GPGI, Inc. Class A

Good day and thank you for standing by. Welcome to the GPGI Second Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 1 1 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press star 1 and 1 again. Please be advised that today's conference has been recorded. I would now like to hand the conference over to our first speaker today, Dave Marshall. Please go ahead.

Good morning and welcome to GPGI's second quarter conference call. This morning's remarks will include forward-looking statements which are subject to risks and uncertainties that could cause actual results to differ materially, including those disclosed in our SEC filings available at SEC.gov and on our IR website. Additionally, definitions and reconciliations of non-GAAP measures used today appear in today's press release and earnings presentation, which are available in our SEC filings and on our IR website. As a reminder, following the Resolute Holdings spinoff, GPGI accounts for GPGI holdings, including our CompostSecure and Husky businesses, under the equity method of accounting in accordance with GAAP. With that, I will turn over the call to Executive Chairman Dave Cody.

Good morning, everyone. GPGI continues to execute with discipline and focus with our customers at the center of everything we do. In the second quarter, we continued to see progress across the platform and delivered results that were consistent with both our expectations and the guidance range we introduced last quarter. The results were driven by continued strength at Compass Secure and some indications of relief as we continue to navigate transient market headwinds at Husky. Starting with Composecure, we're seeing the continued transformative impact of ROS on growth and operations, delivering record sales, strong operating performance, and both year-over-year and sequential margin expansion. With robust demand from a broadening base of customers, Composecure is well-positioned to continue accelerating organic growth and improving profitability in the second half of the year. Composecure is one year ahead of Husky in the deployment of ROS. and we are seeing how cultivating a high performance culture and making strategic investments enable a sustained inflection in financial performance. Turning to Husky, we're navigating through transient market headwinds caused by volatile resin prices and shipping disruptions related to conflict in the Middle East and continued tariff uncertainty. The macro environment has improved marginally since we last spoke to you as oil and resin prices have come off their previous peaks set in late April. and our customers are beginning to have a bit more confidence in making purchase decisions. However, the second quarter was still impacted by macro uncertainty and we're beginning to see pockets of demand recovery and continue to expect a strong second half that is consistent with historic seasonal trends. In addition to demand gradually returning, we expect improved operating leverage and discrete cost actions to drive margin expansion, both sequentially and year over year through the second half. Importantly, we're starting to see initial signs of ROS taking hold at Husky and are aggressively accelerating its implementation to drive durable organic growth and sustainably higher margins. As a reminder, ROS is the cornerstone of how we operate GPGI. It represents an end-to-end commitment to grow sales, control costs, and generate the cash necessary for seed planning, accretive investing, and compounding returns for investors. Our OS is how we translate strategy into results, be it operating metrics, financial performance, or strategic breakthroughs. I'll let Graham and Rob provide specific examples of how our OS is moving the needle at CompoSecure and Husky, but we'll note how this daily mindset compounds performance over time and builds the next generation of world-class operators. Look at Compose Secure, we clearly see the inflection of growth and profitability enabled by our investments in Salesforce and R&D over the past 21 months. This demonstrates the multifaceted focus of ROS well beyond just managing costs. The ROS flywheel specifically requires cultural change to catalyze operational change. That is why I'm so pleased we announced the appointments of Muhammad Kanaan as Chief Financial Officer and Karen Stone as Chief Human Resources Officer of Husky. Muhammad and Karen are proven leaders with significant global experience. It will accelerate the cultural transformation Rob is leading across the business, and both will be integral to our next phase of growth. Change agents make a difference. I also want to highlight how we think about GPGI's long-term growth algorithm. Specifically, we're focused on delivering mid to high single-digit annual organic growth, over 100 basis points of annual margin expansion through the deployment of ROS, double-digit plus annual EBITDA growth, and 90% to 100% free cash flow conversion over time. This is happening while we are strategically investing in the businesses, doing the seed planting today that is necessary for them to achieve their potential tomorrow. The plan is simple. We intend to grow GPGI's earnings and cash flow faster than the market to deliver superior, durable, through the cycle returns for our investors. To conclude, we're extremely focused on execution, remain well positioned to deliver in the second half, and are reiterating our full year guidance. We're also continuing to pursue critical seed planning initiatives to deliver in 2026 and accelerate into 2027. This includes strategic investments and operational improvements that position GPGI to capture incremental sales and margin as Husky's markets rebound. Overall, our thesis remains firmly intact, and we're excited about the path GPGI is on. So with that, I'll turn it over to Tom Knott, our CIO.