Pactiv Evergreen Inc.

Good day, and thank you for standing by. Welcome to the Pactive Evergreen conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kurt Worthington. Kurt, you have the floor.

Thank you, operator. Good morning, everyone. Thank you for your interest and back of everybody, and welcome to our third quarter 2023 earnings call. With me on the call today, we have Michael King, President and CEO, and John Vox, CFO. Please visit the events section of our investor relations website and www.tactiveevergreen.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 want to remind everyone that our discussions today will include forward-looking statements, including those 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 expected. We refer all of you to our recent FTC filings, including our annual report on Form 10-K for the year ended December 31, 2022, and our quarterly reports on Form 10-Q for the course ended March 31, June 30th and September 30th, 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 relief 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 FACTS of Evergreen's President and CEO, Michael Kay. Mike?

Thank you, Kurt, and good morning, everyone. Thank you for joining us today. Turning to slide four, we'll begin with an overview of the progress we've made against our strategic priorities, discuss our performance during the quarter, and then provide updates on our key financial metrics. At the end of the call, we'll open the line for Q&A. Turning your attention to slide five, I'm proud of the steady progress we've made toward our targets for 2023. Our solid performance during the third quarter would not have been possible without our dedicated team. We delivered 21% adjusted EBITDA growth during the quarter, with adjusted EBITDA margin increasing to 16.5%. In addition, we've generated $176 million in free cash flow and made further progress reducing our net leverage. Our teams continue to execute at a high level, navigating challenging market dynamics. Our solid third quarter results reflect the resilience of our business and the company's ability to deliver sustainable returns. As a result, we are revising our guidance upwards, which John will discuss in greater detail. We continue to leverage our broad range of product offerings, channel coverage, and distribution network to generate improved margins and free cash flow. We remain focused on our strategy of value over volume and continue to make progress emphasizing our higher margin product. focusing on operational excellence, and improving our balance sheet. We are confident that focusing on these strategic priorities will allow us to enhance shareholder value. Next, recall that last quarter we introduced the implementation of the Pactative Evergreen Production System, also known as PEPS, which promotes best practices and continuous improvement. During the second quarter, we shared that we anticipate eight plants to reach brown status by year end. I'm pleased to share that we are ahead of that target and during the third quarter, three of our facilities became PEP certified, increasing the number of our plants carrying brown status from six to nine. Longer term, we expect three to five of our plants to achieve silver status next year with our goal of having our first site become gold certified before 2025. While we are still early in the PEP's journey, the progress we have made since the second quarter is meaningful. We are enthusiastic about the impact this will have throughout the organization and waste elimination, and improving our operations saleability. We continue to win with our key strategic customers. As we highlighted during our second quarter earnings call, our business is outperforming its end markets, partially by aligning with customers that are well-positioned for long-term growth. We benefit when our customers succeed, and our strong partnerships provide better insight into their needs. In addition, our team has been able to adapt to broader changes in demand, enabling us to better align with our customers. Although our end markets are moderating, here at Pact of Evergreen we are seeing positive momentum as we continue to strategically align with our key customers. Meanwhile, we remain committed to effectively balancing production costs with demand levels. And we are pleased with the progress we've made to control costs and improve efficiencies. Foot traffic in QSRs and full-service restaurants was down slightly compared to last year. However, our alignment with key strategic customers allowed our food service segment to outperform the market. Over the past year, as consumers transitioned to lower cost calories, they have continued to shift their spending from restaurants to the grocery store. And within the store, they've allocated their budgets to product categories that benefit Pack the Better Grant. Outside of those elements, we've also been disciplined in our value over volume approach, which has supported our price realizations during the quarter. In addition, We've been successful in reducing our manufacturing costs to drive higher profits and improve our margin profile. We've made considerable progress on the beverage merchandising restructuring during the year, including the closure of our Canton Mill and our Olmstead Falls converting facility. Reorganization of our management structure and the related combination of our legacy food merchandising and beverage merchandising businesses into a single segment We remain confident these actions will reduce our capital intensity and overhead costs and position us to remain competitive in the liquid packaging market. Moving to slide seven. This past year has demonstrated the resilience of our business model and our ability to grow adjusted EBITDA and free cash flow through the economic cycle. Last quarter I highlighted the operational excellence aspect of our transformational journey. This quarter I will highlight our diversified in-market exposure, our broad product offering, and our nationwide distribution footprint, as these are critical areas that support our value proposition and provide the foundation that our transformational journey is built upon. Today, we are uniquely positioned to provide sustainable product solutions to our customers with scale and reach unlike any other food service or beverage packaging provider, starting with our diversified in-market exposure. We sell across full-service restaurants, QSRs, convenience stores, broadband distributors, food processors, grocery stores, and beverage companies. This means that no matter where consumers spend, whether it be inside or outside the home, we have the