Q2 2025 Primo Brands Corp Earnings Call

Welcome to Primo, Brands Corporation, second quarter, 2025 earnings conference. Call. The call is being webcast live on Primo Brands website at IRP primo, brands.com and we'll be available there for playback. This conference call contains forward-looking statements regarding the company's future Financial results and operational Trends. Estimated synergies impacts from economic factors and other matters. These statements should be considered in connection with cautionary, statements and discuss.

Disclaimers contained in the safe harbor statements. In this morning's earnings press release and the company's quarterly report on form 10q and other filings with the SEC.

The company's actual performance could differ materially from these statements and the company undertakes. No duty to update these forward-looking statements, except as expressly required by applicable law.

A Reconciliation of any non-gaap Financial measures discussed during the call with the most comparable measures in accordance with gaap. When the data is capable of being estimated is included in the company's second quarter. Earnings announcement. Released earlier this morning or in the investor relations section of the company's website at IRP Primo. Brands.com

In addition to slides, accompanying today's webcast to assist you throughout our discussion. We have included a copy of the presentation, in a supplemental earnings deck on our website.

I am a company by Robert Reebok Primo, branch chief executive officer and David Hass Chief Financial Officer.

As well as the outlook for the full year 2025, with that, I will now turn the call over to Robert.

Thank you, John, and good morning everyone. Before I turn to the quarter, I want to share that our hearts, go out to everyone impacted by the devastating floods in Texas and New Mexico.

We recognize the deep and ongoing toll of a disaster like this, and our committed to supporting local communities.

Aligned with our company's values, especially in times of critical need, Primo Brands has recently made a donation to The Community Foundation of Texas Hill Country. During the quarter, we provided more than 150,000 cases of water products to emergency response organizations, including Convoy of Hope, an organization well known for being among the first responders to provide vital relief supplies.

Turning to second quarter performance, since closing the merger, last November we've been working quickly to integrate our operations with the goal of improving, efficiency and productivity.

The speed by which we closed facilities and reduce headcount led to disruptions in product Supply, delivery and service.

I'll discuss this in Greater detail shortly.

That said, we are confident that we are now on the right trajectory. As we enter the second half of the Year importantly, we never compromise worker safety and product quality and remain on track to deliver on our 2025 and 2026 Synergy targets.

We believe that Primo Brands is well positioned as a leading branded beverage Growth Company in the cpg and beverage industry. We will continue to execute against our strategy and must win priorities while resolving our service issues.

During Q2, we expanded our total points of distribution across key market and channels ramped up our cross-selling, efforts in our home and Office, direct delivery business, and drove continued double-digit year-over-year. Net sales increases for our premium water brands, Saratoga and Mountain Valley as well as our exchange business.

A refill and filtration business is also grew net sales during the quarter.

Our business continues to benefit from consistent demand for our products and services across Primo Brands water channels.

We have an incredible portfolio of All-American Brands and continue to extend our leadership in US bottled water.

Our extensive distribution network of over 200,000 retail outlets and multiple consumption Solutions, including Direct Delivery to More Than 3 million customers and exchange and refill Services remains a significant competitive advantage.

Notably we grew dollar share in retail bottled water. In the first half of the Year by 11 basis points, demonstrating the overall strength of the business and differentiation of our products.

I would now like to spend a little more time on the 2 keys that impacted our Top Line in the second quarter, 1 out of our control and 1 that we own responsibility, for both of which are largely resolved.

First as we reported on our first quarter, call the Hawkins Texas tornado in early April struck 1 of our facilities. Resulting in significant damage that disrupted production and operations for 7 weeks including a temporary shutdown.

The facility primarily supports Ozarka retail products and to mitigate the impact on our customers. While we rebuild, we leveraged our other taxes, and Southeast region facilities to deliver Ozarka. And Pure Life bottled water to impacted areas which introduced additional operational complexities.

Altogether. We estimate the impact related to the Hawkins tornado reduced. Our second quarter, net sales by approximately 26 million or 1.5%.

While some repair work remains in progress, the facilities now back online. And we've made significant strides to rebuild our inventory levels of product Supply to better. Serve our customers.

As David will discuss later, capital expenditures associated with building repairs are expected to be largely covered by insurance. We will also be submitting the business interruption impact to our insurance provider.

The combining upgrading and rationalizing of our operations.

During the quarter, we closed 40 facilities, bringing the total number of facilities closed. Since the merger to 48 facilities or 15% of our total Network.

And we reduced headcount by 1100.

Full-time equivalent roles in the quarter.

in total since the merger, we have reduced headcount by more than 1600 rolls representing an 11% reduction across our organization

Additionally in the past few months, we have been integrating facilities, merging routes and rationalizing technology. Which included transitioning, our Legacy, Primo branches to sap and introducing new handheld devices to a large portion of our Workforce.

While the vast majority of our customers continued to receive the great service, they expect from us. In some markets, the high demand standardization initiatives and challenges from an accelerated integration. Collectively affected our inventory levels and fill rates.

We prioritize speed and cost reductions resulting in some customers experiencing rescheduled or cancelled deliveries on a recurring basis.

Product substitutions and extended customer service. Wait times.

These disruptions began in late May and we have been working tirelessly to address the underlying operational issues, stabilizing service levels and optimizing our Factory to Branch transport and delivery routes.

Our manufacturing supply chain last mile delivery, call center, and it teams are working together to restore the service levels. Our customers expect

We are grateful for the hard work of our Frontline Associates as they continue to manage through this transformational period And Lead With agility and resilience.

And we are equally thankful for our loyal customers who have been patient and understanding through these service disruptions

each quarter. I spent time visiting our manufacturing facilities across different states and markets. And this quarter, I visited the Hawkins facility to see the restoration and Recovery efforts firsthand and thank our Associates on the ground.

I also went on additional route rides in recent weeks and months to directly interact with customers and solicit feedback from Frontline Associates to ensure progress against critical service measures as being made.

We expect to be passed the majority of the challenges. Come the end of September.

Though, there will be some lingering supply side constraints that we expect to normalize in approximately 8 to 10 weeks.

Importantly, our underlying business continues to show resilience and water remains an attractive category with structural Tailwinds, supporting its growth.

As a backdrop, we continue to see significant consumer interests in water quality.

Driven by ongoing environmental concerns and infrastructure challenges across the United States.

Our diverse portfolio spanning multiple price points and channels, enables us to adapt to shifting consumer Dynamics, particularly given our products value proposition relative to Municipal Water options.

While the macro consumer environment remains somewhat soft, for many cpg, companies, we continue to see robust demand for our products and services.

Demand remains strong in our retail business, where several weeks of colder and wetter than usual weather for mid-may to Mid June led to multiple weeks of category softness, especially impacting the northeast or Poland Springs Market.

however,

Retail scans rebounded, as temperatures Rose in late, June, and July with our share outperforming category, scans by approximately 10070 basis points in the last week of June with the momentum accelerating in July.

