Primo Water Corporation
Q3 2017 Earnings Call Transcript

Published: 12 Nov 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Primo Water Third Quarter 2017 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Madeleine Kettle [ph]. Ma'am, you may begin.

[Unidentified Company Representative:]

Good afternoon, and welcome to Primo Water's Third Quarter 2017 Earnings Conference Call. On the call with me today are Matt Sheehan, Chief Executive Officer and Mark Castaneda, Chief Financial Officer. By now everyone should have access to the release that went out this afternoon at approximately 4

[Matt Sheehan:]

Thank you, Madeleine. Good afternoon, everyone, and thank you for joining us today to review our results for the third quarter of 2017. I am excited to review our quarterly results and the continued momentum in our business. Our team and our business continue to show its strength as a highly valuable, recurring-revenue model with significant trends that are back. I'm very pleased to report results that exceeded our guidance. Based on our solid results, we are increasing our full year guidance for revenue and adjusted EBITDA. Mark will provide more detail on our updated guidance. That said, before getting into the details of the quarter, I'd like to take a moment and celebrate Mark Castaneda. Mark has decided to retire after 10 years here at Primo, and a stellar career. Mark will be with us through January, and I'm excited to announce that David Mills will be promoted to CFO and Michael Cauthen to Vice President of Finance, both very well-deserved promotions. People make the difference here at Primo, so before talking through the quarter, I'll turn the call over to Mark to talk about his next chapter.

[Mark Castaneda:]

Thanks, Matt. I am deeply appreciative for all the opportunities I've had over the last 20 years, which is when I first met Billy Prim and relocated to North Carolina. Building and growing the Primo business in this space that didn't exist before has been an exciting path with its share of highs and lows along the way. Looking back, I am most proud of the difficult times when we were tested, came together as a team and overcame the obstacles. I've been very fortunate to work with the most amazing group of people that have inspired and taught me about leadership and life along the away. I've been very fortunate to develop strong personal friendships which I will cherish forever. As the leader, playing a part in the development and growth of people around you is one of the most satisfying feelings one can have. I am very pleased to congratulate David Mills and Michael Cauthen on their promotions upon my retirement. We are fortunate to have a deep bench of talented people that will step right in and continue to take our business to new heights. As for me, I will begin a new chapter to focus on family, friends, philanthropy, directorship and some fun. I want to thank Matt Billy, our Board of Directors, employees, investors, suppliers, bankers, analysts and family for all the support, encouragement and opportunities. I've had a career that I am very proud of and has exceeded my expectations. I am confident in this team and this business and will continue to be a shareholder, as I believe this business has a lot of growth ahead. With that, I'd like to turn the call back over to Matt to talk about our great third quarter results and overview on the industry. Then I'll provide more details on our results and outlook later in the call.

[Matt Sheehan:]

