Q3 2023 Primo Water Corp Earnings Call

November 2, 2023

Operator 2: Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primo Water Corporation's Q3 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. I'll now turn the call over to Jon Kathol, Vice President, Investor Relations. Please go ahead.

Operator: Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Primo Water Corporation's Q3 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. I'll now turn the call over to Jon Kathol, Vice President, Investor Relations. Please go ahead.

[music].

Okay.

Good morning, My name is Chris and I'll be your conference operator today at this time I would like to welcome everyone to the Primo water Corporation's third quarter 2023 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star followed by two thank you I'll now turn the call over to John <unk>, Vice President Investor Relations. Please go ahead.

Jon Kathol: Welcome to Primo Water Corporation's Q3 2023 Earnings Conference Call. All participants are currently in listen-only mode. This call will end no later than 11:00 AM Eastern Time. The call is being webcast live on Primo Water's website at primowatercorp.com and will be available there for playback. 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 and disclaimers contained in the safe harbor statements in this morning's earnings press release and the company's annual report on Form 10-K, 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.

Welcome to Primo Water Corporation third quarter 2023 earnings conference call.

All participants are currently in listen only mode.

This call will end no later than 11, a M eastern time.

Call is being webcast live on Primo water's website at Primo water Corp, Dot com and will be available there for playback.

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 and disclaimers contained in the Safe Harbor statements in this morning's earnings press release and the company's annual report on Form 10-K 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.

Jon Kathol: 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, is included in the company's Q3 earnings announcement released earlier this morning or on the investor relations section of the company's website at primowatercorp.com. We have also included a deck on our website that was designed to assist you throughout our discussion. I am accompanied by Tom Harrington, Primo Water's Chief Executive Officer, and David Hass, Chief Financial Officer. Tom will start today's call by providing a high-level summary of the transaction announced earlier this morning, followed by a review of Q3 and our progress on Primo Water's strategic initiatives.

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 is included in the company's third quarter earnings announcement released earlier this morning or on the Investor Relations section of the company's website at Primo water Corp Dot com.

We have also included a deck on our website that was designed to assist you throughout our discussion.

I'm accompanied by Tom Harrington Primo waters, Chief Executive Officer, and David <unk>, Chief Financial Officer.

Tom will start today's call by providing a high level summary of the transaction announced earlier. This morning, followed by a review of the third quarter and our progress on Primo water strategic initiatives.

Jon Kathol: David will review our segment-level performance and will discuss our Q3 performance in greater detail and offer our outlook for the full year 2023 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.

And then David will review our segment level performance and we'll discuss our third quarter performance in greater detail and offer our outlook for the full year 2023 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.

Tom Harrington: Thank you, John, and good morning, everyone. Before I cover the exciting news announced earlier today and the strong results the team delivered in Q3, I'd like to share that our associates, customers, suppliers, and the citizens of Israel have been and remain in our thoughts and prayers. Our associates in Israel have shown an incredible commitment to our customers, each other, and their communities in the face of a horrific situation by continuing to supply bottled water to the citizens of Israel, and I want to thank them for their tremendous efforts. Now on to today's news. As we announced, that we have agreed to sell a significant portion of our international businesses to Culligan International.

Thank you John and good morning, everyone.

Before I cover the exciting news announced earlier today and the strong results. The team delivered in the third quarter I'd like to share that our associates customers suppliers and the citizens of Israel have been and remain in our thoughts and prayers.

Our associates in Israel have shown an incredible commitment to our customers each other and their communities in the face of the horrific situation by continuing to supply bottled water to the.

The citizens of Israel.

I want to thank them for their tremendous efforts.

Now on to today's news as we announced that we have agreed to sell a significant portion of our international businesses to Culligan International.

Tom Harrington: This deal is the first of several transactions that will occur in 2024 as we are executing strategic alternatives for the remainder of the international businesses, which includes Aimia Foods in the UK, as well as our water and coffee businesses in the UK, Portugal, and Israel, and expect to finalize these in 2024. We believe this deal unlocks significant value for Primo Water shareowners. The transaction was the result of a proactive board-led process that resulted in an agreement that offers an attractive premium valuation for the businesses sold. It enables us to focus on the North American market where we have leadership, scale, and a significant addressable customer opportunity. The proceeds will be used to drive organic growth, reduce leverage, accelerate Water Direct tuck-ins, pursue opportunities in water adjacencies, and return capital to shareowners via share repurchases.

This deal is the first of several transactions that will occur in 2024, as we are executing strategic alternatives for the remainder of the international businesses, which include EMEA foods in the United Kingdom, as well as our water and coffee businesses in the United Kingdom porch.

And Israel and expect to finalize these in 2024.

We believe this deal unlocks significant value for Primo water's share audits.

The transaction was the result of our proactive board led process that resulted in an agreement that offers an attractive premium valuation for their business is sold.

It enables us to focus on the North American market, where we have leadership scale and a significant addressable customer opportunity.

The proceeds will be used to drive organic growth.

Reduced leverage accelerate water direct tuck ins pursue opportunities in water Adjacencies and return capital to shareowners via share repurchases.

Tom Harrington: Highlights of the transaction include up to $575 million all-cash purchase price for a significant portion of our international businesses, unlocking substantial shareowner value, an attractive premium valuation multiple of approximately 11x trailing twelve months Q2 adjusted EBITDA. Upon closing the transaction, we intend to repay the outstanding balance of our cash flow revolver with a long-term goal of sustaining net leverage under 2.5x adjusted EBITDA. In addition, upon closing, the board plans to authorize an incremental $25 million share repurchase program. To be clear, the existing $50 million authorization approved in August 2023 remains in place until closing and will be increased to an aggregate authorization of $75 million post-closing. The remaining international businesses are expected to generate additional cash as they are sold in the upcoming year.

Highlights of the transaction include up to $575 million, all cash purchase price for a significant portion of our international businesses unlocking substantial shareowner value.

An attractive premium valuation multiple of approximately 11 times trailing 12 months Q2 adjusted EBITDA.

Upon closing the transaction, we intend to repay the outstanding balance of our cash flow revolver with a long term goal of sustaining net leverage under two five times adjusted EBITDA.

In addition, upon closing the board plans to authorize an incremental $25 million share repurchase program.

To be clear the existing $50 million authorization approved in August of 2023 remains in place until closing and will be increased so in aggregate authorization of $75 million post closing.

The remaining international businesses are expected to generate additional cash as they are sold in the upcoming year.

Tom Harrington: This transaction marks another major milestone in our transformation as a company. Following the completion of the transaction and the divestiture of the remaining international businesses, the simplified pro forma Primo Water will have greater focus on our pure-play North American water businesses with scale and operational focus, an improved financial profile accelerating the achievement of several previously announced 2024 targets by approximately one year, the means to execute highly synergistic tuck-ins, as well as the ability to pursue adjacent water services and high-growth categories. Our capital allocation priorities will align with our opportunities for growth and will be able to support a full suite of options to drive value. We will be able to drive organic customer growth, digital initiatives, and customer retention activities, and our capital investments will be focused in high-impact profit-generating projects. We will reduce leverage, giving us increased flexibility to pursue the growth opportunities.

This transaction marks another major milestone in our transformation as a company.

Following the completion of the transaction and the divestiture of the remaining international businesses, the simplified pro forma Primo water.

We'll have greater focus on our pure play North America water businesses with scale and operational focus.

An improved financial profile accelerating the achievement of several previously announced 2024 targets by approximately one year.

The means to execute highly synergistic tuck ins as well as the ability to pursue adjacent water services and high growth categories.

Our capital allocation priorities will align with our opportunities for growth and we will be able to support a full suite of options to drive value.

We will be able to drive organic customer growth digital initiatives and customer retention activities and our capital investments will be focused in high impact profit generating projects.

We will reduce leverage giving us increased flexibility to pursue the growth opportunities we.

Tom Harrington: We will fund M&A through tuck-ins, as well as new and potential revenue streams. We will support the return of capital to shareowners via share repurchases. Upon closing, we will have a North American-based company that aligns with our brand strengths, a leaner, more focused associate base, a balance sheet that has lower leverage, the power to increase organic growth, greater earnings power, and a company poised to execute M&A at an accelerated pace. We anticipate releasing next year's guidance in conjunction with our 2023 year-end earnings in February 2024. I would like to thank all of the Primo Water teams for their contributions to the excellent performance of the business in delivering another quarter of strong revenue and earnings results and generating record adjusted EBITDA margins.

We will fund M&A through tuck ins as well as new and potential revenue streams.

And we will support the return of capital to shareholders via share repurchases.

Upon closing, we will have a north American based company that aligns with our brand strength, a leaner more focused associate base a balance sheet that has lower leverage the power to increase organic growth greater earnings power and a company poised to execute.

M&A at an accelerated pace.

We anticipate releasing next year's guidance in conjunction with our 2023 year end earnings in February 2024.

I would like to thank all of the Primo water teams for their contributions to the excellent performance of the business and delivering another quarter of strong revenue and earnings results and generating record adjusted EBITDA margins.

Tom Harrington: In Q3, we delivered consolidated revenue growth of 6%, adjusted EBITDA growth of 21%, adjusted EBITDA margin of a record 22.7%, a 270 basis points increase versus the prior year, adjusted free cash flow of $102 million, and sell-through of approximately 252,000 water dispensers. For Q3, consolidated revenue increased 6% to $622 million compared to $585 million. Excluding the impact of foreign exchange, revenue increased 6% for the quarter. Adjusted EBITDA increased $24 million to $141 million, an increase of 21%. Excluding the impact of foreign exchange, adjusted EBITDA grew 19%. In short, we delivered increased revenue, adjusted EBITDA growth, adjusted EBITDA margin expansion, and significant free cash flow.