Sirana shows we expanded retail dollar share by 48 basis points in July driving 5 weeks of consecutive share growth

Combining this with our first half retail dollar share growth of 11 basis points are year to date. Dollar share has expanded by 17 basis points.

Distribution gains during the second quarter with total retail points of distribution growing over 10%. We continue to work closely with Retail Partners to bring our improved scale and wider product portfolio to them and their shoppers.

week to week philosophies can vary in the initial post-launch stage as consumers, familiarize themselves with new items but the incremental placement in retail stores positions as to drive overall growth as demonstrated in July where we accelerated a dollar share growth,

On the marketing front, our partnership with Major League, Baseball has expanded our branded presence to fans Across the Nation.

You may have noticed that Deer Park, the official water of the MLB sponsored the red carpet show at the All-Star game last month in Atlanta.

Turning to our Direct Delivery performance.

Despite Direct Delivery disruptions in the second quarter, our commercial residential and exchange customers. Continue to show strong demand.

Early in the quarter, tariff related announcements. Drove retailer, uncertainty, including selling to our dispenser business, which saw a year-over-year, net sales decline.

Dispensers remain an important point of entry for our large format business.

As we have previously, noted our exposure to tariffs is primarily concentrated in our dispenser business, which accounts for approximately 1% of our overall, net sales.

Historically, because there is no U.S.-based dispenser manufacturer that can meet our volume requirements, we have been able to claim relief for most tariffs and duties related to our dispenser purchases. It remains to be seen whether such relief will be granted going forward.

Primo Brands continues to maintain strong competitive positioning versus our peers, many of whom make and sell imported Water Products subject to tariffs.

With the exception of water dispensers. Our products are domestically sourced and locally, manufactured, and more than 98% of our sales are us-based.

Our customers continue to recognize our attractive value proposition. As we are seeing continued strong demand from both residential and Commercial customers.

I am particularly pleased with our progress in cross-selling and upselling products from both Legacy organizations in our home and office Direct Delivery Channel.

We are now providing customers the option to choose between their usual purified, water brand, or a regional Spring Water brand, such as bone spring for a premium price.

Additionally, we've started offering delivery of branded case packs directly to customers homes.

Alongside our standard large format orders.

We expect continued sales contributions from these efforts as we increase penetration in the second half of the year.

Finally turning to an update on our Premium Water Channel, where our brand performance continues to shine with 44.2% net sales, year-over-year growth in the second quarter.

Like consumers key retail customers are excited about these Brands and our total points of distribution growth. In the second quarter was fueled by expanded Mountain Valley, and Saratoga pet offerings at Walmart.

Additionally this spring and summer Mountain Valley in Saratoga received prominent placement, with social media, influencers athletes professionals sports teams conferences and award shows.

for example, Mountain Valley was the official water of the Academy of Country Music Awards in May

Looking ahead. We are focused on addressing elevated demand for our premium products and ensuring their availability for all customers and consumers. Seeking our iconic green and blue bottles on their shelves and in their homes.

During the quarter, we broke ground on a new.

Mountain Valley production facility in Hot Springs Arkansas, which we expect to be operational by mid 2026.

This facility is expected to unlock our current Supply constraint so we can better meet demand and continue the Brand's growth trajectory.

Before I turn the call over to David, I would like to talk more about our integration and Synergy capture plans.

As I mentioned earlier, our overall Synergy capture opportunity remains on track.

In total Synergy capture by year end 2026.

Our integration teams are working to streamline processes, optimize our Network and enhance our long-term customer service capabilities, while these activities stress tested, our manufacturing supply chain and go to market capabilities during Q2.

We've addressed the most constrained areas of our operations, and our on the, right track to return to strong service levels going forward.

Looking at the combined, manufacturing Transportation branch, and it infrastructure of Primo Brands is expected to deliver substantial long-term benefits once. Fully optimized, we remain confident in our ability to deliver on our Synergy opportunity targets and create sustainable value. For our stakeholders,

we have a resilient business model that is positioned to deliver our long-term growth algorithm with an attractive margin and earnings profile over time. Despite the disruptions we face in the second quarter, our comparable, adjusted ibida, margin increased, 80 basis points to 21.2%.

As we shore up our service issues, expand our sales network, and restore our topline growth, we expect strong operating leverage to drive improved earnings performance and cash flow generation.

We believe we have learned from Q2. And as we enter the third quarter, We Believe Primo Brands is becoming a more cohesive and resilient organization.

Well, positioned to deliver growth improve margins and generate, strong free, cash flow as we go through the balance of the year.

With that, I would like to turn the call over to David to review the financials and guidance.

Thank you Robert. Let me walk through our financial performance for the first half of 2025 the second quarter and details around our revised guidance.

The Gap Financial comparisons and this morning's press release reflects the 2025 re results of the new Premo Brands versus 2024 results of the Legacy blue Triton business. This is a typical Gap reporting outcome of a merger transaction which can lead to growth metrics that are not comparable.

To assist with more apples-to-apples comparisons, we will be primarily discussing comparable results which incorporate the combination of both legacy organizations, while adjusting for the exited Eastern Canadian operations for both years: 2024 and 2025.

Comparable, net sales were essentially flat. When compared to the prior year at the halfway, mark in the year and included growth of 0.6%. When factoring in the leap day impact,

The business had a strong start to 2025 with q1 2025 net sales Rising 3%.

Or 4.2% when adjusted for the leaf day impact. Coupled with disruptions in the second quarter that I will discuss in a moment.

As we mentioned during our earnings call in may, we started the second quarter with the impact of a tornado that struck 1 of our largest production facilities.

Some additional headwinds began in late may as the cumulative effects of product supply issues led to missed, deliveries and created disruptions resulting from our integration initiatives. We will dive into those details in a moment.

Momentum in our Premium. Water category continued, its strong start with first half 2025, net sales, growth of 46%, all coming from volume Gaines related to brand strength and increased points of distribution. Additionally, our exchange business grew 14%

And our refill business grew approximately 8%.

Volume gains were made across our grocery Mass merchants, and the other channel, which is largely comprised of Home Improvement and natural food retailers.

At the comparable, adjusted ebida line, we were able to capture a 6.2% increase.

During the first half of 2025, well, ahead of our comparable, net sales growth while expanding comparable adjusted ibida margin by 120 basis points.

For the second quarter comparable, net sales declined 2.5% when compared to the prior year.

Approximately 10 million in lower sales and our dispenser business related to Tara volatility, which created retailer indecision on sell-in orders and approximately 6 million dollars in our office, coffee service or OCS business. As we began to unwind and sell off various routes related to this dilutive non-core piece of our business.

The cumulative impact of these activities was approximately 42 million, which would have put the business flat versus the prior year within the quarter.

Separately. We experienced some weakness in our retail business, unrelated to the tornado impact, as the category, navigated poor weather and core geographies leading to several weeks of softer than expected demand in the bottled. Water category, including our products.

