Primo Water Corporation

Good morning, my name is Joanna and I will be your conference operator today. At this time, I would like to welcome everyone to the Primo Water Corporation's fourth quarter 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 John Cottle, Vice President, Investor Relations. Please go ahead.

Welcome to Primo Water Corporation's fourth quarter 2023 earnings conference call. All participants are currently in listen-only mode. 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 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 and quarterly reports on Form 10-Q and other filings with securities regulators. The company's actual performance could differ materially from these statements, and the company undertakes no duty to update these forward-looking statements except as expressly required by applicable law. A reconciliation of any non-GAAP financial measures discussed during the call with the most comparable measures in accordance with GAAP when the data is capable of being estimated is included in the company's fourth quarter earnings announcement released earlier this morning and 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 Robert Reapbrook, Primo Water's Chief Executive Officer, and David Haas, Chief Financial Officer. With that, I will now turn the call over to Robert.

Thank you, John, and good morning, everyone. I'm excited to speak to you today as the new CEO of Primo Water and to be a part of what I believe is the premier and only publicly traded pure play water company. I joined Primo Water in January of this year, bringing more than 25 years of leadership experience at Fortune 200 consumer goods companies, including PepsiCo, Kimberly Clark, and Procter & Gamble. For the past five years, I served as Senior Vice President and General Manager of Quaker Foods North America, a reporting segment of PepsiCo. The team has been tremendous in their welcome, and their pride of Primo Water is abundantly evident. I would like to extend a personal thank you to all our associates, as well as our board, for their warm hospitality and openness. I would also like to thank my predecessor, Tom Harrington, for his efforts and guidance as a dedicated leader of Primo Water, including CEO for the last five years. He should be recognized for delivering strong 2023 results, and we wish him all the best in his well-deserved retirement. With that, let's shift gears to the topics for today's call. I'll provide some initial observations for my ongoing onboarding, including where we have strength as well as high impact opportunities. After that, David will cover the highlights of our recently completed transaction. Then he will review our financial performance in greater detail and outline our 2024 outlook. Then I'll be back to share my priorities, or what I call our must-wins, which have been developed to capture embedded opportunity and further enable profitable growth delivery. We'll then open it up to your questions. Since arriving seven weeks ago, I've spent quality time with our valued associates and customers. I've also connected with members of the financial community, in addition to reviewing last year's perception study. I look forward to hearing from more of you in the next several days and in the coming months as we begin to attend investor conferences and events. I'm of the opinion that Primo Water is set up for growth, as I've had the opportunity to learn more about our company's assets, resources, and practices across five broad areas. Specifically, one, our associates, two, the scale and breadth of our offerings, Three are brands. Four are water stewardship practices and sustainability. And five are production and distribution capabilities. These observations support the ability to fulfill our growth potential as a pure play water company in the large, highly fragmented, and growing North America water markets. First, let's talk about our associates. They're passionate about what we do. They're embedded in our communities and live where we serve our customers. In the last seven weeks, I've met with numerous associates while visiting branches and distribution facilities in some of our largest markets in California, Texas, Georgia, and Florida. I observed firsthand that our associates take the idea of serving the customer to a level which I believe sets us apart in the marketplace. Continuing to empower our associates will be critical to providing superior service to our customer base across our water offerings. Second, our constantly expanding scale and breadth in North America is quite impressive. Leveraging our geographically diverse footprint, we can serve customers at an individual delivery address in our water direct business or work with leading retail partners to provide direct to retail distribution. This allows Primo Water to supply a broad array of water solutions efficiently. I believe we can use our scale to drive a higher level of operating rigor that will allow us to further differentiate us in the highly fragmented marketplace. Starting with our water dispensers, our Water Your Way platform connects customers to our hydration solutions by either renting a dispenser directly from us or buying online or at one of our 10,900 water dispenser retail locations. Both are means to drive recurring consumption of water, whether it's through our water direct, exchange, or refill channels. We have over 1.5 million water direct customers, 17,500 water exchange locations, 23,500 water refill stations, and over 12,000 locations that sell our Mountain Valley premium spring water. Additionally, we service more than 100,000 customers in our growing water