Primo Water Corporation
Q4 2015 Earnings Call Transcript

Published: 10 Mar 2016

[Operator:]

Good day, ladies and gentlemen. And welcome to the Primo Water Fourth Quarter and Full-Year 2015 Results Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call maybe recorded. I’d like to introduce your host for today’s conference, Ms. Hunter Wells of ICR. Ma'am, you may begin.

[Hunter Wells:]

Good afternoon, and welcome to Primo Water fourth quarter and full-year 2015 earnings conference call. On the call with me today are Billy Prim, Chairman and Chief Executive Officer, Matt Sheehan, President and Chief Operating Officer and Mark Castaneda, Chief Financial Officer. By now, everyone should have access to the release that went out this afternoon at approximately 4

[Billy Prim:]

Thank you, Hunter. Good afternoon, everyone, and thank you for joining us today to review our fourth quarter and full-year 2015 results. I’ll begin today's call by providing a few highlights on our full-year performance and initiatives. Then Matt will update us on our strategies. Finally, Mark will review our financial information in more detail and our outlook for 2016. First off, as many of you know, our mission at Primo is inspiring healthier homes through better water. Given the current macro trends consumers are facing, we’re uniquely positioned to deliver on our mission. Now what are those trends? First, consumers are switching from sugary sodas to water. Second, there continues to be an increase in drinking water quality issues. And third, through the media and other sources consumers are more cautious of the quality of the water they consume. In all of these cases, families trust Primo as the solution for their homes at an increasing rate. Given -- in any given year, there are hundreds of water boil alerts throughout communities in the U.S and Canada. Over the past few years, however, we’ve seen an increase in the severity of the drinking water issues that have long-term impact on consumers’ confidence. By now, you’re familiar with the recent issues in both Flint, Michigan, and Indian Point, New York. Just a couple of years ago, there were other significant issues that impacted communities in West Virginia and Ohio [ph]. Family should not have to worry about what is in their drinking water and whether or not their water is safe to drink. According to a recent New York Times article, the EPA estimates that $384 billion in maintenance costs are needed by 2030 to keep drinking water safe in the U.S. These issues tend to a wake in the community and the media attention then propels the concern. With boil alerts somehow solved may return to tap water as their main source. But with the severe issues that is often not an option and family seek to commute to a new solution. At Primo, we’ve worked with our partners to ensure our stores are well stocked with convenient, economical, purified water options. Each and every day, we’re viewed as a trusted solution. In these times of crisis, we see ours sales spike and often remain at elevated levels for the indefinite future. And we know the U.S has high quality drinking water and rigorous standards to ensure safe consumption. But we believe we’re at a tipping point where more and more households will turn to bottle water for their drinking solutions. Matt will discuss the impact of these water issues, as well as some of the donation efforts in his remarks. Now turning to our results. We finished 2015 on the strong note and are very pleased with our performance. The efforts of our team generated results above our expectations throughout the year and the fourth quarter was no exception. For the year, net sales increased over 19% to a record $127 million and adjusted EBITDA grew 40% to a record high of $18.1 million. This momentum help grab leverage across our business model with solid free cash flow generation of $5.7 million fueled by a 61% increase in our cash flow from operations to $13.6 million. Over the last few years, we’ve proven that our entire organization is focused on achieving our goals through the thoughtful and deliberate execution of our core strategies. In fact, in the last three years since we return focus to our core water and dispenser businesses, we’ve consistently delivered results and exceeded our expectations. In 2013, adjusted EBITDA grew 66% to $9.1 million. Again, in 2014 adjusted EBITDA grew 43% to $13 million. And now in 2015, adjusted EBITDA increased 40% to $18.1 million. We accomplish this growth while paying down debt, reducing our interest expense and improving our leverage ratio. In 2016, we expect this momentum to continue by increasing volumes and expanding margins, driving EBITDA growth of approximately 20%. We expect our water segment sales to benefit from additional dispenser households that are being created over the last several years. Additionally, as we continue to improve our business model, we’ve made a few changes in our dispenser business to optimize our use of capital and improve gross margins. Matt and Mark will provide additional details on these initiatives. Overall, we’re extremely pleased to deliver this level of performance in an environment of 2% U.S GDP growth. We will review our guidance in greater detail and importantly we believe the macro and broader consumer trends support the future growth in dispenser households and the increased usage of Primo Water. We intend to build on this momentum in 2016. We ended the year with approximately 25,700 retail locations and continue to believe we can grow this number to 50,000 to 60,000 over the next several years. With that overview, I’ll turn the call over to Matt.

