NYSE:PACK Ranpak Q2 2024 Earnings Report $4.14 +0.02 (+0.36%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$4.16 +0.02 (+0.36%) As of 04/25/2025 04:34 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Ranpak EPS ResultsActual EPS$0.07Consensus EPS -$0.06Beat/MissBeat by +$0.13One Year Ago EPS-$0.03Ranpak Revenue ResultsActual Revenue$86.40 millionExpected Revenue$87.67 millionBeat/MissMissed by -$1.27 millionYoY Revenue Growth+5.50%Ranpak Announcement DetailsQuarterQ2 2024Date8/1/2024TimeBefore Market OpensConference Call DateThursday, August 1, 2024Conference Call Time8:30AM ETUpcoming EarningsRanpak's Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Ranpak Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 1, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Thank you for standing by. My name is John, and I will be your conference operator for today. Operator00:00:04At this time, I would like to welcome everyone to the Rantpac Holdings Second Quarter 20 24 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. As a reminder, this conference call is being recorded. Thank you. Operator00:00:29I would now like to turn the call over to Sarah Horvath, General Counsel. Please go ahead. Speaker 100:00:35Thank you, and good morning, everyone. Before we begin, I'd like to remind you that we will discuss forward looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10 ks and our other filings filed with the SEC. Some of the statements and responses to your questions in this conference call may include forward looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. RamPac assumes no obligation and does not intend to update any such forward looking statements. Speaker 100:01:18You should not place undue reliance on these forward looking statements, all of which speak to the company only as of today. The earnings release we issued this morning and the presentation for today's call are posted on the Investor Relations section of our website. A copy of the release has been included in a Form 8 ks that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non GAAP basis, we have included reconciliations to the comparable GAAP information. Speaker 100:01:51Please refer to the table and slide presentation accompanying today's earnings release. Lastly, we'll be filing our 10 Q with the SEC for the period ending June 30, 2024. The 10 Q will be available through the SEC or on the Investor Relations section of our website. With me today, I have Omar Aqeli, our Chairman and CEO and Bill Drew, our CFO. Omar will summarize our Q2 results and provide commentary on the operating landscape, and Bill will provide additional detail on the financial results before we open up the call for questions. Speaker 100:02:23With that, I'll turn the call over to Omar. Speaker 200:02:27Thank you, Sarah, and good morning, everyone. I appreciate you all joining us today. Our Q2 financial results built on the momentum of the past three quarters and delivered mid single digit top line growth with improved profitability driven by our Q4 in a row of higher volumes. Growth this quarter was largely driven by North America strategic account activity as the plastic to paper shift takes hold as well as strength in Asia Pacific. Overall, our start to the year is in line with the expectations and we are pleased with our steady improvement in the face of a somewhat continued challenging economic backdrop. Speaker 200:03:06North America sales increased 17% in the quarter versus last year driven by improved void fill activity particularly with strategic accounts. The underlying macro remains choppy with industrials under pressure and discretionary goods activity remaining out of favor, particularly as housing activity is muted. That being said, we have not been sitting idly by waiting for the general environment to recover. We have been focused on self help in terms of winning new large accounts and becoming more efficient. And this is what drove the excellent results in North America in the Q2. Speaker 200:03:43The plastic to paper ship transition that began in April drove a substantial portion of the volume growth in North America as our strategic account activity ramped up throughout the quarter. We are pleased to see some of the public announcements regarding the plastic to paper shift that have been made by key players in the e commerce space and expect this to be the beginning of a sizable movement towards paper based solutions. We are excited to see the public validation by marquee names of the equal or better product protection efficacy paper provides versus air pillows as well as the positive feedback from consumers and employees who handle the materials. We applaud the efforts taking place to reduce the amount of plastic in supply chains and the positive impact it will have on the environment and key stakeholders. Europe and Asia Pacific activity levels in the 2nd quarter were less robust than North America with volumes increasing a little over 3%, but constant currency sales down about 1% overall versus the prior year driven by pricing headwinds, which we will begin to lap in August. Speaker 200:04:51Slower activity levels in the region were mainly driven by the manufacturing and industrial sectors. Consumer confidence in the region has been improving since the end of the Q3, but it's still well below pre COVID levels. Geographically speaking, we have seen strength in Brazil, France and the Netherlands, while Poland and Germany remain weaker. In Asia Pacific, Japan has been a meaningful driver of growth. The input cost environment was in line with the Q1 and provided a slight benefit to us year over year, although the mix of lower cushioning and higher void fill resulted in slightly lower gross margins. Speaker 200:05:31We're expecting to see some input cost increases begin to flow through the second half of the year as some producers in North America react to tighter supply price while others are focused on obtaining more volume through more attractive pricing. Overall, we expect some input cost pressure in the second half of the year, which we will look to offset in order to maintain our 37% to 38% target margin profile for the year. Energy pricing in Europe remains favorable as storage levels in the region are above the 5 year average, but we do expect some volatility as we approach fall and winter season and geopolitical headlines may move the markets. We're working with our vendors to lock in their energy pricing where possible to minimize exposure and gain visibility into forward pricing. At this point in the cycle, the inventory levels in the channel are tight with distributors and end users trying to minimize the amount of inventory carried due to increased carrying costs. Speaker 200:06:38If prices begin to rise, you could see some of this tightness reverse as customers will look to protect themselves from increases. With that, let me turn the call over to Bill for some financial detail. Speaker 300:06:51Thank you, Omar. In the deck, you'll see a summary of some of our key performance indicators. We'll also be filing our 10 Q, which provides further information on RANPAK's operating results. Machine placement increased 0.4% year over year to approximately 141,000 machines globally. Cushioning systems declined 0.3%, while void fill installed systems increased 0.7% and wrapping machines were roughly flat year over year. Speaker 300:07:17Growth in the machine field population continues to be lower this year due to a combination of lower activity levels related to industrial and manufacturing sectors as well as our efforts to optimize our fleet. Overall, net revenue for the company in the Q2 was up 5.9% year over year on a constant currency basis, driven by an 8.8% increase in volumes, offset somewhat