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spk06: Thank you for your patience. The RAMPAC Holdings third quarter 2023 earnings call will begin in approximately one minute. Hello and welcome to the RANPAC Holdings third quarter 2023 earnings call. My name is Lauren and I'll be coordinating your call today. There'll be an opportunity for questions at the end of the presentation. If you would like to ask a question, then please press star followed by one on your telephone keypad. I will now hand you over to your host, Sarah Hobarth, Vice President, General Counsel and Secretary to begin. Please go ahead.
spk00: Thank you and good morning, everyone. Before we begin, I'd like to remind you that we will discuss forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K and our other filings filed with the SEC. Some of the statements and responses to your questions in this conference call may include forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. RAMPAC assumes no obligation and does not intend to update any such forward-looking statements. You should not place undue reliance on these forward-looking statements, all of which speak to the company only as of today. The earnings release we issued this morning and the presentation for today's call are posted on the investor relations section of our website. A copy of the release has been included in a Form 8-K that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non-GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the table and slide presentation accompanying today's earnings release. Lastly, we'll be filing our 10-Q with the SEC for the period ending September 30th 2023. The 10Q will be available through the SEC or on the Investor Relations section of our website. With me today, I have Omar Asili, our Chairman and CEO, and Bill Drew, our CFO. Omar will summarize our third quarter results and provide commentary on the operating landscape, and Bill will provide additional detail on the financial results before we open up the call for questions. With that, I'll turn the call over to Omar.
spk02: Thank you, Sarah, and good morning, everyone. I appreciate you all joining us today. Our overall third quarter financial results demonstrate continued improvement from the start of the year as we saw an increase in volumes, sales, and continued expansion in our gross margin profile in the quarter. The team has done a nice job executing on our initiatives this year and have proven resilient in a continued challenging operating environment. Volumes in the quarter were up 5% over the prior year as activity levels improved somewhat, but remained choppy from one month to the next. I am pleased to have the positive performance year over year, but I'm really focused on getting back to consistent higher growth and better execution. Generally speaking, the macro backdrop remains uncertain. Consumers' purchase of discretionary goods remains pressured by the preference for experiences and travel as a percent of wallet share. and consumer spend is increasingly impacted by inflationary pressures and the higher rate environment. Large account activity continues to move down the path of increased volumes in PPS and a meaningful step up in automation in 2024. So we really like how we are positioned going into next year. We expect the inroads we have made will support and improve 2024 from a volume perspective and validate the improvements that we have made in our business over the past number of years. North America sales were up 4.5% in the quarter versus last year, driven by a mix of higher average selling price products, and which were partially offset by a small decline in volumes in PPS. Similar to the first two quarters, I would characterize activity levels in the region as decent, but have remained at a fairly muted level since the start of the year. Manufacturing activity remains in contraction territory as businesses contend with greater uncertainty, and higher cost of capital impacting investing activity while at the same time dealing with tight labor markets and high operating costs. Our outlook for e-commerce activity in the immediate term remains pressured due to lower consumer spending levels on discretionary goods as consumer confidence levels drop to a four-month low in September amid concerns about higher prices and a possible recession. Medium-term trends are more favorable as consumers' plans to boost their online purchases continue to ramp and the preference for sustainable packaging continues to grow. Just as we are doing, many companies continue to tightly manage their inventory in this higher cost of capital environment with lower end market demand trends. The overall message on the landscape is consistent from what you heard from us in Q1 and Q2. I don't have a clear catalyst for general sell-through to pick up. but I'm pleased with the commitments we are receiving from larger players as they roll out plans for next year to transition from plastic to paper. That shift is occurring in North America, and we are pleased to be at the forefront. Sales in Europe and Asia Pacific were up 20 basis points for the quarter on a constant currency basis. I'm pleased to share volumes were up double digits in the region year over year, but this volume growth was offset by the price decrease we provided to our customers in certain regions after we reached our targeted margin levels. Generally speaking, activity levels in the region continue to be weighed on by the slower overall economic environment in Europe and Asia. Manufacturing in Europe remains in contraction territory and services have turned lower, as well due to economic malaise and monetary tightening taking place in response to inflationary pressures. Higher borrowing costs for businesses and consumers continue to impact spending and investment habits across the region. Asia is mixed with places like Australia, Japan, and New Zealand doing well, China doing okay, and South Korea struggling due to weaker electronic shipments. Similar to last quarter, the volume environment remains inconsistent with some solid months, which can be followed by a month with lackluster performance. In Q3, July and August were both pretty strong relative to last year, but we saw a step back in September as activity levels pulled back, particularly in North America, given the economic uncertainty which took its toll on the consumer. We expect the fourth quarter to be similarly choppy, but with an uptick in volumes due to seasonality and continued margin improvement. Input costs continue to be favorable overall, and we saw the continued improvement in gross margin in North America that we expected. We continue to aggressively manage headcount and new projects to keep a lid on our spend profile. Ads currently are really only in absolutely critical areas and those that we need to fulfill what we believe will be upcoming demand in 2024. The company as a whole is focused on cash flow generation and productivity initiatives to improve our profile and extract maximum value out of the investments we made. Now with that, let me turn it over to Bill for some financial detail.
