PACK - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Ranpak Holdings Q4 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today David Murgio, Chief Sustainability Officer and Secretary. you. Thank sir. ahead go Please

David Murgio

you and everyone. good morning Thank

and results Before we defined will I'd as like XXXX. under forward-looking from you that to remind Actual recent our of result Form SEC. with of SEC and discuss release Act Private XX-K filings Litigation including we factors with differ identified in our those statements Securities filed materially a risk discussed those begin, the Reform may forward-looking statements as in other the factors press various the our most the

Ranpak speak responses should Some today. statements are website. not does your this the not and included conference from We our of update assumes the this to future to this intend company the statements. on call X-K statements of to include these and uncertainties such an the call are our Relations only of the issued has release place the no that to to we statements obligation results copy to forward-looking in questions we release cause posted call. reliance statements. Investor could materially actual of SEC which section as morning for forward-looking and submitted earnings in undue any today's of on all A that before events may differ subject presentation forward-looking these been and The

will table more the presentation webcast the a refer also on in other today's as combination this on website. without and predecessor the make treatment of combined non-GAAP via to as successor include we've call on as any information detail a as release. company would Also accompanying information. comparable the reconciliations will combination that We further a for Xrd, described. accounting results GAAP basis slide Please adjustments full we earnings our the the XXXX, of presented later, basis discuss year a replay Financial reflecting to adjustment available arithmetic GAAP we XXXX well is on due simple closed business also presented and June to periods conference

on the Relations ending Lastly, available CFO. XXst, have me our Investor and our with The results XX-K we'll be will we summarize section financial strategies and that XXXX. Chairman With filing Omar for update turn will Asali, our With our questions. SEC the open of XX-K XXXX our and detail December for the be I'll website. the today an CEO; beyond. quarter over outlook the Bill Omar additional issue our our fourth to Bill before through will call on up SEC the provide period results, call and provide Omar. for growth on the Drew,

Omar Asali

maintaining everyone the you, a for quarter Ranpak been standards. team's our the David. Good fourth over in year and of taken to grateful I'm and The approach safety their of while digital our highest employees extremely results, part fulfilling topline ability The who our health our past the I strict XXXX. business. to listening together team the grow and strong an morning come Thank maintaining of and delivered proud has execution and strong safe had staying to safety has needs year profitability. pleased calendar our healthy. team our everybody. are that such performance while robust I'm our with but overall and in well top only I'm the of to as global customers' results delivered as a not opportunities the growth and protocols. pursuing families priority organization be execute hope

unwavering. to our accustomed outbreak of paper two-thirds shopping online convenience shopping XX% presentation our report, a partnership recently a employees offer. is rarely of share are customer do the year annual takeaway for findings want This the focus included for the positioned We in XXXX which and online to intact our played very Included of believe the in ensure for shop and on have respondents have gains with shopping global respondents worked supply longer modestly consumer out global lead-times that and packaging. increased box chain to they Research. growth execution experiencing are up Additionally, our more we that expect Ranpak. items, cited outlining hard paper-based consumers, have and view finished prior to market Consumers long-term. that service is In pursue expecting we to their in while report e-commerce preferred and the some earnings has put here to remains business packaging desire respondents, brands, first and Ranpak's investing and are year consumer's last and also throughout to trends are regarding survey of frequently significant in also to sustainable over. more online focus buying are The Growth more throughout the opportunities the in We the use for conducted the key XXXX which to same in year versus short-term the the XXXX from brick-and-mortar. on believe worldwide I online momentum on that pandemic business survey is the consumers us. XX% become in exist and to they, and stayed share in of have packaging substantial pandemic stay. about e-commerce executing with focused the in are in it excited ramp e-commerce, what cited XX% e-commerce are packaging. gained propensity automation Overall, past and versus on Shopify solid as has almost online for well we for sustainability, store items encouraging after trends purchased XXXX all cited and future Harris the

globe investing is Ranpak to awareness the consistently raising companies brand, in have of know our been across that our and answer packaging we year, needs. their past the solutions Over sustainable the so

quarter, broad-based strong additional more to a navigated North basis quarter, off they product product customer report growth sales meet, strong teams constant in currency was and by demand, a a in increased hat driven the on X.X% my needs. Asia-Pacific pleased Europe, coordinated brought record and demand all XX%, XX.X% Net revenue growth Europe all lines, with is currency consolidated across to year production experienced exiting driven product the quarter, For year American to the bringing source, net in up the with by full in on up exceptional constant constant I'm basis, Overall, sales momentum. as lines. colleagues on the basis. currency on our capacity unprecedented to