by lower price. North American net revenue increased 17.1% year over year with void fill driving outperformance, offset slightly by decreases in cushioning and wrapping. Volumes were up approximately 20% versus prior year, driven by strength in e commerce related to strategic account activity ramp up. In Europe and APAC, net revenue on a constant currency basis was down 1% year over year driven by pricing headwinds in the PPS business that outweighed volume growth of 3.2% and increases in automation. Speaker 300:08:05The industrial sector in Europe remains challenged impacting our cushioning business which experienced the greatest headwinds. The Q2 saw a bit of a step back in Europe compared to what we had seen in the previous few quarters when the general economic improvement was stronger. Our gross profit increased 5.4% on a constant currency basis, implying a margin of 36.8% compared to 37% in the prior year. This is roughly in line with expectations as we expected gross margin to be in line with Q4 throughout the year, but was pressured somewhat from less cushioning contribution versus the prior year. Maintaining our gross margin profile is a critical area of focus for us, so we are committed to taking action to preserve it in the second half of the year. Speaker 300:08:44Adjusted EBITDA increased 7.4 percent year over year to $20,400,000 implying a 22.8% margin driven by higher volumes and gross profit flow through. We are extremely focused on continuing to improve the financial profile of the business and generating cash. We invested in working capital in the quarter to position ourselves well for the ramp in strategic account activity. We will work this down in the second half of the year to ensure we are managing our working capital efficiently and driving cash generation. We've taken actions to reduce our spend, which we expect will be felt in the Q3 in order to continue to improve our financial profile and maximize profitability to drive cash generation. Speaker 300:09:21Capital expenditures for the quarter were $9,900,000 driven by converter placement and investments related to our Malaysia production facility. For the remainder of the year, we expect capital expenditures to step down as many of our converter purchases were more heavily weighted in the front half of the year, as was our spend on the APAC production plant which goes live in August. The Malaysia go live marks the end of our multi year investment cycle related to the transformation of our digital and physical structure. We now have a fully invested platform that is world class and will provide us with the insights and functionality to scale the business. Moving briefly to the balance sheet and liquidity. Speaker 300:09:56We completed Q2 with a strong liquidity position, including a $65,000,000 cash balance and no drawings on our revolving credit facility. As discussed in the Q1 call, we received €20,000,000 in proceeds from a patent litigation settlement and sale of patents in the 2nd quarter. We also made an additional investment in Pickle Robot in the quarter as their unloading robots gain traction in the marketplace. We continue to make steady progress on our goal of deleveraging and reached 4.2 times at the end of the quarter, down from 4.6 times at 2023 year end and 5.7 times as of Q2 2023. We expect to build cash in the back half of the year and particularly in the Q4 as we enter into the traditionally stronger holiday season and volumes pick up, resulting in cash generation for the year. Speaker 300:10:40We continue to pursue our leverage target of being below 4 turns on a constant currency basis by year end and ultimately getting to 3 turns or below. With that, I'll turn it back to Omar before we move on to questions. Speaker 200:10:52Thank you, Bill. In closing, I'm pleased with the continued steady improvement in the business and delivering on our 4th consecutive quarter of volume growth. I'm also pleased with the continued progress on our key commercial initiatives of driving strategic account activity and becoming the go to player in end of line automation. We continue to feel good about the overall trajectory of the business and outlook. We believe our team has done a good job positioning us well with key accounts in North America. Speaker 200:11:23The effects of this began to materialize in Q2 with North American volumes up 20%, and we expect to see additional strategic account benefits get layered in going into the Q4, providing us with solid momentum in TPS for the remainder of the year and into 2025. As a pure play paper provider, as these accounts are switching from plastic to paper, we are gaining incremental business at the expense of our plastic competition, even if we have to share some of these wins. Automation and data is increasingly a differentiator in these conversations with large sophisticated accounts. We have box customization, automated dunnage insertion, visual quality inspection, void detection and analytics, pre cubing analysis, robotic pad insertion and more. We are finding more and more that we are separating ourselves from our competition by being able to provide value added solutions that provide real insights into our customers' business. Speaker 200:12:29It is not strictly a conversation about dunnage. Our approach is about forging deeper and stickier relationships with our customers based on some of these value added solutions that I just mentioned. In Europe, although the macro is choppy, volumes continue to be up and we expect to begin lapping our pricing headwinds in August, which will help the comparison for the remainder of the year. Asia Pacific is off to a strong start to the year, driven by Japan and Southeast Asia. As Bill mentioned, our Malaysia plant will go live in August and will begin serving limited SKUs this year and fully ramp up capabilities in 2025 to serve the Asia Pacific region. Speaker 200:13:11We believe local production capabilities will provide us with additional sourcing options as well as lower logistics and production costs that we can share with the market in order to drive growth. Our goal is to scale that region in PPS, and I'm optimistic that within a few years, we can potentially double the size of that business. Volume growth, profitability and cash generation are the key areas of focus for us. We believe we are well positioned for continued volume growth even with a challenging operating environment. On the profitability side, the lower contribution from cushioning in the near term is putting some pressure on the margin profile, headwinds. Speaker 200:13:59We have identified areas of cost savings and have implemented measures to reduce run rate G and A by more than $5,000,000 by end of the year. Part of our excitement for the near and medium term is driven by 3 distinct activities. 1st are the actions and announcements by large players in the U. S. To switch from plastic to paper. Speaker 200:14:21We all recall the largest e commerce player making such an announcement North America could result in an additional $5,000,000 to $10,000,000 annually in EBITDA for us. If others in the industry follow, there would be further upside. 2nd, we believe that volumes related to discretionary goods purchases and industrial activity will normalize after being in a slump for the past couple of years. A 50% recovery to pandemic peak levels, assuming current pricing and costs sold, could result in roughly another $10,000,000 to $20,000,000 of additional EBITDA. 