scale to meet their needs. This partially insulates us against macroeconomic headlines as consumers shift the behavior to favor one channel over another. This is especially important in the current environment as consumers have altered their buying patterns to adapt to the impact of inflation. As mentioned previously, higher menu prices have caused consumers to trade down from higher end restaurants to QSRs, to lower tier fast food restaurants. Our food service business serves the full spectrum within the restaurant channel, so it is a shift from one outlet to another which gives us the opportunity to capture that foot traffic. Higher menu prices have also forced consumers to shift their spend from the drive-through window to the grocery store. With our presence throughout the grocery store, from the fresh food and beverage options at the perimeter of the store to other options in the center aisle, our food and beverage merchandising segment is able to capitalize on this shift and secure those volumes as they migrate over from food service. In this dynamic economic environment with ever-changing consumer trends, we expect that our diverse end market exposure will allow us to continue to realize profitable growth, even with shifts in consumer behavior. Turning your attention to slide 8, we believe that we offer the broadest array of products and substrates within the food and beverage packaging industry, and we're constantly working to innovate and develop the highest quality, environmentally friendly products. This is a sustainable competitive advantage for us, and it offers convenience and peace of mind for our customers. The breadth of our product offering enables us to respond quickly to changing customer needs. We can pivot to where the demand is and insulate ourselves from any singular trend at the product or customer level. We are considered a solutions provider with a host of technical and supply chain services, which has afforded us the ability to build strong strategic partnerships with our customers and become a critical component of their supply chains and future strategies. In many cases, we are the supplier of choice to help our customers meet their packaging-related sustainability goals. Because we play such a vital role in our customer supply chains and cover such a wide spectrum of their packaging needs, our customers have a strong incentive to work with us to develop next generation products and substrates. We have the expertise and the know-how to engineer sustainable solutions. Impact of Evergreen minimizes disruption for our customers with the convenience of a turnkey solutions provider. Turning to slide nine, Our strategically located distribution footprint is another key differentiator that allows us to offer best-in-class service to our customers. It also gives us an exclusive vantage point into the value chain from upstream packaging production to downstream packaging consumption and all the stages in between. Not only do we have a broad national manufacturing footprint, we also have a strategically located hub-and-spoke network of distribution centers that allow us to deliver products quickly and efficiently while meeting the precise needs of our customers. Many of our distribution centers are also close to our largest, most strategically important customers, ensuring we deliver products in a timely manner. As a result, while a lot of other packaging companies rely on just-in-time delivery, our customers can count on us for just-in-case inventory management. Our distribution centers carry stock across all categories to enable us to adapt quickly to changing customer needs. We work closely with our customers on demand forecasting, which allows us to better anticipate changes and adjust our production and inventory levels accordingly. Our manufacturing operations benefit from reducing variability caused by changing demand levels, and our sales teams benefit from the competitive advantage of playing a critical role in our customer supply chain. We remain committed to further optimizing and improving our distribution network to operate more efficiently and meet the evolving needs of our customers, while also supporting the long-term sustainable value creation. Turning to slide 10, the market backdrop remains challenging as elevated inflation continues to impact consumers' purchasing decisions. More recently, we are beginning to see encouraging signs of moderating volumes. on both a sequential and year-over-year basis. In general, consumers continue to allocate spending to adjust for higher food prices and prioritize channels and product categories that we participate in. We continue to position ourselves so that we are strategically aligned with customers that are industry leaders. We believe they are winning in their respective markets, so we benefit when they succeed. On that front, we have seen limited promotional activity by some of our customers, which contributed to our third quarter volume. Although we have not seen large-scale promotional pricing yet, to the extent that overall customer promotional activity picks up, that would be a net positive for the sector as well as PACT of Evergreen. Regarding the raw material cost environment, the trend in 2023 has been lower cost than 2022. We've made a concentrated effort to reduce our lag and our contractual pass-through mechanisms, and we don't expect the recent commodity price volatility to have a material impact on the results for the rest of the year. Finally, we continue to manage our controllable costs by improving efficiency and productivity across the organization. As a result of our operational efficiencies, we are seeing significant benefits to our adjusted EBITDA and free cash flow. And as a result, we've been able to strategically allocate cash to pay down debt, reducing our interest expense and improving our overall net leverage. Our beverage merchandising restructuring continues to progress on schedule, and we remain on pace to achieve our operational milestones that we communicated from the onset. As a reminder, this is an effort to streamline our physical footprint to focus on converting operations, resulting in lower operational costs and a more capital-light operating structure, both of which support increased cash flow generation overall has taken a tremendous effort from all of our employees, particularly at the impact of facilities, to help us continue to execute according to this plan. And I'm also very proud of the dedication and commitment and hard work along the way. With that, I would now like to turn the call over to John to discuss our third quarter results in more detail. John?