[Matt Sheehan:]

Thank you, Billy. Our strong foundation and committed focus on our strategic objectives continue to yield positive results in the fourth quarter. Operational excellence, as well as the compelling consumer proposition held our financial performance. I’d like to provide an update on the key strategies that drove our performance. First, grow household penetration of dispensers. This has been and will continue to be an important part of our success. As you know, we sold dispensers at low margins as one of our key marketing initiatives to gain future water households and build recurring water sales. The fourth quarter was no exception. With dispenser sell-through of 19.9% to 125,000 units which helped to lead with 14.7% increase in the net sales of our water business. In 2016, we expect to provide our retail partners with additional promotions and dispenser innovation that will further drive dispenser purchases and more importantly continue to drive same-store water sales. Second, improve connectivity. Late in the fourth quarter, Tyler Ayers, joined as Vice President of Marketing. His role will be key as our team focuses on same-store sales and increasing our marketing capabilities both at point of sale and digitally. Tyler has an extensive background of consumer product goods and the beverage industry. Having worked previously with P&G and Keurig, we look forward to his contributions at Primo. We’ve several marketing programs such as coupons, bundled promotions and others that we believe will continue to tie our water to our dispenser uses, thus driving strong water growth. This connection will begin with our own Web site, which will relaunch in the coming months, telling our story more effectively to consumers. In addition, we remain focused on a deepened commitment to consumer research and brand work, which we believe will further attract consumers to our solutions. Tyler and team continue to reshape our digital approach, refresh our in-store branding, and execute several other tests that we believe will drive consumer engagement and revenue. Third, increased retail outlets. We remain focused on the white space opportunities in front of us and have been fortunate over the last several years to work with the tremendous group of retail partners. A strong same-store sales unit growth in exchange and dispenser sell-through gives us and retailers confidence as we roll out new locations. As we’ve said in the past, new locations will come and wait, but we’re seeing an increased engagement from retailers given the water quality concerns on the country. At the end of 2015, we had approximately 25,700 locations, having added 2016 water and dispenser locations throughout the year. As many of you know companies like Wal-Mart came on, Office Depot and other retailers continue to close their least productive stores. Additionally, we continue to evaluate each locations performance to ensure our return on capital to meet our expectations. These two factors have had little impact on our sales and EBITDA, resulted in net growth in locations of approximately 1100. Because of the issues in Flint, Michigan, as Billy referenced, we’re seeing an increase in engagement from retailers and demand from consumers. I will speak to the retail impact under the strategy and an increased productivity under the fourth strategy. On the retail side, Wal-Mart recently asked us to expand both our dispenser and exchange business into locations that did not carry our products. We expect to install several hundred of these locations in the first half of the year. This is important as Wal-Mart often carries all three lines of our business. In the average, Wal-Mart typically produces the equivalent annual units of three to four grocery stores. All in, we believe these water issues will continue to occur, because of the increased retention we will selectively add new locations. Fourth, drive unit economics. Driving unit economics comes from an increased unit revenue, effectively managing and seeking improvements in operating costs, and decreased capital spend per installation. As it relates to increased unit revenue, a few key notes. As previously explained, we continue to drive comp sales of dispensers and exchange; we believe our marketing efforts will enhance that growth. In addition to a strong exchange comps, we’ve been driving consistent gains in our retail business for over two years now. In the short-term, gaining greater productivity from existing location is more valuable than the installation of a new location. So you will see us continue to balance these two growth levers. Specifically, as it relates to Flint or other water issues. Sales at our existing locations often see a dramatic spike and followed by sustained and consistent growth compared to the pre-crisis levels. For instance, in West Virginia, our sales increased by 700% during the announcement followed by a sustained two times growth rate that continues to this day. In Flint, we’ve grown significantly, posting 50% growth despite the availability on substantial water donations. As it relates to support and donations in Flint, Primo teamed with High Point University recently to donate water to the affected area. In addition, we partnered with one of our key retail partners to supply dispensers and water. Moving on to operating costs, we expect to seek incremental leverage of our model in 2016. The fourth quarter gross margin expansion is a great example of what we believe lies ahead. There are two specific measures we continue to focus on. One, expanding upon supply chain and sourcing cost improvements in our water segments. For example, we’ve increased empty bottle margins to sourcing and logistics improvements, which has resulted in enhanced margins, all while driving increased bottle and water sales. Two, we’re improving unit economics in our dispenser business through a licensing model with our manufacturing partner, which we believe will allow us to sell dispensers into new markets. In this model, we licensed the Primo brand to our manufacturing partner. We continue to create new household under this model, while trading the full revenue for licensing fee. This will allow us to remove inventory and logistics cost, which will improve our margins and cash flows. It will also improve some of the lumpiness in our dispenser sales over time. Overall, we’re proud of our achievements in 2015. The progress we’ve made to date could not have been accomplished without the efforts of our employees, service providers, and retail partners and we sincerely thank them for their continued dedication. Our mission and vision will further drive our strategic actions and execution in 2016; we are excited about our opportunities ahead. I’ll now turn the call over to Mark.

