Primo Brands Corp Fireside Chat Hosted by RBC Capital Markets Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nik Modi - RBC Capital Markets Inc - Analyst : <_ALACRA_META_ABSTRACT>Good morning, everyone. Thanks for tuning in for today's fireside chat. I'm joined by Robbert Rietbroek, CEO of Primo Brands; David Hass, CFO of Primo Brands; and Jon Kathol, VP of Investor Relations. I just wanted to thank the Primo Brands team for taking some time to have this fireside chat, especially considering the chain of events over the past few months. I also want to thank the investment community for sending in their questions for this fireside chat. I try to get in as much as I could. So hopefully, I've covered all the ground. But gentlemen, we have a lot to go through. So thanks for being with us today and then let's get going. Just wanted to start first with the details around the direct business. A lot of questions coming in, in terms of what part of the planning around the integration went wrong to result in these service issues and how can investors feel confident that this can be resolved as we move forward?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Yes. And Robbert, if I could just kind of follow up on that. You mentioned speed several times during your prepared remarks when you reported earnings. So maybe if you could just -- I think that's another big question people have on their minds is just why go so fast. Maybe you can just provide some context around that.

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Got it. Okay. That makes sense. Maybe, Robbert, and David, if you want to also kind of chime in. What was -- what does the run rate look like before you started running into these challenges for the HOD business, right? So what did it look like before? And then how much did it kind of drop off, if you can just give us some relative context on the delta?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Okay. Great. Super helpful. And then what was the portion of your user base that you actually had the issues or you lost during the quarter? Obviously, a lot of folks just trying to understand what the churn looked like, if you can provide any context on that.

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Got it. And where -- like the customers that left, where did they go? Do they just stop having home and office water delivery and just started buying in retail or did they switch to a competitor? Any context around that?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Great. So for the direct delivery disruptions, lack of supply was cited as one of the main problems, but what are supply levels now relative to demand? Like do you still have less demand or do you have more supply than demand at this point?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : And Robbert, I guess that is really the key for this whole September timeline that you're talking about, right? It's just kind of getting all that situated? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 11, 2025 / 3:00PM, RY.TO - Primo Brands Corp Fireside Chat Hosted by RBC Capital Markets

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Got it. Okay. And then one of the things that was supposed to be part of the back half top line was price harmonization. I'm assuming that's not the right time for this at this moment. So maybe you can just give us some context around that in terms of timing and kind of how you think about pricing in the direct business.

Question: Nik Modi - RBC Capital Markets Inc - Analyst : And then when I look at the latest Trustpilot data as of early August, it suggests that the negative reviews have dropped by 75% from their peak. If that is the case, why will it take to the end of September to get to a normal trend rate? Is there some kind of delay in terms of when people start complaining and kind of the service levels?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Okay. Yes. This is helpful because I think this was a missing link for a lot of folks in trying to understand why it was going to take that much longer, but that would make sense given -- you're basically trying to catch up at this point. So that's super helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 11, 2025 / 3:00PM, RY.TO - Primo Brands Corp Fireside Chat Hosted by RBC Capital Markets Look, I know you guys have been shying away from giving specific quarterly guidance. But look, I've been getting a lot of questions just in terms of how we should think about phasing for the direct business between 3Q and 4Q. Any context to just help us frame that would be super helpful.

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Got it. And then, Robbert, you were discussing kind of ERP transition in terms of the non-BlueTriton business. Can you just give us some sense of should we anticipate any potential hiccups or do you feel really good about this transition going through seamlessly?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Got it. Okay. One last question on the direct business before I move over to retail. But look, I spent a lot of time on this company, and I was frankly very surprised by this office coffee services headwind that you discussed. So just -- wanted to just get into that and understand are there any other dynamics that we should be attending to that might cause somewhat of a blind side, if you will, on parts of your business. Just anything along those lines just so we're aware of

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Got it. And so David, there are no other kind of ancillary businesses that could potentially also be discontinued or sold off?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Awesome. And Robbert, just a quick follow-up. When you said that there was a 1% to 1.5% churn figure, is that net or gross of customer adds?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : And what does win back campaigns look like? Like is this providing free product, promotions, like any context around that?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Got it. Okay. Perfect. Just moving on to the retail business. Obviously, we all know weather was an issue that's been well documented. But do you think there's anything from a macro perspective weighing on the business at all, perhaps movement into private label? That's a question we get a lot on the retail side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 11, 2025 / 3:00PM, RY.TO - Primo Brands Corp Fireside Chat Hosted by RBC Capital Markets

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Excellent. And just looking at the distribution, it's been very strong. And some would say, well, if they're getting so much distribution, how come we're not seeing better retail sales growth especially at a time where I think Aquafina and Dasani are both kind of coughing up even more market share. So Robbert, maybe you can just kind of address that head on in terms of when we can expect to see that distribution really manifest in better top line?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Excellent. Super helpful. And then just another big question that's been coming in is just the delta, the very large delta between what we see in scanner for the premium brands, right, over 150% versus what you reported in the last quarter in the mid-40s. So can you just help square that gap, like what is going on? I know a lot of that business is untracked, but any perspective would be helpful. Excellent, super helpful. And then just, another big question that's been coming in is just the delta, the very large delta between, what we see in scanner for the premium brands, right, over 150% versus what you reported in the last quarter in the mid-40s. So, can you just help square that GAAP? Like, what is going on? I know a lot of that business is on track, but any perspective would be helpful.

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Okay. So this is really a Mountain Valley issue because of the direct. And you can imagine with all of the Saratoga, Ashton Hall dynamics happening throughout the quarter, I think there was a very high level of expectation for that business. And people were seeing it in scanner data, and I think they were a little thrown off guard when they saw the reported number. So that is helpful clarity. All right. Just moving on to the last kind of few questions here, just on the financials. The sequence of your synergy opportunity chart that you had in the deck implies that you'll tackle call center after you did IT and ERP. So given that historically, this has been a source of some customer headaches in the past, do you see any more further integration issues there? Are you baking that in or do you feel like that's not going to be much of an issue?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Got it. And then, David, the EBITDA margin expanded in the second quarter, but gross margins did contract. Can you just walk us through the moving parts there and how we should think about that dynamic as we think about the back half?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Yes. Yes, it makes sense. And then I guess the -- just kind of two final questions, and I'll kind of turn it over to the team here to see if they have any final comments. But the $1 billion in free cash flow by 2027 despite some of the challenges you've had this year, what's allowing you to maintain that confidence?

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Okay. Super helpful bridge. Thank you for that. And then the final question for me is as you can imagine in two quarters of results that were lower than what people expected, there are questions that come up about the credibility of the guide. And so a lot of folks have been asking how many -- how much in terms of contingency or cushion do you think they've embedded? So hard for me to answer, so I figured you'd be in a better place to give some perspective on that.

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Yes. Excellent. David, Robbert, let me hand it back over to you if you have any kind of final comments before we end today's fireside chat.

Question: Nik Modi - RBC Capital Markets Inc - Analyst : Yes, you bet. Thank you again to the team here for taking the time and for everyone tuning in. If you have any follow-ups for me, you know where to find me. And everyone, have a great week, and thank you again.