results a Our which that America in North had year-over-year. were business, strong slightly X% XXXX, at down delivered fourth top-line quarter very

power margin Our not and quarter pipeline the indicative the fourth forma we We pricing, activity year-over-year, that in in resulting the past are with of in the path, today. to figures changes made of dividends. activity in think $XX believe to region. the adjusted of a terms strong XX.X% XX.X%. America pleased number Pro a North trials EBITDA on that North constant in new very And North the up and region sustainable of a in America was strong new believe starting really of million I currency in America Overall, see over due improved are I business, extremely is year pay And of levels is robust. the higher to I'm XXXX growth. sales

Overall, of today, in engineering penetrate to further as support, And next engineering add for the XXXX revenue of million, the report, in up fourth level, will operations, spoke last we the growth. in When line year, sales capacity growth were to to to continue believe, finance well X.X% take initiatives XXXX, in I fully these function sales For pleased really we continue exceptional and year, feel shared as U.S., done on are adjusted our to and build the filling success, us finish talent, investing order the the these these personnel further upgrading impact platform of $XX.X EBITDA forma bringing began with we'll more We resources. reap positive to this we and areas. in the out and in team beginning which pro Ranpak. automation we In the half benefits things in We're year, and to emphasis people, well XXXX. our regions. was I'm Ranpak quarter these investing year second expand about further to in investments of investing performance in-house, organization XXXX. lines in to technology systems, all production up our some the the at technology. I as with we particular product sets that we've operating adding

us investment, automated and products continues, for resources and reflects technology systems Our loud related automation XXXX we Our our longer-term guidance through meaningful And will further, call growth let upgrade level lower EBITDA turn to up at growth to who the sustainable our year right to are ensure to Bill's quarter this transformation we will success position and continued for organically full outlook, will after fulfill The that, M&A. Bill, Ranpak and achieve place up ramp short-term, as the investments. scale in digital you It's the it.\ demand With to Areas the goals. for to remarks. discuss to slightly XXXX. details further up us as clear. us and is year. top-line this like in position the give well, XXXX me We'll and of over

Bill Drew

driven a of currency combination against placement adjustments in Void-fill XXX,XXX continued adjustment north XX% Europe successor installed gain systems also order successor of the a purchase simple, grew Thank Wrapping, Cushioning its Madison, XXst to steady combination with growing transaction the readers increase, product for a based pro was while of results. year-over-year. and a and and without periods X%. basis, globally. predecessor On further you, XX.X% and increased up for comparison Due and in for globally, in period to to APAC. forma currency to meaningful really presented over smallest Omar. continues line, we constant year-over-year the predecessor reflecting GAAP performance systems ended XXXX. December well combined our the basis, company year-over-year hold present fourth quarter Machine net XX% the strong Overall, and machines broad accounting with XXXX XX-month by arithmetic and revenue the convenience a periods One XX.X% on constant business at up adjustments,

XX.X% combined the an For and year up and experiencing for XXXX, industrial XXXX Wrapping, those revenue constant regions signs categories combined constant and with in and Void-fill reporting in at finished momentum, basis, of bringing quarter, Europe revenue quarter Cushioning to comparison a a the strength finished by in a growth up to APAC global North division, encouraging the X% on record a challenging was currency particularly quarter America of driven APAC all a increased and year, year. the versus currency XX% across Europe on X% prior full of our year basis. XXXX. solid versus the activity a faced which lot fourth

down us as its and XX.X% a to first laid the for Although, the which percentage in material we with margins highest year, comparison X% three by the had cost years, the topline calls, prior depreciation volume as for expense, compared and came On consistent basis, Cushioning, quarter for the some XXXX, XXXX. previous XX.X% on in and America been Gross in in we the freight like in year, experienced fourth overhead Ranpak through and revenue, how slightly groundwork a the the a in quarter. profitable our were seasonality of for Consistent experienced headwinds. quarter the communications successful of X.X% XXXX the year prior underperformance more quarter in North a the for fourth was sales up consolidated quarter. with driven of quarters headwind most were apples-to-apples exited

