per common share. The dividend is payable in cash on September <unk> 2021 to shareowners of record at the close of business on August 19th 2021.
With respect the M&A, we have maintained our disciplined approach and have been focused on accelerating the robust pipeline of tuck in opportunities in front of US recently, we've announced the acquisition of Earth to well as well as help waters of Pennsylvania. These.
These acquisitions are great examples of expanding our customer base and strong earnings potential.
We remain confident in our ability to achieve the higher end of our target of $40 million to $60 million of tuck ins. This year in terms of our growth algorithm. After 2021, we still expect to grow organic revenue by roughly 5% per year generate an incremental 20 to 30 basis points of EBITDA margin improvement annually and.
Add an incremental $5 million to $10 million of an organic adjusted EBITDA annually from accretive tuck in acquisitions I will now turn the call back to Tom. Thanks.
Thanks Jay.
As you can tell we're very happy with our execution during the first half of the year and the momentum we continue to see across the main growth drivers of our business.
For our model is proving itself as a key differentiating factor and a critical driver of our success, including the predictable and consistent operating model and results.
We're excited about our transition to a pure play water model and the opportunities ahead of us.
We remain focused on executing our differentiated what are your way platform and our key focus areas to drive the success of the business.
Our priority will continue to be the health safety and wellbeing of all of our associates customers and suppliers.
We will leverage our pure play water model to drive organic revenue growth by approximately 6% in 2021.
We will continue to enhance the customer experience for them.
Improving customer facing tools and building out a more diverse e-commerce solution.
We are developing new customer acquisition strategies to diversify our acquisition channels for.
Further reduce our call of quit rate and improve customer retention.
In Europe, we're accelerating our water refill water exchange award of dispenser of businesses to diversify our customer base and capture growing demand in the residential market.
Additional focus areas include leveraging our predictable and reliable top line growth, while protecting our efficiency improvements and maintaining our highly variable cost structure.
Identifying and executing highly accretive tuck in acquisitions across North America, and Europe, and seeking new ways to further improve our standing as an ESG and sustainability leader supporting our initiatives are more structural automatic tailwind of driving consumers towards healthy hydration solutions.
The growth in the health and wellness category continued to support our prospects of gaining share of the board of beverage category.
Covid continues to elevate the help of wellness conversation and consumers are increasingly conscious of their overall health and wellbeing.
In addition.
The perception of the decline in quality of the municipal tap water is well documented which supports the growth of both products and services have water as the primary drinking source is expected to continue to decline.
Lastly, as Jay noted, we expect our consolidated third quarter revenue to be between 550 and $560 million and for adjusted EBITDA to be between 112 and the $118 million.
For full year 2021.
Forecasting revenue growth of approximately 6%.
The raised our adjusted EBITDA forecast to be in the range of $390 million to $400 million.
We expect to see sustained strength from award of direct and exchange residential customer base and improvement from a water direct commercial and B the <unk> customer base as we progress through the year.
We also maintain a strong pipeline of tuck in M&A candidates, which we expect to execute on during the second half of the year.
Again, I would like to thank the Primo water associates across the business for delivering these solid results. Thus far in 2021 with that I'll turn the call back over to John to move us for Q&A.
Thanks, Tom during the Q&A to ensure we can hear from as many of the U S. Possible. We would ask for a limit of 1 question and 1 follow up per person.
Thank you.
Operator.
Questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by 1 on your Touchtone phone, you'll hear of 3 tone prompt acknowledging your request and your questions.
I'll be pulled in the order of the received should you wish to decline from the polling process. Please press star followed by 2 if you're using a speaker phone. Please lift the handset before pressing any keys 1 moment for your first question.
Okay. Your first question comes from Kevin Grundy from Jefferies. Kevin. Please go ahead.
Great. Thanks, Good morning, everyone and congrats on the strong results here.
Can you pick up on the on the guidance I guess, if we could.
So you raised the top line organic growth, which is great and imply sort of a similar level of organic growth in the back half of the year that you saw in the front half of the year.
The <unk> demand has been good lower quit rates, even if sort of commercial recovers.
Talk about if you could maybe a little bit how are you thinking about the <unk>.
Back half of the year the balance here between your residential business in commercial as people sort of slowly returned to work notwithstanding the.
The the FLIR of here more recently with the with the virus and then Jay.