Thanks. Mark has been an integral part of this business and his roots go deep into who we are, how we operate and the very values we live. While we will miss his friendship and partnership on a daily basis, I commend and thank Mark on a care he has taken to set up Primo for the future. Mark, you'll be a part of the fabric of this company for a long time. Transitioning to our results. I'd like to begin today by thanking our team of associates, retailers and partners for continuing their efforts, which were truly notable this quarter, with the recent hurricane activity that touched many areas of the Southern US as well as the wildfires in California. Our associates and our distribution partners showed why living our values and purpose is embedded in our everyday actions. We were present until final evacuation orders were given, delivering both Exchange water as well as maintaining Refill machines in affected areas, even while tending to our own employees who were impacted. These efforts not only helped to deliver results, but showcased the type of character present here in Primo. With those efforts in mind, this business continues to operate with strong tailwinds. Consumer beverage trends continue to provide momentum and support our purpose as consumers continue to choose healthier beverages over sugary alternatives. Health and wellness trends have been the top driver for bottled water growth over the past several years and it is expected to continue. More recently, increased concerns over tap water are driving consumers to look for a long-term, bottled-water solutions. Each week, there are new stories about contaminants in the drinking water systems that exceed government standards. In the past quarter alone, we have seen several examples, such as a continuing hepatitis A outbreak in Southern California, which, in part, has been traced back to contaminated drinking water and unaddressed warnings by government officials. New research from the Flint area showing increased fetal death rates and long-term development issues of children from contaminated water consumption in this community. Lastly, resurgence of the Lake Erie algae bloom, which each year - each summer season continue to have an impact on drinking water quality and safety. We believe that increased consumer awareness of these issues will continue to fuel growth in the water category, while we have the best water solution for the home, with over 46,000 locations, offering convenient, purely amazing water at a fraction of the cost of most alternatives, with no plastic waste. We will continue to focus on increased issues with tap water, the effective CFR solution in a home and our ability to help families live healthier lives. Now a few highlights from the quarter. Our third quarter results for both sales and adjusted EBITDA exceeded the high end of our guidance, which has been raised throughout the year. Sales and adjusted EBITDA more than doubled to $82.2 million and $18 million, respectively. The acquisition of Glacier Water fueled most of the growth within our Refill segment. Exchange posted total sales growth of 8.6%, primarily results of a strong 6.2% same-store unit growth in addition to transaction mix and gross location expansion. Additionally, our dispenser sales increased over 12%, primarily as a result of retailers accelerating shipment timing. During the quarter, we experienced record sell-through to end consumers of 169,000 units. This sell-through is specifically strong, given the growth in the prior year of 13.4%. Having discussed the market and the results, I'll now talk about our progress against certain key strategies, including an update on our integration activities related to the Glacier Water acquisition. As a reminder, we're a purpose-driven company that is committed to inspiring healthier lives through better water. We will achieve our purpose and our vision by executing on our 5 core strategies. First, grow household penetration. Secondly, improve connectivity of our dispensers and our water. Third, increase retail outlets. Fourth, drive unit economics. And fifth, fostering highly engaged teams. I'd like to give a few notable updates. First, grow household penetration. This quarter, we sold another record level of dispensers through retail to consumers. In the past two quarters alone, nearly 340,000 dispensers were purchased. Year-to-date, we have been able to exceed last year's record pace of dispenser sell-through, which included two quarters of 20% plus growth versus the prior year. We are extremely pleased with these results, and as a reminder, with any new dispenser sell-through, we have the potential to create valuable new water household sales. As we increase focus on connectivity to our water, the impact of the new and existing dispenser household can be even more impactful. Lastly, we continue to execute and plan our promotional activity calendar with our retail partners as we close out 2017 and head into 2018. Second, increased connectivity of our dispensers and our water. We continue to test the various ways to bundle water with dispensers as well as how to take a thought-leadership position in the Bulk Water category. We believe our market share leadership should be accompanied by efforts to help educate and build awareness on why a dispenser and connected Bulk Water solution is the most efficient, economical and environmentally friendly way to consume purified water. That said, here are some of the projects underway. Updating our dispenser packaging to help tell a better story on reasons to connect with Primo Water solutions. Piloting instant, redeemable coupons that help consumers immediately connect dispenser purchases with Primo Water. Testing and deployment of better point-of-purchase signage with both Exchange and Refill to include additional information on our dispenser solutions. Increasing our social and digital presence with the recent hiring of an online content Director. This position will help deploy awareness strategies regarding the benefits of Bulk Water and why Primo should be their choice during their path-to-purchase journey. Third, increased retail outlets. In the quarter, we added over 500 gross locations, but net locations were down slightly due to the retail closures and removals of low-performing locations. Year-to-date, we have added about 1,600 gross locations. We believe we have upgraded the quality of our retail footprint despite some retail closures and removals. In this quarter alone, approximately 70% of the Exchange installs were with Walmart, with a significant number of the de-installs coming from Kmart in the office-supply channel. This is important, as we believe retail consolidation will continue to impact our net location number, but we have consistently been able to replace them with high - higher-quality locations. Given this, we will intensify our focus on driving same-store sales activities and selectively remove underperforming locations, which we believe will have a positive impact on our EBITDA margins. In addition, we will continue to look at smaller acquisitions in the Refill segment that will provide location density in certain markets as well as earnings leverage. For example, this year, we completed a small acquisition in the Southeast at an EBITDA multiple under 5 times. We will actively seek regional tuck-ins where they make the most sense and financially fit our acquisition profile. Fourth, drive unit economics. As a reminder, our focus on unit economics zeroes in on revenue-driving activities, cost improvements and efficiencies in CapEx. Turning attention to our integration activities, we remain pleased with the progress to date. We remain confident in our $7 million to $8 million integration-savings target on an annualized basis, which includes operational and supply-chain efficiencies. We believe the operational integration is in the rearview mirror and now begin to shift our focus to supply-chain efficiencies, which is approximately $1 million to $2 million of the total synergies. Culturally, we are very pleased with the speed and commitment to this process. As we transition into 2018, our focus will shift to continuous-improvement activities that we can identify beyond our initial synergy goals. Shifting to revenue-enhancing activities. We remain on track in pursuing cross-selling between Exchange and Refill as well as pricing tests in Refill. We have begun to deploy regional pricing test as previously communicated throughout the US, mostly in the outdoor Refill space. We believe these tests pause represent a solid cross section of our locations that will help guide deployment as well as additional areas needing test modifications. As a reminder, in order to intelligently track and measure the impact, these tests will run for 90 to 180 days to review potential trade-offs between pricing increases and volume, along with any differences caused by seasonality. We look at pricing as ongoing activity, constantly optimizing throughout our network. Beyond pricing and cross selling, we believe we can continue to test targeting - targeted-messaging strategies in store for Refill and Exchange to drive consumer awareness and adoption. As these tests shows promise, we will extend or expand them across our businesses appropriately. Our few ongoing tests include