[Mark Castaneda:]

Thanks, Matt. I’ll review the fourth quarter and full-year financial results in more detail. I’ll also review the outlook for 2016 before turning the call back over to Billy. To help investors understand our operating results, we do provide adjusted EBITDA, which is a non-GAAP financial measure. A reconciliation of this can be found in today’s earnings press release posted on our Web site. We are very pleased with our financial results for the quarter and for the full-year of 2015. For both sales and adjusted EBITDA, we exceeded the high-end of our guidance which were raised each quarter as results outpaced our forecast. Top line growth for the fourth quarter was 6.5% to $31.5 million, driven by a 14.7% increase from water segment sales. We experienced growth in both our water business with U.S exchange leading the way up 23.7%, driven by same-store sales unit growth of 9.2%. This is on top of 10.8% same-store sales unit growth in prior years fourth quarter. In our dispenser segment, sales increased 9.6% to $9.1 million, primarily due to the record number of shipments to retailers in the fourth quarter of last year. Dispenser sell-through to consumers, however, which is more indicative of the strength of our business increased 19.9% to 125,000 units in the quarter. Moving down to P&L, gross margin percentage increased about 400 basis points to 29% compared to 24.8% the prior year. The increase in margin is two-fold. First, higher margin in water sales were greater mix of the overall sales. Second, we continue to see gross margin expansion in both water and dispenser segments as a result of improvements in our supply chain. We believe these improvements will continue into 2016. Next SG&A decreased 22.4% to $5.1 million from $6.6 million in the prior year as a result of lower stock compensation expense. Interest expense for the quarter increased 12% to $470,000 as a result of lower debt balances. Adjusted EBITDA increased 44.9% to $4.8 million from $3.3 million in the prior year, driven by top line growth and strong margin expansion. On a GAAP basis, net income from continuing operations was $300,000, resulting in diluted earnings of $0.01 per share compared to a loss of $0.14 per share. As a result of the significant rise in our stock price in 2015, our fully diluted share count increased due to the outstanding equity warrants and exercise of warrants by our former debt holders. Continuing on to our balance sheet, we ended the year with $1.08 million in cash which is an increase of $1.04 million over the prior year. Additionally we paid the remaining $1 million balance on our revolver which is down from $4 million at the beginning of the year. Our total leverage ratio decreased to 1.1 times from 1.9 times a year ago. In addition we have amended our credit facility to allow for greater flexibility and to allow us to repurchase our common stock. Turning to our outlook for 2016, we expect sales to be in the range of $132 million to $134 million. To add a little more color, in 2016 we expect our sales to be impacted by approximately $5 million due to the addition of the dispenser license program and to a lesser extent the strong U.S. dollar versus the Chinese Yuan and the Canadian dollar. Looking at the segments, we expect water sales to increase 8% to 10% with continued strong same store sales growth. We expect dispenser unit selling volume to increase 8% to 10%. However our dispenser sales dollars will be flat as the result of the dispenser license program and lower prices to our retailers. We do not expect the results of the dispenser license program and impact of the currency fluctuations to have a material impact on our gross margins or EBITDA. We believe the improved gross margins achieved in 2015 of 27.2% will continue to expand during 2016 and will result in an increase of a 100 to 200 basis points due to continued leverage in our supply chain cost. Turning to cash flow, we expect adjusted EBITDA to be in the range of $21.3 million to $22.2 million or an EBITDA margin of 16% to 16.6%, which is up from 14.3% in 2015. We expect interest expense to be approximately $1.9 million and CapEx to be in the range of $10 million to $12 million resulting in free cash flow of between $7.4 million and $10.3 million. Looking at the first quarter of 2016, we expect net sales to be in the range of $30.3 million to $31 million and adjusted EBITDA of $4.4 million to $4.8 million. I will now turn the call over to Billy, for closing remarks.