3rd, we believe our automation business is inflecting, potentially turning it from an $8,000,000 negative EBITDA profile to a positive contributor as it scales to become a high teens to 20% EBITDA margin business over time. Speaker 200:15:22Bottom line is our platform is fully invested in and beginning to pay us back on our investments in terms of efficiencies, scale and insights into the business. All of these three things contribute to growing near term EBITDA meaningfully and improving the margin profile of the business. Regarding cash generation, 2024 concludes our investment cycle and our CapEx spend will take a meaningful step down going forward. Expected adjusted EBITDA growth, lower CapEx and managing our working capital will enable us to get back to generating cash in 2024. The first half of the year is consistently a draw on cash and we tend to build cash up in the final 4 months of the year as volumes peak and we work down inventory for our busy season. Speaker 200:16:12Our entire organization is committed to managing spend and working capital tightly to focus on generating cash. Now, let's open it up for some questions. Operator? Operator00:16:26Thank you. We will now begin our question and answer The first question comes from the line of Ghansham Panjabi from Baird. Please go ahead. Speaker 400:16:58Hi, everyone. Good morning. This is actually Josh Bessly on for Ghansham. Thank you for taking the question. Speaker 200:17:04Good morning, Josh. Speaker 400:17:06Good morning, Omar. Maybe starting off with a question on pricing. You guys called out the pricing headwinds in Europe of roughly 2% in the quarter. Was that in line with your initial expectation? Any color around that would be helpful. Speaker 400:17:18And then for my second question, could you guys disaggregate between new wins versus core markets as it relates to the 20% increase in North America? I know you said the majority of it was the result of new wins, but any color there would be helpful as well. And then maybe how should we think about that dynamic between the two for the back half of the year? Speaker 200:17:42Sure. So on pricing, Josh, yes, no surprise. That's within our expectation and that will start lapping this month in August given some pricing action we took a year ago, sort of with some price reductions in the marketplace in Europe. And we think the comparison, if you will, in the second half of the year will start getting easier from a pricing standpoint. On the new wins, maybe I'll just start and then have Bill give you more detail. Speaker 200:18:17So a big chunk of the growth has been in the strategic accounts. Our base business did grow, but obviously the majority of that 20% in volume has been with some of the new accounts. We expect that in the second half of the year, we still have a number of wins by the way that are signed, the trials are over, they're closed accounts. So we're going to be installing and servicing mode of these customers. So I'm expecting meaningful growth with new wins in the second half of the year. Speaker 200:18:51And we typically see a pickup just given the seasonality of our business in the base case. So overall, if you put that in numbers, I think year to date, globally, we've grown around 7%. We're very confident that growth for the year will be in low double digits once you layer in the strategic accounts and the activity in the second half. But I'll have maybe Bill give you a bit more color as well. Speaker 300:19:21Yes. Thanks, Josh. Just as far as the consolidated base business goes, even without those strategic accounts, the volume still would have been up in the quarter. So we are still continuing to see the base business grow and we're layering in these additional strategic accounts on top of it and that's kind of the mindset going into this year, right, is continue to grow the base business and layer in the strategic accounts on top of it. Speaker 400:19:44Awesome. Great. That's super helpful. And then, for my second or next question, maybe just focusing on Cushing. Can you expand on what drove the decline in the quarter? Speaker 400:19:55And how would you have us thinking about that vertical for the back half of the year? And then also how are margins for Cushinging relative to the company as a whole? Speaker 200:20:05So cushioning tends to be a slightly higher margin business for us. By the way, as a company, levels of margins we have in the different products are pretty close, but cushioning tends to be slightly higher. Look, industrial activity has not been robust, frankly, globally, and that has impacted our cushioning business. We're not seeing attrition or account losses. We're not seeing customers go to competitors, but we are seeing in manufacturers and industrial players, a bit of a slowdown. Speaker 200:20:41Frankly, it's a little bit more pronounced in Europe than in other geographies. We continue to service these customers. We continue to be very bullish about their outlook. The rate environment and some of the macro aspects in the environment may impact how these companies how they do business and how they grow going forward. But we're not seeing any signs that are concerning frankly other than a macro backdrop that is not robust. Speaker 200:21:11And we're pretty focused on sort of as these companies recover that we maintain our market share with them. Operator00:21:25The next question comes from the line of Adam Samuelson from Goldman Sachs. Please go ahead. Speaker 500:21:31Yes. Thank you. Good morning, everyone. Speaker 200:21:33Good morning, Ed. Speaker 500:21:34Good morning. So, Omar Bill, maybe just as a kind of level set, given the performance in the quarter and some of the tailwinds from new business wins and some of the headwinds in the cushioning business and softness in Europe. I just wanted to be clear, are you is your view on kind of the revenue growth and EBITDA for the year changed relative to where you were 3 6 months ago? Speaker 200:22:01It has not. If anything, our confidence has increased, Adam, in what we've been saying, given the robust activity with, in particular, some of the larger accounts. And we've been talking about these strategic accounts, I think, for 3 to 4 quarters now. And the difference today versus the last few quarters is we've closed on these accounts. They're actual wins. Speaker 200:22:25Now in Q2, it was a ramp up period with some of them. So you will see hopefully a rerating of our base case volume going forward given some of these wins. And in addition to some of these Q2 wins, we have a number of closed deals in Q3 that we're installing and that we'll start servicing and hopefully ramping up in Q3, getting ready for Q4. So I think our confidence is increasing in terms of volume trends. This is why we're saying in the second half of the year, you're going to see more robust volume numbers from us than in the first half. Speaker 200:23:02And in that base case, we are not assuming a big recovery in the industrial channel, in the manufacturing channel. We're assuming that things stay more or less the same and that we continue to service these accounts and continue to work with them. If we are surprised to the upside, I think that's no problem. If there is further macro weakness in industrial and manufacturing, clearly, like anybody else who's in this space, that will impact us. But for us, if you look at us as a company, historically, we've been under indexed to large accounts. Speaker 200:23:38So this effort in the past year to really work with large strategic accounts, service them, have some wins with them, and clearly, we've been supported by the switch from plastic to paper. I think this is getting us in a place where we're more comfortable that our business is more representative of large accounts, medium and small sized accounts and that we're not under indexed to the big players. But overall, our conviction is increasing, Adam. Speaker 500:24:07Okay. No, that's helpful. And then, Omar, in your prepared remarks, you gave kind of some potential EBITDA contributions