[Mark Castaneda:]

Thanks, Matt. I will first review our financial results in more detail and discuss our outlook for the remainder of 2017, then I'll turn the call back over to Matt for closing remarks. To help investors understand our operating results, we do provide adjusted EBITDA and adjusted EPS, which are non-GAAP financial measures. A reconciliation of these can be found in today's earnings press release posted on our website. We are very pleased with the financial results for the third quarter, which exceeded our guidance for both sales and adjusted EBITDA. As Matt mentioned, our third quarter top line more than doubled to $82.2 million, driven by growth in all segments. The Glacier acquisition contributed to most of the increase as our Refill segment sales increased approximately sevenfold to $51.3 million. Additionally, sales in our Exchange business grew 8.6% to $20.4 million, driven by the continued strength in same-store unit growth, which was 6.2% for the quarter. In addition, we realized an increase in the rate of initial purchase transactions in Exchange as a result of the two hurricanes. This helped drive up average unit revenue higher but slightly impacted gross margins. Overall, we believe the growth in our Water business is a result of continuing to add new consumer households through the sale of Primo Water dispensers. Dispenser segment sales increased 12.4% to $10.5 million. This increase is primarily result of the shift in timing of shipments to certain retailers being moved forward into the third quarter. As a reminder, we recognized sales as dispensers are sold into the channel, which contains year-to-year based on the timing of retailers' orders, promotions and store sets. For the quarter, sell-through of dispensers to end consumers was up 169,000 units, which represents over 15% growth on a 2-year comp basis. Moving down to P&L. Total gross margin for the quarter was 30.3% compared to 31.2% in the prior year. The increased mix of lower-margin dispensers and Glacier Refill sales resulted in lower gross margin in the quarter. Next, SG&A for the quarter increased to $7.9 million from $4.9 million, primarily as a result of the acquisition. We continue to see leverage in our business model as SG&A decreased to 9.7% as a percent of sales from 13.8% in the prior year. Moving down the P&L. Interest expense for the quarter was $5.2 million compared to $0.5 million in the prior year. The increase is the result of interest expense due to additional leverage incurred for the Glacier acquisition. Adjusted EBITDA for the quarter more than doubled to $18 million from $6.7 million in the prior year as a result of significant revenue growth and leverage from our SG&A expenses. Our adjusted EBITDA margin increased to 22% from 19% in the prior year. On a GAAP basis, our net income for the quarter was a record $4.9 million or $0.14 per diluted share compared to $2.5 million or $0.08 per share in the prior year. This is the first quarter in 2017 that demonstrates the earnings power of the business without significant nonrecurring and acquisition-related costs. We are reporting some minor tax expense related to the accounting for the acquisition-related items. We do not expect to pay cash taxes in the next few years because of our net operating loss carryforwards. On a comparable basis, adjusted net income from continuing operations was $6.4 million or $0.19 per diluted share compared to $3.8 million or $0.13 per diluted share. Continuing on to our balance sheet, we ended the quarter with $4.3 million in cash. Our accounts receivable DSO decreased to about 23 days from 31 days at December 31, as a result of improved collections as well as the addition of the Glacier business that carries lower receivables compared to revenue. Due to seasonality, inventories increased slightly and our accounts receivable increased $8.5 million. We expect a slight increase in CapEx for the year over our original plan to address machine refurbishment and supplying additional Exchange bottle flow related to the hurricanes. Turning to our outlook. We are increasing our guidance for revenue and adjusted EBITDA for the full year based on solid operating performance. We now expect full year revenues of $284.5 million to $288.5 million from $283.5 million to $287.5 million, and adjusted EBITDA of $54.5 million to $55.8 million from the original $54 million to $55.5 million. We believe a total of approximately $2 million in revenue is pulled forward into Q3 related to our dispensers and our Water business. In summary, our third quarter results exceeded our plan as all business segments performed. We are confident in raising our guidance to reflect the positive consumer trends. I will now turn the call over to Matt for closing remarks.