In Q3, we delivered consolidated revenue growth of 6%.

Adjusted EBITDA growth of 21%.

Adjusted EBITDA margin of a record 22, 7%.

At 270 basis point increase versus the prior year.

Adjusted free cash flow of $102 million.

And sell through of approximately 252000 water dispensers.

For the third quarter consolidated revenue increased 6% to $622 million.

Compared to $585 million.

Excluding the impact of foreign exchange revenue increased 6% for the quarter.

Adjusted EBITDA increased $24 million to $141 million, an increase of 21% excluding.

Excluding the impact of foreign exchange adjusted EBITDA grew 19%.

In short we delivered increased revenue adjusted EBITDA growth adjusted EBITDA margin expansion and significant free cash flow.

Tom Harrington: Revenue growth was driven by strong revenue growth in Water Direct and Exchange of 7%, double-digit revenue growth in Water Refill and Filtration of 19%, increased revenue growth in our European operations of 4%, excluding the impact of foreign exchange, and global Water Direct customer retention of approximately 86%, a slight increase from last quarter. 2023 growth in customers is expected to reflect a combination of organic customer growth as well as the execution of our tuck-in strategy. As a reminder, our tuck-in acquisitions are a core component of our customer growth plans.

Revenue growth was driven by strong revenue growth of water direct in exchange of 7%.

Double digit revenue growth in water refill infiltration of 19%.

Increased revenue growth in our European operations up 4%, excluding the impact of foreign exchange.

And global water direct customer retention of approximately 86% a slight increase from last quarter.

2023 growth in customers is expected to reflect the combination of organic customer growth as well as the execution of our tuck in strategy. As a reminder, our tuck in acquisitions are a core component of our customer growth plans. These customers have strong retention rates.

Tom Harrington: These customers have strong retention rates, generally synergize within 90 days, and enhance route density, resulting in increased adjusted EBITDA dollars and margins in the markets where executed. Our razor-blade business model includes two approaches: the rental of water dispensers direct to residential and commercial customers, and the sale of water dispensers through retail partners. Both approaches enable growth in water solutions and contribute to our predictable and recurring revenue growth. In Q3, we had water dispensers sell-through of approximately 252,000 units, on pace with our target of 1 million water dispensers sold through for the year. In 2023, we are particularly focused on growth with our brick-and-mortar retail partners, where we have greater visibility into the connectivity to our water solutions and where the connectivity is dramatically higher than through e-commerce.

Generally synergize within 90 days and enhanced route density, resulting in increased adjusted EBITDA dollars and margins in the markets were executed.

Our razor razor blade business model includes two approaches.

The rental of water dispenses direct to residential and commercial customers and the sale of awarded dispenses through retail partners.

Both approaches enabled growth in water solutions and contribute to a predictable and recurring revenue growth.

In Q3, we had water dispenser sell through of approximately 252000 units on pace with our target of 1 million water dispensers sold through for the year.

In 2023, we are particularly focused on growth with our brick and mortar retail partners, where we have greater visibility into the connectivity to our water solutions and where the connectivity is dramatically higher than through e-commerce.

Tom Harrington: Our consolidated Water Direct and Exchange business continued to experience strong top-line momentum during the quarter, with 7% revenue growth driven by pricing and 86% customer retention in Water Direct. Our Water Refill and Filtration business continues to exhibit strong growth, with revenue increasing 19% in the quarter. The growth was driven by pricing, consistent service levels, and machine uptime at our refill stations. We have a high refill station retention rate, and we are expecting continued revenue and profit growth in this category. Water Refill targets a value-conscious consumer and provides similar margins to our other water offerings, which provides a diverse platform of water solutions for all consumers. We are pleased to report that our commitment to improving the customer experience has resulted in improved operational metrics, digital experience, and customer satisfaction.

Our consolidated water direct and exchange business continued to experience strong topline momentum during the quarter with 7% revenue growth driven by pricing and <unk>.

86% customer retention and more to direct.

I want to refill and filtration business continues to exhibit strong growth with revenue increasing 19% in the quarter.

The growth was driven by pricing consistent service levels and machine uptime at our retail stations.

Have a high refill station retention rate and we are expecting continued revenue and profit growth in this category.

Water refill targets, a value conscious consumer and provide similar margins to our other water offerings, which provides a diverse platform award solutions for all consumers.

We are pleased to report that our commitment to improving the customer experience has resulted in improved operational metrics digital experience and customer satisfaction.

Tom Harrington: As a reminder, a key service metric we focus on is On-Time In-Full, or OTIF. OTIF, simply put, is did we deliver to the customer on the scheduled day and with all the products they requested? OTIF in North America in Q3 increased when compared to Q3 of 2022. The ability to serve our customers in the most efficient manner possible is a critical driver of both our short and long-term profitability. Units per route per day increased approximately 4% compared to Q3 of 2022, and revenue per route increased 7% compared to Q3 of 2022. Our scale and leverage are becoming more evident as we service more customers with higher volume per route.

As a reminder, our key service metrics, we focus on is on time in full or <unk>.

<unk> simply put is did we deliver to the customer on the scheduled day and with all the products. They requested Otis North America in Q3 increased when compared to Q3 of 2022.

The ability to serve our customers in the most efficient manner possible is a critical driver of both our short and long term profitability.

Units per Rep per day increased approximately 4% compared to Q3 of 2022 and revenue per hour increased 7% compared to Q3 of 2022.

Our scale and leverage are becoming more evident as we service more customers with higher volume per route.

Tom Harrington: Route density and revenue per route have never been higher, and as a result, we're able to post record adjusted EBITDA margins of 22.7% across the entire company and North American margins of 25.7%. Relative to ESG, last month we received the results of the Sustainalytics Gap Analysis Report. We were able to significantly improve our overall risk score related to ESG factors and received a strong corporate governance score. Our strengths in ESG, coupled with our ownership of water rights and access to water sources, as well as our expansive distribution network, sets us apart in terms of our ability to meet our customers' needs whenever, wherever, and however they want. We have an economic moat that is not easily replicated and sets us up for sustained success.

Route density and revenue per Rep has never been higher and as a result, we were able to post record adjusted EBITDA margins of 22, 7% across the entire company and North American margins of 25, 7%.

Relative to ESG.

Last month, we received the results of the sustained Atlantica GAAP analysis report.

We were able to significantly improve our overall risk or related to ESG factors and received a strong corporate governance score.

Our strength in ESG, coupled with our ownership of water rights and access to water sources as well as our expansive distribution network sets us apart in terms of our ability to meet our customers' needs whenever wherever and however, they want.

Have an economic moat that is not easily replicated and sets us up for sustained success.

Tom Harrington: Looking ahead, we are reaffirming our full year 2023 revenue guidance to be between $2.32 and $2.36 billion, with revenue growth in a range of 7% to 9% and full year 2023 adjusted EBITDA to be between $460 and $480 million, while understanding the current challenges in Israel. Our disruptions to date have been relatively minor, and we continue to monitor the situation closely. We've made significant strides with respect to adjusted free cash flow generation through a combination of increased earnings and improved working capital. We expect an increase in full year 2023 annual adjusted free cash flow to $160 million, a $10 million increase versus prior guidance.

Looking ahead, we are reaffirming our full year 2023 revenue guidance to be between $2, three two and $2 $3 6 billion.

With revenue growth in a range of 7% to 9%.

And full year 2023, adjusted EBITDA to be between 460 and $480 million, while understanding the current challenges in Israel.

Our disruptions to date have been relatively minor.

And we continue to monitor the situation closely.

We've made significant strides with respect to adjusted free cash flow generation through a combination of increased earnings and improved working capital we.

We expect an increase in full year 2023 annual adjusted free cash flow to $160 million, a $10 million increase versus prior guidance.

Tom Harrington: We anticipate releasing next year's guidance in conjunction with our 2023 year-end earnings in February 2024. I'll now turn the call over to our CFO, David Hass, to review our Q3 financial results in greater detail.

We anticipate releasing next year's guidance in conjunction with our 2023 year end earnings in February of 2024.

I'll now turn the call over to our CFO, David <unk> to review, our third quarter financial results in greater detail.

David Hass: Thank you, Tom, and good morning, everyone. Starting with our Q3 results, consolidated revenue increased 6% to $622 million, compared to $585 million. Excluding the impact of foreign exchange, revenue increased 6% for the quarter. Adjusted EBITDA grew 21% to $141 million, which represents 270 basis points of margin expansion to 22.7%. Excluding the impact of foreign exchange, adjusted EBITDA grew 19%. Turning to our segment level performance for the quarter, North America revenue increased 5% to $470 million, compared to $447 million. Adjusted EBITDA in North America increased 18% to $121 million. Adjusted EBITDA margins climbed to 25.7%, a 280 basis point improvement over last year.

Thank you Tom and good morning, everyone, starting with our third quarter results consolidated revenue increased 6% to $622 million compared to $585 million, excluding the impact of foreign exchange revenue increased 6% for the quarter.

Adjusted EBITDA grew 21% to $141 million, which represents a 270 basis points of margin expansion to 22, 7%.

Excluding the impact of foreign exchange adjusted EBITDA grew 19%.

