Primo Brands Corporation Q4 FY2025 earnings call

• Top line growth: Focus on improving customer experience in the direct delivery business (customer direct), with progress seen in top of the funnel demand, on-time info (OTIF) improvement, net promoter score increase, and Trustpilot ratings returning to pre-integration levels. Also, initiatives like implementing a new warehouse management system, harmonizing systems, and a new customer retention program 'Solve by Sundown'. Driving executional excellence at retail by increasing presence across the store, leveraging brand power with marketing partnerships. Prioritizing premium brands Saratoga and Mountain Valley, with their net sales growing impressively. Implementing a strategic and holistic revenue management approach across price points, package types, and channels. - Integration: Completed the first five complex rounds in 2025, confident in completing the final two rounds in 2026, with synergy capture being one driver of margin expansion. - Culture: Committed to a winning culture, putting the customer at the forefront, and ensuring frontline associates have training, tools, and technology

Fourth quarter net sales were $1.554 billion, a 2.5% decrease on a comparable basis from the prior year, with the direct delivery business showing an improved recovery pace. For the full year 2025, comparable net sales were $6.660 billion, down 1% from the prior year. The fourth quarter comparable adjusted EBITDA was $334.1 million, up 11%, with a margin of 21.5%, up 260 basis points versus the prior year. The annual comparable adjusted EBITDA was $1.447 billion, up 7.4%, with a margin of 21.7%, up 170 basis points from the prior year. In 2026, excluding the office coffee service business, Primo Brands anticipates comparable net sales growth of flat to 1% and an adjusted EBITDA range of $1.485 billion to $1.515 billion, implying margin expansion of 60 to 80 basis points

• 2026 net sales: Anticipates organic net sales growth in the range of 0% to 1%, with return to growth weighted in the second half, facing a difficult first quarter comparison cycling 3% year-over-year sales growth. - Adjusted EBITDA: Expect a range of $1.485 billion to $1.515 billion with a midpoint adjusted EBITDA margin of 22.5%, up approximately 70 basis points year over year. - Adjusted free cash flow: Expected to be in the range of $790 million to $810 million. - Dividend: Board of Directors authorized a $0.12 quarterly dividend, annualizing to $0.48 per share, a 20% increase. - Share repurchase: Approximately $107 million remaining under the $300 million share repurchase program authorization

Q: Hit on key KPIs in the quarter, especially on the direct delivery side, and how to think about the guide.

A: Key KPIs in supply chain improved, but OTIF still needs work; customer calls reduced to pre-merger levels, customer quits lowered, nets increased. Guide focus is on fixing the customer experience in the direct delivery business and getting the business back to growth.

Q: Provide color on the top line guidance, drivers across channels, volumes, and pricing strategy.

A: Growth is more second half weighted, with balanced growth across channels. There's a big opportunity in the cold drink business. Emphasizes strategic revenue management and retail execution efforts.

Q: Context on retail guidance, phasing, and impact of weather.

A: Started the year strong in retail, with a strong share month in January. Weather has been a headwind but teams have been agile. Aims for balanced and broad-based growth across the enterprise.

Q: Free cash flow guidance and related opportunities.

A: Focus on working capital enhancements, with the potential to benefit from a normalized operating platform improving accounts receivable and credits.

Q: Impact of discounting promotions on pricing, lapping initiatives, and net customer ads.

A: Reinvestments in 2025, continue to invest in 2026. Anticipate net customer ads to trend positive in the second quarter.

Q: Phasing of EBITDA and cadence.

A: First half leans in on investments like route counts, then phases back.

Q: Synergy capture in the quarter and remaining in 2026.

A: Substantially captured synergy in 2025, with two integration waves left in 2026.

Q: Free cash flow net of integration and other cash costs.

A: Confident in cash flow from operations, with CapEx in line with sales, tax benefits, and working capital improvements contributing