spk01: Thank you, Omar. In the deck, you'll see a summary of some of our key performance indicators. We'll also be filing our 10Q, which provides further information on RAMPAC's operating results. Machine placement increased 2.5% year-over-year to 142,000 machines globally. Cushioning systems declined 1.7%, while void-fill installed systems increased 4.3%, and wrapping increased 2.3% year-over-year. We continue our fleet optimization efforts and are focused on minimizing capex spend on new converters by refabricating and refurbishing as many machines as possible. Overall, net revenue for the company in the third quarter increased 1.9% year-over-year on a constant currency basis, driven by higher volumes and slightly offset by pricing headwinds in our Europe and Asia reporting region due to lower input costs being shared with our customers. North American net revenue increased 4.5% versus the prior year, driven by a combination of new account activity and strengthened void fill. In Europe and APAC, net revenue on a constant currency basis was roughly flat at 0.2% year-over-year, as volumes increased nicely from a year ago, partially offset by pricing get-back. Cushioning was a bright spot in the region, with most of our cushioning products outperforming year-over-year, and in particular, our Guardian solution, which is seeing continued solid adoption. Base volumes in Europe remain steady, but have not demonstrated a material uptick due to the lower economic activity in the region. Automation sales increased year-over-year and represented approximately 6% of sales on a constant currency basis. Our solution set of the cut-it, auto-fill, and flap-it continues to gain traction, and we are excited to utilize our additional manufacturing capacity going into 2024. We made further progress on gross margin improvement in the quarter. Although our top line improved roughly 2%, the improved volumes and better input cost environment in the third quarter drove gross profit to increase 23% year-over-year on a constant currency basis, implying a margin of 38.2%, compared to 31.5% in the prior year. This is approximately 1,000 basis points of improvement from the 28.1% constant currency gross margin we experienced in Q4 of 2022. We are pleased with this continued sequential improvement throughout this year and look to peak in the fourth quarter as more expected volumes flow through and help us to better absorb overhead. Constant currency adjusted EBITDA increased 8.4% year over year to 18 million, implying a 21% margin driven by improved gross profit, offset somewhat by increased G&A as overall personnel costs are higher, and we have invested in key areas to support our 2024 plans. As we get into the fourth quarter, we expect our financial performance to improve as we get into the highest volume portion of the year traditionally. Input costs remain attractive for us to improve our margin profile going into year end. Capital expenditures for the quarter were $9.7 million, driven by $6.5 million in converter equipment spend and approximately $3.2 million in project spend related to our real estate projects and other investments. We continue to place a strong emphasis on minimizing CapEx projects and converter spend to maximize cash flow generation for the remainder of the year. Moving briefly to the balance sheet and liquidity. We completed Q3 with a strong liquidity position, including a cash balance of $52.1 million to end the quarter and no drawings on a revolving credit facility. Our net leverage based on reported LTM constant currency adjusted EBITDA was 5.6 times at the end of the quarter and 5.8 times based on the bank adjusted EBITDA ratio. We believe leverage has peaked as the fourth quarter is expected to be a favorable comparison from an adjusted EBITDA perspective, and we expect to maintain a similar cash balance for the remainder of the year. We are hopeful this will be a good initial step towards getting back to our targeted leverage ratio of three turns or below. The only remaining strategic project items that will carry into next year is the final $1 million for the Malaysia project. We are excited to be through the large investment phase of the past couple of years, moving back towards a profile of cash maximization. The team has diligently managed working capital to maximize our cash position and will continue to keep this as a key area of focus. With that, I'll turn it back to Omar before we move on to questions.