We see signs of improvement based on our total points of distribution, gained versus the prior year and strong retailer scanner data to kick off the third quarter.

shifting to the direct delivery business as Robert mentioned, we experienced some disruptions as the first waves of integration impacts caused product Supply and delivery service in late May and we were unable to fulfill

Strong demand from our customers.

These friction points in our integration were not anticipated, but we believe that as our product Supply stabilizes, this business will resume a creative performance to our long-term algorithm.

We believe this portion of the business will stabilize in late Q3 and will discuss more about how this impacts our revised Financial guidance in a moment.

Integrations can be challenging particularly when merging 2 established leaders. But we have moved quickly, to address the product supply issues and expect to return to growth as we exit the year.

The comparable, net sales, decrease for the quarter was driven by a 2.3%, decrease from volume and a 0.2% decrease from Price or mix as a reminder volume for Primo Brands is defined as case goods equivalents which are measured as 12 liters.

The challenges in volume were directly related to the items pre previously discussed, including our temporary inability to facilitate, some customer demand in our Direct Delivery business.

We believe our shortfall was largely driven by correctable product supply issues.

A bright spot is that we continue to see growth in our premium branded portfolio, with a net sales increase of 44.2% in Q2.

We are expanding capacity to meet the future growth trajectory of these brands.

Comparable, adjusted ibida, increased 1.3% to 366.7 million with comparable adjusted ibida. Margins of 21.2%, an increase of 80 basis points versus the prior year.

Within These results are Synergy capture continued. Although we realized inefficiencies, as we look to stabilize our product Supply to meet the demand of our Direct Delivery customers,

The pursuit of our factory closures across production and branches, in addition to routing as part of the integration, resulted in short-term disruption to the supply and service of our products to our Direct Delivery customers. We do not see signs of customer weakness that could be related to the overall macroeconomic factors. Thus, we believe that we can resume our long-term growth algorithm once we stabilize our service.

Part of our revised guidance factors in the activities required to stabilize. The direct delivery business, including temporary product discounts, and win back campaigns for those customers who might have quit as a result of these integration related disruptions.

We continued reducing long-term costs in the quarter by delivering another wave of integration activities. We actioned another 20 million of synergies within the quarter. We believe this puts us on Pace to achieve approximately dollars of in-ear, Synergy capture with the remaining 100 million coming in 2026.

While we are pleased with the process of executing. Our integration plan, it has led to some disruptions in our business that is preventing us from fully realizing the benefits of the integration within the p&l.

This has also resulted in adjusting our financial guidance for the year, which will discuss in a few minutes.

Today.

Offsetting some of the gains were actions taken to stabilize the business across product supply, product distribution, and extra costs related to delivery and service to support customer activities, including retention.

Now, let's shift to our balance sheet and cash flows at the end of the first quarter, debt Capital, gross of deferred, financing costs and discounts totaled approximately, 5.2 billion. The credit agreement amended in February as part of a series of debt transactions includes a 750 million revolving credit facility. This facility remained undone at the end of the second quarter providing us with approximately 612 million of available liquidity after accounting for standby letters of credit totaling approximately 138 million.

Our liquidity remains strong, with approximately $412 million of unrestricted cash on the balance sheet. When combined with the $612 million of availability under our revolving credit facility, this brings our total liquidity to approximately $1 billion at the end of the second quarter. Our net leverage ratio was 3.44 times.

Accordingly. Today, our board announced a 250 million share repurchase authorization the board. Recognizes the fundamental long-term value opportunity of purchasing our shares at current valuations.

Moving to cash generated from the business in the second quarter. Primo Brands, generated, 155 million of cash flow from operations.

When accounting for significant items including but not limited to our integration and merger activities. Our cash flow from operations would have totaled. 218 million. Additionally we invested 48 million in capital expenditures, excluding integration related capex which resulted in adjusted free cash flow of 170 million.

when compared to the prior year, on a combined basis, this resulted in adjusted free, cash flow, growth of 23 million

A key metric. We track closely is our conversion of adjusted free cash flow to adjusted ibida on a trailing 12-month basis. Our adjusted free cash flow totaled. 718 million yielding a conversion ratio of 51.6%.

Looking ahead. We remain focused on discipline Capital allocation while maintaining a strong balance sheet to support our ongoing integration and growth initiatives. We plan to continue to prioritize reducing our debt and maintaining our investment grade credit profile and plan to take advantage of opportunities to repurchase shares with our newly authorized, share repurchase program.

Last week, our board of directors authorized another quarterly dividend of 10 cents per share of class, a common stock, which represents an 11% increase over last year's quarterly dividend rate at Primo water.

Let me now provide our updated outlook for the remainder of 2025, which reflects our anticipated recovery initiatives to address our operational disruptions.

Given the temporary headwinds that we faced. In the second quarter, that slowed our growth trajectory versus our original guidance. We are revising our full year comparable, net sales, growth expectations to between flat and 1%.

This adjustment accounts for disruptions in our business. In the second quarter of 2025 as well as recovery actions in the back half of 2025.

in total our revised guidance, net sales, midpoint equates to a 350 basis point reduction from the midpoint of our original guidance,

Approximately 69 million of the net sales guidance reduction or approximately 100 basis points is related to the headwinds from the 3 short-term items. We have discussed today, 1, the impacts of the Hawkins tornado realized in the first half results, approximately 26 million, to dispenser tariffs, impacting sell-in, orders for the year, approximately 16 million dollars,

3, our office coffee services or OCS wind down approximately 27 million, the sum of these items remain largely 1-time in nature.

Experienced weakness in this business for the past few years and began selling off many of these routes during the first half of 2025.

While we understood, this was a possibility. When we laid out our fiscal 2025 guidance, we have been able to sell routes faster than expected.

Going forward. The OCS business is a non-core offering. We will remove from the business to reduce our complexity.

This business, previously contributed approximately 54 million annually with limited growth?

by year end 2025, we expect the business to contribute approximately, 27 million dollars in net sales, and thus the 27 million decline in our guidance, as mentioned previously,

Our goal is to exit or wind down this business without future Financial activity, as we head into 2026.

Due to discontinued operations accounting rules. We are unable to exclude this business from our operating results. And we are providing Clarity for purposes of explaining. Our revised guidance. And we expect to address this again, when providing our 2026 Financial guidance, this business sits under other within our net sales by water type and under Direct Delivery within our. Net sales by trade, type disclosure tables listed in our earnings supplement.

Of the remaining 250 basis points in net sales. Guidance reduction, approximately 140 basis points is related to the previously mentioned disruptions in our Direct Delivery business and the remaining 110 basis points is related to softness in the retail category, due to the weather impacting key geographies, which was largely experienced in the first half of the year.

While we remain a single segment reporting company. As we go to market, across our various water brands within channels of trade, in the second half of 2025, we believe our retail offerings or small format will experience strength with net sales, growth of approximately 2% at the midpoint and even stronger. If we were to perform at the higher end of our revised guidance, our Direct Delivery offering or large, formats is still on a pathway to recovery within the third quarter. And we believe we'll exit the fourth quarter resuming growth.

