Pactiv Evergreen Inc.

Good day, and welcome to the PaxGrid Evergreen first quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Kurt Worthington, Vice President, Strategy and Investor Relations. 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 2023 earnings call. With me on the call today, we have Michael King, President and CEO, and John Bocht, CFO. Please visit the events section of our investor relations website at www.pactiveevergreen.com and access our 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 will include forward-looking statements, including, but not limited to, statements regarding our guidance for 2023. These forward-looking statements are not guarantees of future performance, and actual results could differ materially from those contemplated by our forward-looking statements. Therefore, you should not put undue reliance on those statements. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings, including our annual report on Form 10-K, for the year-ended December 31, 2022, and our quarterly report on Form 10-Q for the quarter-ended March 31, 2023, for a more detailed discussion of those risks. The forward-looking statements we make on this call are based on information available to us as of today's date, and we disclaim any obligation to update any forward-looking statements except as required by law. Lastly, during today's call, we will discuss certain GAAP and non-GAAP financial measures, which we believe can be useful in evaluating our performance. Our non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP, and reconciliations to the most directly comparable GAAP measures are available in our earnings release and in the appendix to today's presentation. Unless otherwise stated, all figures discussed during today's call are for continuing operations only. With that, let me turn the call over to Pactive Evergreen's President and CEO, Michael Kang. Mike?

Thank you, Kurt, and good morning, everyone. Yesterday after the market closed, Pactive Evergreen released strong first quarter results, including adjusted EBITDA of $189 million. exceeding our guidance and establishing solid momentum heading into the second quarter. Our performance in the quarter is a testament to the resilience of our platform, the diversity of our product portfolio, and the tremendous efforts of our dedicated employees. As we will continue to outline during sections of this presentation this morning, this is an uncertain macro environment for many sectors of the economy. However, our results underscore the inherent strength of the Pact of Evergreen business model and reinforce our confidence in executing the next phase of our strategic journey. Turning to the agenda on slide four, I will start today's call with the highlights from the quarter along with an update on our previously announced beverage merchandising restructuring plan. John will then discuss Q1 results in more detail along with an update on our 2023 outlook. Finally, I will close with an update on our strategic journey. We will then move to a question and answer session. Moving to our first quarter highlights on slide number six. We reported net revenues of $1.4 billion, a solid performance that reflects the many strengths of our platform and our unique ability to service our customers. While the first quarter net revenues represented a 4% decrease compared to the first quarter of 2022, excluding the impacts of divestitures, primarily beverage merchandising Asia in 2022, we were essentially flat to last year. Sales volumes declined due to a focus on value over volume in the food service and food merchandising segments and the market softening amid inflationary pressures in the beverage merchandising and food merchandising segments. Pricing levels were slightly higher than last year as a result of the actions we took to manage price over the course of 2022. Our input costs have largely stabilized as compared to recent periods, and our pricing strategy reflects our contractual pass-through mechanisms and our competitive value proposition. First quarter adjusted EBITDA was $189 million, which is ahead of our guidance. The outperformance compared to our guidance was primarily driven by favorable mix and lower SG&A. We also benefited from an extension of key business that was previously expected to occur in the second quarter. During the quarter, we generated $25 million of free cash flow and reduced our net leverage ratio to 4.5 times. As we will cover in more detail later in the presentation, we remain committed to deleveraging our balance sheet, and we are focused on maximizing long-term free cash flow generation. We do not expect our beverage merchandising restructuring plan to prevent us from driving solid free cash flow in 2023, and we expect our net leverage ratio to improve by year end. We expect the beverage merchandising restructuring plan will put us in an even better position to generate free cash flow and accelerate our deleveraging path in 2024 and beyond. Turning to slide seven. 2023 is an important year for Pact of Evergreen as we execute on a number of strategic actions designed to help us focus on our core converting operations for food and beverage packaging to position us for profitable growth in the future. First, we have already made significant progress on our beverage and merchandising restructuring plan, and we are confident that we will cease operations at the Canton Mill and Olmstead Falls facilities by June. We have also taken steps to support a smooth transition of our paper board supply to avoid disruption to our customers and our remaining operations. As we outlined in March, the beverage and merchandising restructuring plan is expected to result in non-cash and cash charges We have since refined those estimates as follows. Non-cash charges are expected to be $320 million to $330 million, which reflects updated non-cash costs associated with accelerated depreciation of property, plant and equipment and other non-cash charges. Cash charges are expected to be $130 million to $160 million. We have reduced the high end of the range to reflect lower than anticipated severance and other expenses at the impact of facilities. Finally, as we outlined previously, we have implemented a new management and operating structure for our food merchandising and beverage merchandising business as of April 1st. This is a major step toward achieving the run rate cost benefit that we highlighted in March. By combining the converting operations of our food and beverage merchandising businesses and exiting the can't mill, we intend to leverage our collective efforts on Pective Evergreen's core food and beverage merchandising end markets and allow for a more profitable liquid packaging operation in the future. Not only does this align with our strategy to focus on our consistently growing higher margin businesses, it also yields meaningful savings in annual operating costs and capex. We will begin reporting the financial results for the new food and beverage merchandising segment with our second quarter earnings release in 10Q. Lastly, we have progressed the review of strategic alternatives for the Pine Bluff Mill and Waynesville facility. We do not have a definitive timetable for this process. We intend to provide additional updates on the status of the review throughout the year. Turning to slide eight. As our results indicate, we exited the first quarter on a solid trajectory and are taking the steps to improve our future EBITDA and free cash flow profile. As a result of the strong start to the year, we are now expecting our 2023 adjusted EBITDA to be in the $775 million to $800 million range. Of course, none of these accomplishments would be possible without the tremendous efforts of the great team at PACT of Evergreen. I want to take this opportunity to thank everyone for their outstanding performance. I will now turn it over to John to discuss our first quarter results in more detail, including our segment performance, before I provide an update on our strategic direction and closing remarks. John?