spk02: Thank you, Bill. In closing, we continue to make progress in a challenging environment, but we still have a lot of work to do financially to get us where I want to be. Volumes appear to be stabilizing and turning upwards. Year-to-date gross margins have improved dramatically and are close to target. I think we can do better on GNA using the tools we have invested in and will continue to keep that as an area of focus. We did a good job on cash and will continue to keep a tight lid on CapEx now that we are exiting our major investment cycle. At this time, given the uncertainty that persists in the markets due to rates, inflation, student loan payments restarting, and potential war in the Middle East, I believe it will be challenging to hit the low end of our adjusted EBITDA range. We're going to do everything we can to achieve it, and I believe we will meaningfully outperform last year. but to get to the level required to hit 76 million would require a lot of things to go right, and I just don't have the confidence in this environment. Disappointing, but I think that is the reality of the world that we're in. We do expect a strong finish in Q4, but it may not be enough to hit our range for the year. We've built a world-class infrastructure over the past couple of years, and I believe 2024 will be the year where a lot of the hard work and investments really start to show through. We expect that the large account activity we have been pursuing in PPS will start to show up in the order book as the transition from plastic to paper in North America takes off. Our automation infrastructure and end-of-line product offering is second to none, and we now have the pipeline and bookings to really make financial progress in this area, which we have been meaningfully investing in at the expense of the overall P&L. My confidence comes from the feedback we are getting from the marketplace on the quality of our machines and service capabilities. Customers and key integrators are taking notice and are now making rampback automation their preferred partner. We have won a number of key projects in automation for delivery in 2024 that we expect will have substantial follow through to additional facilities in upcoming years. I think the quality of our machines and service capabilities set us apart in the industry. I think 2024 will be an inflection year for us as we prove out the thesis in automation and show the world what we have been building. In many cases, these early wins are with customers that can scale with us as we prove our product offering. RAMPAC in 2024 and beyond will grow based on the following building blocks. First, the PPS business, which we believe will continue to grow nicely in the high single digit, low double digit area on the top line. Major new accounts, new products, Asia expansion, and sustainability tailwinds will be the key drivers. Second, automation. The true step change potential for RAMPAC at what will take us into the next phase. This is a business that has marginally contributed to the top line to date and primarily manifested itself as a headwind in G&A. We expect the top line of this business to be multiples of where it currently is over the next number of years, given the demand we believe is out there for box customization and automated end of line solutions. I am very confident in our solution set and excited about some of the newer offerings such as Decision Tower that will be commercially launched in 2024. Third, cold chain. We also have the ability to make some traction in cold chain and get into an exciting and growing area. We admit we are the new kid on the block here, but believe sustainable cold chain solutions will become the market standard over time and believe this market is wide open. We are confident that we have a really strong platform and are excited to build on it. The opportunity here at the crossroads of sustainability and automation is unique. We are focused and determined with lofty goals and aspirations. The past couple of years have been painful, and our infrastructure and technology investment cycle occurred in a very challenging macro environment. But I truly believe all of the trials and tribulations we have endured will be worthwhile. Our North Star remains delivering sustainable and profitable growth to create value for our shareholders. At the end of this, I believe we will have a company with the potential to grow high single digits to low double digit, to have EBITDA margins in the high 20s to low 30s area, and to generate meaningful cash. With that, let's open the call up for some questions. Operator?
spk07: Thank you.
spk06: If you would like to ask a question, then please press star followed by 1 on your telephone keypad. To withdraw your question, please press star followed by 2. Please also ensure that your phone is unmuted locally. has a reminder that he's startled by one to ask a question. Our first question comes from Greg Palm from Craig Hallam Capital Group. Greg, please go ahead.
spk05: Yeah, thanks. Good morning, everybody. Maybe just starting off a little bit more color on some of those closing comments, Omar, just on 2024. And I know the macro is outside of your control, but you highlighted a lot of trends that seem to be you know, in favor, whether it's that reacceleration automation, it sounds like, you know, the switch from plastic to paper at some of your bigger customers seems to be, you know, have some momentum. You've got no destocking headwinds. So a little bit of color on how you're thinking about 2024. And you talked about high single digit to low double digit growth was was that specifically, you know, highlighting 2024 expectations, or is that more long term in nature?