Turning to our segment level performance for the quarter, North America revenue increased 5% to $470 million compared to $447 million <unk>.

Adjusted EBITDA in North America increased 18% to $121 million adjusted EBITDA margins climbed to 25, 7%.

A 280 basis point improvement over last year.

David Hass: In our Europe segment, revenue increased by 13% to $81 million. Excluding the impact of foreign exchange, revenue increased 4%. Adjusted EBITDA in the Europe segment increased 32% to $20 million. Excluding the impact of foreign exchange, adjusted EBITDA increased by 18%. Adjusted EBITDA margins climbed to 25.2%, a 350 basis point improvement over last year. Turning to our Q4 and full year outlook, we expect consolidated revenue for the Q4 to be between $558 and $598 million, and adjusted EBITDA will be in the range of $108 to $118 million.

In our Europe segment revenue increased by 13% to $81 million, excluding the impact of foreign exchange revenue increased 4%.

Adjusted EBITDA in the Europe segment increased 32% to $20 million, excluding the impact of foreign exchange adjusted EBITDA increased by 18%.

Adjusted EBITDA margins climbed to 25, 2%, a 350 basis point improvement over last year.

Turning to our Q4 and full year outlook, we expect consolidated revenue for the fourth quarter to be between $558 million and $598 million and adjusted EBITDA will be in the range of $108 million to $118 million.

David Hass: As Tom mentioned, for the full year of 2023, we are reaffirming our guidance with revenue projected to be between $2.32 and $2.36 billion, with revenue growth in the range of 7% to 9%, and full year 2023 adjusted EBITDA to be between $460 million and $480 million. Additionally, we are raising our adjusted free cash flow guidance to $160 million, an increase of $10 million compared to the previous guidance. Our reported SG&A expenses in the third quarter were 50.7%. As expected, our Q3 SG&A declined as a percentage of sales as we were able to benefit from the leverage and scale of higher volume due to seasonality.

As Tom mentioned for the full year 2023, we are reaffirming our guidance with revenue projected to be between $2 three two and $2 three 6 billion with revenue growth in the range of 7% to 9% and full year 2023, adjusted EBITDA to be between 460 million.

And $480 million.

Additionally, we are raising our adjusted free cash flow guidance to $160 million, an increase of $10 million compared to the previous guidance.

Our reported SG&A expenses in the third quarter were 57% as expected our Q3 SG&A declined as a percentage of sales as we were able to benefit from the leverage and scale of higher volume due to seasonality on.

David Hass: On a year-to-date basis, adjusting for the one-time non-recurring items such as the activist proxy contest, SG&A would have been 52.5% compared to the reported 53.2%. We are maintaining our 2023 CapEx guidance of approximately $200 million, which is approximately 7% of revenue, plus an incremental $30 million. We reaffirm our prior guidance that we expect to return to our total CapEx spend of approximately 7% of revenue in 2025, irrespective of the transaction. Key initiatives to be funded from our CapEx plan include driving organic growth, including investments in digital capabilities, leading dispenser innovation, building a more environmentally friendly fleet, as well as investing in our private fleet, which will allow for a more efficient distribution of our products, installing more efficient water production lines, which will reduce water usage and increase productivity.

On a year to date basis adjusting for the onetime nonrecurring items such as the Actavis proxy contest SG&A would have been 52, 5% compared to the reported 53, 2%.

We are maintaining our 2023 capex guidance of approximately $200 million, which is approximately 7% of revenue plus an incremental $30 million.

We reaffirm our prior guidance that we expect to return to our total capex spend of approximately 7% of revenue in 2025 irrespective of the transaction.

Key initiatives to be funded from our Capex plan include driving organic growth, including investments in digital capabilities, leading dispenser innovation.

<unk>, a more environmentally friendly fleet as well as investing in our private fleet, which will allow for a more efficient distribution of our products installing more efficient water production lines, which will reduce water usage and increased productivity and driving growth in resale infiltration will refresh signage.

David Hass: Driving growth in refill and filtration with refreshed signage and branding of our existing units, the development of our on-the-go units, and new filtration innovations. For the full year 2023, we continue to expect interest expense of approximately $70 to 75 million. Most of our interest expense is tied to our two senior note debt facilities with very low interest rates of approximately 4%, with maturity dates of 2028 and 2029. The balance of our interest expense is tied to our cash flow revolver that we are actively managing lower with excess cash while rates remain at approximately 7%. Due to the increased cash generation from the business and the management of CapEx and working capital items, we've been able to prioritize reducing our cash flow revolver by $76 million in Q3 alone.

And branding of our existing units the development of our on the go units and new filtration innovations.

For the full year 2023, we continue to expect interest expense of approximately 70% to $75 million. Most of our interest expense is tied to our two senior note debt facilities with very low interest rates of approximately 4% with maturity dates of 2028 and 2029.

The balance of our interest expense is tied to our cash flow revolver that we are actively managing lower with excess cash while rates remained at approximately 7%.

Due to the increased cash generation from the business and the management of Capex and working capital items, we've been able to prioritize reducing our cash flow revolver by $76 million in the third quarter below.

David Hass: Full year 2023 cash taxes are expected to be approximately $25 million. This anticipates utilization of US net operating losses, or NOLs. We still have a substantial amount of US NOLs available in the balance of 2023 and 2024. As a reminder, our water dispenser category was previously under a 25% import tariff, but was reclassified last year and a refund process was initiated. We have recorded the refunds in the same manner as the original transactions. Through Q3, we have received approximately $5.1 million of tariff refunds, a slight increase since last quarter. Approximately $2.4 million of the $5.1 million is reflected in year-to-date adjusted EBITDA related to water dispensers sold to retail.

Full year 2023 cash taxes are expected to be approximately $25 million. This anticipates utilization of U S. Net operating losses or Nols, we still have a substantial amount of U S. Nols available in the balance of 2023 and 2024.

As a reminder, our water dispenser category was previously under a 25% import tariff, but was reclassified last year and a refund process was initiated.

We have recorded the refunds in the same manner as the original transactions.

Through Q3, we have received approximately $5 1 million of tariff refunds and a slight increase since last quarter.

Approximately $2 $4 million of the $5 1 million as reflected in year to date adjusted EBITDA related to water dispensers are sold to retail a similar $2 4 million is related to the water dispensers that we read as capex with the residual value approximately $326000 related to interest income.

David Hass: A similar $2.4 million is related to the water dispensers that we rent as CapEx, with the residual value approximately $326,000 related to interest income for the year-to-date tariff balance paid to Primo. Through Q3, $5.1 million is reflected in our adjusted free cash flow guidance that we'll discuss in a moment. We have not included any additional refund amounts in our updated guidance due to the uncertain timing of the refund process. As we look at our performance in the first three quarters of the year, we are confident in our ability to raise our annual adjusted free cash flow guidance to $160 million, an increase of $10 million.

For the year to date tariff balance paid to Primo.

Through Q3, $5 $1 million is reflected in our adjusted free cash flow guidance that we'll discuss in a moment.

We have not included any additional refund amounts and our updated guidance due to the uncertain timing of the refund process.

As we look at our performance in the first three quarters of the year, we are confident in our ability to raise our annual adjusted free cash flow guidance to $160 million, an increase of $10 million.

David Hass: The $10 million increase from prior guidance is attributable to the slight increase in tariff receipts since last quarter, with the balance related mainly to the benefits in working capital actions across the quarter and anticipated into year-end. We are pleased to report that we have achieved our targeted adjusted net leverage ratio with the latest quarter coming in at 2.9x, which is below our 3.0x target for the end of 2023, and we remain committed to achieve a targeted net leverage ratio of less than 2.5x after the completion of the transaction. Our year-to-date tuck-in M&A activity, along with potential acquisitions for the remainder of the year, positions us to achieve the high end of our 2023 tuck-in purchase guidance of $20 to 30 million. Acquisitions remain a complementary source of customer acquisition.

The $10 million increase from prior guidance is attributable to the slight increase in tariff receipts since last quarter with the balance related mainly to the benefits in working capital actions across the quarter and anticipated into year end.

We are pleased to report that we've achieved our targeted adjusted net leverage ratio with the latest quarter coming in at two nine times, which is below our 3.0 time target for the end of 2023, and we remain committed to achieve a targeted net leverage ratio of less than two five times after the completion.

Of the transaction.

Our year to date tuck in M&A activity, along with potential acquisitions for the remainder of the year positions us to achieve the high end of our 2023 tuck in purchase guidance of 20 million to $30 million acquisitions.

Acquisitions remain a complementary source of customer acquisition.

David Hass: Whether we acquire organically or through the acquisition of the customer base of tuck-ins, both are means of scaling our customer base. The cost per customer acquired through acquisition is typically similar to other means of acquisition. However, the difference lies in the stickiness of the customer. Customers acquired through tuck-in acquisitions are already users of the service and understand the benefits and annual costs of Water Direct service. We remain committed to Water Direct tuck-ins to accelerate density in our operating regions and provide operating scale. Our cash flow and balance sheet enable us to simultaneously return value to shareholders through regular quarterly dividends and opportunistic share repurchases while continuing to invest in internal and external opportunities that will further strengthen our operations and drive long-term growth.

Whether we acquire organically or through the acquisition of the customer base of tuck ins, both our means of scaling our customer base.

The cost per customer acquired through acquisition is typically similar to other means of acquisition. However, the difference lies in the stickiness of the customer.