[Matt Sheehan:]

Thanks, Mark. We are very pleased with the efforts of our team to post solid results while making major changes to the service infrastructure of the business. We believe the macro and broader consumer trends will continue to fuel future growth in dispenser households and increased usage of Primo Water. Additionally, the combined businesses of Primo and Glacier have resulted in a stronger foundation for our business and significant opportunities for value creation. As we look to the future, we're operating from a position of strength and remain confident that our positive momentum will continue to build. As always, we appreciate the hard work and dedication of our associates, partners and retailers, and specifically, during the very challenging weather conditions we faced in the quarter. Lastly, I'd like to, once again, thank Mark for his leadership and contributions for years here at Primo. With that, I'd like to open the line up for questions. Operator?

[Operator:]

[Operator Instructions] Our first question comes from Mike Petusky with Barrington Research.

[Mike Petusky:]

Mark, congratulations. So I guess the first question about the pricing tests in outdoor Refill, did those begin - those have already begun and I'm assuming they began in the beginning of the quarter or can you just speak about the timing there?

[Matt Sheehan:]

Yes, Mike, this is Matt. They have recently begun as we've been targeting Q4, and so we're on schedule there. And we probably have about a couple of hundred locations represented of the national footprint across the country and regions.

[Mike Petusky:]

Any regions that you can disclose or you want to disclose?

[Matt Sheehan:]

No. Not at this time.

[Mike Petusky:]

And then on the Walmart adds, obviously, great momentum there. I am just wondering, are there any other Walmarts that you expect to be added between now and year-end '17?

[Matt Sheehan:]

There could be as most of a - as much as a couple of hundred, and that's probably going to take a few quarters to get through. We're getting close to a good level of penetration there. And again, you'll never get full penetration at Walmart. So there is still some left. But we've really focused on majority of that opportunity this year.

[Mike Petusky:]

Is there any, even anecdotal, information to share on cross-selling efforts? I mean, have you had any kind of - even minor wins that you can, kind of, anecdotally cite or is it just too early?

[Matt Sheehan:]

It - So we've had some wins. It's a little early. In the future, we'll be able to give you a bit more detail on that.

[Mike Petusky:]

And then just last question. On the small deal in Refill. Did that happen in the third quarter?

[Matt Sheehan:]

That was in Q2 and it was a very small deal. It's not material, but when we looked at it, we thought we should share that the tuck-in is a strategy for us.

[Mike Petusky:]

Would you expect there to be other deals, say, over the next four to eight quarters?

[Matt Sheehan:]

There's something could be, Mike. We're looking at those now. And again, we are very focused on doing good deals that have accretion for us. So we'll be picky about those deals, but certainly, if they make sense, we can move on those fairly quickly.

[Operator:]

Our next question comes from Mark Argento with Lake Street Capital.

[Mark Argento:]

Congrats, Mark. You'll be missed. David, congrats on the promotion. Just wanted to follow up on the kind of the new locations or units. Obviously, Kmart, office-supply chains, kind of, churning off. You're adding Walmart, other guys. Could you kind of talk where you think you are in terms of the, kind of, burning off or running down some of the Kmarts and office guys? And when we could - when you could see potentially starting up positively comp on an absolute basis? And then I have a follow-up question.

[Mark Castaneda:]

Yes, Mark, thanks again. And as far as between Kmarts and office, there is still about 1,000 of those left that we have installed. But there's also independent stores that are impacting. So the timing of when retailer - retail stops contracting, that's going to be pretty tough. We don't know how long that will take.