spk02: Yeah, good morning, Greg. I think the comment about the growth rates was a bit more, I would say, you know, medium term in nature rather than specifically hitting 2024. What we are seeing in 2024 is very encouraging. It's the trends that you highlighted, large accounts, in particular in the U.S. In many cases, we have trials, we have equipment. We're doing a lot of work with them about switching a big portion of their business and with some large accounts, all of their business. away from plastic into paper. As you know, the cadence with our business is in Q4. People hesitate to switch given peak season. So that activity right now, you know, which has been ongoing for trials, I assume will pick up in early 2024 and hopefully will translate into closings at the beginning of the year. But the level of engagement with our large accounts and in our pipeline is very, very healthy. In automation, in this quarter, we had our record bookings quarter. So the largest bookings ever since we've entered the automation business. And that means this is equipment that now we're building in order to deliver to customers in 2024. So we're starting seeing actual visibility around orders and bookings from customers who want to basically order our equipment. And in many cases, these are large customers If we execute and deliver, which we believe we will, these are customers that have many DCs and many facilities that we think our end-of-line solutions can roll into their added sort of facilities. So that's another reason for our excitement. So if I look at the mix of trial pipeline in PPS, if I look at the bookings for automation, all these are indicating healthy things. The hesitation we have, Greg, which is similar to any other company, is the macro environment and the backdrop, and frankly, the inconsistent environment where I feel every time we are making good progress, gaining market share, something happens in the environment, whether it's related to the rate or to geopolitics or to consumer sentiment, that just makes us a little bit cautious about where we're heading. But I think what I'm seeing in terms of our execution and the cadence for our own business, there is a lot to like. And I think all that bodes well for 2024.
spk05: Yeah, it's helpful. And automation specifically, you know, when you talk about record bookings, you know, are you talking about, you know, millions, tens of millions,
spk02: and you know just to be clear are these for you know sort of trials where you're putting them in you know a dc or two or are these more sort of large scale in nature yeah i am i am talking in in the multiple millions for just this quarter which is a cadence we want to build on and and close to tens of millions let's say uh so that's what we're seeing in bookings again in just one quarter which should hold to very good growth in 2024. And we're seeing that trend continue again with large customers and with medium sized customers. And just to be exact, what I mean by bookings, these are orders and equipment purchased by customers that don't show in our revenue because we just booked the deal and we will be building now the equipment To deliver you know that solution let's call it sometime in 2024 in some cases in the first half, in some cases in the second half so it's a very good leading indicator of actual wins that we have. That once we build the equipment will become revenue so it's a bit better than just a pipeline or a trial.
spk05: Understood. Okay. And then just lastly, on the core PPS business, I know you talked about September trends. Can you give us kind of some sense of how trends, you know, were or have been in October? And, you know, it still sounds like you're expecting some sort of seasonal ramp in Q4. Is that right? Sure.
spk02: Yeah, I mean, look, and I mentioned it in the comments, this year has been inconsistent. I would say from what I'm seeing from our customers and our own activity, I'm pleased with how we're executing in Q2 and Q3 of this year. I think it's noticeably better than how we were executing in 22 and earlier in 2023. The challenge is the environment, given the choppiness and inconsistencies, Honestly, it's very tough to put three robust months in a row. So in this particular quarter, July and August were very strong months. September was a little bit softer. In prior quarter, in Q2, if I recall properly, I think April was on the soft side. May and June picked up. So we're seeing that pattern where every quarter there's a month or a few weeks of period of softness. To answer you on October, since we're at the end of October, October has been a strong month. Now, hopefully that's an indication of what November and December are going to be. And we're trying to ramp up and get ready for busy season. But frankly speaking, the world changes and it changes sometimes pretty quickly. And we're trying to react to our customer needs. The one thing that I will tell you has been consistent around that period that I think other companies are seeing is no one is in the mood of building their inventory level and ordering and anticipating good activity. Everybody's being cautious. I would say we continue to see customers that prefer to almost run out of product and scramble last minute to get product versus carrying too much on their shelf. And that dynamic is making it very, very difficult to forecast. But, you know, I think we delivered an okay quarter despite a little bit of softness in September. And then October, as I said, is off to a strong start.
spk05: Okay. That's really helpful. I'll leave it there. Best of luck. Thanks.
spk02: Thank you, Greg.
spk06: Thank you. Our next question comes from Ganshan Pandabi from Bird. Ganshan, please go ahead.
