B. Riley & Co. Consumer Conference - September 16, 2015 - Primo Water
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B. Riley & Co. Consumer Conference September 16, 2015
SAFE HARBOR STATEMENT
Certain statements contained herein are not based on historical fact and are "forward-looking statements" within the
meaning of the applicable securities laws and regulations. These statements include the Company’s financial guidance
and the expectation that its momentum will create further growth opportunities in the exchange and refill businesses.
These statements can otherwise be identified by the use of words such as "anticipate," "believe," "could," "estimate,"
"expect," "feel," "forecast," "intend," "may," "plan," "potential," "project," "should," "would,” “will,” and similar
expressions intended to identify forward-looking statements, although not all forward-looking statements contain these
identifying words. Owing to the uncertainties inherent in forward-looking statements, actual results could differ
materially from those stated herein. Factors that could cause actual results to differ materially from those in the forward-
looking statements include, but are not limited to, the failure to achieve the incremental net sales or reduced distribution
costs associated with strategic alliance agreement with DS Services of America, Inc., adverse changes in the Company's
relationships with its other independent bottlers, distributors and suppliers, the loss of major retail customers of the
Company or the reduction in volume or change in timing of purchases by major retail customers, lower than anticipated
consumer and retailer acceptance of and demand for the Company's products and services, the entry of a competitor
with greater resources into the marketplace, competition and other business conditions in the water and water dispenser
industries in general, the Company’s experiencing product liability, product recall or higher than anticipated rates of sales
returns associated with product quality or safety issues, the loss of key Company personnel, changes in the regulatory
framework governing the Company's business, the Company's inability to efficiently expand operations and capacity to
meet growth, the Company's inability to develop, introduce and produce new product offerings within the anticipated
timeframe or at all, the Company’s inability to comply with its covenants in its credit facility, significant liabilities or costs
associated with litigation or other legal proceedings, as well as other risks described more fully in the Company's filings
with the Securities and Exchange Commission, including its Annual Report on Form 10-K filed on March 16, 2015 and its
subsequent filings under the Securities Exchange Act of 1934. Forward-looking statements reflect management's analysis
as of the date of this press release. The Company does not undertake to revise these statements to reflect subsequent
developments, other than in its regular, quarterly earnings releases or as otherwise required by applicable securities laws.
2
INVESTOR HIGHLIGHTS
• Positive Financial Trends
• Well-Positioned for Industry & Consumer Trends
• Only Single Vendor Retail Solution
• Established Enviable Customer Base
• Proven Executive Track Record
• Strong Growth Prospects w/ Operating Scale
• Financial Results Exceeding Expectations
3
POSITIVE FINANCIAL TRENDS
Net revenue growth of 21% to $32.4 million, exceeding
expectations
Strong growth at retail with U.S. exchange same-store unit
growth of 8.7%
Sales growth and operating efficiency propelled adjusted
EBITDA growth of over 48% to $4.4 million, exceeding
expectations.
Raised outlook for the remainder of 2015
4
Source: Company SEC Filings. Adjusted SG&A and Adjusted EBITDA are non-GAAP measures.
FAVORABLE HEALTH TRENDS
Majority of the U.S. population has high intakes of added sugar…improved beverage selections that
limit or remove sugar-sweetened beverages would help lower intakes of added sugar.
- 2015 USDA Dietary Guidelines Advisory Committee, February 2015
• Consumers are increasingly choosing healthy, zero calorie
bottled water
o Bottled water has increased its share of the overall beverage
market from 11.8% in 2003 to 17.8% in 2014
o Sales of bottled water in 2014 are expected to grow to $13
billion, a 6.1% increase from the prior year
• Heightened negative focus on obesity & sugar consumption
o By 2016, bottled water is expected to overtake carbonated soft
drinks as the #1 packaged beverage in the United States
5
Source: Beverage Marketing Corporation
FAVORABLE ENVIRONMENTAL & SUSTAINABILITY TRENDS
• Environmental & sustainability movements continue
o >70% of single serve bottles end up U.S. Geological Service identifies
landfills annually “Impaired Waters”
(defined as not meeting guidelines for sustainable water quality)
o Continued challenges to reduce or even in literally every state in the U.S.