Customers acquired through tuck in acquisitions are already users of the service and understand the benefits and annual cost of water direct service.

We remain committed to water direct tuck ins to accelerate density in our operating regions and provide operating scale.

Our cash flow and balance sheet enable us to simultaneously return value to shareholders through regular quarterly dividends and opportunistic share repurchases, while continuing to invest in internal and external opportunities that will further strengthen our operations and drive long term growth.

David Hass: Our board of directors has authorized a quarterly dividend of $0.08 per common share, which continues our path to the multiyear dividend step up with an increase in our quarterly dividend per share of $0.01 in each of the last two years. As it relates to the transaction announced this morning, we are very excited about Primo Water's financial profile on a go-forward basis. We remain confident in our ability to achieve previously communicated 2024 financial targets, and this transaction will allow us to accelerate several of these targets by up to a year sooner than anticipated. The transaction will also allow Primo Water to focus on the North American business that contributes most of the financial benefits to the company. Across the board, the transaction yields greater financial outcomes across the margin and adjusted free cash flow conversion metrics.

Our board of directors has authorized a quarterly dividend of <unk> <unk> per common share, which continues our path to the multiyear dividend step up with an increase in our quarterly dividend per share of <unk> in each of the last two years.

As it relates to the transaction announced this morning, we are very excited about Primo water's financial profile on a go forward basis.

We remain confident in our ability to achieve previously communicated 2024 financial targets and this transaction will allow us to accelerate several of these targets by up to a year sooner than anticipated.

The transaction will also allow primo water to focus on the North American business that contributes most of the financial benefits to the company.

Across the board the transaction yields greater financial outcomes across the margin and adjusted free cash flow conversion metrics, while the notional value of adjusted EBITDA and free cash flow declines the conversion of each future dollar increases significantly.

David Hass: While the notional value of adjusted EBITDA and free cash flow declines, the conversion of each future dollar increases significantly. This reflects the scale present in the North American business. When you take our updated 2023 full year adjusted free cash flow guidance of $160 million, the new Primo Water will deliver approximately $140 million of that benefit. As we right-size the company across 2024, we expect to replace nearly all of the $20 million of adjusted free cash flow by optimizing the cost structure of the company. This is prior to the additional organic and acquired free cash flow growth that will occur in normal course throughout the year. Immediately upon close, we intend to repay the outstanding balance on our cash flow revolver, as well as increase and fulfill the newly authorized $75 million share repurchase program.

This reflects the scale present in the North American business. When you take our updated 2023 full year adjusted free cash flow guidance of $160 million, the new Primo water will deliver approximately $140 million of that benefit as.

As we right size the company across 2024, we expect to replace nearly all of the $20 million of adjusted free cash flow by optimizing the cost structure of the company.

This is prior to the additional organic and acquired free cash flow growth that will occur in normal course throughout the year.

Immediately upon close we intend to repay the outstanding balance on our cash flow revolver as well as increase and fulfill the newly authorized $75 million share repurchase program. The additional.

David Hass: The additional proceeds will provide financial flexibility to pursue organic growth, accelerate accretive Water Direct tuck-in acquisitions, and engage in acquisition opportunities complementary and adjacent to our core North American water businesses. To achieve the $20 million in business optimization previously discussed, we intend to engage outside consultants to support initiatives to drive efficiencies as we shift from a global organization to one focused solely on the North American market. We intend to provide updated 2024 guidance for the North American-focused version of Primo Water in February during our normal earnings call related to Q4 and fiscal 2023 results. I will now turn the call back to Tom.

Proceeds will provide financial flexibility to pursue organic growth accelerate accretive water direct tuck in acquisitions and engage in acquisition opportunities complementary and adjacent to our core North American water businesses.

To achieve the $20 million and business optimization previously discussed we intend to engage outside consultants to support initiatives to drive efficiencies as we shift from a global organization to one focused solely on the North American market.

We intend to provide updated 2024 guidance for the North American focused version of Primo water in February during our normal earnings call related to Q4 and fiscal 2023 results.

I will now turn the call back to Tom.

Tom Harrington: Thanks, David. Our strong performance reinforces our confidence in our ability to deliver sustained growth, supported by strong revenue growth in our Water Direct and Exchange, Water Refill and Filtration businesses, continued execution of our tuck-in M&A strategy, the improved performance of our operations, and adjusted EBITDA margin expansion. We are making solid progress and have the right plan and the right team in place to succeed. We are one of the only pure play water platforms with leading national and local brands, and we benefit from a large and growing revenue base. Our long-term growth targets are driven by the connectivity of water dispensers to our water solutions, as well as consumer tailwinds, such as the focus on health and wellness and concerns about the aging water infrastructure. We have a healthy balance sheet, a compelling long-term growth outlook, and an attractive margin profile.

Thanks, David.

Our strong performance reinforces our confidence in our ability to deliver sustained growth supported by strong revenue growth in our water direct exchange refill and filtration businesses.

Continued execution of our tuck in M&A strategy.

The improved performance of our operations and adjusted EBITDA margin expansion.

We are making solid progress.

And have the right plan and the right team in place to succeed.

We are one of the only pure play water platforms, with leading national and local brand and we benefit from a large and growing revenue base.

Our long term growth targets are driven by the connectivity of water dispensers to our water solutions as well as consumer tailwind such as the focus on health and wellness and concerns about the aging water infrastructure.

We have a healthy balance sheet.

<unk> long term growth outlook, and an attractive margin profile.

Tom Harrington: We are confident that shareowners will be pleased with the results of the transaction announced earlier today as we create value by driving organic growth, reducing leverage, funding M&A, and supporting the return of capital. As an update, earlier this summer, I announced my retirement at the end of 2023, and the board initiated a search for my successor. The board, with the support of an international search firm, has met with a number of highly qualified candidates and is in the final stages of the process, and we therefore anticipate announcing a new CEO later this quarter. As you can see from our results, the business continues to perform at a high level with strong results and is clearly well-positioned for the future. It has been an amazing personal journey over the last two decades, including the last five years as the CEO of the company.

We're confident that shareowners will be pleased with the results of the transaction announced earlier today as we create value by driving organic growth.

Reducing leverage funding M&A and supporting the return of capital.

As an update.

Earlier this summer I announced my retirement at the end of 2023 and the board initiated a search for my successor.

Board with the support of an international search firm has met with a number of highly qualified candidates and is in the final stages of the process and we therefore anticipate announcing a new CEO later this quarter.

As you can see from our results the business continues to perform at a high level with strong results and is clearly well positioned for the future.

It has been an amazing personal journey over the last two decades, including the last five years as the CEO of the company.

Tom Harrington: I'm proud of what we have accomplished. The transformation of the company from a private label juice, coffee, and soft drink manufacturer into a pure-play water company has proven to be the right move for our customers, associates, and shareowners. All this accomplished while managing through a global pandemic, record high inflation, two major wars, and a significant board refresh. The current transaction to sell most of our international businesses at a premium valuation will enable the company to become a more focused North American water business. I will remain a supporter of the company and will be cheering them on as an investor, fan, and a customer. I'd also like to thank you, the investors and analysts of the financial community. I'm hopeful that the marketplace recognizes the value of our model and our consistent execution and rewards us accordingly.

I'm proud of what we have accomplished.

The transformation of the company from a private label juice coffee and soft drink manufacturer into a pure play water company has proven to be the right move for our customers associates and shareholders.

All of this accomplished whilst managing through a global pandemic record high inflation.

Two major awards and a significant board refresh.

The current transaction to sell most of our international businesses had a premium valuation.

We will enable the company to become a more focused north American water business.

I will remain as supportive of the company and will be cheering them on as an investor fan and the customer.

I'd also like to thank you the investors and analyst of the financial community.

I'm hopeful that the marketplace recognizes the value of our model and our consistent execution and rewards us accordingly.

Tom Harrington: Our leadership team and our associates across the business are amazing, and I thank them for their tireless efforts and support in our mission of serving our customers with professionalism. They truly are the best in the business. With that, I'll turn the call back over to John for Q&A.

Our leadership team.

Our associates across the business are amazing and I, thank them for their tireless efforts and support and our mission of serving our customers with professionalism they choose.

Really are the best in the business.

With that I'll turn the call back over to John for Q&A.

Jon Kathol: 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. Operator, please open the line for questions.

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.

Operator, please open the line for questions.

Operator 2: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Derek Lessard, TD Cowen. Derek, please go ahead.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Derek Lessard, TD Cowen. Derek, please go ahead.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone.

You will hear three tolling prompt acknowledging a request in your questions will be pulled in the order. They are received should you wish to decline from the polling process. Please press star followed by two if you are using a speaker phone. Please lift the handset before pressing any keys one moment. Please for your first question.

Your first question comes from Derek Lessard TD Cowen Derek. Please go ahead.

Derek Lessard: Hey, good morning, everybody. Just wanted to-

Derek Lessard: Hey, good morning, everybody. Just wanted to...

Good morning, everybody.

Just wanted to say Derek.

Tom Harrington: Good morning, Derek.

Derek Lessard: Morning, Tom. I just wanted to start off maybe with a little congratulations, Tom, on your retirement. I think you've done a remarkable job at the helm of this organization through really challenging times, to say the least. Wishing you nothing but the best for the second act, whatever that may be.

Good morning, Tom.

Wanted to start off maybe with a little congratulations Tom on your retirement I think you've done.

Marketable job at the helm of this organization through really challenging times to say the least so wishing you nothing but the best for the second act whatever that may be.