filtration business. These services in aggregate sold more than 1 billion gallons of water last year. With a total addressable market of nearly 29 million North American households, we have an opportunity for additional organic growth in both residential and commercial channels. We support our ongoing marketing and customer recruitment efforts to direct to consumer connections with our websites, mobile apps, and partnerships with major club stores, retailers, and prominent grocery stores. We target quality customers through in-store events, customer referrals, and old-fashioned door knocking. In addition to organic growth, M&A is a key part of our DNA and integral to our long-term strategy. My initial impression is that our ability to successfully integrate synergistic acquisitions is a core competency. Our research indicates that customers acquired through M&A have high retention rates because they understand the benefits of our services and have accepted hydration solutions as an important part of their lifestyle. As a career consumer goods leader, I recognize our portfolio of brands have a long history and legacy. In fact, it's one of the reasons for my interest in coming to lead Primo Water. Our portfolio of 14 brands includes some of America's most longstanding and beloved beverage brands. Dating as far back as 1871 with Mountain Valley, 1888 with Hinkley Springs, and 1925 with sparklets. These brands are shining examples of water products that benefit the health and wellness of our customers. I believe we have the potential to be even more impactful with the right combination of customer marketing, communication, and connectivity. We own amazing assets like Water.com, Agua.com, our mobile My Water Plus app, and other brand and domain names with direct to consumer and retail access that enables a connection with our consumers. Fourth, a truly unique aspect of our company is our commitment to sustainability, ESG, and being good stewards of the environment. I love our company's commitment to accountability. For example, reducing plastic in the environment. One of our bottles, replaces as many as 1,500 single-use plastic bottles from entering the waste stream. By reusing and recycling our large format bottles, we can help close the loop on plastic waste. By sourcing and processing responsibly, we aim to protect the planet we inhabit. To achieve this, we are implementing an environmental strategy that is focused on three priorities. First, reducing climate change impacts through greenhouse gas emissions management. Second, sourcing water responsibly. And third, integrating circular economy principles in our business models. We thank all our associates for their continued hard work and dedication, and our investors for their ongoing support as we continue our sustainability journey. The fifth area of observation relates to the footprint of our manufacturing and supply chain operations, which put us within reach of the majority of population in North America. The vast network has grown significantly over the years through a combination of organic and inorganic growth. While our expansive production and distribution network sets us apart in terms of our ability to meet our customers' needs, I see opportunity to optimize this footprint to improve operating efficiencies. better serve our existing customers and reach new customers across North America. This includes investing in physical production assets, distribution capabilities, and technology suites to support more efficient planning. Let me discuss each of these in a bit more detail. First, we continue to upgrade and automate our production facilities, further ensuring the safety and well-being of our associates. and delivering enhanced growth and efficiency over the long term through manufacturing best practices. I recently had the opportunity to see this technology in action at our largest bottling facility located in Los Angeles. This new bottling line is remarkable. It nearly doubles the production, reduces waste, and improves the safety for our associates through robotics. We will have six of these lines installed at various locations by the end of this year. Second, fleet enhancements and upgrades are an important part of what we do. We are in a continual state of recycling out the oldest portion of our delivery fleet and replacing them with new, environmentally-friendlier propane-powered vehicles and benefiting from improved efficiency and lower repair and maintenance costs from this transition and increase our own primary fleets. Third, to embed digitization efforts throughout the organization, we are leveraging artificial intelligence and data analytics in areas like forecasting as part of our planning processes for production and sales and operational planning, also known as SNOP. Utilizing tools like Salesforce.com and Tagedic, We can take real-time information and do things like employing precision marketing to generate customer contacts as part of improving the overall customer experience. These tools are part of a broader effort that will allow us to reduce cost, increase working capital efficiency, and improve our return on invested capital. I hope you can understand why I'm excited about the growth potential in front of us. We have a unique combination of associates, assets, and resources that are capable of delivering results that benefit all our stakeholders. I will now turn the call over to David to review our financial results in greater detail and provide our 2024 outlook. And once again, I would like to thank all our Primo Water Associates for their support and contribution to the excellent performance of the business.