between some of the large accounts and the automation and kind of non paper consumables growth that you've been targeting as well as $5,000,000 of annualized savings from G and A cuts. Of those kind of measures, what how much do you actually think you'll be realizing in calendar 2024? And in particular, the what is the current expectation for the machine for the automation kind of other equipment revenue this year? Speaker 200:24:53Sure. So let me start and then maybe Bill can give a bit more precision. So on the cost savings exercise, which was driven by a number of factors. One is we're looking at where the opportunities are and in areas where we had too much spend and are not expecting growth or had too much G and A, we decided to basically reduce some costs there. The second piece is frankly given our investments in technology with efficiencies and with new processes, we felt there are ways for us to reduce spend and be a bit more efficient. Speaker 200:25:30And that $5,000,000 number I talked about, that is something we executed on in this quarter. You will see some impacts of it this quarter. You will see a bigger impact in Q4. And then the annual run rate going forward would be the $5,000,000 So I think you'll see a nice contribution from this quarter and then more in Q4. In terms of the strategic accounts, look, a lot of these are done. Speaker 200:25:57It's about us just installing, starting to sell product. These are no longer trials, etcetera. So our conviction in hitting that number of incremental EBITDA from those accounts is high. The question is how do you annualize it and what's the ramp up period. And again, many of them are Q2 wins, so they will contribute at a minimum for the full second half of the year. Speaker 200:26:21Some of them are Q3 wins that will help us starting in August September and then hopefully fully ramp up by Q4. With all strategic accounts, Adam, in our business, it's very important that we are fully ramped up and ready by the beginning of Q4 because that's peak season and that's what customers expect. So at a minimum, expect that quarter to fully contribute. But let me have maybe Bill give a bit more specifics. Speaker 300:26:51Yes. Adam, just on the strategic account wins, right, that 5,000,000 to 10,000,000 dollars for this year, as Omar mentioned, some of it is staged, right? So some of it is Q2. So we'll get a big chunk of that this year and then others would be late Q3 into Q4 as those ramp up. So of that, call it, 5% to 10%, I would say at least 3% we should be experiencing this year with the remainder fully ramped up going into next year. Speaker 200:27:18All right. That's all very helpful. I'll pass it on. Thank you. Speaker 300:27:21Thank you. Operator00:27:24The next question comes from the line of Greg Palm from Craig Hallum Capital Group. Please go ahead. Speaker 600:27:31Yes, thanks. This is Danny Eggerich on for Greg today. I was hoping to maybe hit on strategic accounts too. Obviously, it seems like activity has been really good. I guess, if you look back 3 months, is it safe to say that the conversion has maybe gone better than you were thinking at that time and you've seen kind of incremental volume gains from what you were expecting a few months ago? Speaker 200:27:57I think that's fair. I think, look, when you're winning some of these accounts and you're trying to forecast and trying to understand the business, we're doing the best we Sometimes the forecast that we have might be a little bit more aggressive and we're surprised of the downside. And sometimes maybe we were a little bit more cautious, more conservative, and the speed with which accounts have implemented solutions and maybe the volume was a bit better than we expected. And we're clearly sort of in Q2 in the latter category. So some of these wins ended up being a bit more sizable than we expected. Speaker 200:28:37The ramp up and the customers pushing us to install and get going was a little bit faster. I will tell you, I feel great about how we're executing with these accounts. I get a lot of sort of feedback from some of these large customers about our customer service, about product showing on time, quality of our product, their packers being happy, their leadership being happy. So we're very focused on that execution, which is building both our confidence as well as our reputation. And I feel really good that as we install and work more with some of these large accounts, we'll keep proving ourselves. Speaker 200:29:13But I think overall, your characterization is probably fair that in Q2, maybe in North America, a couple of accounts were a little bit sort of more sizable than we expected. Speaker 600:29:27Got it. And then just maybe in terms of that Amazon announcement of kind of the full switch from paper to plastic, I guess, do you expect or have you seen any evidence yet of maybe other companies within the industry or customers kind of accelerating their plans or kind of spurring kind of an industry wide shift from a plastic to paper? Speaker 200:29:53100%. You're going to see more follow suit and more companies are not just talking about it, but they're actually doing it And more and more accounts are thinking about that switch. And that's part of the closes that I mentioned that we're experiencing in Q3 where we're trying to service these accounts and ramp up. But I think you're going to continue to see a wave with large accounts and sizable brands and brand owners making the switch and embracing more paper solutions in our industry. And that's part of the conviction and the excitement that we're seeing in the North America market that we like, and we're anxious to sort of continue to deliver to some of these new customers. Speaker 200:30:37And frankly, some of them are existing that may have had different substrates and different products that they're using. And now they're announcing that they want to switch completely to paper and less on plastic. Speaker 600:30:53Got it. Makes sense. Maybe just one last one hitting on automation, kind of took a sequential step down in the quarter. Are we still thinking about that kind of a 50% plus grower for this year? Speaker 200:31:09We are. Our bookings in the quarter were up about 100% this past quarter. Some of the revenue delays was more driven by customers and IT integration on the customer part, not on ours. We have a very good funnel, very good pipeline for second half of the year, and we continue to have very high conviction in that 50% plus number for the full year. So we're expecting to have a very busy second quarter our automation business, given recent bookings activity and given funnel activity. Speaker 600:31:45Okay. That's great. I'll leave it there. Thanks. Speaker 200:31:49Thank you. Operator00:31:51And that does conclude the question and answer session. I would like to turn the floor back over to Bill Drew for closing remarks. Speaker 300:31:58Thanks, John, and thanks everybody for joining us today. Looking forward to catching up next quarter. Operator00:32:05Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallRanpak Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Ranpak Earnings HeadlinesRanpak (PACK) to Release Earnings on ThursdayApril 24 at 2:51 AM | americanbankingnews.comCEO Confidence Drops As Economic Uncertainty LoomsApril 23, 2025 | forbes.comTrump’s betrayal exposed Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 27, 2025 | Porter & Company (Ad)Ranpak (PACK) Introduces AI-Powered Packaging Innovations to Reduce WasteMarch 17, 2025 | insidermonkey.comRanpak Unveils New AI and Automation Solutions at ProMat 2025March 12, 2025 | finance.yahoo.comRanpak Holdings Corp. (NYSE:PACK) Released Earnings Last Week And Analysts Lifted Their Price Target To US$11.17March 11, 2025 | finance.yahoo.comSee More Ranpak Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Ranpak? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Ranpak and other key companies, straight to your email. Email Address About RanpakRanpak (NYSE:PACK), together with its subsidiaries, provides product protection solutions and end-of-line automation solutions for e-commerce and industrial supply chains in North America, Europe, and Asia. The company offers protective packaging solutions, such as void-fill protective systems that convert paper to fill empty spaces in secondary packages and protect objects under the FillPak brand; cushioning protective systems, which convert paper into cushioning pads under the PadPak brand; and wrapping protective systems that create pads or paper mesh to wrap and protect fragile items, as well as to line boxes and provide separation when shipping various objects under the WrapPak, Geami, and ReadyRoll brands, as well as cold chain products, which are used to provide insulation for goods. It also offers end-of-line packaging automation products, which help end users automate the void filling and box closure processes after product packing is complete. The company sells its products to end users primarily through a distributor network, and directly to select end-users. Ranpak Holdings Corp. was founded in 1972 and is headquartered in Concord Township, Ohio.View Ranpak ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00Thank you for standing by. My name is John, and I will be your conference operator for today. Operator00:00:04At this time, I would like to welcome everyone to the Rantpac Holdings Second Quarter 20 24 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. As a reminder, this conference call is being recorded. Thank you. Operator00:00:29I would now like to turn the call over to Sarah Horvath, General Counsel. Please go ahead. Speaker 100:00:35Thank you, and good morning, everyone. Before we begin, I'd like to remind you that we will discuss forward looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10 ks and our other filings filed with the SEC. Some of the statements and responses to your questions in this conference call may include forward looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. RamPac assumes no obligation and does not intend to update any such forward looking statements. Speaker 100:01:18You should not place undue reliance on these forward looking statements, all of which speak to the company only as of today. The earnings release we issued this morning and the presentation for today's call are posted on the Investor Relations section of our website. A copy of the release has been included in a Form 8 ks that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non GAAP basis, we have included reconciliations to the comparable GAAP information. Speaker 100:01:51Please refer to the table and slide presentation accompanying today's earnings release. Lastly, we'll be filing our 10 Q with the SEC for the period ending June 30, 2024. The 10 Q will be available through the SEC or on the Investor Relations section of our website. With me today, I have Omar Aqeli, our Chairman and CEO and Bill Drew, our CFO. Omar will summarize our Q2 results and provide commentary on the operating landscape, and Bill will provide additional detail on the financial results before we open up the call for questions. Speaker 100:02:23With that, I'll turn the call over to Omar. Speaker 200:02:27Thank you, Sarah, and good morning, everyone. I appreciate you all joining us today. Our Q2 financial results built on the momentum of the past three quarters and delivered mid single digit top line growth with improved profitability driven by our Q4 in a row of higher volumes. Growth this quarter was largely driven by North America strategic account activity as the plastic to paper shift takes hold as well as strength in Asia Pacific. Overall, our start to the year is in line with the expectations and we are pleased with our steady improvement in the face of a somewhat continued challenging economic backdrop. Speaker 200:03:06North America sales increased 17% in the quarter versus last year driven by improved void fill activity particularly with strategic accounts. The underlying macro remains choppy with industrials under pressure and discretionary goods activity remaining out of favor, particularly as housing activity is muted. That being said, we have not been sitting idly by waiting for the general environment to recover. We have been focused on self help in terms of winning new large accounts and becoming more efficient. And this is what drove the excellent results in North America in the Q2. Speaker 200:03:43The plastic to paper ship transition that began in April drove a substantial portion of the volume growth in North America as our strategic account activity ramped up throughout the quarter. We are pleased to see some of the public announcements regarding the plastic to paper shift that have been made by key players in the e commerce space and expect this to be the beginning of a sizable movement towards paper based solutions. We are excited to see the public validation by marquee names of the equal or better product protection efficacy paper provides versus air pillows as well as the positive feedback from consumers and employees who handle the materials. We applaud the efforts taking place to reduce the amount of plastic in supply chains and the positive impact it will have on the environment and key stakeholders. Europe and Asia Pacific activity levels in the 2nd quarter were less robust than North America with volumes increasing a little over 3%, but constant currency sales down about 1% overall versus the prior year driven by pricing headwinds, which we will begin to lap in August. Speaker 200:04:51Slower activity levels in the region were mainly driven by the manufacturing and industrial sectors. Consumer confidence in the region has been improving since the end of the Q3, but it's still well below pre COVID levels. Geographically speaking, we have seen strength in Brazil, France and the Netherlands, while Poland and Germany remain weaker. In Asia Pacific, Japan has been a meaningful driver of growth. The input cost environment was in line with the Q1 and provided a slight benefit to us year over year, although the mix of lower cushioning and higher void fill resulted in slightly lower gross margins. Speaker 200:05:31We're expecting to see some input cost increases begin to flow through the second half of the year as some producers in North America react to tighter supply price while others are focused on obtaining more volume through more attractive pricing. Overall, we expect some input cost pressure in the second half of the year, which we will look to offset in order to maintain our 37% to 38% target margin profile for the year. Energy pricing in Europe remains favorable as storage levels in the region are above the 5 year average, but we do expect some volatility as we approach fall and winter season and geopolitical headlines may move the markets. We're working with our vendors to lock in their energy pricing where possible to minimize exposure and gain visibility into forward pricing. At this point in the cycle, the inventory levels in the channel are tight with distributors and end users trying to minimize the amount of inventory carried due to increased carrying costs. Speaker 200:06:38If prices begin to rise, you could see some of this tightness reverse as customers will look to protect themselves from increases. With that, let me turn the call over to Bill for some financial detail. Speaker 300:06:51Thank you, Omar. In the deck, you'll see a summary of some of our key performance indicators. We'll also be filing our 