[Matt Sheehan:]

And Mark, let me just add to that. I think our strategy is really positioned towards same-store sales on this because of that retail consolidation. And when we have lost, we've been focused on adding better locations, even if that number stays phase net. And typically, consumers will - they've already committed and they have a dispenser in their home, so they'll find Primo Water elsewhere. So we do expect to see continued consolidation, and we're going to continue to focus on same-store. Keep also in mind that when we lose a Kmart or an Office Depot, and we add a Walmart, that Walmart will back 3x what an Office Depot or an average location will do. So that's - while the net location number might be a little down or flat, in terms of productivity, that's all a good net increase for us. Does that make sense?

[Mark Argento:]

Yeah, no, that's helpful. And then in terms of grocery, how do you guys see that opportunity now? I know it's - I know you have a much bigger grocery footprint after that Glacier acquisition. In terms of the opportunity to cross-sell there, is that more of a 2018 or 2019 opportunity? How do you guys see that playing out?

[Matt Sheehan:]

There's a strong opportunity in grocery for sure, and that's going to be a good focus of ours in '18.

[Mark Argento:]

And then my last question, just something to do with when you did the original Glacier acquisition, that would - part of that consideration was done in stack. Could you talk about - have you guys distributed all those shares at this point? Or you could just walk through how that occurs? I just want to make sure I've an understanding of that.

[Mark Castaneda:]

Yes. No, we have not distributed all the shares. There is some additional shares that will be coming - be distributed in December - December 12, just over 1 million shares.

[Mark Argento:]

And after that, then it's been fully paid for at that point?

[Mark Castaneda:]

That's correct.

[Operator:]

Our next question comes from Amit Sharma with BMO Capital.

[Drew Levine:]

This is Drew Levine on for Amit. And Mark, congrats on the retirement. Just wanted to touch on a couple of points. As far as the impact from the hurricane, wondering if you guys have any sense on if you know if these customers are potentially new customers? Are they customers that you already had and any sort of connectivity on dispensers there as well?

[Mark Castaneda:]

What we've seen so far is we do expect that's a mix of both. So it is some existing customers that did pull forward some demand as well as new customers. Now these hurricanes were a little different as far as the recovery time period goes. So the recovery in Florida was pretty quick, there wasn't a lot of displacement. So those consumers mostly pulled forward demand as opposed to having to wait - waited out somewhere without having power.

[Drew Levine:]

And I think you said the total impact on revenue was $2 million in the quarter combined with the pull forward of dispensers. Is that right?

[Mark Castaneda:]

That's correct.

[Drew Levine:]

And then just another thing. If you could remind us, we've been hearing a lot about increased freight costs across bunch of different companies. Just wondering if you guys have been seeing anything or how that is factored into your model?

[Mark Castaneda:]

Well, we actually - during the hurricanes, we did incur additional freight costs in moving bottles around to get to the affected areas, which had some slight impact on the margins for Exchange, but not significantly. As far as overall freight costs, no, most of our freight is through our DS contract. We kind of have fixed adjustments in there for pricing.

[Drew Levine:]

And just on the acquisition front, just can you kind of maybe size potential opportunity there? And then just, kind of, taking into account the balance sheet leverage, just what you guys are thinking about potential size of bolt-ons?

[Mark Castaneda:]

So there's hundreds of smaller Refill opportunities out there, but they are really small. I think there's only a couple of players that have over 1,000 locations. But most of these are pretty small and have been pretty immaterial. So as far as affecting our free cash flow, we probably wouldn't do anything in a very meaningful way to make much of an impact.

[Operator:]

Our next question comes from Mike Grondahl with Northland Securities.

[Mike Grondahl:]

Mark, best of luck in your next phase, and David, congrats on the promotion. First question, just want to verify the Glacier pricing test at these couple of hundred locations that what you're testing is a $0.05 price increase. Is that correct?

[Matt Sheehan:]

Yes, Mike, this is Matt. That's the majority of the locations is a $0.05 increase. Correct.

[Mike Grondahl:]

What are the other locations? Are you actually testing a larger increase?

[Matt Sheehan:]

It could tweak just a little bit. And some of those might be some indoor locations, so you could get a little bit of movement up off of the $0.05 in that. But the majority of that test is going to be a $0.05 move north.

[Mike Grondahl:]

And would you anticipate, Matt, that on your year-end call, you'd be able to kind of say directionally we're going here or we're not? Like what's - you did say 90 to 180 days, but if this thing started, let's say, two weeks ago, the calendar is going to turn by pretty quick. When would you expect to give us an update on how you're going to proceed?