ban single serve bottles gain
momentum
• Municipal tap water quality concerns
o Municipal systems underinvested
• Taste preference; Filters ≠ Purified Water
6
Source: International Bottled Water Association
ONLY SINGLE VENDOR RETAIL SOLUTION
DISPENSERS EXCHANGE REFILL
7
RECURRING REVENUE BUSINESS
RAZOR RAZORBLADE
Water Dispenser Water Exchange & Refill
Average of 35 Annual
Exchange
Purchases
Sell 1 Appliance
Refill Weekly Grocery Trips
8
ENVIABLE RETAIL CUSTOMER BASE
Dispensers Exchange Refill
Membership
Home Centers Mass Merchants Grocery Stores Drug Stores Hardware Stores
Warehouses
24,000+ Locations and Growing
9
Source: Company Information
PROVEN EXECUTIVE TRACK RECORD
EXECUTIVE POSITION RELEVANT WORK EXPERIENCE
Founder, Chairman & Chief Executive
Billy Prim Officer
Matt Sheehan President & Chief Operating Officer
Mark Castaneda Chief Financial Officer
Senior Vice President and General
Rick Belmont Manager of Dispensers & Innovation
Jamila Granger Vice President, General Counsel
Vice President, Strategy, Financial
David Hass Planning & Analysis
Vice President, General Manager of
Bob Heer Refill & Canada
David Mills Vice President, Finance
Bob Travatello Vice President, MIS
10GROWTH STRATEGY
• Grow Household Penetration of Dispensers
• Improve Connectivity
• Increase Retail Outlets
• Drive Unit Economics
11IMPROVING HOUSEHOLD PENETRATION IN DISPENSERS
• Room temperature, cold, and hot options
• Top and bottom load, plus stainless steel
12DISPENSER: SELL-THRU TRENDS
QUARTERLY DISPENSER SELL-THRU CUMULATIVE DISPENSER SELL-THRU
2,750,000
18 Quarters to 1M (Q2 ’12)
160,000 10 Quarters to 2M (Q3 ’14)
2,500,000
140,000 2,250,000
2,000,000 2.0M
120,000
1,750,000
100,000
1,500,000
80,000 1,250,000
1,000,000 1.0M
60,000
750,000
40,000 500,000
20,000 250,000
0
0 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15
Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15
BOTTOM-LOAD 2008 2014
% OF SELL-THRU 27% 40%
13
Source: Company InformationIMPROVE CONNECTIVITY
Email marketing and social
Improving communications Branding of water displays and
media engagement with
and couponing within each dispenser packaging to better
Primo dispenser owners to
dispenser sold, to drive communicate our entire
communicate the benefits of
consumers to Primo water solution
Primo water
VALID 1/1/2014-6/30/2015
Get
Save 5 $ On your first purchase of
PrimoExchange Water
RETAILER: We will reimburse you the face value of thiscoupon
plus8¢ handling provided you and the consumer have complied
with the termsof thisoffer. Invoicesproving purchasesof
sufficient stock to cover presented couponsmust be shown on
Started
Today
Use these
redeemable
request. Any other application may constitute fraud. coupons to
Coupon void where prohibited, taxed or restricted.
Consumer must pay any salestax. Cash value .001¢. try Primo
Reproduction of thiscoupon isexpressly prohibited.
Mail to: Primo Water, Inmar Dept. # 51199,
Water.
One Fawcett Drive, Del Rio, TX 78840
PNR083 2013-11-12
VALID 1/1/2014-6/30/2015 VALID 1/1/2014-6/30/2015
$ 1OFF 5 Gallon Refill
of Primo Water
RETAILER: We will reimburse you the face value of this coupon plus 8¢ handling provided you and the consumer
have complied with the t erms of this offer. Invoices proving purchases of sufficient stock to cover presented
coupons must be shown on request. Any other application may constitute fraud. Coupon void where prohibited,
$ 1OFF 5 Gallon Refill
of Primo Water
RETAILER: We will reimburse you the face value of this coupon plus 8¢ handling provided you and the consumer
have complied with the t erms of this offer. Invoices proving purchases of sufficient stock to cover presented
coupons must be shown on request. Any other application may constitute fraud. Coupon void where prohibited,
taxed or restricted. Consumer must pay any sales tax. Cash value .001¢. Reproduction of this coupon is expressly taxed or restricted. Consumer must pay any sales tax. Cash value .001¢. Reproduction of this coupon is expressly
prohibited. Mail to: Primo Water, Inmar Dept. # 51199, One Fawcett Drive, Del Rio, TX 78840 prohibited. Mail to: Primo Water, Inmar Dept. # 51199, One Fawcett Drive, Del Rio, TX 78840
14EXCHANGE: SELL-THRU TRENDS
QUARTERLY U.S. EXCHANGE SELL-THRU
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 14 14 14 14 15 15
15
Source: Company InformationRUNWAY FOR RETAIL EXPANSION
WATER LOCATION OPPORTUNITY
• Large Market Opportunity: 200,000+ Locations in the U.S. and Canada
• Strong Runway of Opportunity with Both Existing & New Retailers
50k – 60k
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
18,400
Water Locations
20,000
15,000
10,000
5,000
-
Remaining
New Channels Convenient
Opportunity w/
New Retailers Availability
Existing Relationships
16
Source: Company Information.GROWING UNIT ECONOMICS
C.O.R.T. TELEMETRY
Company Operated Regional Territories Remote monitoring technology rollout
REFILL
Leverages Company Service Technicians in Relays meter flow data and signaling of
dense markets equipment issues real-time
Improved service, brand presence and Reduces unnecessary visits, drives efficiency
enhanced Gross Margins and enhances Gross Margins
Selective deployment remains in the U.S. Seamless billing
and Canada
Transition from reactive to proactive service
DISTRIBUTION TRANSITION
EXCHANGE
Transition of a majority of the U.S. Bottling Improved distribution costs, delivery
and Distribution Services to one primary frequency and proximity to retail clients.