spk04: Thank you, operator. Good morning, everybody. Omar, I just want to go back to, you know, the volume cadence throughout the third quarter, which obviously has been very choppy, as you referenced in the second quarter as well. If you sort of set aside the macro, which is just the obvious, and you kind of drill down into, you know, some of the micro details in terms of the supply chain, Is it just the fact that, you know, maybe customers de-stocked inventory aggressively previously, and that's sort of been optimized, and now we're just sort of reflecting just month-to-month volatility from a macro standpoint? Or what do you attribute that towards?
spk02: Yeah, I think de-stocking, Gancham, and good morning, is – is largely behind us with very, very few exceptions. We're not seeing that as an issue anymore, frankly, globally. So that applies to APAC, to Europe, and to US customers. I think what we are seeing is a little bit of nervousness at the company level, a little bit, obviously, and it's related to what's happening at the consumer level and industrial activity. And I think you're seeing some of that volatility where people do not want to carry a lot of product. And frankly, order pattern are a bit more conservative. And headlines don't help, you know, in that effort. So I think some of these factors are causing, you know, the quarterly activity, if you will, to be a little bit more inconsistent. Now, within that, there are trends that we all know, Gansham, that we see them manifesting themselves in our business. Smaller accounts and companies are struggling in this environment. Larger accounts are getting bigger in our business segments. We see in wrapping more softness and that's driven by certain retailers, let's say in home furnishings. Or in consumer goods in particular the more durable expensive consumer goods, where they might be adding a little bit of a frapping solution we're seeing more softness and those. we're seeing the cushioning part of our business continue to perform and be very consistent. And invoice filled frankly it's a little bit dependent on what's happening in E commerce and not just broadly in E commerce because. If it's e-commerce that's more grocery related and small items related, that's not typically where we play. If it's more, you know, the slightly more weighty items, if you will, that require our solutions, then that's where you see our product being consumed. So the reasons honestly varied, I would say, in Voightville and Cushioning overall. We feel okay despite that volatility. In wrapping, this isn't a reason why we've been innovating quite a bit and coming up with solutions to address market needs and price sensitivity from some of our customers. The softness has been a bigger disappointment and a bigger surprise for us.
spk04: And that softness is more pronounced on a monthly basis in North America or Europe, or is it equally sort of distributed?
spk02: I would say probably a little bit more pronounced in North America than in Europe. And I would say in Asia, depending on the country, there's quite a bit of monthly volatility. So what we see in particular out of China, South Korea, et cetera, can be pretty pronounced in terms of volume. I would say Europe has been a little bit more consistent. And then certainly places like Japan and Australia, have had a better cadence.
spk04: Okay. And then just finally, as it relates to deleveraging, you made some comments in there about your commitment towards deleveraging, et cetera. You highlighted the liquidity that you have, but you have a couple of big tranches of debt coming up for renewal. And I think the swap expires in June of next year, which is going to increase your cash cost as well. What is the strategy as it relates to deleveraging? Is it just based on EBITDA improvement and then some level of free cash flow conversion beyond that? Or how should we think about the phase towards your, towards hitting, the pathway towards hitting your target of under three times?
spk02: Sure. I think, and I'll let Bill chime in with the details. The first step is EBITDA improvement. We believe by the end of this year, at the end of Q4, we will be at a high four handle. which is a meaningful move in the right direction. And we feel we, given all the, you know, discussions and outlook I said about 2024, we think that will continue to help us trend in the right way. And then obviously next year, given the swap, as you discussed, we will be looking at optimizing, depending on, you know, the cost of capital and the financing environment then, But we think through EBITDA growth, we could meaningfully, you know, go down from here in the very near term. But I'll let Bill chime in and give you more detail.
spk01: Yeah, I'm just on the on the D leveraging. Right. I mean, that's a top priority for us as an organization. So, you know, priority number one is continue to, you know, increase EBITDA and hit numbers. So continue to each quarter to get that leverage ratio down. And when we get below that five turns, right, that will save us 25 bps on our on our interest expense just based on the leverage ratio. And then throughout next year, focus on cash maximization and get ourselves ready to hit the refinancing market. The maturity is June 26. So we've got some time, but we want to do it from position of strength. So, you know, top priority for the organization is, you know, minimize CapEx. The nice thing is we are through the majority of our, you know, major investment cycle, right, between the ERP and IT investments, as well as all the real estate investments, which are coming to an end this year with only a small part carrying over into next year. That will really help us focus on, you know, maintaining our cash balance and growing it as we exit next year.
spk04: Thanks so much.
spk07: Thank you.