Hey, with respect to the EBITDA outlook, it would seem that you're basically flowing through the upside.
In the second quarter to the full year outlook, so not necessarily anything more favorable with respect for the back half of your maybe you could just comment on that as well, perhaps some level of conservatism in how youre thinking about the back half of the year from a margin perspective, and then I have a follow up thank you.
Thanks, Kevin I'll take the first half and I'll, let Jay talk about the EBITDA.
We would expect the residential consumer base to continue to grow at current levels.
Really think about that primarily in the award of direct in the exchange business, where we've had good success.
Year to date.
We would expect to continue to see the elevated performance on residential.
The rest of World, which has performed well with a slower recovery in Europe on commercial.
And of course, our what I'll refer to as more of <unk> in North America as debt, while those small businesses that are open.
So so we have anticipated continued growth.
Outside of whatever the Delta co.
Covid strike if you will.
<unk> provides us in terms of headwinds, but we think we have it all baked in and of pretty strong on our expected revenue performance for the balance of the year.
And on EBITDA.
You got it right, Kevin and that.
We did update our synergy capture we did complete the activity is really related to procurement and the quarter.
So.
Mental benefit.
In Q2 as some of the pricing actions were actually day.
<unk> back to the beginning of the year and we will continue to see that flowing through the remainder of this year and then a little into next year. So we did update our guidance for that net up.
Date, our guidance for for the good quarter, we had.
And when you look at the remainder of the year you did.
It talks about the Delta variant, we continue to see our top line progress as forecasted we continue to.
Manage our costs very tightly, but really until we get through the current variance and see where the world is going and how we're going to continue to operate like we are just manage our costs in line with the with.
With how we see the top line come back.
Got it. Thanks. Thank you both just a quick follow up for me just on the cost environment, which is obviously, putting a lot of pressure on margins sort of up and down the supply chain, maybe just spend a moment on that from.
From labor.
Other other costs.
The P&L, what's sort of embedded there and then I think you'd probably.
Certainly aware that the company has the ability to pass on through surcharges, maybe just comment on that sort of expectations for not just even in the next 6 months for the next 12 months as well I'll pass it on thank you.
Thanks, Thanks, Kevin.
Certainly we are experiencing wage inflation.
We have addressed that in each local market what each subset of the labor for US. We've also baked that into our forecast in terms of the actions that we've taken.
We are also.
Obviously, taking pricing along net very specific.
Opponent of the cost.
We like many others our experience some incremental thoughts on ocean freight.
Which is really related to the expenses that come from China to North America, and frankly into Europe. We.
We are also baked that into all of forecasts and taken appropriate pricing actions.
Of that piece of our business.
And then if you think about the impact of fuel of course, we have the energy surcharge and the delivery fees all of which we've acted upon so I'm pretty confident that the pricing actions that are in place not to be put in place.
We will offset these costs certainly through the balance of the year.
Then.
Wage inflation being next year, we think we're going to be fine in terms of how we think about it the wildcard frankly for me is ocean freight everything I read says that the ocean freight should ease post Chinese new year in Q1 next year, but that remains to be seen.
Got it very good. Thank you both good luck.
Thanks, Kevin I appreciate it.
Your next question comes from Andrea Teixeira from Jpmorgan Andrea. Please go ahead.
Thank you and thank you for pronouncing my my last name correctly.
Everyone and can you. Please update on some of the volume impacts from commercial customers in Q2 relative to 2019 levels. You gave a lot of good information that I think is very supportive of that coming back but previously you had mentioned that in.
These customers have been using about for part of the month against.
That's from for borrowers to about 3 and a half on the average can you update us on those on those numbers and like why why do we think so customers and then.
I'll be back to you I have.
If I can follow up.
I'll give you a couple of numbers would of direct of water exchange, which is obviously the high percentage of our business North America.
Is the 11% higher than Q2 of 2019.
And in the rest of world.
The 12% lower than Q2 of the 19th.
If you think about as the commercial business come back in the rest of world will still waiting for that recovery to happen and the fact that it's slower is obviously baked into our forecast.
On a.
Pro forma revenue when aggregated is about 1% better than 2019.
If you asked about pro forma the.
Adjusted EBITDA.
It is a very different company in 2019 were up 13%.
Roughly.
Over 200 basis points. So if you could give you a flavor for a pretty good performance versus 19, albeit the pure play water business it's different.
