Graphic Packaging Holding Company

Hello everyone and welcome to the Graphics Packaging third quarter 2023 earnings call. All lines have been placed on mute during a presentation portion of the call with an opportunity for question and answer at the end. If you'd like to ask a question, please press star followed by one on your telephone keypad. I would now like to turn the conference call over to our host, Melanie Skijas, Vice Principal of Investor Relations. Please go ahead.

Good morning and welcome to Graphic Packaging Holding Company's third quarter 2023 earnings call. Joining us on our call today are Mike Doss, the company's president and CEO, and Steve Scherger, executive vice president and CFO. To help you follow along with today's call, we will be referencing our third quarter earnings presentation, which can be accessed through the webcast and also on the investor section of our website at www.graphic.com. Before I turn the call over to Mike, let me remind you that today's press release, the third quarter earnings presentation, and the statements made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the risks identified in the release and the presentation, as well as our filings with the Securities and Exchange Commission. With that, I'll turn the call over to Mike.

Thank you, Melanie. Good morning, everyone, and thank you for joining us on the call today. Let's begin with the highlights on slide four. I'm very proud of our team's performance during the third quarter. Amid a very dynamic environment, we continue to make progress on our goals deliver adjusted EBITDA growth and margin expansion, invest for the future, and fulfill our purpose to package life's everyday moments for a renewable future. As customers have pointed out in recent months, the consumer environment remains dynamic. An uncertain and evolving macroclimate has resulted in a relatively more cautious consumer in the near term. At the same time, and as we've discussed last quarter, retailers are operating with more normalized inventory levels versus a year ago as supply chain challenges have largely subsided. The combination of these factors has had a modest impact on our packaging volume. In listening to a broad mix of our global customers and given the confidence we have in our innovation pipeline, we're anticipating a return to our targeted 100 to 200 basis points of net organic sales growth in 2024. Responding to external factors, Our team leveraged the scale and flexibility inherent in our system and reduced paperboard production by 150,000 tons during the quarter. Through our disciplined commercial approach and active management of supply and demand, we met our commitments to customers and stakeholders while adopting to current volume changes. Together, our team, our capabilities, and our strong operational execution provided the path to targeted EBITDA margin levels In the core, our performance demonstrates the resilience of our business and is a testament to our differentiated approach to servicing and growing consumer packaging markets. We are delivering value to customers with the packaging solutions we provide and optimizing our system to position graphic packaging for long-term growth. A key element of our strategy is supporting growth through advancing innovation capabilities and making strategic investments. We made considerable progress on this front and third quarter, including new innovations that are driving category and market expansion, continued progress on our multi-year CRB system transformation, both of which I will expand on in a moment, and lastly, the completion of the Bell Incorporated acquisition. The acquisition of Bell is a good example of how we are investing in our packaging network by adding capabilities and expanding the customers and markets we serve. Acquisition integration is well underway, and we are excited about the new opportunities Bell provides. As we look ahead, we are positioned to benefit from the long-term strength of demand for sustainable fiber-based packaging. We are focused on further distinguishing graphic packaging as the leader in recycled and recyclable consumer packaging. We have updated our guidance and continue to expect 2023 adjusted EBITDA of $1.9 billion at the midpoint of our guidance range. In addition, we are tracking to meet or exceed our enhanced Vision 2025 financial goals. We remain confident in our ability to achieve annual organic sales growth targets in the years ahead. One of the many reasons we remain confident in our organic growth outlook is the continued advancements we are driving through innovation with our customers. Slide five provides another example of our innovation engine at work, and the continued progress using fiber to replace packaging previously created with non-renewable resources like plastic and foam. I'm sure many of you recognize the iconic Nissin cup noodles, a leading brand in the ramen comfort food category. Historically, the noodle cups have been made of foam. Through our innovation capabilities and expertise in both food service and retail packaging, The fiber-based solution we developed serves as a more sustainable packaging alternative to foam and is effective in a shelf-stable retail environment. Notably, our retail cup solution for Nissan provides added convenience for the consumer as it is safe for microwave use, eliminating an extra step required in meal preparation when using foam. We are excited to share with you today a new partnership we have with Nissan Foods and the upcoming launch of their Cup Noodles product package in our proprietary retail double wall fiber-based cup solution. The rollout is expected to begin in the first quarter of 2024. Aligned with consumer preferences for more sustainable packaging options, Nissan plans to convert their entire 16-ounce Cup Noodles product line in the U.S. from foam to our solution over time. This packaging application marks our first in microwave COPs as we continue to expand the addressable market within the more than $4 billion COP and container market in the U.S. Our history