We remain optimistic about the customer demand generated and believe we will fulfill a larger portion of these orders as our product Supply and delivery actions stabilized with improved service.

We are also lowering our adjusted ibida guidance to approximately 1.5 billion with an implied adjusted ibida margin of 22.2% at the midpoint approximately 80 basis points below our original guidance.

The decrease in anticipated adjusted ibida and margin is largely related to our net sales guidance reset and partially tied to disruptions in the business, from the Hawkins tornado investments in our dispenser business, to support retail orders, due to the impact of tariffs and other anticipated recovery actions across the balance of 2025 and stabilizing, our Direct Delivery product Supply and service.

We remain committed to achieving our in-ear 2025 and overall Synergy capture opportunity, totals by the end of 2026.

With our Synergy capture opportunity intact. This leaves the base business, a bit behind schedule versus our original expectations. Largely, as we work to improve and stabilize our product Supply and deliveries

We believe once things have improved, we will be able to fully retain the benefits of the synergies. And our business margins will be more in line with our original margin assumptions.

Moving on to Capital expenditures, we are maintaining a forecasted run rate growth and maintenance capex. Budget of approximately 4% of comparable. Net sales plus integration related capex across 2025 and 2026.

Separately we are working through the anticipated. Restoration costs that are Hawkins Texas facility though. Insurance proceeds are expected to largely offset these expenses.

our base capex, spend included 115 million of spending in the first half of 2025 representing approximately 3.4% of our first half comparable, net sales,

Additionally, our integration capex was a minimal 26 million in the first half of 2025.

We expect our integration related capex to ramp sequentially.

Of expected. Adjusted Ava.

While this represents a dollar reduction from our initial guidance, we expect cash flow generation could improve based on the timing of our capex spending integration recovery initiatives including working capital actions to drive improvements.

As a reminder this forecast assumes adding back acquisition and integration costs in-ear integration only capex and reimbursed repairs for the Hawkins facility, impacted by the tornado, as well as the benefit of after tax in your Synergy capture.

While we fully acknowledge the near-term. Disruptions we remain confident in our ability to execute our recovery plans, that are well underway.

The revised guidance delivers improved performance as we progress through the remainder of 2025, with our operations, reaching optimized levels, during the fourth quarter,

And resume our long-term guidance in 2026 and Beyond.

With that, I will now turn the call back to Robert for any closing comments.

Let me conclude by addressing our path forward.

Looking ahead, while we have adjusted our current Year's growth expectations. We are confident in our post 2025 long-term growth algorithm of 3 to 5% organic at sales

I also want to express my appreciation to our team of Primo Brands Associates for their hard work and dedication with that. I will turn the call back to John to take us through Q&A.

Thanks, Robert, for ensuring we can address as many of your questions as possible. Please limit your inquiries to one question and one follow-up. Please open the line for questions.

Thank you so much. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to remove your hand from the queue, please press star, followed by 2.

If you're using a speaker-phone, please lift the handset, before pressing any Keys. Just a moment for your first question.

In your first question comes from Nick Modi with RBC Capital markets, please go ahead.

Yeah, thank you. Good morning everyone. Um

May maybe we we can just start with and I'm sure a lot of folks have this question. Its Robert your your confidence around integration pathway going forward. I mean how much was actually accomplished? You know, like meaning, how much more would you have to do in the back half of the year in terms of Route, consolidation, maybe Warehouse consolidation? And what is it? Exactly mean by normal, you know, things getting back to normal by the end of September, any Clarity on, that would be helpful.

Okay. Yeah thanks. Thanks Nick. Um,

The, I'll I'll start high level and I'll get a bit more specific. But, you know, we started at about, uh, 310 facilities. And we're going down to 250 approximately, right? And so we've closed 48 to date. We've currently planned about 11 more to go for the balance of, of the integration, which is, um, there's 3 more phases. There's a phase in September 1 in February next year, 1 in March, most of those are technology, conversions.

So far, we've streamlined routes; we've closed 48 facilities.

That's a 48. Uh sorry, 15% reduction in the footprint.

And we've optimized headcount by now, 1600 FTE. Um that's about 11%. We've also discontinued 5 Brands uh Brands like deeprock Crystal Rock Mount Olympus and we've replaced those with our regional spring water brands. Now, you know, we had extensive integration planning but due to the speed of integration, we we clearly prioritized speed. We did temporarily experience supply shortages, but we've addressed that Nick by adding um, modular racks thousands uh bottles. Um, and worked with engineering to ensure that our production lines are now completely compatible with the existing,

Fleet of of racks and bottles of both companies. We've also converted handhelds in the majority of our, um, existing um staff. So, you know, that led to a bit of a disruption um, in in the large format Network. And that was exacerbated by high demand led to shortages and missed deliveries. Um, but we have largely uh resolved these uh, delays across the network.

Testing and well positioned to restore growth. Uh, improve margins and generate free cash flow in the second half. Um, if you, if you look at, um, what what does it mean? Um, it means that right now, uh, whilst our retail service is usually in high 90s. Um, our um, last mile delivery service rate dropped.

But we're back at 92%, I tracked this every day, that means daily service rate is back at 92% and we are working our way back to 95 plus which is where you would have seen us in in in the pre merger status. Uh, so we expect to be passed most of those challenges come September. There will be some lingering Supply constraint that we expect to normalize in about 8 to 10 weeks. So we really learned from Q2 and we're working to ensure we have minimal disruptions um to end, you know, to the end consumer in the next 3, waves of integration which as I said are mostly technology conversions and you know, approximately 10 more Branch closures between now and March of 2026 hopefully that that clarifies your question.

Yeah, it does I'll I'll pass it on and get back to the queue. Thanks.

Your next question comes from Peter, galbo with Bank of America, please go ahead.

Hey guys, good morning. Uh, thanks. Thanks for the questions. Um, I I guess a couple of clarifications, um, David it was helpful to get the kind of breakout of revenues in in the quarter and, and you outlined, I think it was something like forty million dollars of of discrete items. Um, within that, I, I think you had about 16 million that was related to, to the office and coffee and then the dispenser business, um, which would seemingly flow through, you know, the Direct Delivery, um, Channel as as you outlined it. You know that business again, based on our math was down about 20 million dollars. So it it would seem to account for the large majority of it and I guess, I guess what I'm getting at is it implies that

I didn't know there was less than a $5 million hit on Direct Delivery specifically related to integration hiccups in the quarter. So I just wanted to test that math with you. Make sure I understood it correctly because if that is the case, it would seem that, you know, it's maybe not as big of a hit as we're all, you know, seeing in the stock today.

Yeah so you're right in that uh office coffee and dispensers flows through Direct Delivery, as would things like exchange uh in the Q2 itself.

Um, you know, dispensers accounted for about $10 million of that, with office coffee about $6 million. I think a lot of the numbers I was providing in the walk were to help clarify what we're expecting, you know, up against the 4% original guide that left, excuse me, that left Direct Delivery at about $13 million in residual decline, excluding those already contributed parts that I broke out separately. So you're correct in that, um, you know, it wasn't a great quarter in terms of being responsive to customers. But there are opportunities for tremendous strength as our delivery service rate and success rate has, uh, you know, kind of resumed its upward trajectory.