[Matt Sheehan:]

We're really hesitant to give a date on that, right? But it's possible by the time we have our call in March to have some insights. We just don't want to over promise that, because we just want to make sure we give ourselves plenty of time to understand how the consumer reacts to pricing. It's possible. We just want to be careful putting a stake in the ground on timing. But for us if it's accretive, we're going to - we'll happily tell you.

[Mike Grondahl:]

Yes, $0.05, if you could get that across the network, that's a big deal. Secondly, Matt, when you were talking about the connectivity, you were talking sort of updating the packaging, kind of piloting some instant coupons, better signage, social media. You guys test stuff quite a bit before you roll it out and kind of run it across the network. So are those items on connectivity, are they past the testing stage? Or where would you describe that you are with those?

[Matt Sheehan:]

Yes, I mean if we - it's great question, and we do - we're pretty scientific about our testing, just to make sure that we take any risks out of - before we make any big decisions and roll any new moves out. So across marketing and across connectivity, we have several tests going, and probably, not all those tests will work. We do have some tests, like I mentioned earlier, on signage and Exchange. We've been testing three different ways to communicate our proposition to consumers, and one has stood out amongst the rest and we'll be rolling that out across a couple of our retail partners next year. So yes, we do test fairly scientifically. We have a lot of tests going on. So Mike, we have some that we've decided didn't work. We have some that we are rolling out, because they did work. And then we have a whole host of tests that are just starting or are in process. And to your point, that's everything from, what we call, a shelf back, so in the store, packaging, signage in the store, all the way through digital. And as we've always said, digital is a new game for us. And we're adding talent to the team who are experts of that and know how to communicate digitally to consumers, which is, frankly, something we've never done. We think there's good upside to that. But that will take us while to tweak, perfect and show the growth from it.

[Mike Grondahl:]

So those are all sort of in process. It's not like you can say, hey, we're doing these things and it should enhance growth a couple of hundred basis points, is that correct?

[Matt Sheehan:]

Correct.

[Mike Grondahl:]

Hey Mark, how should we think about the gross margin outlook?

[Mark Castaneda:]

So gross margins in the quarter, you can see we're up about 200 basis points versus last quarter. And if you drill in to each of the different segments, so Refill was up about 300 basis points, and part of that is due to seasonality. So as you have more volume going through this fixed-net-cost network, you are able to increase margins. We do think we can get more efficient in our Refill network and increase margins over time, so that's first. Exchange is - was about 31.7%, so just a little bit less than last quarter. Year-to-date, Exchange is just a slightly ahead of last year. Exchange is probably going to be in that same range. We don't have the leverage in Exchange, we just want more transactions going at that same gross margin. On the dispensers, we're around 12% versus about 11 - about 100 basis points up last - versus last year. And that, we see the potential of that coming down closer to that 10% range. So we do want to do more promotions and give some of that 12% margin back. Does that answer your question?

[Mike Grondahl:]

Yes - no, directionally. And as long as you were saying it, what was the Refill gross margin in the quarter? You gave the 31.7% for the Exchange.

[Mark Castaneda:]

Yes, 33.5% was our Refill gross margin.

[Operator:]

Our next question comes from Kara Anderson with B. Riley FBR.

[Kara Anderson:]

Most of my questions have been asked, but just a clarification on the $7 million to $8 million in integration savings with Glacier. Is that $1 million to $2 million you cited the balance of that or are there additional savings left?

[Matt Sheehan:]

That's part of the $7 million to $8 million. So as we look back when we announced the deal, we said there was $6 million to $7 million, we upped that to $7 million to $8 million. A part of that, now $7 million to $8 million, was the $1 million to $2 million of supply-chain efficiencies. And so that's a part of that or that's not - that is not additional.

[Kara Anderson:]

I guess asked differently, what have you realized so far of that $7 million to $8 million?

[Matt Sheehan:]

Do the math.

[Mark Castaneda:]

So it's closer to $6 million to $7 million that we've realized so far. Now we - now that's not in the nine months, just to be clear. So some of that happen throughout the year, that's an annualized number.

[Operator:]

And I'm showing no further questions at this time. I'd like to turn the call back over to Matt Sheehan for closing remarks.

[Matt Sheehan:]

Thank you for your participation on today's call and interest in Primo Water. Have a good evening.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thanks for your participation. Have a wonderful day.