[Billy Prim:]

Thanks Mark. For Primo, 2015 was an excellent year. The results we achieved wouldn’t be possible without a strong team that is highly focused on our corporate vision as well as our financial and operational target. Looking forward, we believe our unique Razor and the Razorblade business model positions us well to benefit from sustainable consumer demand for our purified water through sales of our innovative dispensers. Our team remains intently focused on the execution of our strategic plan to further grow our business and enhance long-term shareholder value. This concludes our prepared remarks. We’re now ready to take questions. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question is from Reed Anderson of Northland Securities. Your line is open, sir.

[Reed Anderson:]

Thank you. Thanks for taking my question, and congrats on a terrific finish to the year, nice job.

[Billy Prim:]

Thank you.

[Reed Anderson:]

Couple of things, Mark, let me start with you, and I didn’t catch everything you were kind of ticking down sort of what's baked into the guidance et cetera. But you talked about gross margin; I thought I would just say, expecting 100 to 200 basis points of improvement. Was that event directed to 2016 or was that over some other timeframe?

[Mark Castaneda:]

Yes, that was for 2016.

[Reed Anderson:]

Okay. And so, and is it -- is that, on the fourth quarter it was, mix was more prominent as a factor, it sounded like versus supply chain. Is it -- is that going to be kind of a similar dynamic to drive that 100 to 200 basis points or should we think about it differently?

[Mark Castaneda:]

It is going to be a combination of mix as well as expansion in margins in both the water and dispenser businesses.

[Reed Anderson:]

Okay, good. And then, can you -- and then expanding on that last of the dispenser piece, can you -- is there a little more detail you can give, because my first look at the top line, it seemed like it was kind of on the low end of where you typically go, but then now knowing what you’re doing to dispenser business that makes sense. Are you just testing this now with a particular vendor or customer or is this something that is going to ramp. How do we think about that business shifting to more that license model?

[Mark Castaneda:]

Yes, it’s a test that we’re trying now with some incremental volume with new retailers. So we have not decided whether we’re going to change anymore, but at this point we’re just testing it out.

[Matt Sheehan:]

Yes, it is -- Reed, it’s about $5 million in ’16, so it is material in how we will -- how we look at ’16. Now whether we expand that or not will be, whether or not it does all the things we think. But we believe that this will be a better use of capital as we loose our inventory costs, our capital costs and we just take a licensing fee. Mark, just let me know it’s a total of $5 million difference in the currency and the licensing deals with licensing fees is $3 million.

[Reed Anderson:]

Okay. And will that license program, is that like kicking off now or is that something that is, its kind of a second half, we’ll start to see that license product out in the store?

[Matt Sheehan:]

We have already kicked it off.

[Reed Anderson:]

Okay, good. That makes sense. And then, another question might be for Mark -- excuse me, obviously if you want to take it, but it was a question that was on the Wal-Mart [indiscernible] and you’re talking about hundreds -- you’re adding hundreds of locations. With curiosity that was, are those incremental -- with those Wal-Mart’s you might have had with refills previously or are these Wal-Mart’s you had no presentation in whatsoever before?

[Matt Sheehan:]

Yes, Reed this is Matt, good question. Some of those would have refill in. What we’re really focusing on with that expansion is on the dispenser and exchange businesses. But to your question, some of those could already have refill in that.

[Reed Anderson:]

Okay, that’s good, and that’s kind of what I figured, it makes sense. But I think its good clarification. And then lastly, I guess probably more for Mark, I mean -- so really nice uptick in ’16 on the EBITDA margin side, but still really -- its really still at the low end of what you’re -- what you’ve kind of talked about your long-term opportunity. Any thought of upticking those longer term opportunities. I think the last time I saw 16%, 20% or is that still in place and we’re just kind of working our way down?