Our net to EBITDA.
That's super helpful. Thanks to double click <unk> go ahead sorry.
Sorry, just on your you asked the specific on on per unit commercial consumption.
We have seen.
Fractions of bottles come back on the commercial side on a per unit basis. So we are starting to see more more foot traffic traffic in the small businesses, we service, but it's not back to pre pandemic levels yet.
Yeah. No. This is actually I think encouraging what you just said about the 11th for Shanghai and U S and 12% lower in Nebraska, the World I'm, assuming that is combined both commercial and residential or that that's the only commercial.
No Thats correct.
I'd say North America had a higher residential base.
In terms of customer mix. So we are benefiting from the fact that we had a different customer mix in North America that has roughly channel.
Correct me half of the business residential and in Europe, We know, it's something like 90% commercial so those numbers fit in that context net.
Obviously, our strategy with the growth of residential and the rest of world is the shift that mix going forward. It's 1 of the key learnings of outcomes post pandemic, if you will and with rest of the world being down 12%.
Keep in mind.
That is of great or more traditional office type business. So there is probably.
20, plus percent of our customers that we sell are not delivering to because they have not reopened during the so being down only 12% warmer so not servicing 12, 20% plus of our customers I view as a very positive sign.
Uh-huh of course, and then that's all of course to any of you can give us like the cadence for the quarter is that getting better from I believe the number was much higher like mid teens, probably in the first quarter.
How does that how does that we made.
It is improving sequentially.
Right so.
It's the aggregation of let's call. It 19 countries in Q2 is better than Q1.
We baked in all of our expectations for obviously for the 3 and for and we'll see how that turns out but.
That's where we're at eastern Europe, performing better than Western Europe.
So we're quite pleased with where we are and the progress, we're making and we expected the continues sequentially.
Reasonable rate.
And that of and just also make sure that we are in the same topic on the residential side in the U S. You're not seeing from the numbers I don't think you were seeing much of a deceleration either in your commentary you sort of part of the fat rights for the big banks of bi.
As we reopen.
Yeah, we're not seeing a deterioration because of the residential business was up 3%.
In the quarter.
As Tom says a lot of we're not seen it as of 1 for 1 as commercial comes back can be regained that that per unit half of bottle that you mentioned, we're not seeing the same deterioration on the residential side and Andrea importantly, and referenced in the script is that the customers. We signed early on in the dynamic which were large.
The residential or really sticky.
So we're quite pleased that let's call. It a year plus layer of that many of those customers are still with US which is part of that why would continue to see growth in the residential base.
Yes, it makes a lot of of San Thank you so much I'll pass it on.
Thanks, Thank you.
Your next question comes from Derek Lessard from TD Securities Derrick.
Please go ahead.
Yeah. Thanks, Erin good morning, Congrats on another strong quarter.
Thank you Derek.
1 question for me is maybe could you just talk about maybe some of the weakness that you saw in the water refill of it.
The sensor business and maybe on the flipside of that you also had strong revenue growth.
Yes, the other categories, just wondering what was driving that.
Yes.
I'll start with the the refill business.
On the top side.
Had anticipated the loss of the large customer so part of that is year over year cycles with debt loss, we anticipated that and then the other thing that we are experiencing is.
I can't pull of pantry loading, but it really was so if you think about Q2.
Year ago, our refill business.
It was meaningfully impacted as a good source of water.
So where we're dealing with some less pantry loading in that spending machine business. If you will so it was really the 2 big drivers of opportunity.
Do you want me to hit the dispensers.
The dispensers.
Very unusual year on time and you look at the growth we had in dispensers in Q2 of last year. It was very high for me I look on a year to date basis year over year and our dispenser sales. This year for the first 6 months up 22% versus last year. So it helps just to take the timing noise out as.
There was pantry loading on the sensors also last year, but looking at year to date being up 20, 22% and a very positive.
Yes, that's very so the 6 month numbers very strong J, which is what is have you had any impact from the shipping.
Shipping delays and what have you.
The answer is yes.
And we have a team of people that every day of working on the shipping lanes in 1 week.
Do you have the container book it is at all of the ship when will it get to the port.
So that would be active daily management and the team is reacting to all of that in real time.
So so we have probably fewer in physical inventory.
But we're satisfying demand because of the efforts of the team.
<unk>.
Working through.
Pretty complex situations in a rising cost environment.