10 Q, which provides further information on RANPAK's operating results. Machine placement increased 0.4% year over year to approximately 141,000 machines globally. Cushioning systems declined 0.3%, while void fill installed systems increased 0.7% and wrapping machines were roughly flat year over year. Speaker 300:07:17Growth in the machine field population continues to be lower this year due to a combination of lower activity levels related to industrial and manufacturing sectors as well as our efforts to optimize our fleet. Overall, net revenue for the company in the Q2 was up 5.9% year over year on a constant currency basis, driven by an 8.8% increase in volumes, offset somewhat by lower price. North American net revenue increased 17.1% year over year with void fill driving outperformance, offset slightly by decreases in cushioning and wrapping. Volumes were up approximately 20% versus prior year, driven by strength in e commerce related to strategic account activity ramp up. In Europe and APAC, net revenue on a constant currency basis was down 1% year over year driven by pricing headwinds in the PPS business that outweighed volume growth of 3.2% and increases in automation. Speaker 300:08:05The industrial sector in Europe remains challenged impacting our cushioning business which experienced the greatest headwinds. The Q2 saw a bit of a step back in Europe compared to what we had seen in the previous few quarters when the general economic improvement was stronger. Our gross profit increased 5.4% on a constant currency basis, implying a margin of 36.8% compared to 37% in the prior year. This is roughly in line with expectations as we expected gross margin to be in line with Q4 throughout the year, but was pressured somewhat from less cushioning contribution versus the prior year. Maintaining our gross margin profile is a critical area of focus for us, so we are committed to taking action to preserve it in the second half of the year. Speaker 300:08:44Adjusted EBITDA increased 7.4 percent year over year to $20,400,000 implying a 22.8% margin driven by higher volumes and gross profit flow through. We are extremely focused on continuing to improve the financial profile of the business and generating cash. We invested in working capital in the quarter to position ourselves well for the ramp in strategic account activity. We will work this down in the second half of the year to ensure we are managing our working capital efficiently and driving cash generation. We've taken actions to reduce our spend, which we expect will be felt in the Q3 in order to continue to improve our financial profile and maximize profitability to drive cash generation. Speaker 300:09:21Capital expenditures for the quarter were $9,900,000 driven by converter placement and investments related to our Malaysia production facility. For the remainder of the year, we expect capital expenditures to step down as many of our converter purchases were more heavily weighted in the front half of the year, as was our spend on the APAC production plant which goes live in August. The Malaysia go live marks the end of our multi year investment cycle related to the transformation of our digital and physical structure. We now have a fully invested platform that is world class and will provide us with the insights and functionality to scale the business. Moving briefly to the balance sheet and liquidity. Speaker 300:09:56We completed Q2 with a strong liquidity position, including a $65,000,000 cash balance and no drawings on our revolving credit facility. As discussed in the Q1 call, we received €20,000,000 in proceeds from a patent litigation settlement and sale of patents in the 2nd quarter. We also made an additional investment in Pickle Robot in the quarter as their unloading robots gain traction in the marketplace. We continue to make steady progress on our goal of deleveraging and reached 4.2 times at the end of the quarter, down from 4.6 times at 2023 year end and 5.7 times as of Q2 2023. We expect to build cash in the back half of the year and particularly in the Q4 as we enter into the traditionally stronger holiday season and volumes pick up, resulting in cash generation for the year. Speaker 300:10:40We continue to pursue our leverage target of being below 4 turns on a constant currency basis by year end and ultimately getting to 3 turns or below. With that, I'll turn it back to Omar before we move on to questions. Speaker 200:10:52Thank you, Bill. In closing, I'm pleased with the continued steady improvement in the business and delivering on our 4th consecutive quarter of volume growth. I'm also pleased with the continued progress on our key commercial initiatives of driving strategic account activity and becoming the go to player in end of line automation. We continue to feel good about the overall trajectory of the business and outlook. We believe our team has done a good job positioning us well with key accounts in North America. Speaker 200:11:23The effects of this began to materialize in Q2 with North American volumes up 20%, and we expect to see additional strategic account benefits get layered in going into the Q4, providing us with solid momentum in TPS for the remainder of the year and into 2025. As a pure play paper provider, as these accounts are switching from plastic to paper, we are gaining incremental business at the expense of our plastic competition, even if we have to share some of these wins. Automation and data is increasingly a differentiator in these conversations with large sophisticated accounts. We have box customization, automated dunnage insertion, visual quality inspection, void detection and analytics, pre cubing analysis, robotic pad insertion and more. We are finding more and more that we are separating ourselves from our competition by being able to provide value added solutions that provide real insights into our customers' business. Speaker 200:12:29It is not strictly a conversation about dunnage. Our approach is about forging deeper and stickier relationships with our customers based on some of these value added solutions that I just mentioned. In Europe, although the macro is choppy, volumes continue to be up and we expect to begin lapping our pricing headwinds in August, which will help the comparison for the remainder of the year. Asia Pacific is off to a strong start to the year, driven by Japan and Southeast Asia. As Bill mentioned, our Malaysia plant will go live in August and will begin serving limited SKUs this year and fully ramp up capabilities in 2025 to serve the Asia Pacific region. Speaker 200:13:11We believe local production capabilities will provide us with additional sourcing options as well as lower logistics and production costs that we can share with the market in order to drive growth. Our goal is to scale that region in PPS, and I'm optimistic that within a few years, we can potentially double the size of that business. Volume growth, profitability and cash generation are the key areas of focus for us. We believe we are well positioned for continued volume growth even with a challenging operating environment. On the profitability side, the lower contribution from cushioning in the near term is putting some pressure on the margin profile, headwinds. Speaker 200:13:59We have identified areas of cost savings and have implemented measures to reduce run rate G and A by more than $5,000,000 by end of the year. Part of our excitement for the near and medium term is driven by 3 distinct activities. 1st are the actions and announcements by large players in the U. S. To switch from plastic to paper. Speaker 200:14:21We all recall the largest e commerce player making such an announcement North America could result in an additional $5,000,000 to $10,000,000 annually in EBITDA for us. If others in the industry follow, there would be further upside. 