Tom Harrington: Thanks, Derek. I appreciate that very much.

Thanks, Derik I appreciate that very much.

Derek Lessard: Of course, you're going out with a bang. I expected nothing less. Congrats to you with the help. Just had a few questions. Maybe it's more for David, but on the pro forma business, it's mostly really all on slide 12. Just wondering if maybe you could clarify the step-down in EBITDA from $470 million to $375 million. I think, you know, the Europe or the legacy or the business that you're selling in Europe is close to $60 million of that. What's the missing piece there?

Of course, Youre going out with a buying I expected nothing so congrats.

No.

Just a few questions.

Yes.

Maybe it's more for David but on the pro forma business, it's mostly really all on slide 12.

Just wondering if maybe you could clarify the step down in EBITDA from 470 million to $3 75, I think.

Or the legacy business that you're selling in Europe is close to $60 million of that so what's.

What's the missing piece there.

David Hass: Yeah. Thanks, Derek. The purpose of that was to give everyone a foundation of who and what we call NewCo will be on a 2023 guide basis. As you think about the 470 representing the midpoint of our guidance, 375 would include the PWNA component and the corporate component. The reality is there's about $416 million of equivalent midpoint guide EBITDA in the business that includes PWNA, corp, and the assets that will be part of secondary transactions across 2024. The other thing the 375 does not yet contemplate would be optimization gains as we look to rightsize the business, i.e., reduce some of the overhead in the business for just a domestic business.

Yeah. Thanks, Derrick so the.

The purpose of that was to give everyone a foundation of who.

And what we call Newco will be on a 23 guide basis.

So as you think about the $4 70, representing the midpoint of our guidance $3 75 would include the PWA component and the corporate component, but the reality is theres about $416 million of equivalent midpoint Guide EBITDA.

The business that includes PW, ne Corp, and the assets that will be part of secondary transactions across 2024.

The other thing the $3 75 does not yet contemplate would be optimization gains as we look to rightsize the business I E reduce some of the.

Reduce some of the overhead in the business for just a domestic business and so obviously.

David Hass: Obviously, on a pro forma basis, that 375 equivalent to the free cash flow chart has about $20 million of upside. This is all before we give guidance that includes both organic and inorganic growth likely across 2024. I think that's really the clarity we wanted to provide there. Appreciate the question.

On a pro forma basis that $3 75 equivalent to the free cash flow chart has about $20 million of upside and this is all before we give guidance that includes both organic and inorganic growth lighting across 2024, and so I think that's really the clarity we wanted to provide there.

Appreciate the question.

Derek Lessard: Okay. That's helpful. I guess maybe you just touched on it too on the same slide, looking at that free cash flow. You kind of walk it down to 140, then talk it back up to 160. I think you did allude to it on the call, but maybe just what you're expecting to drive that incremental $20 million.

Okay. That's that's helpful and I guess, maybe you just touched on it two on the same slide looking at that free cash flow.

To walk it down to 140 to talk you back up to 160.

I think you did allude to it on the call, but maybe just what youre expecting to drive that incremental 20 million Bucks.

David Hass: Correct. Yeah. Again, 160 would be the guide we just took up with that $10 million increase for the enterprise for 2023. Inside that 160, $140 million would be the adjusted free cash flow generative capacity of the PWNA business that we will have as a go forward. The $20 million represents the pro forma view of us, again, rightsizing with, you know, 100% flow through of that benefit. Basically saying that when we're done on a run rate basis, there will be zero slippage in free cash flow for what we consider the NewCo business. Now, that'll take across calendar 2024 to develop. Again, similarly to the comments in the prepared remarks, that is prior to any organic or inorganically acquired free cash flow that comes across 2024.

Correct, Yeah. So again 160 would be the guide we just took up with that $10 million increase for the enterprise for 2023.

Inside that 160 $140 million would be the adjusted free cash flow generative capacity of the PWM business that we will have as a go forward.

The $20 million represents the pro forma view of US again, right sizing with 100% flow through of that benefit basically saying that when were done on a run rate basis, there will be zero slippage in free cash flow for what we consider the newco business now that will take.

Frost calendar 'twenty four to develop and again similarly to the comments in the prepared remarks.

That is prior to any organic or Inorganically acquired free cash flow that comes across 2024, So kind of the same thing $3 75 has upside when you think about these optimization and we depicted the $1 40 with its $20 million off the upside to sort of get us back to parity with the business. We are right now and that kind of shows you again the <unk>.

David Hass: Kind of the same thing, 375 has upside when you think about these optimizations. We depicted the 140 with its $20 million offset upside to sort of get us back to parity with the business we are right now. That kind of shows you again, the free cash flow potential of who will be going forward of just this domestic, you know, oriented business.

Cash flow potential of who will be going forward of just this domestic oriented business.

Derek Lessard: Okay. That's all very helpful. Maybe I'll sneak one last one in just again on your 2023 guide, more specifically on Q4. Obviously, you know, big beat this quarter, but revenue and adjusted EBITDA guide you kept unchanged. That's not discontinued ops just yet, right?

Okay. That's all very helpful and maybe I'll sneak one last one and just again on your 2023 guide more specifically on Q4, obviously big beat this quarter by revenue and adjusted EBIT Guide you kept unchanged.

That's not in discontinued ops, just yet right now.

Tom Harrington: No, that's normal course, right? We expect to close on, you know, I think we've said 31 December 2023, that is existing company as is, where is. Look, Derek, to be completely transparent, we have a business in Israel. It hasn't, you know, it's performed well through the last crazy four weeks and thus far, minimal impact. Frankly, I wanted to have a degree of conservatism here because I don't know what's gonna happen over the next four or six weeks. We watch it, we're in contact in real-time all the time with the team. You know, just hedging against what could be, an outcome in Israel. I don't know, so I don't wanna get, you know, ahead of myself. I certainly don't wanna leave this for the new guy, you know, not properly reflecting what could be.

No.

No. So that's normal course right. So we expect to close on I think we've said 12 31. So that is existing company as is where is.

Eric to be completely transparent.

We have a business in Israel.

It hasn't performed well through the last crazy four weeks.

And thus far minimal impact, but frankly I wanted to have a degree of conservatism here because I don't know whats going to happen over the next four to six weeks, we watch it were in contact.

In real time, all the time with the team.

So.

Just hedging against what could be.

An outcome in Israel I don't know so I don't want to get ahead of myself I certainly don't want to leave this for the new Guy.

Uh huh.

Not properly, reflecting what could be.

Derek Lessard: No, that's fair, guys. Thanks, Tom. Thanks, David, again. Congrats.

Yes, Thats fair guys. Thanks, Tom Thanks, David again, congrats absolutely Derek appreciate Ya.

David Hass: Absolutely.

Tom Harrington: Derek, appreciate you.

Operator 2: Thank you. Your next question comes from Stephen Powers, Deutsche Bank. Stephen, please go ahead.

Operator: Thank you. Your next question comes from Stephen Powers, Deutsche Bank. Stephen, please go ahead.

Thank you. Your next question comes from Stephen Powers of Deutsche Bank. Steven. Please go ahead.

Stephen Powers: Great. Thanks so much. Tom, congrats, from me as well.

Great. Thanks, so much and Tom Congrats.

Tom Harrington: Yeah. Thanks, Stephen. Appreciate it.

Thanks.

Yes.

Stephen Powers: Great. Hey, building on that topic, the transaction topic, I guess. The first thing, Tom, you had mentioned, used the words in your prepared remarks and some slides as well, of proceeds from the transaction of up to $575 million, and I just wanted to clarify what might be the variables around that. I mean, if it's just normal course, you know, closing costs and the like, that's fine. But if there is any kind of variability in the terms of the deal, that would be helpful to know.

Great.

Hey, so.

Building on.

That topic transaction topic I guess, the first thing Tom you had mentioned you used the words in your prepared remarks and slides as well.

Proceeds from the transaction of up to $5 75, and I just wanted to clarify what might be the variables around that I mean, if it is just normal course closing costs and the like that's fine, but if there is any kind of variability in terms of the deal that would be helpful to know no no. There is no.

Tom Harrington: No, there's no if A then B. It is just those last-minute closing costs between now and then. So yeah, we expect to close at $575, but you know, costs could vary a little bit between now and then.

And B if it is just.

Those last minute closing close between now and then.

So, yes, we expect to close the $5 75, but.

Costs could vary a little bit between now and then so.

Stephen Powers: Okay.

Tom Harrington: There's no trigger that says up or down or anything to that nature. So.

No triggers that set up or down or anything to that nature.

Stephen Powers: Great. Okay. I guess, you know, maybe, you know, David, if you could clarify a little bit more, just, you know, kind of bridging the pro formas. Just I guess, another way to cut it. Like what is the EBITDA base of the businesses that remain for sale? Like, what is that EBITDA base from the perspective of a future buyer, number one? And then I guess, netted against that, what's the stranded corporate cost assumption that you've embedded here? I'm having a little hard time parsing that out from the numbers that have been provided.

Great Okay.

And then.

I guess.

Maybe.

Yes, David if you could.

Verify a little bit more just kind of bridging the pro forma I guess another way to cut it like what is the EBITDA base.

The businesses that remain for sale what is that EBITDA base from the perspective of.

Of a future buyer number one and then I guess netted against that what's the what's the stranded.

Corporate cost assumption that you've embedded here.

Hard time parsing that out from the numbers you provided.

