Coffee Service

Primo Water Q3 revenue jumps 10%, beats revenue and earnings expectations

Logo provided.

November 5, 2020

Primo Water Corp. reported a 10% revenue gain to $518 million for the third quarter ending Sept. 26, 2020 compared to $472 million for last year's third quarter, according to an earnings release.

The company, which provides water direct to consumers and water filtration services in North America and Europe as well as water dispensers, purified bottled water and self-service refill drinking water in the U.S. and Canada, beat both revenue and earnings estimates for the quarter, according to Seeking Alpha. Revenue beat expectations by $20.62 million while non-GAAP earnings of 23 cents beat expectations by 9 cents.

Net income and net income per diluted share were $22 million and 14 cents, respectively, for the 2020 third quarter compared to reported net income and net income per diluted share of $7 million and 5 cents, respectively, for 2019. Adjusted net income and adjusted net income per diluted share were $38 million and 24 cents, respectively, for the 2020 third quarter compared to adjusted net income and adjusted net income per diluted share of $24 million and 18 cents, respectively, for 2019's third quarter.

Shares traded at $13.88 today against a 52-week range of $6.33-$16, according to Seeking Alpha.

"Continued strong performance in our water direct/exchange residential customer base along with steady improvement from our commercial customer base allowed us to once again exceed expectations for the quarter," Tom Harrington, CEO, said in the release. "The cost actions we executed earlier in the year are also yielding better operating results and improved efficiency. As a result, we believe that Primo will be a structurally more profitable company going forward and we are raising our targeted annualized adjusted EBITDA margin to no less than 18%."

Gross profit increased 6% to $304 million driven by the acquisition of the legacy Primo business as well as higher gross profit in the North America segment. Gross profit as a percentage of revenue was 58.8% for the quarter compared to 60.6% last year. The decline in gross profit margin was the result of lower gross profit in the ROW segment and the lower gross margin profile of the legacy Primo business.

Adjusted EBITDA increased 28% to $111 million compared to $87 million. The increase was driven primarily by growth in volumes from increased water direct services and products to residential customers, improved operating leverage, the benefit of the legacy Primo acquisition and synergy realization.

Primo is targeting fourth quarter 2020 consolidated revenue from continuing operations of approximately $470 to $500 million excluding the impact of foreign exchange as well as adjusted EBITDA of $85 to $95 million. Fiscal 2020 is a 53-week fiscal year, with an additional operating week in the fourth quarter of 2020.