Where we remain cautious is.

Ensuring that product Supply you know gets to the point of steady uh contribution and that our route service you know technicians are basically our our individuals in the field can be uh more successful with their daily completion. We are actually seeing units per route per day increase. We're seeing some efficiencies there, but it's not quite where we would want it to be, uh, at this time. So again, we do have some attribution to pieces of the business that remain sort of non-core. Um, and you know we remain very positive in the way we're approaching the recovery plans, it just ends up being a little bit of a time in math. Exercise, when you're talking to you here today, in August of how much time we have.

To rectify the issue with, you know, how we wanted to handle the guide.

Okay, no, that's that's super helpful. Thank you. Uh, for that on the, the kind of the 13 million. Um, residual I, I guess maybe just to follow up, it would be helpful. Just any puts and takes around, you know, the third quarter specifically as we're thinking about modeling, I know David you gave some kind of growth rate expectations for for the second half on on again, some of the different, you know, components or or mixed channels. Um but but anything specifically to to 3 Q both on the top line and and from an EVO margin perspective would be great. Thanks very much.

At a slight decline on a year-over-year basis, but sequentially, ideally improving. And that means that really, when you look at our small format pieces, in retail notably, in our premium Brands, you know that business coming out of the gate strong in, Q3, with July scan data already mentioned. So again, it'll be a balance there where, you know, on a on a sort of combined basis, we feel, uh, we'll start the right trajectory where we really feel confident is when we get to Q4 having largely the Direct Delivery disruptions behind us, you know, being able to start to exit 2025 with a nice exit, velocity that provides more linear confidence in how we start 2026. So, again, won't get into the specifics on the quarter. As we're really trying to be patient and attentive to our customer disruptions, uh, and really try to resolve this as we look at a full year perspective.

Great, thank you very much.

Thank you. Your next question comes from. Derek lassard. With TD Cowen, please go ahead.

Yeah, good morning everybody. Uh, Robert. I just wanted to maybe follow up on your comments around the service levels. I was just curious where uh, that service level actually fell to uh, in the quarter.

Yeah, I think we, uh, we temporarily dropped below 80% in the first weeks of May. So through April, uh, when we uh, started the conversion of the branches, roll out to new handhelds.

Um, Consolidated branches. We saw a significant disruption there for for a short period. We then started adding modular racks and Bottles. We we had a compatibility issue. We um, we were running the Legacy Primo bottles through the ready. Refresh Network and discovered that we had missed your decapping and capping the bottles. Uh, we also learned about compatibility issue with the, with the racks, uh, where where we put in Optical eyes to, to be able to identify the racks. Um, I personally went to to a number of manufacturing facilities to see, um, what the issues were and how to address it. We have address those, we've added um thousands and thousands of modular racks. Each of those hold about 40 bottles, and we've added millions of bottles, um, to the extent that we've been adding about a half a million bottles a week over the last, uh, 2 months and, um,

We have to ramp that up. We, we discovered that because of the significantly reduced, uh, network, uh, the distances between factories and branches were slightly elevated and we needed a lot more, um, bottles on hand. We we we also in the brand conversion, lost the number of bottles. So, you know, we've been steadily going back above 80 and we're over the last 3 weeks we've been well above 90, we were sitting at 90 and now we're 92. In fact, we're above 92 this week, um, we're working our way back to this, consistent steady pace of 95%, what we call Daily Service rates. So, the number of orders placed that we can, we can fill on the day itself. We've we also had

Temporarily something we refer to as multi-drug where um, a delivery gets delayed, uh, more than 1 day, we've addressed that decisively. And we're now back to normal delivery, schedules in the majority of the markets. Um, but again, you know, it'll take us about 8 to 10 weeks to fully fully recover.

Okay. That's uh, very helpful and great color and David. Maybe I missed this but, um, the year to date and where are you guys on the year to date? Synergy catcher for the 200 million and then maybe what are the sort of the big buckets of synergy capture for the, uh, the second half?

Yeah. Excuse me. So we are on pace again to sort of achieve our in-year and 2026 values. Um, that walk at this point includes, you know, approximately $20 million we captured in Q1, a similar second $20 million we captured in Q2. In aggregate, that puts us, you know, into the realization of about $60 million year to date, but when you extrapolate those decisions out, it puts you on pace, you know, for about $140 million of annualized targeted actions. As Robert mentioned, we have a few phases to go, uh, with a large one coming up. Uh, and then the remaining facility and act, or excuse me, the remaining activities in the field will largely be technology transitions. So again, we're on pace to really take action on the majority of what we need to, uh, and then it's really letting the residual impacts of those change management activities, you know, play out in the field. Uh, again, as we mentioned before, we'll resume 202.

26. Sorry. Debbie you said 20 and 20 q1 and Q2 and 140 remaining.

No, 20 and 20 and q1 and Q2, and you annualize those out that get you about 140 million of actions on the, you know, about comparable basis to what 200 would be.

Okay, thank you.

Your next question comes from Andrea tasher with JP Morgan. Please go ahead.

Thank you for taking the question. So um, can you can you talk about the client with tension at the hod business?

Um, and how do you progress through the quarter?

I mean, I understand the service levels have improved, which is good news, but um, I think as you as you're trying to chase that, uh, the Synergy targets that David just mentioned, uh, you probably obviously had to, um, had some things through, through the process. Right? So as you think about, like, what you're calling for inflection in Q4

What are the assumptions by division by retail and by hod, um, I appreciate the 250 basis points impact that you called out in the hood. So perhaps, you know, that's the source of liking flexion that goes away in the fourth quarter, is that what you're assuming? And then, my follow-up is regarding, um, the share in proof 5 pack water, retail seems that you tested some of the discounts, uh, in some key retailers. Um, so can you talk about the response and share Dynamics?

um, so far

Yeah, hi and Andre Andrea. Thank thanks for the question. Very good question. You know, let me just start by saying that our um refill uh, super premium exchange and retail business all grew in Q2 and the the issue was entirely concentrated in The Last Mile, right? That's the big drag that that drivers down and on the retail side we're impacted by by the tornado, uh, for about 26 million. But the fundamentally uh, the underlying business, uh, health is strong and what it really was is. There's so much demand out there. We couldn't fulfill because of internal uh, Supply disruption that led to uh service issues.

So, you know, we've we've been in that journey to restore the service level on Last Mile to, you know, now above 90% And um, well on our way back to 95. And what I would say is, um, we'll probably see, uh, a soft July and a more stable August, and, and the September, we really should be sort of back to getting back to more normalized velocities and the fill rates, and, and, and sales on the, on the Last Mile with the fourth quarter, truly being representative of the, you know, of the potential of the business with, with regards to retail, you know, we we're very, um, uh, confident in retail.