kraft Our tightened recently. paper XXXX, somewhat favorable for market the largest input was but has cost, us in

of a products. with a While new we to certain headwind are favorable for pricing mix expensive will of working grades and less some the pricing us, offset more be pressure grades on

focused we topline, our are growth on always, profitability. consistent growth profile As for but also having of our a

the on While the there remain markets. paper dynamics is some near-term in constructive pressure, overall, we supply-demand

the to profile. support will XXX to attractive last the build We our XXX. initiatives, monitor headcount finish continued required year growth the by and increasing from closely driven steps year, necessary margin take To at SG&A approximately to situation maintain

year-over-year senior sales, we personnel internal Omar for increase As and finance begin operations effort, quarter. the building well $X.X resulting mentioned, million added as talent management, of out as in in an automation our

the for invest product spend of portfolio. of was we revenue, percentage development a As to as quarter, continue up R&D XX our bps in

to And overall expect approximately going R&D that increased can spend into levels, activity some you X%. year, XXXX. pace the given the For accelerate

and leverage the fourth was demonstrates largest the standpoint. in of pro fourth fourth an expected, as particularly As EBITDA to forma business margin resulting in achieved half year, quarter. quarter quarter the in EBITDA This increased the a EBITDA finish revenue adjusted We our and second the from power year, XX.X% the the significant operating in of XX.X%. year-over-year,

on debt gone eliminated to final additional on over to target XXXX in a reduce adjusted liquidity, our the the to the combination we our X.XX With payment shares $X.X approximately lender, in lender, turn structure before X.X% from Moving a Due times. on the facility. facility. of we to with LTM drawn on surpassed puts to million, pleased financing warrants our the so. we related bank of We at this quarter, on or and capital EBITDA basis which a XXXX. an XX, all credit recently, thresholds best. $XX a To XXXX, deleveraging our payment X.X the and paid in made One clear, position, cash Omar I'll X.XX a a guidance will XX-day the facility implies the times principal strong one-time X.X equity sheet is of required under leverage. million credit From that, balance week it million, net times of is our our requires be and our the the our structure progress threshold, midpoint our this back amounts the the leverage us this no using $XX.X which in not September be structure will our XXXX we've including was revolving and Overall, deleveraging move completed are to balance liquidity This with towards questions. of a drawings against fee basis, initial out quarter, Madison. Most million make outstanding on standpoint, one-time to simplified success business to progress with our to trading it first on earn-out as of to next fairly

Omar Asali

Bill. Thanks,

significant the of $XXX million to area million, as currency $XXX range open. $XXX million words of XX% uncertainty Now, XXXX on million, and reflecting growth of we're X% discussing to of assuming impact XX%. a economic we revenues the few reflects in The on downturn, constant our our basis in timing guidance. XX% growth low anticipating year topline ramping This as well investments economies of automation, of EBITDA and of no to $XXX been as of the reflecting up end timing the the a to adjusted have

drive As automation I mentioned healthy earlier, portfolio building product growing a on our we're growth protective to packaging focused the topline profile. business expanding and

excited input in our to Ranpak slight Overall, as EBITDA. longer-term of still in growth attractive increases lower, profile very drive Some our EBITDA. QX. growth of I'm double-digit business general we like an where level XXXX at beyond. lower in e-commerce the In continued remains revenue I about hyperactivity some in elevated, adjusted than and a personnel of feel we as adjusted investments positioned in platform cost is our modestly and well building albeit saw but our targets well environment deliver the for a very feel

Foundation be globe of Ellen momentum really committed sustainability believe the industrial progress companies XXXX report across same at a improve, North when packaging. and are time, at an for movement of recently activity in I or CEO. Ranpak. out America point plastic has to ago to use begins published could backdrop Global their we more I inflection the While attractive reducing their actions only became I even anticipated outlining than phasing MacArthur Commitment X.X The years that

do were of seen not take reduction to achieve plastic paper the in share and the and In you find to to report response greatest same. I encourage an be how the have that I incredibly convince goals that point terms companies packaging substituting greater their a percentage an to their materials. businesses you If with environmental of powerful report to even was going improve want look.

marketplace. sure We solutions make utmost in doing our we the are to best the have

We most as and service our are leader protective fortifying reputation the in packaging. provider reliable

better and of to is Ranpak. footprint environmental goal the encourage improve Our their to deliver chain world to a by choosing companies supply

Lastly, we and Thank environmental continued commitment expect ESG to so to for next report highlight progress again for our responsibility. which social month open questions. we'd all you publish impact this our XXXX up will Operator? and in annual point, us. like the the At to line joining or

Operator

first your Craig-Hallum question with Palm Group. from Instructions] And comes [Operator Greg Capital

Greg Palm

morning. Bill. congrats good Really the quarter. results hey, Thanks. Omar, here, Good Hey, on Yeah. so

Omar Asali

Thanks. Good morning.