David Hass: Yeah. Understood. Obviously on the screen with that same slide that Derek was asking about, there's about a $95 million step down. Inside that, the residual assets not included with this transaction, on an equivalent kind of guide, you know, guide apples to apples like, value is about $40 million USD, local currency here. Then there's about $2 million of stranded North American overhead that gets shipped overseas, basically, if you will, as support costs that comes back and increases the overall corp value to about $35.5 million. That's, you know, kind of the bucket, if you will, of the money where we're trying to seek the optimization across 24.

Yeah understood so the.

Obviously on the screen with the same slide that Derek was asking about it was about a $95 million step down in.

Inside the residual assets not included with this transaction.

On an equivalent kind.

Kind of a guide.

Apples for apples like value is about $40 million in USD.

Local currency here and then there's about $2 million of stranded.

North American overhead that gets.

<unk> overseas basically if you will is support cost that comes back in.

<unk> increases the overall corp value to about $35 5 million.

And so thats kind of the.

The bucket if you will of the money, where we're trying to seek the optimization across 24.

Stephen Powers: Okay. I got it. From an apples-to-apples basis, you've got about a $40 million EBITDA base that remains for sale.

Okay, Okay, I got it but from an apples to apples basis, you've got about a $40 million EBITDA base that remains for sale.

Stephen Powers: Okay. I got it. From an apples-to-apples basis, you've got about a $40 million EBITDA base that remains for sale.

David Hass: That's correct. Yeah. Again, we are in active processes to monetize those additional transaction of those entities. You know, today, obviously, we wanted to talk about the primary and the first transaction that is a major benefit for us to begin the focus here domestically.

That's correct, yes, and again, we are in active processes to monetize those additional transaction.

All of those entities.

But today, obviously, we wanted to talk about the primary and the first transaction that is a major benefit for us to begin the focus here domestically.

Stephen Powers: Okay. That was in my mind. I just wanted to make sure that those conversations, like, you know, are all in flight. It sounds like they are. Just wanted to confirm.

Okay.

I just wanted to make sure that those conversations are all in flight. It sounds like they are just wanted to absolutely.

David Hass: Absolutely. That's correct. Yes.

Stephen Powers: Okay. Very good. Thanks so much.

Correct, yes, okay.

Very good thanks, so much thank.

Tom Harrington: Thank you.

David Hass: Thanks, Stephen. Have a good one.

Thank you thanks, David I would go in.

Operator 2: Thank you. Your next question comes from Andrea Teixeira, J.P. Morgan. Andrea, please go ahead.

Operator: Thank you. Your next question comes from Andrea Teixeira, J.P. Morgan. Andrea, please go ahead.

Your next question comes from Andrea Teixeira Jpmorgan Andrea Please go ahead.

Andrea Teixeira: Thank you. Good morning. Congrats on the transaction.

Good morning.

Congrats on the transaction.

Tom Harrington: Thank you, Andrea. Good morning.

Thank you all have a good morning.

Andrea Teixeira: Yeah, good morning. I had congratulated you on your retirement, so here goes again.

Yeah. Good morning, Ed I have to congratulate you on your retirement.

So as again.

Tom Harrington: You said nice things about me, I remember.

The nice thing about me I remember, yes.

Andrea Teixeira: Yes. I have two questions. First on the deal, and if we step back, Tom, on this divestiture, you talked about strategic options for you now, as you have been. Now you're gonna be able to focus in the US. Can you think about like, potentially bigger transaction, transformational transactions as you had attempted in the past, obviously with, you know, your largest competitor? Is that like this obviously puts you in a completely different position from a capital structure perspective. You're gonna have excess cash, no leverage. You're gonna have, obviously, additional free cash.

Yes, yes.

So that's.

I have two questions first on the on the deal and if we step back Tom.

This divesture you talked about strategic options.

Now as you have been now youre going to be able to focus in the U S.

Can you think about like potentially bigger transaction transformational transactions as you had attempted in the past.

Obviously with your largest competitor.

Is that like this obviously puts you in a completely different.

Position from a capital structure perspective, youre going to have excess cash.

The leverage youre going to have obviously.

Additional free cash.

Andrea Teixeira: I mean, just a very little impact on your free cash flow. From an LBO perspective or anything you can think of, like, I was just hoping to see where this company could take in terms of like, you know, next steps from a strategic perspective. Then second on the underlying business, there are a couple of things that I wanted to clarify. One is the Water Direct and Exchange. Can you talk a bit more about the composition of the top line? I know this is something that investors in CPG have been asking throughout, like in terms of volume, customers, and pricing within the Q3 growth. And also, I mean, I know in the dispensers you had a very tough comparison the quarter.

Just a very little impact on your free cash flow. So from an LBO perspective, or anything you can think of like I was just hoping to see if you.

Could this company to take.

In terms of like.

Next steps from a strategic perspective, and then second on the underlying business for a couple of things that I wanted to clarify one of the water direct the next change.

Can you talk a bit more about the compensation of the topline I know I know this is something that investors and CPG have been asking for how to like in terms of volume customers and pricing within the third quarter growth.

And also I mean, I know and dispensers you had a very tough comparison in the quarter. I think you were shift shipping ahead of consumption ahead of the price increase last year.

Andrea Teixeira: I think you were shipping ahead of consumption, ahead of the price increase last year. Just like, you know, a little bit of color there if you're seeing anything as it relates to any deceleration or anything that we should be aware of.

But just like a little bit of color there.

If you're seeing anything.

As it relates to any.

Any deceleration or anything that we should be a warehouse.

Tom Harrington: All right, Andrea.

Alright, I know, it's a lot.

Andrea Teixeira: I know it's a lot.

Tom Harrington: Let's talk about our capital deployment strategy, right? Which I think is important. As we see it today, we will invest in growth in North America, right? That's, you know, the organic triggers, digital capabilities, as well as investments against, you know, high profit-generating projects. You know, that would be some of the plants that we've discussed in the past, as an example. Continued development on our digital capabilities, so to support the growth of the top line from an organic perspective. We are focused on deleverage, so we will reduce the cash flow revolver to zero at the time of closing, which will get us, you know, in a position that we could maintain a 2.5x leverage go forward, you know, for the foreseeable future.

Yes, we will see if I.

We'll get through this so.

Let's talk about <unk>.

Our capital deployment strategy, right, which I think is important as we see it today, we will invest in growth.

In North America right. So that's.

Organic triggers digital capabilities as well as investments against high profit generating projects.

And that would be some of the plants that we've discussed in the past as an example continued development on our digital capabilities. So to support the growth of the top line from an organic perspective, we are focused on deleverage. So we will.

Reduce the cash flow revolver to zero at the time of closing, which will get us in a position that we could maintain that two five times leverage go forward.

On for the foreseeable future that is our intended path.

Tom Harrington: That is our intended path. We have the ability because we have a robust pipeline of, you know, think of it as Water Direct, M&A tuck-ins, that we will invest energy there because they remain highly synergistic and help us build both EBITDA, but certainly EBITDA margins as we leverage that, those incremental customers and in revenue through inside the markets where we execute those. That'll be a primary focus of ours. And of course, we, you know, we reference share repurchase, you know, as part of our go-forward capital deployment strategy. We don't see anything transformative on the near-term horizon. We will look at what I'll call water adjacencies. Are there other highly profitable areas that fit in water, because we are a water company, that we will consider?

We have the ability with because we have a robust pipeline of <unk>.

Think of it as water direct M&A tuck ins that we will invest the energy there because they remain.

Highly synergistic and help us build both EBITDA, but certainly EBITDA margins as we leverage that those incremental customers and revenue.

Inside the markets, where we execute does so that'll be a primary focus of ours and then of course, we would.

Referenced share repurchase as part of our go forward capital deployment strategy.

We don't see anything transformative on the near term horizon.

We will look at what I'll call a water adjacency. So are there other highly profitable areas that fit and water because without water company that we will consider theres nothing eminent or actionable there, but this gives us the ability to further pursue adjacent states that that fit with our model.

Tom Harrington: There's nothing imminent or actionable there, but this gives us the ability to further pursue adjacencies that fit with our model and that, at the end of the day, would inure to our shareholders' benefit. So that's the capital deployment, our current view of how we'll use cash, and responsive to your question about, you know, that biggest customer. I'll skip the revenue. I'll leave that one for David, but I'll just touch base briefly on your dispenser question. Yes, we had a big comp. We were able to sell through roughly 252,000 dispensers. We're confident on our ability to get to approximately 1 million this year. Importantly, 1 million of sell-through in 2023. Importantly, we're very focused on brick-and-mortar as opposed to e-commerce.

Net.

At the end of the day would ignore it and nor to our shareholders benefit.

So that's the capital deployment.

Our current view of how we will use cash and responsive to your question about that biggest customer.

I'll skip the revenue I'll leave that one for David.

Touch base briefly on your dispenser question, Yes, we had a big comp.

We're able to sell through roughly 252000 dispensers, we're confident in our ability to get to approximately $1 million. This year importantly, millions of sell through in 2023.

Importantly, we're very focused on brick and mortar.

As opposed to e-commerce, and part of our cycle or the comp we have it is because of some activities. We did a year ago in e-commerce.

Tom Harrington: Part of our cycle or the comp we have is because of some activities we did a year ago in e-commerce. But we've really shifted to be focused on that brick-and-mortar because we have a clear line of sight to the connectivity. When I sell a dispenser to a large retailer, I can see it translate into an exchange sale. It's much harder for us to see that benefit in e-commerce. I think some of the future work that the team will have to do is, how do we improve that visibility in e-commerce? We're not there today, and shift our real focus to how do we sell more in big box retailers and all of our customers where, you know, we enjoy a relationship where they sell dispensers. Hopefully that clarifies that a bit.