[Mark Castaneda:]

Yes, so as we said we expect ’16 to eclipse that 15% the low end of that range. So yes, we will increase our range going forward 17% to 20%. So a longer term target is 20%.

[Reed Anderson:]

That’s great. I will let somebody else jump on. Thanks again and good luck guys.

[Mark Castaneda:]

Thanks Reed.

[Matt Sheehan:]

Thanks, Reed.

[Operator:]

Thank you. Our next question is from Mike Petusky of Barrington Research. Your line is open, sir.

[Michael Petusky:]

Hi, good afternoon guys. Mark, you have any guidance around the share count for ’16 or range?

[Mark Castaneda:]

Yes, share count again because of the stock performance has done very well. Share price or account we expect to be around 29 million to 30 million shares the end of ’16.

[Michael Petusky:]

All right. Great. And then, I thought I heard, I think you said that you demanded your credit facility to allow for stock repurchases, is that right?

[Mark Castaneda:]

That’s correct.

[Michael Petusky:]

There is no authorization by the board at this point for that, correct?

[Mark Castaneda:]

That is correct. We just put the -- have the ability to do it, that is something we will [technical difficulty] review from time-to-time to see if it makes sense but at this point we do not have a plan to buyback stock.

[Michael Petusky:]

Okay. Is there any way you can dial in. I know you said several 100 Wal-Mart adds, is there anyway to dial that in a little tighter, is it -- I mean, is it 500 or is it 500 to 700? Is there a way to talk about that a little more in a little more exact way?

[Matt Sheehan:]

Yes, Mike, this is Matt. Good question, and we’re going to leave it at several hundred for now just to give us some room, it could be higher than that. We’re going to keep it several hundred for now. And again -- what we achieved this year was 2000 new locations and that’s remaining our target for 2016 which is another 2000 new locations.

[Michael Petusky:]

Okay. So, when you say that 2000, I’m assuming you expect less churn [ph] kind of, so the net number maybe closer to 2000 this year than say it was in ’15, correct? Is that -- I mean, is that a fair assumption?

[Matt Sheehan:]

Yes, it’s hard to predict retailer consolidation, Mike. So it’s hard exactly to say what that gross will net down to, but yes of course that would be the hope.

[Michael Petusky:]

Okay. All right. And I guess, just maybe another quick one or maybe not so quick. Earlier I think Matt, you mentioned dispenser innovation. Can you touch; I mean obviously it’s on the bottom end loaded; you’ve done a few things. Is there anything you can touch on as far as what future things you maybe working on or just any kind of sense of what that actually would mean?

[Matt Sheehan:]

Yes, probably not in many specifics, but we continue to do consumer research and work with retailers on whether its designs or functionality and all that is being fairly well received by retail at this point.

[Michael Petusky:]

Okay. All right. Okay, well very good guys. Thanks and obviously a great year. Thanks.

[Matt Sheehan:]

Thanks so much.

[Operator:]

Thank you. Our next question is from Matt Blazei of Lake Street Capital Markets. Your line is open, sir.

[Matt Blazei:]

Thanks for taking my question guys; I got a few questions here. I’m still a little confused on the guidance with the $5 million revenue number yet in 2016. You said $3 million of that was due to licensing deal with dispensers and yet you still expect. Did I hear you correctly? You said you still expect flat year-over-year numbers in the dispenser or revenue line?

[Mark Castaneda:]

That’s correct. So what's happening Mike, is we’re shifting -- we’re trading revenue on sales and new units, and those unit growth is going to be 8% to 10% up this year. So we’re trading, we’re giving that revenue up for a commission. So instead of getting bookings say $100 for dispenser we’re booking $8 for a commission. Now there’s no cost to that $8, so it’s all gross margin, but we’re only taking the commission.

[Matt Blazei:]

I see. And then, okay that makes sense. And then the $2 million related to the $1 million, I’m not aware that you have exposure, foreign currency exposure in your business model.

[Mark Castaneda:]

Yes, so it’s not really foreign currency exposure. What happened is, as you know what happened with the Yuan’s pricing or the devaluation, we went to retailers and gave them a price decrease. We also got our price decrease from our manufacturers. So overall pricing to retail was down 3%, it’s not really -- we don’t do transactions in Yuan and it’s on an FX transaction, it’s a price reduction to retailers.