Greg Palm

As most what and level North eye a what's details, lagged I activity I most America APAC. look caught at Europe the impressive, the in is know And our bit.

on quarter maybe -- pipeline we based maybe in North on as seem highest think our I confident you for And region still ever. explain the But importantly, going a the in help just some what's time math, ahead, it maybe quite basis? the America. was second look pretty more revenue

So acceleration expect should we some XXXX? in here growth

Omar Asali

Yeah, sure.

I'll North and Let geographically first start on me America. then focus

very of customers indicated, plastic strong as as So mix strong Europe, well market it's in customers, and to you of year. expanding from new share existing as footprint with their Europe, a Frankly gain a paper. lot the very very, quarter, switch

are Europe, to continue our believe factors quite I these and going in while. is business all for So supporting a that

the is switches. in all at if speak, still of look plastic Europe you despite these market share, As we a market majority

places has just So by be there. momentum Australia, been in there's it a of very depends I South Korea, E-commerce quite Asia-Pacific, In going in robust bit like China. to region. think obviously

that done another Asia-Pacific trends markets year. expect these And continue have and robust sort very year we've will well. this really in of we those So

worth of other is America. to North a The those region real Latin America see lot some are where numbers in like places we Brazil, the heavily our with geography. there e-commerce that's mentioning European continue we quickly and growth and partners are investing reflected of

number dollars, In quarter little a indicated, happy And more so in we was North factors I our year strongest you has of Greg. as number very quarter. indicators of we're couple couple the for had the a business Last just absolute important it in strong frankly that is As of factors -- But than a about QX, a me America a leading very we XXXX result America. know, or North of our was paper. saw And trials up. you good and of comp excited gets new to more increasing was customers existing a and equipment XXXX, that for up and bit the more trending the which with one our switching is was quarter, is converters from the with dialogue The demand in where plastic is quarters. and about challenging.

So on into behind guys will this as that North that. I've America And paper. from use I year maybe to meaningful sustainability we're plastic while see expect a said is see Europe. couple for you switch a years Well of starting

in So you North put all America we're growth excited think is to anticipated I and why deliver our closes. meaningful these about XXXX. factors of going that's together some which And

Greg Palm

Got it.

an the optimistic last see seen in pretty for America sounds So XXXX we're versus in North maybe few kind years? you're what inflection going we've of higher it like to that

Omar Asali

Yes.

Greg Palm

pointed one is mean is by that versus is post-pandemic. that you driven product theme last of like much these in core it importance out quarter. sounds of that adjacencies. increasingly I a I mean, automation, Cold growing some newer that how the chains And

and for new but I'm of you broadly well? this going curious America, adoption kind specifically So product how introduction forward as kind North more view just, year of,

Omar Asali

Sure.

just with to dynamics core packaging customers for America, year So given going going and the think, existing customers. our protective be I meaningful business with experience described, North this and that's growth it's I to new

going to tailwind. big think I that's So be a

all automation think, to than are that, addition Greg. globally In frankly bigger we needs

post-vaccine up of more facilities. and more is about and their discussed the their Hopefully won in that So more quite important Cold right and think I in opening customers needs hearing limiting that's improves automation see as improving warehouses, we've from a a COVID little meaningfully now businesses a all our factor we you'll in past. and automation And contribute facilities are chain we've number bit. XXXX. The bit. for more automation of

that heavily are in I'm on We investing area. focused very it.

numbers going will cold big chain be big XXXX. it's to a the opportunity. occur I suspect growth I think from in

expanding address are the can that we our really year, And and then up right with coming more investment more this so and Given customer in mode. needs. more offering products we

Greg Palm

Good.