2nd, we believe that volumes related to discretionary goods purchases and industrial activity will normalize after being in a slump for the past couple of years. A 50% recovery to pandemic peak levels, assuming current pricing and costs sold, could result in roughly another $10,000,000 to $20,000,000 of additional EBITDA. 3rd, we believe our automation business is inflecting, potentially turning it from an $8,000,000 negative EBITDA profile to a positive contributor as it scales to become a high teens to 20% EBITDA margin business over time. Speaker 200:15:22Bottom line is our platform is fully invested in and beginning to pay us back on our investments in terms of efficiencies, scale and insights into the business. All of these three things contribute to growing near term EBITDA meaningfully and improving the margin profile of the business. Regarding cash generation, 2024 concludes our investment cycle and our CapEx spend will take a meaningful step down going forward. Expected adjusted EBITDA growth, lower CapEx and managing our working capital will enable us to get back to generating cash in 2024. The first half of the year is consistently a draw on cash and we tend to build cash up in the final 4 months of the year as volumes peak and we work down inventory for our busy season. Speaker 200:16:12Our entire organization is committed to managing spend and working capital tightly to focus on generating cash. Now, let's open it up for some questions. Operator? Operator00:16:26Thank you. We will now begin our question and answer The first question comes from the line of Ghansham Panjabi from Baird. Please go ahead. Speaker 400:16:58Hi, everyone. Good morning. This is actually Josh Bessly on for Ghansham. Thank you for taking the question. Speaker 200:17:04Good morning, Josh. Speaker 400:17:06Good morning, Omar. Maybe starting off with a question on pricing. You guys called out the pricing headwinds in Europe of roughly 2% in the quarter. Was that in line with your initial expectation? Any color around that would be helpful. Speaker 400:17:18And then for my second question, could you guys disaggregate between new wins versus core markets as it relates to the 20% increase in North America? I know you said the majority of it was the result of new wins, but any color there would be helpful as well. And then maybe how should we think about that dynamic between the two for the back half of the year? Speaker 200:17:42Sure. So on pricing, Josh, yes, no surprise. That's within our expectation and that will start lapping this month in August given some pricing action we took a year ago, sort of with some price reductions in the marketplace in Europe. And we think the comparison, if you will, in the second half of the year will start getting easier from a pricing standpoint. On the new wins, maybe I'll just start and then have Bill give you more detail. Speaker 200:18:17So a big chunk of the growth has been in the strategic accounts. Our base business did grow, but obviously the majority of that 20% in volume has been with some of the new accounts. We expect that in the second half of the year, we still have a number of wins by the way that are signed, the trials are over, they're closed accounts. So we're going to be installing and servicing mode of these customers. So I'm expecting meaningful growth with new wins in the second half of the year. Speaker 200:18:51And we typically see a pickup just given the seasonality of our business in the base case. So overall, if you put that in numbers, I think year to date, globally, we've grown around 7%. We're very confident that growth for the year will be in low double digits once you layer in the strategic accounts and the activity in the second half. But I'll have maybe Bill give you a bit more color as well. Speaker 300:19:21Yes. Thanks, Josh. Just as far as the consolidated base business goes, even without those strategic accounts, the volume still would have been up in the quarter. So we are still continuing to see the base business grow and we're layering in these additional strategic accounts on top of it and that's kind of the mindset going into this year, right, is continue to grow the base business and layer in the strategic accounts on top of it. Speaker 400:19:44Awesome. Great. That's super helpful. And then, for my second or next question, maybe just focusing on Cushing. Can you expand on what drove the decline in the quarter? Speaker 400:19:55And how would you have us thinking about that vertical for the back half of the year? And then also how are margins for Cushinging relative to the company as a whole? Speaker 200:20:05So cushioning tends to be a slightly higher margin business for us. By the way, as a company, levels of margins we have in the different products are pretty close, but cushioning tends to be slightly higher. Look, industrial activity has not been robust, frankly, globally, and that has impacted our cushioning business. We're not seeing attrition or account losses. We're not seeing customers go to competitors, but we are seeing in manufacturers and industrial players, a bit of a slowdown. Speaker 200:20:41Frankly, it's a little bit more pronounced in Europe than in other geographies. We continue to service these customers. We continue to be very bullish about their outlook. The rate environment and some of the macro aspects in the environment may impact how these companies how they do business and how they grow going forward. But we're not seeing any signs that are concerning frankly other than a macro backdrop that is not robust. Speaker 200:21:11And we're pretty focused on sort of as these companies recover that we maintain our market share with them. Operator00:21:25The next question comes from the line of Adam Samuelson from Goldman Sachs. Please go ahead. Speaker 500:21:31Yes. Thank you. Good morning, everyone. Speaker 200:21:33Good morning, Ed. Speaker 500:21:34Good morning. So, Omar Bill, maybe just as a kind of level set, given the performance in the quarter and some of the tailwinds from new business wins and some of the headwinds in the cushioning business and softness in Europe. I just wanted to be clear, are you is your view on kind of the revenue growth and EBITDA for the year changed relative to where you were 3 6 months ago? Speaker 200:22:01It has not. If anything, our confidence has increased, Adam, in what we've been saying, given the robust activity with, in particular, some of the larger accounts. And we've been talking about these strategic accounts, I think, for 3 to 4 quarters now. And the difference today versus the last few quarters is we've closed on these accounts. They're actual wins. Speaker 200:22:25Now in Q2, it was a ramp up period with some of them. So you will see hopefully a rerating of our base case volume going forward given some of these wins. And in addition to some of these Q2 wins, we have a number of closed deals in Q3 that we're installing and that we'll start servicing and hopefully ramping up in Q3, getting ready for Q4. So I think our confidence is increasing in terms of volume trends. This is why we're saying in the second half of the year, you're going to see more robust volume numbers from us than in the first half. Speaker 200:23:02And in that base case, we are not assuming a big recovery in the industrial channel, in the manufacturing channel. We're assuming that things stay more or less the same and that we continue to service these accounts and continue to work with them. If we are surprised to the upside, I think that's no problem. If there is further macro weakness in industrial and manufacturing, clearly, like anybody else who's in this space, that will impact us. But for us, if