serving retail markets and our ability to invest behind and scale with customers creates new opportunities across various dry food categories that today are primarily in foam and plastics. Items such as pasta, hot cereals, breakfast mixes, and single-serve dry foods are examples where our fiber-based solution has tremendous potential to win. While discussing growth opportunities in the broader cup market, let me also provide an update on our program in Chick-fil-A. Last quarter, this important customer went to market with our new, highly insulated, double-wall beverage cup in approximately 10% of its stores as a potential long-term solution for its beverage program. Feedback from both stores and consumers has been favorable, and Phase 1 of the program continues with roll-offs currently underway to additional stores. We continue to believe our innovation can be a long-term solution for Chick-fil-A and others currently using foam cups and containers. Thriving innovation with industry leaders like Chick-fil-A and Nissan Foods demonstrates how top brands are investing to transition toward more sustainable packaging solutions. Through our extensive design and packaging network, we are partnering with leading brands to effectively transition to sustainable packaging solutions that consumers prefer. We believe long-term tailwinds support the continued demand for this transition, such as end-use consumers seeking more sustainable packaging, customers responding to demand and pursuing sustainability goals, and in a growing number of jurisdictions, environmental legislation requiring the use of more sustainable packaging. Moving to slide six, let me provide a brief update on the significant progress we've made on our CRB transformation. Since 2019, we've embarked on a multi-year optimization effort to simplify our CRB system while strategically expanding capacity and lowering cost. The end result will further distinguish graphic packaging as the lowest cost and highest quality coated recycled paperboard producer in North America. Our efforts to optimize and strategically expand capacity are the result of trends we identified early on, including growing consumer demand for packaging made from recycled materials. Our focused investments will ensure we will sustain unmatched quality and cost advantage in this important category for years to come. Since the project began, we have made significant progress in our CRB system transformation. With our new 550,000-ton K2 machine ramped in Kalamazoo, we have effectively increased our net CRB capacity by 70,000 tons to support our growth. Three higher-cost, less efficient facilities and our longest-running paperboard machine in Kalamazoo, a total production of 480,000 tons, have been removed from the system. As noted, this total includes our recently announced permanent decommissioning of the K3 machine. Our decision on K3 reflects the incredible success of the state-of-the-art K2 machine, which has been operating at or above committed efficiency and quality levels. We look forward to replicating the success of K2 with our new CRV paperboard machine in Waco, Texas, which will expand upon our quality and cost advantages when it begins production in late 2025. As we have talked about before, the ability to cost-effectively produce higher quality CRB allows us to meaningfully and profitably expand opportunities within new markets and ones we already serve. One example of this quality improvement is the new Pace Center Revere recycled paperboard, which we introduced last quarter. This new grade of the highest quality recycled paperboard available will facilitate CRB and more consumer packaging experiences across the food, health, pharmaceutical, and beauty product applications. We are pleased to have our first sale of PaceCenter in the air in October and look forward to sharing many more packaging example wins in the quarters to come. The third quarter also included the release of our 2022 ESG report, detailing the progress we have made towards achieving our vision 2025 ESG goals. Sustainability is an integral part of our business strategy, and our impact extends well beyond our own business. We enable customers, including many of the world's leading household brands, to transition towards recycled and more recyclable packaging solutions. I'd like to note a few key highlights from the report that can be seen on slide seven. To start, we successfully achieved our goals for greenhouse gas emissions intensity and non-renewable energy intensity three years early. We did so through investments in efficient manufacturing and expanding the scale of our packaging operations. For example, the K2 machine helped reduce emissions intensity associated with CRV production by an estimated 3% in 2022. We also highlighted we are on track with our goal to have 100% of our global facilities compliant with a fiber certification standard. Forest certification and certified sourcing programs give consumers confidence that our packaging does not contribute to deforestation or biodiversity loss. The goal demonstrates our support for sustainable forest management and forest product sourcing practices we follow to ensure compliance. We have more than 24,000 teammates worldwide, and I am proud of the progress we are making as we build a more diverse and inclusive workforce. There is always more work we can do, and we remain committed to fostering continuous improvement in the workplace centered upon our employees' growth and sense of belonging. Slide 8 highlights the recent sustainability achievement I am very excited to share with you. We learned in early October that the Science-Based Targets Initiative approved our 2032 carbon reduction goals, which are outlined here. As an increasing number of consumers are voting with their wallets by purchasing products and brands that are doing the right thing for the planet, we are proud to be fulfilling our purpose to package life's everyday moments for a renewable future. With that, I'll turn the call over to Steve to provide more detail on the financial results. Steve?