Okay.
Maybe just 1 last 1 for me.
As you guys continue to execute and deliver relatively stable earnings just wondering.
About your thoughts on the balance between.
Lower leverage and returning capital to shareholders.
Yes, I think Jay strip.
<unk> pointed out that 3.4 times is where we are today and that we continue to work towards 3 times or lower.
So that would be our current plan obviously the leverage.
Also from me the debt pay down or actually frankly of the benefit of revenue growth and the benefit of tuck in terms of as our EBITDA continues to grow.
And on share buyback I mean, we have our program or executing behind it I talked about what we bought last quarter.
Of our stock has been thus far this quarter.
We have continued to execute behind it I would probably have about $14 million left on the $50 million program at.
And our goal is to continue to execute on it throughout the remainder of the year.
Okay. Thanks for that guys.
Thanks, Doug.
Your next question comes from George <unk> from Scotiabank George Please go ahead.
Yeah. Thanks, Good morning, guys and congrats on the per quarter Hello, George.
Thank you.
I wanted to talk a little bit about the 6% organic growth algorithm that you guys put off end of the year.
Can you talk a little bit of how much of that is pricing how much of that is consumption, maybe how much of that is new customers, maybe break that down a little bit yeah think about volume at roughly 13%.
And price volume impacting our revenue at 6% of net price and mix.
Shifts across channel that was water water out of Rex and that was in this quarter right.
So maybe you can scale and moving.
Sorry for the algorithm for the year.
Yeah, I mean, let me let me take this 1 I mean, you look at it we are lapping through the year, what I'll call. It easy comps from the commercial side of the business.
So I would say of what we're talking you're probably talking 2 thirds, 1 third on price of being the 2 thirds and price.
The price feet, sorry price being the 1 third volume being the 2 thirds of the the 6% growth full year average of an average.
Okay. That's helpful guys and just 1.
1 of them. If you look at the Israel was obviously been open for.
For about 4 months now can you maybe give us an update on how the market is trending and maybe to what extent consumption above 2019 levels.
Certainly the business has continued to perform at an elevated level.
It is the combination of.
The good retail performance right, which is simple market <unk> business, frankly that goes to homes.
Our overall residential customer base mix.
Is roughly 70% so we benefited from that and it continues.
Pretty significant customer growth in the market.
So very nice recovery I think we referenced something on the order of 60% in April it didn't grow at 60%.
May or June, but it was a solid contributor to growth.
In the second quarter.
Thanks, guys.
Thanks George.
Your next question comes from Dan Moore from C. J S. Tam. Please go ahead.
Good morning, the Stefanos Crist missed the Stefanos crist, calling in for Dan how are you.
Very good how are you.
Good so first in Europe on recent calls you're saying you're already getting good traction on the home delivery of an exchange sides with your initial e-commerce initiatives could you give us an update there.
Yes, so our residential at home and the rest of world for the quarter was up 43%.
Youll recall last year, we began the rollout the residential website and it was it was month over month as we went from no countries to let's call. It.
18 countries by the time, we finish the year, we stood up our first E Commerce site.
Actually the third site in Germany this month.
And you would see us begin to sell the expenses both out of a site in the UK site in the Netherlands. The site in Germany, and then we will build the sites and the frankly the same fashion that we did last year expect to be probably halfway through the countries by the end of.
The 2021.
And we think that obviously, that's the or.
And it's an important contributor to further developing our residential consumer base across those countries.
In Europe.
Great. Thank you and then just the follow up already refresh have you seen any notable changes in just the competitive dynamics under new ownership.
Nothing excuse me nothing notable.
So I think it certainly would appear to be business as usual.
Just trying to get their arms around the business at this point in time.
Great. Thank you for taking my questions.
Thank you.
Your next question comes from John Some apparel from CIBC John Please go ahead.
Good morning, John Thanks, Good morning, guys.
Hello, John Good morning, Ryan.
I wanted to sort of dive a bit deeper on the 1 for 1 comments and in the water direct business or the commercial customers that you're.
The recovering or adding do you sense do you get a sense of how many of them of returning customers versus new incremental ones and is there any overlap between those commercial customers and residential as well and by that I mean or are there some customers who of residential and Theyre now, adding the service to their small business for example.
Yes.
We don't track it that way, but.
The firsthand experience says that there are small businesses, let's start of the service in residential.