spk06: As a reminder, to ask a question, please press star followed by 1 on your telephone keypad. Our next question comes from Adam Samuelson from Goldman Sachs. Adam, please go ahead.
spk03: Yes, thank you. Good morning, everyone. Morning, Adam. Hi. So I guess first, just going back to the cash flow, discussion and that path to deleveraging. Can we talk about the free cash flow margins when you get to those target EBITDA margins, Omar, that you talked to earlier in the high 20s? What do you think kind of the capex to sales looks like at that run rate? What do you think the free cash flow, the EBITDA to free cash conversion actually looks like?
spk02: Sure, I'll let Bill take that one, Adam, but I want to just reiterate again that as we get to that profile and we have some scale in automation and some scale in cold chain, both of these businesses do not require the same upfront CapEx for our razor blade business in BBS. So that will move the numbers a little bit to improve sort of, you know, the cash profile. But I'll let Bill walk you through it.
spk01: Yeah, I think the way to think about it, right, is the PPS business, which we expect to continue to grow, as Omar mentioned, in that kind of high single digit, low double digit area. The CapEx as a percentage of sales, I think in the near term should be in that high single digit to double digit, right? We're focused on a lot of refabrication and refurbishment of machines to minimize the converter spend. And then over the longer term, we would expect that to get back to close to that 10 to 12% of sales, right, for the PPS business, just on the converter spend. Overall, right, as automation grows, that business, you know, it's a bit of a different profile than the PPS business. The gross margins for that business should be in the high 20s, 30%, EBITDA margins of around 20%, you know, high teens. But the nice thing about it is there's minimal CapEx, right? We're not investing CapEx in order to grow that business outside of the facilities, which we've already done. So over time, the CapEx as a percentage of sales for that business should be low single digits. So if you're thinking about your model for the next number of years, getting that CapEx as a percentage of sales down from the low double digits to kind of mid to high single digits is what we're playing for here. So if you think about, you know, kind of a 30% EBITDA margin, you know, high 20s, 30% EBITDA margin minus the overall capex, you know, you should be in the high teens area as a percentage of sales. Does that help you?
spk03: Yeah, it does. And then maybe just come back to the core PPS business. And if you think about the install base, the growth, The growth has slowed some more recently given economic conditions, but it's interesting that you're actually seeing some sequential declines in cushioning, but the most meaningful declines in throughput and pressure seems to be in wrapping. And I guess just as you look at that wrapping footprint today, clearly there's economic challenges and volume challenges with their customers and their sales. But is there any view towards some optimization of that installed base where you get to a point where you say, look, this is not as productive of an asset base as we intended when we made these investments and we've got to right-size kind of the placements at customers in a more significant way to drive the business forward?
spk02: I think we're constantly doing that, and we've had a big focus on that, Adam, you know, the last number of quarters. And this is why Bill was referring to sort of the refabs and refurbishing some of the equipment. And we're doing some of that in retail. But the other thing that we're doing in retail, and this is what I was alluding to earlier, for some of our wrapping customers, A big part of our solution has been helping retailers, if you will, ship from DCs and from their warehouse. And now we're introducing a number of products to help ship from store, whether it's just the back of the store or actually the front of the store. And these are very different type of converters, different type of equipment. If you're doing stuff in the front of the store, they tend to be a lot smaller, have a much smaller footprint to fit, and have different, frankly, aesthetics. And we've been launching some of these things and we continue to focus on that pipeline for the near term, i.e. in the next couple of quarters. So we think from a converter standpoint, you may see some pickup, if you will, of number of converters that are out there as we have that ship from store footprint. But per converter, these are a lot cheaper per unit cost for us. And we're hoping that they will be driving a lot more volume, given what we're seeing from some of our retail customers. So it's a little bit of just changing the mix and the service that we're providing to some of the wrapping customers where we feel the last couple of quarters, our focus on what's happening in the warehouse and DCs has not been the optimal focus given the activity that some of these retailers are seeing and what they're trying to do in terms of optimizing their footprint and use the store to help with fulfillment.
spk03: Okay. I appreciate that, Culler. I'll pass it on. Thanks.
spk07: Thank you. Thank you.
spk06: We have no further questions, so I'll now hand back over to Bill Drew for closing remarks.
spk01: Thank you, Lauren, and thank you all for joining us today. We look forward to seeing you next quarter.
spk07: Thank you, everyone. This concludes today's call. Thank you for joining me. We now disconnect your lines.
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