distributor (DS Services)
Reduced market completion
Shift from 60+ independent operators to
one national network of 200+ distribution
points
17FINANCIAL RESULTS
2015 SECOND QUARTER FINANCIAL HIGHLIGHTS
Net revenue for the quarter was $32.4 million, an increase of
20.7% over 2014
Water segment net revenue increased 29.3% to a record $22.1
million
Same-store unit sales growth for the quarter of approximately
8.7% in U.S Exchange
Dispenser sell-thru of 130K, up 3.8% over 2014 and 9.2% over Q1
Adjusted EBITDA of $4.4 million, an increase of 48.4%
Earnings from continuing operations of $0.03 per diluted share.
19
Source: Company SEC Filings. Adjusted SG&A and Adjusted EBITDA are non-GAAP measures.FINANCIAL MOMENTUM & SCALE
(All $'s in 000's)
NET REVENUE ADJ SG&A % of NET REVENUE
ADJUSTED EBITDA
20
Source: Company SEC Filings. Adjusted SG&A and Adjusted EBITDA are non-GAAP measures.SOLID BALANCE SHEET AND CASH FLOW
Summary Balance Sheet June 30, 2015
Current assets $22,743 Current liabilities $21,052
Capital assets 37,086 Long-term liabilities 24,493
Other assets 9,584 Stockholders’ equity 23,868
Total assets $69,413 Total liabilities and equity $69,413
• Total debt of $22.3 million down from $24.3 million at Dec 31, 2014
• Total debt to adjusted EBITDA improved to 1.45x in 2015 from 2.40x in
2014
• Operating cash flow of $8.5 million for the first six months of 2015
• Free cash flow for the $4.5 million for the first six months of 2015
21
Source: Company SEC Filings.INCREASED 2015 OUTLOOK & INITIAL Q2 GUIDANCE
• Increased 2015 Full-Year Outlook:
o Increased Net Revenue to $122.8 - $124.8M from $114.5 - $118.5M
o Increased Adjusted EBITDA* to $15.8 - $16.8M from $14.7 - $16.2M
• Third Quarter 2015 Guidance:
o Net Revenue of $31.5 - $32.5M
o Adjusted EBITDA* of $4.7 - $4.9M
* - Adjusted EBITDA excludes primarily non-cash stock compensation expense
22LONG-TERM PERFORMANCE TARGETS
FINANCIAL METRIC 2013 2014 Q215 5 YEAR TARGETS
REVENUE GROWTH (0.3%) 16.6% 20.7% 7% - 15%
GROSS MARGIN 25.0% 26.2% 25.3% 25% - 35%
% OF NET REVENUE
ADJ. SG&A 15.1% 14.0% 11.6% 10% - 12%
% OF NET REVENUE
ADJ. EBITDA MARGIN 9.9% 12.2% 13.7% 15% - 20%
23
Source: Company SEC Filings. Adjusted SG&A and Adjusted EBITDA are non-GAAP measures.INVESTOR SUMMARY
• Favorable Industry & Consumer Trends
• Only Single Vendor Retail Solution
• Recurring Revenue Business Model
• Proven Executive Track Record
• Strong Growth Prospects w/ Operating Scale
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