[Matt Blazei:]

And that’s because they were getting alternative pricing from competitors based in China?

[Mark Castaneda:]

Yes, that’s because we do business in the U.S. dollars. So what we did is, we went back to our manufacturing partner and had them push the pricing down to us, and we passed all that pricing on to retailers, so consumers could benefit.

[Matt Blazei:]

And this is obviously the manufacturing of your dispensers, correct?

[Mark Castaneda:]

That’s correct. It’s only for dispensers.

[Matt Blazei:]

I see, okay. So this is purely a -- okay, I understand. So it doesn’t affect the bottom line?

[Mark Castaneda:]

Correct.

[Matt Blazei:]

And a second question related to the Wal-Mart question that came up earlier. You said you expected that the impact of a Wal-Mart unit is three or four times a traditional sort of grocery location. So even though you may add say, call it 300 to 500 Wal-Mart’s over the course of the year that could be the equivalent of adding 1500 grocery stores. Am I reading that correctly?

[Mark Castaneda:]

Yes, Matt. That’s exactly right.

[Matt Blazei:]

Okay. And then lastly, given the fact you finished 2014 with 24.7 million shares, you expect to end 2016 with 29.5 million shares, sort of 5 million share increase in your share count. Is that fully now diluted with the warrants?

[Mark Castaneda:]

Yes, so the warrants that we, third party received from our debt that was -- those were exercised and we ended the year with more than 24 million shares. If you look at the fourth quarter we were at 28 range, so ...

[Matt Blazei:]

No, [indiscernible] last year it was 24.7, so that’s what I was saying and I’m sorry, 2014 at 24.7.

[Mark Castaneda:]

Yes, so the impact of the warrants as well as equity plans. So in 2014, we had a net loss, so there was no shares that were in dilutive count -- for fully diluted share count.

[Matt Blazei:]

Okay. But the 29 to 30 million is the fully diluted [indiscernible] warrants exercise count.

[Mark Castaneda:]

That’s right.

[Matt Blazei:]

Okay. Got it. All right, thanks you guys. Very good.

[Operator:]

Thank you. And we have a follow-up from Mr. Anderson at Northland Securities. Your line is open, sir.

[Reed Anderson:]

Thanks. Matt, I’m curious as I was thinking about or hearing other questions on the -- going back to the Wal-Mart business. If you’re willing to share, how many Wal-Mart’s do you currently have with the exchange in dispenser business and you’re going to add several hundred. What is kind of the current count roughly?

[Matt Sheehan:]

Again they overlapped in some. So we have resale in some, we have exchange in others and dispensers in other. So across the board we’ll have APs [ph] of our business and roughly 3,000 to 3,300 Wal-Mart’s, but again some will have all three, some will have two, some will have one, and frankly that’s where the opportunity is, is growing the portfolio in the stores where we might have one or just two pieces of our business. Does that help?

[Reed Anderson:]

That’s what I was looking for. Thank you I appreciate.

[Operator:]

Thank you. We also have a follow-up from Mr. Matt Blazei of Lake Street Capital Markets. Your line is open, sir.

[Matt Blazei:]

Thank you. Sorry about that guys. One question on the revenue guidance too; and I understand that obviously it’s getting hit by this sort of currency situation. But you guided I think 8% to 10% top line growth in the water side of the business. Clearly you’ve been doing same store numbers in the high single digits to low double digits for a number of quarters now, and typically dispenser sales are a very strong indicator or I should say dispenser sell through was a very strong indicator of future water sales and I think you said you’re up almost 20% in Q4. That number just seems conservative to me, I guess I’m saying given the new locations, the dispenser sell through -- sort of the trends you’ve been seeing recently.

[Matt Sheehan:]

And Matt, as you’ve seen over the last couple of years, we are generally conservative with our guidance and we want to make sure there’s room for us to perform.

[Matt Blazei:]

All right. I just wanted to see if I was missing something, that’s all. All right. Thank you.

[Operator:]

Thank you. At this time, I’d like to turn the call back to Mr. Prim for any closing remarks.

[Billy Prim:]

Thank you. Thank you, for your interest in Primo Water and your participation on the call to get today. We look forward to providing you with an update on our business progress next quarter. Have a great evening.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program. You may now disconnect.