Pactiv Evergreen Inc.

Thank you for standing by. This is the conference operator. Welcome to the PRACTIVE Evergreen first quarter 2021 earnings conference call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Deval Patel, Senior Vice President of IR and Strategy. Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for your interest in PACT of Evergreen, and welcome to our first quarter 2021 earnings call. With me on the call today, we have Michael King, Chief Executive Officer, and Michael Reagan, Chief Operating Officer and Chief Financial Officer. Before we begin, Please visit the events section of the company's investor relations website at www.pactofevergreen.com and access the company's supplemental earnings presentation. Management's remarks today should be heard in tandem with reviewing this presentation. Before we begin our formal remarks, I would like to remind everyone that our discussions today may include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ maturely from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Lastly, during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. And reconciliation to comparable GAAP measures are available in our earnings release. With that, let me turn it over to Michael King. Mike?

Thank you, Deval. Good morning, everyone, and welcome. Before jumping in, and with this being my first earnings call as the CEO of PACT of Evergreen, I thought it might be helpful to give a bit of insight on my background leading up to now. I'm a pedigree chemical and mechanical engineer. My career started in the operations and development space of the automotive industry, and it's rapidly progressed into both private and public sectors with companies like Lear Corporation, TI Automotive, Fram and Autolite, as well as Hutamaki Packaging, and most recently, Graham Packaging. My sweet spot is in driving business transformation through culture, manufacturing turnaround, and end-to-end systems integration. My approach is hands-on and collaborative. I'm very results focused with a keen eye to long-term and short-term viability of the business. I have to say that it's been a pleasure to meet so many of our Pact of Evergreen employees over the past two months as I've taken over as the CEO. My short tenure, I visited our mill operations and several of our converting facilities. I'm confident that we have an amazing team of talented individuals across the organization that are well suited to manage the current challenging environment, as well as the opportunities of the future. The first quarter in 2021 presented a number of challenges as our COVID-19 pressured business was also impacted by an unprecedented winter storm, Yuri. as well as a scheduled cold mill outage. Despite these challenges, we managed to deliver solid results across the segments and remain laser focused on improving our paper mills and eliminating waste through a host of strategic initiatives. If I could turn your attention to slide three. During this presentation, we will discuss key business takeaways and first quarter 2021 highlights. We'll provide an update on the business. We'll go through our first quarter financial performance. We'll provide an update on our full year 2021 outlook. And we'll conclude this with questions and answers today. If I could direct your attention to slide five. Our first quarter results continue to see steady improvement in underlying business activity. We're negatively impacted by continued depressed volumes due to COVID-19. along with winter storm URI and the planned cold mill outage. In food service and food merchandising, we actually saw year-over-year adjusted EBITDA improvement of 9% and 4% respectively for the quarter despite the negative impact of COVID-19 and the storm. The total company volume was 3% up from the month of March. We expect the stronger year-over-year volume growth to continue. for the remainder of 2021. We are still relatively early in the process of our operational review of the beverage merchandising segment and our next generation pack of evergreen waste elimination program. We do not have an update for you at this time, but we plan to provide you further details in the coming months. The company has continued to focus on paying down debt and has repaid 59 million of notes in a quarter. Please now turn to slide six. Now let's move to quarter 2021 highlights. Net revenue of $1.164 billion was down 4% from Q1 2020 due to the continued impact of COVID-19 as well as lower raw material costs passing through the system. We would note net sales are recovering and we're up 7% year over year for the month of March. Net loss from continuing operations was $15 million. and earnings per share from continuing operations was a loss of $0.07. Adjusted EBITDA of $77 million for the quarter was down 47% from Q1 2020 due to the impact from winter storm URI, the cold mill outage, as well as COVID-19. These results were partially offset by favorable raw materials. Free cash flow defined as adjusted EBITDA, less CapEx was $17 million and declined versus Q1 2020 driven by the depressed EBITDA. Finally, our strategic investment program is on track and delivered 23 million of benefits in the first quarter. If I could direct you to slide eight. As we have previously discussed, PACT of Evergreen continues to have many EBITDA growth levers that will deliver benefits in 2021 and beyond. As the overall economy continues to rebound and COVID-19 subsides, we should realize significant volume upside and leverage operational costs. The incremental operating costs during the COVID-19 pandemic will also decline as mass vaccination continues across the country. The secular shift to more online ordering, delivery, and takeout will also help drive our volume growth. We plan to continue investing in incremental capacity to meet customer demand. We view sustainability is another pillar of our growth story and also a differentiator for the business. We are able to provide a broad portfolio of sustainable products to our customers as well as work with customers to develop new sustainable products as they shift their product offerings to meet customers' preferences. Finally, cost reduction initiatives and optimization will also continue to contribute to EBITDA growth. Please now turn to slide nine. As one of the largest companies in the food and beverage packaging industry, we recognize the responsibility we have to lead and inspire when it comes to ESG issues. In our latest sustainability report, we outlined where we are headed, and we are committed to updating all our stakeholders on our progress towards excellence. When it comes to protecting our planet's resources, we are currently finalizing our 2020 greenhouse gas emissions data and examining options to accelerate our reductions to date and help mitigate climate change. One data point that we can share today shows our commitment to another focus area, and that is sustainable forestry. In 2020, 30% of the fiber we procured came from third-party certified sources, up from 23% in 2019. Related to our products pillar, we're building the broadest offering of sustainable packaging in the industry. which helps us reach our goal that by 2030, 100% of our products will be made with recycled, recyclable, or renewable materials. During the first quarter, we launched 10 new products, which were all fiber-based. That brings the total number of new items we've introduced to 94 in the last year and a half. Valuing our people has always been a top priority at Pact of Evergreen, and in the first quarter, we saw overall injury rates come in below target, and three times better than industry averages. Looking beyond our people, we celebrated National Volunteer Week by launching a new program that rewards actions for our employees and their families to better their communities. Finally, as a newly public company, we're working with our board of directors to develop transparent policies that promote effective governance, and we look forward to sharing more in the future. We'll be providing greater external reporting on ESG topics in the coming quarters and years, and we invite you to view more details at the link included in this presentation. Please now turn to slide 10. Another key focus for Pactive Evergreen has been innovation. We have and continue to invest in capabilities to make products from a number of substrates. The integration of Evergreen into Pactive only further enhances those capabilities. This allows us to be the right partner to work closely with our customers as they tackle the challenging requirements of a dynamic consumer that has evolving needs and preferences of functionality and sustainability. We have now launched a total of 94 new Earth Choice products with 22 launched in the first quarter of 2021 as we focus on sustainability-oriented products to align with today's customer preferences. In addition, we are launching new products focused on food safety, and tamper evidence to address customer needs. We have not only developed a number of projects to realize 6 million of EBITDA and synergies in 2021 from the combined PACT of Evergreen, but we've also identified an additional 25 million of potential synergy opportunities. Please now turn to slide 11. We remain on track to complete our strategic investment program in 2021. We will have spent a total of $661 million by the end of the year on a number of programs that is a total average a two to two and a half year payback. We are in the maturing stages of both our beverage merchandising operational review and our next generation pack of evergreen waste elimination programs. We plan to provide more information on these programs over the coming months and quarters as we start to implement actions across the business. I will now turn it over to Mike Reagan for a detailed financial review.