you look at us as a company, historically, we've been under indexed to large accounts. Speaker 200:23:38So this effort in the past year to really work with large strategic accounts, service them, have some wins with them, and clearly, we've been supported by the switch from plastic to paper. I think this is getting us in a place where we're more comfortable that our business is more representative of large accounts, medium and small sized accounts and that we're not under indexed to the big players. But overall, our conviction is increasing, Adam. Speaker 500:24:07Okay. No, that's helpful. And then, Omar, in your prepared remarks, you gave kind of some potential EBITDA contributions between some of the large accounts and the automation and kind of non paper consumables growth that you've been targeting as well as $5,000,000 of annualized savings from G and A cuts. Of those kind of measures, what how much do you actually think you'll be realizing in calendar 2024? And in particular, the what is the current expectation for the machine for the automation kind of other equipment revenue this year? Speaker 200:24:53Sure. So let me start and then maybe Bill can give a bit more precision. So on the cost savings exercise, which was driven by a number of factors. One is we're looking at where the opportunities are and in areas where we had too much spend and are not expecting growth or had too much G and A, we decided to basically reduce some costs there. The second piece is frankly given our investments in technology with efficiencies and with new processes, we felt there are ways for us to reduce spend and be a bit more efficient. Speaker 200:25:30And that $5,000,000 number I talked about, that is something we executed on in this quarter. You will see some impacts of it this quarter. You will see a bigger impact in Q4. And then the annual run rate going forward would be the $5,000,000 So I think you'll see a nice contribution from this quarter and then more in Q4. In terms of the strategic accounts, look, a lot of these are done. Speaker 200:25:57It's about us just installing, starting to sell product. These are no longer trials, etcetera. So our conviction in hitting that number of incremental EBITDA from those accounts is high. The question is how do you annualize it and what's the ramp up period. And again, many of them are Q2 wins, so they will contribute at a minimum for the full second half of the year. Speaker 200:26:21Some of them are Q3 wins that will help us starting in August September and then hopefully fully ramp up by Q4. With all strategic accounts, Adam, in our business, it's very important that we are fully ramped up and ready by the beginning of Q4 because that's peak season and that's what customers expect. So at a minimum, expect that quarter to fully contribute. But let me have maybe Bill give a bit more specifics. Speaker 300:26:51Yes. Adam, just on the strategic account wins, right, that 5,000,000 to 10,000,000 dollars for this year, as Omar mentioned, some of it is staged, right? So some of it is Q2. So we'll get a big chunk of that this year and then others would be late Q3 into Q4 as those ramp up. So of that, call it, 5% to 10%, I would say at least 3% we should be experiencing this year with the remainder fully ramped up going into next year. Speaker 200:27:18All right. That's all very helpful. I'll pass it on. Thank you. Speaker 300:27:21Thank you. Operator00:27:24The next question comes from the line of Greg Palm from Craig Hallum Capital Group. Please go ahead. Speaker 600:27:31Yes, thanks. This is Danny Eggerich on for Greg today. I was hoping to maybe hit on strategic accounts too. Obviously, it seems like activity has been really good. I guess, if you look back 3 months, is it safe to say that the conversion has maybe gone better than you were thinking at that time and you've seen kind of incremental volume gains from what you were expecting a few months ago? Speaker 200:27:57I think that's fair. I think, look, when you're winning some of these accounts and you're trying to forecast and trying to understand the business, we're doing the best we Sometimes the forecast that we have might be a little bit more aggressive and we're surprised of the downside. And sometimes maybe we were a little bit more cautious, more conservative, and the speed with which accounts have implemented solutions and maybe the volume was a bit better than we expected. And we're clearly sort of in Q2 in the latter category. So some of these wins ended up being a bit more sizable than we expected. Speaker 200:28:37The ramp up and the customers pushing us to install and get going was a little bit faster. I will tell you, I feel great about how we're executing with these accounts. I get a lot of sort of feedback from some of these large customers about our customer service, about product showing on time, quality of our product, their packers being happy, their leadership being happy. So we're very focused on that execution, which is building both our confidence as well as our reputation. And I feel really good that as we install and work more with some of these large accounts, we'll keep proving ourselves. Speaker 200:29:13But I think overall, your characterization is probably fair that in Q2, maybe in North America, a couple of accounts were a little bit sort of more sizable than we expected. Speaker 600:29:27Got it. And then just maybe in terms of that Amazon announcement of kind of the full switch from paper to plastic, I guess, do you expect or have you seen any evidence yet of maybe other companies within the industry or customers kind of accelerating their plans or kind of spurring kind of an industry wide shift from a plastic to paper? Speaker 200:29:53100%. You're going to see more follow suit and more companies are not just talking about it, but they're actually doing it And more and more accounts are thinking about that switch. And that's part of the closes that I mentioned that we're experiencing in Q3 where we're trying to service these accounts and ramp up. But I think you're going to continue to see a wave with large accounts and sizable brands and brand owners making the switch and embracing more paper solutions in our industry. And that's part of the conviction and the excitement that we're seeing in the North America market that we like, and we're anxious to sort of continue to deliver to some of these new customers. Speaker 200:30:37And frankly, some of them are existing that may have had different substrates and different products that they're using. And now they're announcing that they want to switch completely to paper and less on plastic. Speaker 600:30:53Got it. Makes sense. Maybe just one last one hitting on automation, kind of took a sequential step down in the quarter. Are we still thinking about that kind of a 50% plus grower for this year? Speaker 200:31:09We are. Our bookings in the quarter were up about 100% this past quarter. Some of the revenue delays was more driven by customers and IT integration on the customer part, not on ours. We have a very good funnel, very good pipeline for second half of the year, and we continue to have very high conviction in that 50% plus number for the full year. So we're expecting to have a very busy second quarter our automation business, given recent bookings activity and given funnel activity. Speaker 600:31:45Okay. That's great. I'll leave it there. Thanks. Speaker 200:31:49Thank you. Operator00:31:51And that does conclude the question and answer session. I would like to turn the floor back over to Bill Drew for closing remarks. Speaker 300:31:58Thanks, John, and thanks everybody for joining us today. Looking forward to catching up next quarter. Operator00:32:05Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by