one Bill. Okay. Makes for And sense. then

seen I'm kind of months. here input significantly the sort potential And as heard mentioned And kraft paper impact? manageable? marketplace importantly, switching big cost to you, we've of go Is be You an gone that recent I'm what it could that for resin sort in curious of, cost the up an from curious what from customers how if accelerator headwind. view the in view more the just well. paper overall? the pretty How you of we've how of resin has that is

Bill Drew

Sure. Greg. Thanks,

So you'll negotiate an we suppliers with our recall, basis. annual on do as

have paper we So in lot those out is fourth some year. quarter that there in pointed conversations the you markets. And tightness now for we're as the seeing the of a upcoming

them some where extra demand on more some talking are for So some suppliers working supply. we any we solutions with and to need may

commodity out, you're a chains pointed increases it of number seeing inputs resin. and whether seems or you paper As in areas are some supply like

the board. So movement you of kind are seeing there across of fair a amount

months think, of level next and that through some producers. a what the the, few you'll out. number in So on happens could And I some and unplanned that have with also reopenings vaccine was depending downtime of at the of normalize worked

And watching we're that we'll accordingly. So closely. it's now plan area an

Greg Palm

Makes it. sense. Got

I of Best forward. queue. back luck Great. hop Thanks. going will Okay.

Omar Asali

Greg. you, Thank

Operator

question CJS with [Operator your Crist next Instructions] Stefanos And Securities. comes from

Stefanos Crist

on Omar. and Congrats Bill the morning, quarter. Good

Greg Palm

Good morning, Stef.

Stefanos Crist

markets is How recovery in industrial question XXXX is guidance. on the end baked in first my So much there?

Omar Asali

environment. more a for maybe not year and we robust progresses activity obviously, There the of a as recovery. element year is be a more industrial of have bit bit as – full normalized may we It's think some the given

in industrial So an where e-commerce discussions elevated. to that then, continue a of that there a provide I've surveys, bit quite frankly remain in expecting is think our will will will a this with activity big need quoted opportunity the In year. growth we reflected, to some ship of we mini lot many on DCs, about ship particular warehouses, the number stuff customers, I them we're as equipment And improvement of activity. are they more talking continue be And largest highlight much US, that think of to of will from of about pretty warehouses, customers are our talking where more all more store. retailers, even also product and then

element a recovery these an driving there factors the is but as growth, all what's year the industrial progresses. is activity So, mix in of of

Stefanos Crist

see Got guidance, big talked part investments about to from in thinking you're you automation? growth automation. about about of meaningful next it. the Also that in talk expecting all a you returns your on And how Thank you're what maybe, you. Is year? can

Omar Asali

still Yes. year dollars is the a not if mover puzzle, will. piece small of biggest because This needle in the you automation absolute it's

projection XXXX, going a you're remains a growth our packaging portion But the have what but growth area absolute As a our seeing contributor, in bulk dollars, and terms meaningful year-over-year, and of think the core very a in in to it's sort we -- protective certainly in percentage, business. in business of it's in automation. of we're

But lot placed want equipment that's one consumable automation that Stef well. of and replacing automation I a become scale, and on at our that is as expect times of contributor. highlight to customers gain thing as meaningful important to are time is, think, the more that buying equipment goes remember very a I

equipment yielding more adjacent and really cases is us. our is automated for consumable business this to automation more business extremely many So because -- in

Stefanos Crist

just back. Makes concerns there quarter, those up? concerns? seeing COVID. automation it. And just and Last Any I'll Are one sense. facilities were Got one getting to quick still you those some more due there? lightened progress into Have with jump

Omar Asali

up bit. Lightened little a

improves as and we're some what meaningfully customers. lighten from them We given weather frankly, our hearing expect up to of the

pretty So, from in customers. will as I hearing schedules of planned, half occur we facilities going we've the them numbers you progresses in We improve activity our our agreed the we're what visits, more see expectation but in think again, with delivery, of year. feel second seeing is lot as and more you're FATs up. automation, are open what from a terms think year in The will terms of in to will good the

Stefanos Crist

congrats. you, both and Thank Perfect.

Omar Asali

Stef. Thanks a lot

Operator

[Operator Instructions] And there at time, no are this further questions.

Omar Asali

thank us all morning. quarter. to Well, look Great. you forward this We joining you for next again with speaking

Operator

That your participation. concludes you conference. today's Thank for

may now You disconnect.

Ranpak (PACK) 4 Mar 212020 Q4 Earnings call transcript