Um, we did see the first quarter, uh, much stronger than the second quarter, right? The second quarter, it was impacted by the cold and wet weather in the Northeast, but, um, the category retail volume year to date is, uh, is up 160 basis point for a year ago and that indicates continued strength in consumer demand.

We also looked at panel data um, bottled water continues to attract new buyers and and trip growth is up as well. So cercano shows us that year to date new buyers, growing about 50 basis points and trips are up 170 basis points for Shero. So if you look at the first half, our dollar scan growth of the category is up 1.4% and if you look at Primo Brands, we were up 2% in the first half in retail. So that's why we are a growing share in the first half by by 11 basis points. We are actually the only large and branded manufacturer to grow. Uh, both dollar scans and share in the first half in bottled water. Now the the third quarter we see uh strengthening um, the category is up 1%, that's higher than Q2 our dollars scans in Q3 in retail are up 3.7% for a year ago. So that gives us that share growth of 48 basis points in the quarter to date and volume shows similar trend.

Um, pretty reassuring. Uh, I would say fundamentals and and metrics that we can, we continue to stay focused on. So the underlying health of the category is strong. The demand is there, it is. Really our ability to fill the demand, both both in Last Mile and less. So, in retail where we have fully restored from the uh, the tornado,

We don't see that super helpful. We don't see everything even though we have both takana and and Nielsen uh here but um but perhaps if you extrapolate so you're saying that even without um Mountain Valley instead of over which obviously you're growing um bits and Bounds and 44% or 45%, rounded up. Uh in the quarter you're saying that even despite that you exited the quarter with purified market shares up. Um, so to just to make sure I I get the the data for for um, all all channels.

I will come back to you on the, uh, specific market share for purified, but we we see that, uh, the the case pack, uh, business. Uh, the category levels of 170 basis points are users. Our household penetration is up as well. And we we're growing 130 basis points on user and our volume growth. Um, you know, so far year to date is about 360 basis points in in case back. So that that's that that's not the the super premium segment that is the sort of per

Ified and Regional Spring Water segments. So yeah, we feel good about that.

Thank you very much, Robert. I'll pass it on.

Your next question comes.

Zhou Securities, please go ahead.

Good morning. Thanks for the question.

Maybe um, first off David, to clarify the, the integration issues, I I think you mentioned uh, customers who may have quit, I think, was the term, and I'm curious if you can, elaborate on that. Is it, is it possible to quantify cancellation rate at this point? Are they elevated versus history? Could there be a lag in cancellations, just your observations there and then I have a follow-up.

Sure. So, as you recall, we came into this merger with a very strong customer base. Both customer bases are known if we have a direct relationship with you and two pieces of our business that are unknown: exchange and refill.

So when you look at uh refill which is a machine, an automated vending machine, that has service technicians that has been untouched through this integration that business is performing incredibly well with high single digits and thus has an implied customer base elevation.

And growth exchange is a, you know, an another implied category where we're unaware of who you are, but we know you're shopping and unless your consumption pattern changes, we have to assume that largely the volume. Growth is a beneficiary of more dispensers in the market and more households. So, there again with

With the, you know, the strong growth, we experience in exchange, we have an implied household growth. Now you come into the Direct Delivery which both we on a historical basis and the ready refresh pieces of the business combined, their customer lists.

We have seen some elevation in quits largely in the June and July period. But that is always a lagging indicator of service. And so as service started to decline in April and May that led to some of the June departures and then as service persisted in June that led to some of the July Departures. What we are incredibly enthusiastic about is what we thought was a benefit of merging, is our digital acquisition opportunity where as we consolidate websites and reduce the competing offers Legacy companies were throwing to their respective potential customers. We've been able to have digital ads that have really outperformed our expectations at this time, in some of those months where we've had some higher elevated departures, that's not been able to outpace that but we remain very confident that as service stabilizes that customer departure rate, you know the digital ads, plus our infield sales and other programs through Club will allow us to sort of

Resume our net organic additions that, you know, we've been very proud of and believe is, you know, obviously a very big beneficiary of the 2 Direct Delivery businesses coming together. So again, temporarily, we see that as an elevated level of departure. You can see that whether it be in Google or trust pilot reviews, um, but we have seen those things stabilize, we have seen negative sentiment stabilized in the market and I think that is a completely correlated impact of of what Roberts mentioned, where our operating teams are doing an amazing job of stabilizing service, and improving that delivery success rate to our customers.

Investing to correct these issues are these are these largely pricing concessions to male some of these consumers. Or is there also a business reinvestment component? You mentioned the racks in the bottles. I'm curious about the split in reinvestment there and then, you know what, it's sort of implies about your Synergy targets as you're getting into it. Are you learning that maybe your current targets risk cutting too close to the Bone for this model. Thank you.

Yeah, absolutely good question. So again, we I think felt we have, we feel we have a very good plan because really what you can't have are redundant locations on a long-term basis. You can't have 2 production facilities in the same geography where they are not at their efficiency points. So we believe that that plan was appropriate. Again, it comes back to the speed and pace of which we have executed that created some of the product Supply challenges when you look at the, the first part of the question around investment, they're they're largely areas where there's been a delivery error or there might be a billing item issue with the conversion. And in that case, we have tried to be very accommodative with regard to customer credits as opposed to a pricing concession, where we will entertain some activities around customer concession. Because when we are looking through the the customer departure group and and you know, having Outreach and entertaining Outreach with those to sort of have a wealth of

Welcome back sort of opportunity for them that might provide either discounted or subsidized product for a period of time. Um, but at this point, it's not generally a price discount and I want to clarify also that in our Synergy capture which is largely been operational, focused we have not been executing pricing harmonization. We talked about that this whole time. It was our first priority to get the operational activities done before. We would look at any of those operational. Uh excuse me pricing harmonization done with the consumer or customer base. So we still feel confident that when that service stabilizes we'll have opportunities to do that as we head into 26.

Okay. Thanks. David.

Appreciate it.

Your next question comes from Stanley. Eric SATA with Morgan Stanley. Please go ahead.

Great. Thank you. Um, it's Eric soda from Morgan Stanley. Um, wanted to talk about, I guess what's left for the integration for the second half. Um, you talked about the next few Milestones, uh, being largely technology transitions. Uh, but when you look past you, you know, when you look at past cpg Tech transitions um, I know it's a large bucket there have been uh, you know, they they've been in the past caused operational issues for a number of companies so I guess maybe. Can you give us a little bit more visibility as to what these

Uh, Tech transitions are and why you don't expect them to have any operational issue on, you know, product Supply billing or order taking or anything like that.

Yeah, I'll I'll um, give some perspective and then if David would like to add, I would welcome that as well.

Um, from an Enterprise software standpoint.

Both companies were running on different platforms or either companies. So 1 on sap, the other 1 on Oracle.

Where migrating the company to sap.

That means that all of the, um, invoiced order billing shipping make move sell, as well as the handheld technology um, is, is the, the 1 that's linked to sap. So, what we we decided to back, Primo, water. Essentially into the ready, refresh infrastructure.