We've really shifted to be focused on that brick and mortar because we have a clear line of sight to the connectivity when they sell a dispenser a large retailer I can see it.

Translate into an exchange sale, it's much harder for us to see that benefit in e-commerce.

So I think some of the future work that the team will have to do with how do we improve that visibility and ecommerce we're not there today and shift our real focus to how do we sell more in big box retailers in all of our customers were.

We enjoy a relationship where they sell dispensers.

So hopefully that clarifies that a bit and then I'll flip the ret your revenue question or component questions over to David.

Tom Harrington: I'll flip your revenue question or component questions over to David.

Andrea Teixeira: Thank you.

David Hass: Yes. Andrea, within the quarter itself, again, focused on the North America side as that's our go-forward business. We had a positive volume contribution of close to 1%, with the balance being pricing. That obviously shows a sequencing that is how we had articulated the pacing would undergo throughout the calendar year, and that came true within Water Direct and Exchange, being, you know, about 1 point of volume and the balance being price.

So Andrea.

Within the quarter itself again focused on the North America side as that's our go forward business we had.

Positive volume contribution of close to a percent with the balance being pricing and so that obviously shows a sequencing that is how we had articulated the pacing would undergo throughout the calendar year and that came true within water direct in exchange.

<unk>.

About a point of volume and the balance being price.

Andrea Teixeira: Very helpful. I'll pass it on. Thank you.

Very helpful I'll pass it on thank you.

David Hass: Thank you, Andrea.

Tom Harrington: Thanks, Andrea.

Thank you Andrew Thanks Andrea.

Operator 2: Thank you. Your next question comes from Daniel Moore, CJS Securities. Daniel, please go ahead.

Operator: Thank you. Your next question comes from Daniel Moore, CJS Securities. Daniel, please go ahead.

Thank you. Your next question comes from Daniel Moore CJS Securities. Daniel Please go ahead.

Daniel Moore: Thank you. Good morning, Tom and David. Tom, thank you again. Best of luck. I think you left this company with an exceptional collection of assets poised for growth going forward.

Thank you good morning, Tom David and Tom. Thank you again best of luck I think you've left the company with exceptional collection of assets for poised for growth going forward.

Tom Harrington: Thanks, Dan.

Thanks, Dan I wanted to.

Daniel Moore: I wanted to-

Tom Harrington: Thanks, Dan. Appreciate that.

Daniel Moore: Absolutely. I wanted to, I was gonna say don't let the door hit you, but I didn't want to say that, so. If it's in the presentation and I missed it, please let me know. Is there any tax leakage of the $575? And I'm assuming there's no regulatory hurdles that you're particularly concerned with given the short window in which you expect to close.

Totally.

I wanted to I was going to say don't let the door hit you, but I must say that too.

Okay.

Yes.

If it's in the presentation and I missed it. Please let me know, but is there any tax leakage to the $5 75, and I'm assuming there is no regulatory hurdles that you are particularly concerned with given the short window in which you expect to close.

Tom Harrington: Yeah. You know, we obviously have to get through some regulatory hurdles, but you know, Culligan believes they'll get through those. You can see it's a pretty quick close. We think, you know, there are no guarantees, but you know, our view is, Culligan's view is we'll get through any of those, in normal course over the next kind of several weeks. Next, whatever it is, two months, Dan.

Yes.

You have to get through some regulatory hurdles, but.

Collagen believes they will get through those.

And you can see it's a pretty quick close so we think.

<unk>.

There are no guarantees.

But our view is collagen view is we will get through any of those in normal course over the next several weeks.

Whatever it is two months Dan.

David Hass: Yeah. Dan, on the tax side, we're estimating some minimal leakage. We don't believe that will actually end up becoming true, but just for conservatism and kind of how we're looking to deploy capital, you know, we're reserving a little bit, sort of sub-$10 million on that. We'll circle back obviously upon close with the final outcome.

Yes, and Dan on the Tech side, where we're estimating some minimal leakage. We don't believe that will actually end up becoming true, but just for conservatism and kind of how we're looking to deploy capital, we're reserving a little bit sort of sub $10 million on that.

But we will circle back obviously upon close with the final outcome.

Daniel Moore: Perfect. As it relates to, you know, the multiple you received from Culligan, Tom, when you think about the assets that you're selling relative to the assets that, you know, remain, any discernible differences? You know, in other words, obviously Culligan will probably, you know, generate some pretty reasonable synergies on their side, and that's embedded in the multiple. You know, anything else that would explain the sort of discrepancy between, you know, the sale price versus where Primo's trading? Thanks again.

Perfect.

And then as it relates to the multiple you received from Culligan, Tom when you think about the assets that youre selling relative to the assets that remain.

Any discernible differences you know in other words, obviously collagen will probably generate some pretty reasonable.

Synergies on their side and Thats embedded in the multiple but anything else that would explain the sort of discrepancy between the sale price versus where pretty much trading. Thanks again.

Tom Harrington: Yeah. You know, the Culligan deal stands on its own for what it is and, you know, the value that, you know, that they were willing to pay for us for, you know, in many cases, overlapping assets. That's that. I don't wanna get, you know, we're in processes and starting processes and, you know, don't really wanna get into a public discussion about what multiple we might not get for those remaining assets 'cause, you know, it'll all be different. I think it would be wise to not disclose any of that will hurt our ability to maximize value, frankly, over the long haul on those assets.

Yes.

The collagen deal stands on its own what it is and the value of that.

They will be willing to pay for us for mill in many cases overlapping assets.

So that's that and I don't want to get.

And processes and starting processes and don't really want to get into a public discussion about what multiple you might might not get for those remaining assets because it will all be different.

So I think it would be wise to not disclose any of that will hurt our ability to maximize value frankly over the long haul on those assets.

David Hass: I think as communicated, you know, the ability with just this transaction to eliminate the revolver, with just this transaction to increase the share repurchase by $25 million, you know, obviously we'll have additional communications as those transact about next set or next use of proceeds. We're pretty pleased that with just this transaction we can be that impactful to sort of our leverage and our, you know, cash flow.

As communicated.

Ability with just that this transaction to eliminate the revolver.

Just this transaction to increase the share repurchase by $25 million.

Obviously, we will have additional communications as those transact about next set or next to use of proceeds but we're pretty pleased with just this transaction, we can be that impactful sort of our leverage and our.

Cash flow.

Daniel Moore: Perfect. The last one, while I get one more crack at you, Tom. Route density, obviously a big focus, and you know, kind of reached peak level, well not peak, but in record levels this quarter. Excluding further price increases, how much room is there in your mind to continue to improve route density from current, you know, these kind of current levels we saw in Q3? Thank you again.

Perfect and then the last one while I get one more crack at your Tom Route density, obviously, a big focus.

<unk>.

Kind of reached peak levels without peak, but record levels this quarter.

<unk> further price increases how much room is there in your mind to continue to improve route density from current these current levels we saw in Q3.

Tom Harrington: Thanks, Dan. If you look at the numbers we put out there, it runs on the order of 3% to 4% on a quarter-over-quarter basis. I don't think we've finished. It does absolutely have to do with customer density. One of the things we benefit from our Costco relationship is we bring in customers over those same routes. As you reduce miles and you have more customers in a smaller geographic footprint, we'll deliver more on a daily basis of that footprint. It's also an important component of our M&A tuck-in strategy. As you buy businesses in overlapping geographies, we will continue to benefit from the leverage that they provide us in terms of route density. I think maybe he dropped.

Yeah. Thanks, Dan if you look at the numbers, we put out there it runs on the euro at 3% to 4% on a quarter over quarter. So I don't think we finished.

It does absolutely have to do with customer density so as one of the things we benefit from our Costco relationship as we bring in customers over those same routes.

So as you reduce miles and you have more customers in a smaller geographic footprint will deliver more on a daily basis of that footprint and then it's also an important component of our M&A tuck in strategy as you buy businesses and overlapping overlapping geographies, we will continue to benefit from the leverage.

<unk> that they.

<unk> us in terms of route density.

And I think maybe he dropped.

Operator 2: Okay. Thank you. Moving on, your next question comes from John Zamparo, CIBC. John, please go ahead.

Operator: Okay. Thank you. Moving on, your next question comes from John Zamparo, CIBC. John, please go ahead.

Okay. Thank you moving on your next question comes from John's MRO CIBC John Please go ahead.

John Zamparo: Thank you. Good morning. Tom, I know your ears are already burning, but I'll echo my congratulations on your career and transition as well. It's been a pleasure.

Thank you good morning, Tom I know youre user already burning, but ill echo my congratulations on your career and transition as well it's been a pleasure.

Tom Harrington: Thanks, John. Appreciate it.

Thanks, John I appreciate it.

John Zamparo: My first question's on the M&A market, and I wonder what you've seen here. Are there more opportunities now relative to years past, given private equity might be pulling back in the environment of higher for longer? Is that one of the reasons that you might wanna accelerate tuck-in deals?

My first question is on the M&A market.

And I wonder what you've seen here are there more opportunities now relative to years past given private equity might be pulling back in the environment of higher for longer is that one of the reasons that you might want accelerates tuck in deals.