And we know that there would be residential consumers, who are independent operators, who would start the service and that the debate.
So that is normal course for us.
Does the denture base continues to grow the.
The revenue from commercial is up pretty significantly in the stick the North America, which says the reopening so that number was something on the order of 22% revenue growth in Q2.
Which is the growth of reopening at a little bit lower consumption of Jay referenced earlier, right, which is we believe direct real estate related to the foot traffic as the.
Those stores, if you will reopen.
So we're pretty confident and expect residential to continue we are seeing more of our new customers today on residential versus commercial.
And customers are really just restarting as you will.
On a year over year basis.
Okay got it and then my follow ups on the the couple of tuck in transactions that you announced recently can you add any color on these with the in line with traditional valuations and can you give a sense of materiality either on the purchase price of our sales that you expect them to add.
Yes, I'll take the first part these would be standard fare center cut.
Small M&A for us.
Inside our existing footprint. So you think about the overlap and the benefits in terms of customer density of that leads to route density.
These businesses will provide debt.
And on that.
A couple of questions on what's included in our guidance with respect to the 2 we just announced.
<unk> is definitely of the larger of the 2 I would say the 2 combined youre, probably talking revenue of about 4% to $5 million.
2 oh, we're going to be a little slower to integrated just.
Certain setup, we have some work to do to integrate it so I'd say EBITDA for the 2 in the back half of the year is probably a half a million dollars.
Got it okay. That's great. Thank you very much.
Thank you.
Your next question comes from Derek <unk> from Canaccord Genuity Derek. Please go ahead.
Yeah, Hi, guys from Derek.
Yes.
Just a question on the on the.
e-commerce or on the on the digital business can you just give an update on what youre seeing there I mean did you see growth pick up during the Covid period as it has it stayed at that same level and if you could give a little bit of color on.
Perhaps where this ranks in your pecking order of the new ads per channel.
The.
I'll give you the high level, obviously, we are seeing the growth in the residential business.
In the Europe, which is the direct result of digital investments for the website debt business was up 43% in the quarter.
We are seeing good growth on that large e-commerce retailer.
We've talked about Amazon before were currently available in about 10000 Zip codes and with the get in the U S and we're beginning to see sequential growth period over period, which gets to the stickiness and then the frequency of that customer.
In terms of where it fits its pretty important strategically, particularly if you think about beginning to sell the razors. The dispensers in Europe, we all sorts of more again North America to enhance our set our websites of web shops to make it easier to buy and then we know once the customer starts.
As I referenced in the script something on the order of 60% of them of looking for solution of it says board of directors, which really works for us in terms of the growth story, which frankly should feed continue to feed residential.
Volume and revenue growth over time.
Okay. That's great. Thank you very much.
Thanks, Dara Thanks, Doug.
Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by 1 year.
The next question comes from Pavel <unk> Chen.
From Raymond James Please go ahead.
Thanks for taking the question.
You touched on M&A and in the U S a minute ago and I wanted to ask about.
Of the opportunity set in Europe, I think youre less tuck in acquisition in Europe was at the very beginning of 2020 pre COVID-19, what's the landscape looking like there for you to expand.
Yes, good morning Pablo.
We are we have a number of opportunities in the pipeline.
Some are and frankly relatively short order well will likely be closing on some so.
Pretty balanced opportunity.
U S versus North America.
Number of the items in Europe.
Debt overlaps in our footprint in important countries. So we're quite pleased about where we are and how many will frankly execute before the year is out.
So.
This call at a timing element of that as we enter all of them through the.
For the business.
Understood.
And I can't help asking you about the.
Kind of a little bit of of political question about California out of the referendum that was just approved.
A few weeks ago about essentially banning single use plastics in the state by 2030.
I'm curious if you have any.
The perspective on what that process is going to look like over the next 12 months for yourself.
Yes.
I can't prognosticate over the next 12 months, we know that our returnable 3 and 5.
5 gallon solution is the sweet spot for us.
The very high percentage of our revenue so.
We will benefit frankly in my opinion, there are challenges against single use plastic and that will continue to stick to our knitting in terms of rolling that size of our business overtime.
Very good I appreciate it.
Thanks, Bob Thanks, Jeff I appreciate it.
There are no further questions at this time I'll turn it back for Tom for closing remarks.
This concludes the Primo second quarter results call. Thank you all for attending.
Yeah.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.