As we did that we converted handhelds. We taught our teams in the last quarter. How to use the software, how to, um, work with the the go routing system.

And we've also integrated some upgrades to those systems that Primo water had already. Um, implemented. So, there's a change management component. There is a hardware, uh, components. And there's a software component to this changeover. I feel very confident that we've identified uh, the the challenges and already addressed them. Now, there's still a number of upgrades we're going to be making to the handheld technology and we may migrate eventually to the iPhone, um, over the next 2 years or so. Uh, from the current handle technology that we, um, leveraged, uh, because of the, you know, the the the fit for use

Uh, the challenges and have already addressed those in the uh, in the go to market system, which is why we are now back at the 92%. Um, you know, DSR daily service rate on our way back to 95% and we've largely gone through change management. David, do you have any additional thoughts? Yeah, I think the only quick thing I'd add is that's allowed us to get a laundry list of whatever change management or friction would have been created from prior branches. And we've increased our training significantly For an upcoming wave, uh, of integration. And that training will allow those real-time experiences from the field to be, you know, used in the dynamic training that that, that heads to those next series of branches, uh, before it's just theoretical. Hey, you're going to have a new device. Here's how you're going to work it. Now, we actually have real time examples then behind the scenes from a tech platform, the team have been incredibly Nimble to be able to address any of those concerns. A lot of times you have to actually start delivering product and understanding what those issues are.

Um because just taking a customer table to another company's. Customer table doesn't expose everything until you start actually delivering. So again we feel confident. Um it's not to say there might not be a disruption, but I don't think it would be anywhere uh close to obviously what we could

Experience today.

And Eric 1 1 Edition points. So 1, 1 additional point on that, the consumer interface,

Both companies had an app. Both companies had websites, we are we're working hard to.

Upgrade those and to integrate those uh from a you know, ready? Refresh.com and water.com the Primo Legacy, my water Plus app, and the ready refresh app. Um, we've had some conversions there where consumers had to switch apps. Those are largely behind us.

And um we're we're going to work to fully integrate those and make them absolutely frictionless and that's going to take a couple more months to to finalize as well.

Okay, that's helpful. And then just as a follow-up, um, I know you reiterated the Synergy Target and then you reiterated the, the Post 25, uh, long-term growth algorithm at at the 3 to 5%. Um, but with the the lower, uh, Revenue growth and lower revenue for 2025, um, how are you feeling in terms of the, uh, billion dollar adjusted free cash flow number that you had out there from the investor day? Um, any change there? Just given the the lower Top Line base

No, I I we really don't think so. I think, you know, honestly, the free cash flow opportunity still this year. Uh, I think we're being cautious as we've had to adjust our ibida.

Our capex remains a little bit behind plan, in terms of our spend, just largely due to vendor and timing lead timing activities, but we really feel like with both the trend of interest rates, the trend of long-term capital deployment, uh, within, you know, certain capex initiatives, and then other efficiencies in the working capital side, which have not really been discovered because of friction created right now through integration. We still feel that's very addressable and this is before we even address. What we do with either our Term Loan product, or our Euro note, where we might have opportunities to sort of adjust interest rates paid, uh, in sort of our debt sack. So I think we, you know, again,

we remain very optimistic about where we can go this year and that doesn't put us too far off our original, uh, direction to allow us to sort of still Target that billion dollars.

Great. Thanks so much. I'll pass it on.

Your next question comes from Daniel Moore with CJs Securities. Please go ahead.

Thank you, Robert David uh covered a lot but just in terms of the revised sales growth guidance 0 to 1% for the full year just break that down volume and price in you know really getting at the the Cadence of volume growth. You expect over the next 2 quarters and your confidence in getting back to a run rate of at least kind of low single digit positive volume growth as we exit the year and enter 26,

Yep, thanks Dan. So you know, clearly Q2 demonstrated um a lack of volume growth and largely control because of 2 issues where you know you're taking about 26 million dollars of retail volume out of Market. Uh, just simply from the tornado before you even address. What would have been demand challenges uh in certain geographies and then you know, the Direct Delivery side.

Regard to the balance of the year. We would expect Q3 to probably have some additional volume um, areas in in Direct Delivery, as we try to recuperate, sort of, you know, facilitating a higher rate for those customers. Obviously at a, you know, nominal 50 basis points on a full year. Midpoint you know its volume and price is not really uh a significant relevance at that point. But we do feel we could exit Q4 and heading into 2026 with a much uh more balanced.

Kind of 50/50 approach. If you will, like we started the year at our 4% midpoint. Um, we do you know, again we're not fully quantifying at this point and we'll address that as we lay out, 26 guidance which would be in the spring of next year. You know, where some of the pricing harmonization actions will come into play and if in certain quarters that might skew somewhat price. But again, we still remain in our planning internally to have a very strong contribution from volume.

Very helpful and then maybe this has been asked, but are there any areas of future integration that you might pursue? Um, you know, a little bit more cautiously or or slowly given the experience in Q2. Um, you've obviously you just described some of the confidence that you have and kind of next phases, but, you know, not thinking about the, the, of the synergies but just, uh, the Cadence and the timing. Thanks again.

Yeah I'd say the easiest thing to answer there. We we discussed from Eric's prior question on change management. In the infield training, the easiest area for us is is having more time from today. Till when we do whatever the next wave is to build up days of, uh, days of inventory on hand. So, when I talked about a little bit of working capital inefficiency, really what we figured out is as we are cutting over production supply houses, we need to have days on hand as the absorbing facility might not be able to run at the right capacity or utilization immediately. And so if you have and give yourself a date in the future where you know you're going to cut over, we have the opportunity today and up until the point of cut over to build up product Supply. And that's really where we started running into issues. As Robert mentioned, we had different distances. We had different uh, production to Branch kind of marriages or uh, connections and so at this point as we look in the

Uh, you know, look ahead, we can build up that inventory in excess heading into the transition, allow that receiving production facility to sort of grow into its production strength and that should largely helped us avoid the product Supply disruption.

All right, thank you again.

Your next question comes from. Lauren liverman with Barclays. Please go ahead.

Great. Thanks so much. Um I just you know maybe as like a wrap up type question, you've given so much detail and contacts on second half on the you know the issues that challenge the quarter and so on but

I I just wanted to kind of say like at the 1.5 billion on eBay for this year degree of confidence, in hitting that number. Um, because I think, you know, earlier in the year like, you know, we we started to talk about some of the integration issues that you were facing. You kind of thought it would be taken care of by July. And now we're saying like through September. So just like confidence level that you've really got your arms around it, you really know the scope of the issues and that we can all say confidently. We've kind of de-risked from here.

You know, the challenges are embedded in the Outlook um and that we can really again like start thinking about 26 as as let's call it almost the starting point. Thanks.

Yeah, I mean, I think again, from our side that is our confidence in resetting, uh, we understand the Dynamics of what's hit to date, uh, that's why we've been more prudent in how we approach. The next waves going through excess training and making sure we have days on hand and inventory available. And, you know, again, we hope to use that as a reset Point, sort of

Uh, enter the last months of Q4 and then really be prepared to start 2026 with strength and allow more of the Synergy capture to show in the in the physical results.