Tom Harrington: Well, I think there's you may recall last year when we gave our guide of tuck-ins of 20 to 30, we were purposeful about lack of clarity about the revenue performance of some of those tuck-ins, and that we articulated we wanted to be cautious 'cause many times we pay a multiple of revenue, and we wanted to make sure that any price increases they took stuck. Secondly, you know, we talked about the impact of high fuel prices on smaller operators. We think that was a prudent decision and that, you know, as we stand here today, we have as robust a pipeline as we've had in maybe as long as I can remember doing this, right?

Well I think there as you may recall last year. When we gave our guide of tuck ins of 20 to 30, we were purposeful about.

Lack of clarity about.

The revenue performance of some of those tuck ins that.

We articulated we wanted to be cautious because many times with pay a multiple of revenue and we wanted to make sure that any price increases they took stock.

And secondly that we talked about the impact of high fuel prices on small operators. So we think that was a prudent decision.

And that as we stand here today, we have as robust a pipeline as we've had in <unk>.

Maybe as long as I can remember doing this right. So it is a.

Tom Harrington: It is a actionable, you know, 2024/2025 pipeline of activities that, you know, we have to be thoughtful about timing of when we do them so we can execute properly. That's the company's job. But it's a robust platform. I think it's the market conditions that are inuring to our benefit, and we continue to, you know, kind of be the leader in this space in terms of our ability to execute in more to direct.

Actionable.

'twenty four 'twenty five pipeline of activities that we have to be thoughtful about timing of when we do them. So we can execute properly that the company's job.

But it is a robust platform. So I think it's the market conditions that are ignoring to our benefit.

And we continue to kind of be the leader in this space in terms of our ability to execute in more of a direct.

David Hass: Yeah. I think, John, the one thing I'd pile on there is because of Primo's scale domestically and our branch network, we really don't bump up against private equity where a single transaction would benefit them none in creating or starting a platform, if you will. So we would have the ability to compete at any level really, because of the ability to synergize those down quickly within our network itself. I feel pretty fortunate that that's our pipeline and its ability to sort of, you know, tuck in very smoothly.

And I think John the one thing I'd pile on there is because of Primo's scale domestically in our branch network, we really don't bump up against private equity where a single transaction.

Benefit them, none in creating or starting a platform. If you will so we would have the ability to compete in any at any level really because of the ability to synergize those down quickly within our network itself.

So I feel pretty fortunate that that's our that's our pipeline and its ability to sort of tuck in very smoothly.

John Zamparo: Right. Understood. Okay, that's helpful. My follow-up is on pricing. Specifically, you've demonstrated some real pricing power over the past couple of years. I wonder how you're thinking about pricing for 2024. Do you have anything planned at the moment? Does it depend on your outlook for costs? Have you seen pushback on pricing subsequent to Q3?

Right understood. Okay. That's helpful. And then my follow up is on is on pricing.

Specifically, you've demonstrated some real pricing power over the past couple of years I Wonder how youre thinking about pricing for 24, you have anything planned at the moment as it depends on your outlook for costs have you seen pushback on pricing subsequent to.

Tom Harrington: Yeah. It's a

Yes, Yes, yes fair question, John I think in my prepared remarks, we talk about our retention rate on that what a direct business at 86%, which was a slight uptick from prior quarter.

John Zamparo: Yeah.

Tom Harrington: Yes. Yeah, fair question, John. I think in my prepared remarks, we talk about our retention rate on that Water Direct business at 86%, which was a slight uptick from prior quarter. That's a pretty good indication of our ability and the customer's reaction to pricing. We haven't, you know, went pretty elastic. We would currently in 2024 look at normal course pricing, right? We don't currently see the need for accelerated pricing, you know, based on where inflation appears to be settling in. But we've always reserved the right if that number moves, then we'll get ahead of it. We certainly watch fuel pricing, you know, on a daily basis. You know, if that ticks the other way, we'll take an action.

So it's a pretty good indication of our ability and the customer's reaction to pricing.

So we havent.

Pretty elastic.

We would currently in 24 look at normal course pricing.

Right. So we don't currently see the need for accelerated pricing base.

Based on.

Where inflation appears to be settling in.

But we've always reserve the right if that number moves and we will get ahead of it and we certainly watch fuel pricing.

On a daily basis, and if that takes the other way we will taken action and I think the last two and a half years or so would indicate that the <unk>.

Tom Harrington: I think the last two and a half years or so would indicate that the customer base is stable. We're able to drive the pricing through. It does offset inflation, and we've been able to add to our margins, you know, as a result of those actions over the course of, I don't know, 15, you know, 12 quarters, right? That we've been doing it.

Basic stable, we're able to drive the pricing through it does offset inflation and we've been able to add to our margins.

As a result of those actions over the course of I don't know if <unk>.

A dozen quarters right that we've been doing it.

Okay.

John Zamparo: Okay. Fair enough. Thank you very much.

Okay fair enough. Thank you very much.

Tom Harrington: Thanks, John.

Thanks, John.

Operator 2: Thank you. Your next question comes from Pavel Molchanov, Raymond James. Pavel, please go ahead.

Operator: Thank you. Your next question comes from Pavel Molchanov, Raymond James. Pavel, please go ahead.

Thank you. Your next question comes from Pavel <unk> of Raymond James Pavel. Please go ahead.

Pavel Molchanov: Yeah, thanks for taking the question. Kind of back on the M&A topic. The fact that you have not been particularly active with roll-off activity over the past 12 months, is that because you've been kind of reluctant to take on more debt while you are above the leverage targets?

Yes, thanks for taking the question kind of back on the M&A topic. The fact that you have not been.

Particularly active with roll off activity over the past 12 months is that because you've been kind of reluctant to take on more and more that while you are above the leverage targets.

Tom Harrington: No. You know, we funded out of free cash flow, and that has not been the driver. It was more strategically. Obviously, debt is strategic and our long-term target where we said we wanted to get under 3 in 2023. We did it a quarter early. We're 2.91 at the end of Q3. Clear line of sight to 2.5 as normal course. I don't wanna diminish how important that is. But it was really more about market conditions, largely driven by inflation, largely driven within the fuel cost and how that we believed would wear on the smaller target or the direct operators, and I believe that's now become true based on our pipeline.

No.

We funded out of free cash flow.

And that has not been the driver it was more strategically obviously that are strategic in our long term target, where we said we wanted to get it under three in 2023, we did it a quarter early were $2 91 at the end of Q3 clear line of sight to two and a half is normal course, so I don't want to diminish.

How important that is.

But it was really more about market conditions, largely driven by inflation largely driven within the fuel cost and how that.

We believed would wear on a smaller target or the direct the operators and I believe that's now become true based on our pipeline.

David Hass: Yeah. I think, Pavel, we've been able to buy the right targets at the right price this year. Then obviously within the quarter alone, still reduce the revolving loan by $76 million. It's not been an either/or to date. It's been about the right target, the right geography, the right ability to synergize it down for value. But again, we're of course excited about the cash generative opportunity of the new business that seems to match well heading into 2024 with the pipeline that built across for us to execute against next year. I think it's maybe reversing your question a little bit. We're pretty excited about where we can go with tuck-ins next year.

Yes, I think Pablo.

We've been able to buy the right target at the right price. This year and then obviously within the quarter alone still reduce the revolving loan by $76 million. So it has not been an either or today, it's been about the right target the right geography, the right ability to synergize the down for value.

But again, we are of course excited about the cash generative opportunity of the new business that seems to match well heading into 'twenty four with the pipeline that built across for us to execute against next year. So I think it's maybe reversing your question a little bit we're pretty excited about where we can go with tuck ins next year.

Yeah.

Pavel Molchanov: Now that you will be a North American pure play, are there any particular states or Canadian provinces where you have not historically, you know, perhaps accessed, but are now going to try to penetrate?

And now that you will be a north American pure play are there.

Killer.

Rates or Canadian provinces, where you have not historically, perhaps accessed but are now going to try to penetrate.

Tom Harrington: Yeah. You know, our first course is, you know, I'll call it, Pavel, overlapping 'cause they're the most synergistic to us. You know, greenfield has historically not been an area we've invested energy on tuck-ins. What we will do, though, is begin to think about what are those water adjacency that makes sense for us. That would be, you know, to the right of center, but it's something that this company needs to think about longer term, about what are the things we could do, 'cause we will be in a position to do that makes sense for the company and its shareholders.

Our first course is all caught barbell overlapping because they are the most synergistic to us.

So.

Greenfield has historically not been an area, we've invested LNG on tuck ins.

What we will do though is begin to think about what are those water adjacency that makes sense for us so that would be.

To the right of center, but it is something that this company needs to think about longer term about what are the things we could do because we will be in a position to do that that makes sense for the company and its shareholders.

Pavel Molchanov: All right. Thanks very much.

Alright, thanks very much.

Tom Harrington: Thanks, Pavel. Appreciate it.

Thanks, Bob I appreciate it.

Operator 2: Thank you. There are no further questions at this time. I will now turn it back to Jon Kathol for closing remarks.

Operator: Thank you. There are no further questions at this time. I will now turn it back to Jon Kathol for closing remarks.

Thank you there are no further questions at this time I will now turn it back to Jon Cutler for closing remarks.

Jon Kathol: Thanks, Chris. This concludes Primo Water's Q3 results call. Thank you all for attending.

Thanks, Chris This concludes Primo water's third quarter results call. Thank you all for attending.

Okay.

Operator 2: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.

Q3 2023 Primo Water Corp Earnings Call

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