Ranpak Holdings Corp.

Good morning and welcome to the RANDPAC Holdings Corp second quarter 2025 earnings call. All participants are in a listen only mode. After the speaker's remarks, we'll conduct a question and answer session. To ask a question at that time, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Sarah Horvath, General Counsel. Please go ahead.

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 FCC. 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 under 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 8K 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 10Q with the SEC for the period ending June 30th, 2025. 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 second quarter results and discuss our outlook, 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.

Thank you, Sarah, and good morning, everyone. Thank you for joining us today. I wanted to start by saying that despite the slower start to the year, we remain confident in the outlook for the business. We expect that our financial performance will improve meaningfully in the second half of the year as our cost improvement initiatives and structural realignment takes hold. And we target a meaningful ramp up for our automation revenue, which will be driven by deepening relationships with enterprise customers in North America, as well as continued broad-based penetration in Europe. In North America we're working on a strategic multi year deal that we believe will be transformational for our business and consume a lot of our capacity in our Shelton facility. We have made substantial investments in the team and solutions over the past few years, and I feel comfortable saying it is now paying off. Outside of our large enterprise customers, the business environment is dynamic with sentiment among individual customers and businesses across regions, varying widely and at times changing quickly in reaction to headlines. It has been a challenging start to the year, much more so than I envisioned going into 2025, given the tariffs, but we're taking the hard steps to drive results in this environment. Overall, I believe the actions we have taken this year to improve our margin profile and reduce costs will support a much improved second half. I believe those actions, combined with our expectations to ramp further with enterprise customers, position us very well for sustained growth in upcoming years in PPS and automation. We expect that our cost reduction and margin improvement efforts will start to be really felt in the third quarter, in particular as it relates to North America, where we have experienced the most meaningful pressure on gross margins to start the year. In the second quarter, we took pricing in North America and we'll get the full benefit for that in the third quarter. We secured more favorable warehousing arrangements beginning in August and optimized our freight and logistics spend through carrier consolidation and investment in our own logistics assets. We executed on targeted headcount reduction programs across the globe and deferred non-essential hires and spend. Across the company, we have reduced headcount by 3% since April. Of the roughly 8 million in annualized identified cost-out initiatives, we expect that approximately 1 million of that will be felt in Q3, and the full run rate of 2 million per quarter will be felt in the fourth quarter. Margins in North America in particular have been most challenged, and we believe those initiatives have the potential to improve gross margin ex-depreciation by 300 to 500 basis points in the second half of the year. In July, we took steps to realign the organization to what I believe is a more efficient and common structure for a company that is as global as ours. Over the past few years, we have been in the process of moving toward a more global, functionally based organizational structure with many areas such as finance, IT, legal, HR, engineering, under global functional leadership. Our regional managing director structure no longer fit in the ecosystem. So we decided to take the final step in globalizing our business by transitioning our commercial and operational functions to a more global structure as well. We recruited a very high quality chief operating officer to globalize our operations and help us scale efficiently. He joins us in September from Ingersoll Rand and will be based in the Netherlands. We believe he can bring a tremendous amount of value to supply chain procurement, as well as getting operational efficiencies from our footprint as we scale. Our head of automation will assume responsibility for all of our sales efforts and strategy as chief revenue officer going forward. Our MDs in Europe and APAC have done a great job advancing RAMPAC in their geographies and leading the local teams. I appreciate their years of great leadership and valuable service to RAMPAC and wish them the best. I'm optimistic this new global structure and infusion of talent will enable RAMPAC to improve our execution and grow the business profitably over the upcoming years as we have laid the groundwork for growth and expansion. Now, moving on to our results. Our volume momentum continued with our eighth quarter in a row of volume growth. consolidated net revenue increased 3.8% and would have increased 5.2% excluding the non-cash impact of the Amazon warrants on a constant currency basis for the quarter, driven by 5.2% volume growth as e-commerce activity drove growth in North America. North America was the key driver of top line performance with sales up 12.2% and volumes up 14.8% over the second quarter in 2024. Enterprise accounts contributed solid growth while the distribution channel was less robust compared to the first quarter as trade and tariff uncertainty took a toll on buying behavior. I like what I'm seeing out of our team as the work on trials and closes is strong and believe that the fundamental blocking and tackling we're doing along with our new sales leadership is paving the way for solid profitable growth ahead in our distribution and direct channels. Our relationships with enterprise accounts used to be an area of weakness for us as we were under indexed to those large high volume accounts. I'm pleased to say I now view our enterprise account management as a source of strength and are working closely with operations and procurement to take these relationships and extract efficiencies within our processes to make them more profitable for us as I believe the opportunity is there. Europe and Asia Pacific volumes were flat for the second quarter versus the prior year, as Europe remains growth challenged and impacted by tariff and trade uncertainty. We saw some sequential improvement in Europe as volumes were down less than the quarter compared to the first quarter, and July is showing volume improvement year over year, hopefully indicating some signs of stabilization in the region. We were glad to see the trade deal with the EU at 15% tariffs as we hope that striking such a deal will bring stability and predictability to the European markets, which are very important for us. We experienced 1 to 2 million in destocking in Asia Pacific as our Malaysia factory ramps up SKU production and customers that used to have multi-monthly times have much faster and cheaper access to product. Long-term, this is great news for our business opportunities in the region, as it'll help us penetrate further and at more competitive pricing, but it does create some air pockets as we get ramped up. Automation increased 34% in the quarter versus last year and has a robust backlog, leading us to expect that we will see full-year automation revenue of 40 to 45 million. We saw some projects move from Q2 to Q3 and a handful into next year, but overall feel really good about the second half of the year and outlook for this business, given the strong payback profile for high volume customers. In North America, the recently enacted fiscal package allows for bonus depreciation for tax purposes, which should help further improve cash on cash returns for customers investing in our automated solutions. On a constant currency basis, adjusted EBITDA declined 18% for the quarter or 12% excluding a 1.2 million non-cash impact of the Amazon warrants. Overall profitability was negatively impacted by increased input costs and temporary inefficiencies in North America year over year, mixed headwinds from outsized contribution of void fill and lower sales volume in Europe. Again, as more trade deals are agreed to and with the actions we have taken, we expect to improve the top line and margin profile of the business beginning in the third quarter. The input cost environment continues to vary by geography. In the U.S., pricing moved up early in the quarter but has since been flat. We do not expect to endure further pricing pressure in the second half based on our contracts and negotiations with the mills. The mill disruptions we encountered earlier this year have dissipated and lead times have returned to normal. We felt the effects of these disruptions in our financial profile in the second quarter through more expensive inventory and freight, but expect that will normalize in the third quarter. In Europe, the energy markets were much more favorable compared to the first quarter with Dutch nat gas in the 30 to 40 Euro per megawatt hours range, which is down more than 30% from its early peak in Q1. We expect paper pricing for the second half to be flat with the first half. Overall, in Europe and Asia Pacific, we have maintained an attractive margin profile and are focused on driving volumes further as those markets stabilize. To summarize, our focus is really on a few things. Improve margin in North America, drive volumes in Europe, and ramp up automation. We're executing on a plan to do all of these. With that, here's Bill with more info on the quarter. Thank you, Omar.