Okay, great. Thanks so much.

Your next question comes from Steve Powers with Deutsche Bank, please go ahead.

Excuse me. Uh thank you and good morning. Um, you may have David already sort of implicitly answered this, in the answer to Eric's question on free cash flow. But just as I rounded out on the 27th targets, just your your confidence in the the, the 25% ibida margin objective as well. It sounds like that still stands but just wanted to hear it explicitly.

Again, you know, sort of the basis point departure here is just largely a function of Revenue Decline and then some of the cost support that we've had to put into the market, um, to sort of, stabilize the business. Um, but again, recall that we've really not taken any price harmonization between the businesses. We've really been absent of price and Retail outside of just natural premium mix. That's slowing through the uh small format pieces of business.

So, you know, to only have a, you know, 80 basis point compression and evida margin to date with the implied new guide without really having any of the pricing levers pulled. I feel pretty confident that that's um an an you know, an objective that remains on track.

Yep. Okay.

Um, you know, if I sort of draw a line between that answer, which fully understand and kind of the comments so far, it really seems like, um, you have confidence collectively as a team that the, that, the, um, Direct Delivery disruptions that we've seen so far and that we'll see through September are really going to be contained to this 3Q 4q, period. So, as we exit it, you know, kind of net customer adds the value per customer, um, you know, Recruitment and Retention, uh, costs will all kind of, um, revert back to the trend that we, we were seeing, you know, kind of exiting last year without a, without any real additional kind of run rate costs. And uh, I want to play that back and see if that was correct and then,

maybe just get you to, to articulate a little bit more as to, as to why you have confidence that that we can kind of, you know, kind of snap back on Trend as we as we get to October and Beyond

Sure. So when you just look at q1 on a leap adjusted basis. It's 4.2% and you had many parts of the company far accretive to that obviously premium, which isn't really, you know, there's obviously premium product that flows through Direct Delivery. Um but you know you had an exchange business which really doesn't have a constraint from the consumer's mind. You have a refilled business that

You know, for its population of the economy is performing at, you know, more than double our sort of guide, midpoint of our original 4%. So you have a lot of areas of the business that their par value remains a creative to our original midpoint. Uh, and then you had customer editions that were outpacing or at a minimum were on par with the quit levels in the direct delivery business and since then, as we've, you know, harmonized our digital properties. We've actually seen an acceleration of our ability to acquire customers through digital.

So again a lot of that confidence remains that the demand is there. The customer acquisition profile is continuing its a matter of fulfilling the product on time and in full as they've requested it and that's really where we feel uh that the Snapback is is is there. And again that's before you really start to address anything on pricing or future tuck in Acquisitions that, you know, we will remain very, uh, focused on

Okay yeah understood thank you for that, appreciate it.

Your next question comes from. Andrew strazik with beimo. Please go ahead.

Hey, good morning. Thanks for taking the question. Um, obviously a lot of ground has been covered, so just 1 quick 1 for me. Um, you, you talked about introducing the cross-selling in Direct Delivery so I was just curious. Um, how far along you are in that effort in terms of availability, what? The uptakes been so far and, and kind of your early read on on that opportunity as you roll forward.

Yeah. Very good. Uh, we we have uh, introduced Regional spring water case back.

Then the Nestle Legacy Brands, the blue dragon Legacy brands on the Primo water trucks. We've also um expanded availability of Mountain Valley.

On the trucks as well more trucks but we have not yet launched 5 gallon. Uh Saratoga Water.

Uh we have not made Saratoga fully available yet to the Legacy Primo truck. So there's still um transitions happening and still editions happening to to branches

Journey, but we're seeing very encouraging results.

Great, thank you very much.

And your next question comes from John Anderson.

Please go ahead.

Hi. Thank you. Um, 2 2, quick ones. Um,

I think you mentioned in the prepared comments that you've rationalized 5 Brands to date wondering. Um,

How much more, uh, rationalization work? Do you have to do across the portfolio or plan to do? And, um, how are you thinking about that in terms of a, a Topline drag and then, on the, um, super premium business. It sounds like, um, a good chunk of that growth has been driven by, um, expansion of, um, Mountain Valley. Saratoga Inn in pet at retail. I think specifically Walmart. Um, where what are you seeing in terms of early culture at Walmart and and then where is the white space as you see it in in that super premium business from here. Thank you.

Yeah.

Thanks, uh, thanks John. Um, with regards to the brand rationalization. This is um, the largest part of rationalization has been completed. We are, uh, refocusing certain regions

As well. Uh, on the core spring Brands, I'll give you an example. The Sparkletts Brands will remain in California the West Coast.

But Texas will largely convert to Ozarka. So whilst we're rationalizing. The sparklett brands in Texas. The the actual brand will continue to, uh, exist in the portfolio. As an example, we really focus on the smaller Regional brands that drive a lot of complexity, uh, to simplify and streamline our operations. So we have fewer line changeovers in the Legacy, mostly Legacy Nestle Water factories that. Uh, we, um, we now have at our disposal to go from maybe 1 shift a day to 3 shifts a day 7 days a week. With fewer bigger stuck, keeping units, um, and bigger Brands, like Ozarka and Poland Spring,

With regards to premium, you know, it's very exciting business. We grew 44.2% in the quarter. Um, that was all volume based, um, Mountain Valley grew, um, you know, 23% um over 50 million in Q2 net sales, and Ciro grew 91 and a half percent with over, uh, with 36 million in Q2 net sales. So we launched pet in Walmart. Um, you know, the brands are now available across the different channels and Mountain Valley in Saratoga. As I just said are now available, uh, for like Direct Delivery customers as well.

Although we have not yet launched Saratoga in the 5G format, we are working on that. Um, you know, the brands are getting great marketing from the Golden Globes in a Country Music Awards. Um, and we're really focusing on food service. So

we're seeing a lot of demand, um, emerging from restaurants hotels, especially in light of the, uh, the tariffs that are coming in on imported Brands, um, and we're actually adding a new production line to support Saratoga. Um, and we've broken ground on a new production facility for Mountain Valley in Arkansas, which will be operational by mid 2026, and that will really unlock our, uh, Supply constraints on Mountain Valley, so we can even better meet demand. And continue with that really high growth trajectory for the brand.

Thanks John.

Great. Thank you.

There are no further questions at this time. So I would like to turn the call back over to Robert Reep broke for a closing remarks.

Yes. Well, thanks everyone. Um, I'm excited about the the potential of our company. Primo Brands underlying business Foundation is solid. And we are a leader in an attractive category with numerous growth opportunities. We believe we have multiple levers of value. Creation in front of us, including organic, net sales growth, a creative m&a, free cash, flow generation, and strategic Avenues of capital, allocation, thank you for your

Participation and for your continued interest in Primo brands.

Ladies and gentlemen, this concludes today's conference call. Thank you so much for your participation. You may now disconnect