Ranpak Holdings Corp. Reports Second Quarter 2023 Financial Results

Ranpak Holdings Corp (NYSE: PACK) (“Ranpak” or “the Company”), a leading provider of environmentally sustainable, systems-based, product protection solutions for e-Commerce and industrial supply chains, today reported its second quarter 2023 financial results.

“We are pleased to continue to see improvement in our financial profile as our margins improve faster than anticipated,” said Omar M. Asali, Chairman and Chief Executive of Ranpak. “Sales for the quarter were down 5.6% year over year, or 7.0% on a constant currency basis, as consumers continue to allocate their spend towards experiences and services rather than goods, and the European economy remains impacted by the war and inflation. Overall though, while the volume environment remained challenging, the improvements in the input cost environment drove gross margin expansion of more than 400 bps year over year and 900 bps above the fourth quarter of 2022 to 36.9%, or 37.0% on a constant currency basis. Gross profit improvement of 6.7%, or 5.4% on a constant currency basis, and tight spending enabled us to increase Adjusted EBITDA by 4.4% year over year to $19.0 million on a constant currency basis. Generally speaking, the environment remains inconsistent, but we are pleased to see the continued sequential improvement of Gross Profit and Adjusted EBITDA on a constant currency basis compared to the fourth quarter of 2022 on similar levels of sales. The operating leverage that was so painful for us last year with rising input costs, is finally turning the other way.”

“In the near term, we are extremely focused on working the assets that we have and getting returns on the investments we have made over the past few years. We have state of the art systems and technology, a full new slate of new product introductions, and brand new facilities to support our growth ambitions. Our focus right now is on maximizing cash generation through increased volumes and minimizing additional spend. With the major projects behind us, our team is focused mainly on extracting efficiencies and gaining productivity in those areas that are within our control. I am confident the volume environment will improve given the trial activity we are having, but the timing of that recovery remains unclear given the general macro environment. In the meantime though, I am pleased with the momentum we are building.”

Second Quarter 2023 Highlights

• Packaging systems placement increased 3.1% year over year, to approximately 140,700 machines as of June 30, 2023
• Net revenue decreased 5.6% and decreased 7.0% adjusting for constant currency
• Net loss of $2.1 million compared to net loss of $11.3 million
• Constant currency AEBITDA¹ of $19.0 million for the three months ended June 30, 2023 is up 4.4%

Net revenue for the second quarter of 2023 was $81.9 million compared to net revenue of $86.8 million in the second quarter of 2022, a decrease of $4.9 million or 5.6% year over year. Net revenue was negatively impacted by decreases in cushioning, void-fill and wrapping, partially offset by increases in other products. Currency rates contributed a benefit of 1.3%, though revenue was negatively affected by lower economic activity, the impact inflationary pressures are having on consumer and corporate budgets, and increased business sponsoring costs. Cushioning decreased $1.6 million, or 4.2%, to $36.6 million from $38.2 million; void-fill decreased $3.2 million, or 9.3%, to $31.1 million from $34.3 million; wrapping decreased $1.8 million, or 17.6%, to $8.4 million from $10.2 million; and other sales increased $1.7 million, or 41.5%, to $5.8 million from $4.1 million for the second quarter of 2023 compared to the second quarter of 2022. Other net revenue includes automated box sizing equipment and non-paper revenue from packaging systems installed in the field, such as systems accessories. The decrease in net revenue is quantified by a decrease in the volume of sales of our paper consumable products of approximately 8.7 percentage points (“pp”) and a 0.1 pp decrease in the price or mix of our paper consumable products, partially offset by an increase of 2.0 pp in sales of automated box sizing equipment. Constant currency net revenue was $84.6 million for the second quarter of 2023, a 7.0% decrease from constant currency net revenue of $91.0 million for the second quarter of 2022.

Net revenue in North America for the second quarter of 2023 totaled $32.2 million compared to net revenue in North America of $34.3 million in the second quarter of 2022. The decrease of $2.1 million, or 6.1%, was primarily attributable to decreases in wrapping, void-fill, and cushioning, partially offset by an increase in other sales.

Net revenue in Europe/Asia for the second quarter of 2023 totaled $49.7 million compared to net revenue in Europe/Asia of $52.5 million in the second quarter of 2022. The decrease of $2.8 million, or 5.3%, was driven by lower void-fill and cushioning, partially offset by increases in other sales and wrapping. Constant currency net revenue in Europe/Asia was $52.4 million for the second quarter of 2023, a $4.3 million, or 7.6%, decrease from constant currency net revenue of $56.7 million for the second quarter of 2022.

Year-to-Date 2023 Highlights

• Net revenue decreased 3.7% and decreased 3.1% adjusting for constant currency
• Net loss of $14.5 million compared to net loss of $25.4 million
• Constant currency AEBITDA of $34.1 million for the six months ended June 30, 2023 is down 8.6%

Balance Sheet and Liquidity

Ranpak completed the second quarter of 2023 with a strong liquidity position, including a cash balance of $53.9 million and no borrowings on its $45 million Revolving Credit Facility. As of June 30, 2023, the Company had First Lien Term Loan facilities outstanding consisting of a $250.0 million USD-denominated term loan and €135.1 million euro-denominated term loan resulting in an Adjusted EBITDA net leverage ratio of 5.7x based on results on a constant currency basis through the second quarter of 2023. The Bank Adjusted EBITDA net leverage ratio was 5.8x through the second quarter of 2023. The First Lien Term Loan facilities mature in June 2026.

The following table presents Ranpak’s installed base of protective packaging systems by product line as of June 30, 2023 and 2022:

Conference Call Information

The Company will host a conference call and webcast at 8:30 a.m. (ET) on Thursday, August 3, 2023. The conference call and earnings presentation will be webcast live at the following link: https://events.q4inc.com/attendee/222823856. Investors who cannot access the webcast may listen to the conference call live via telephone by dialing (888) 330-2446 or (240) 789-2732 and use the Conference ID: 8498994.

A telephonic replay of the webcast also will be available starting at 11:30 a.m. (ET) on Thursday, August 3, 2023 and ending at 11:59 p.m. (ET) on Thursday, August 10, 2023. To listen to the replay, please dial (800) 770-2030 or (647) 362-9199 and use the passcode: 8498994.

Note Regarding Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. Statements that are not historical facts, including statements about the parties, perspectives and expectations, are forward-looking statements. In addition, any statements that refer to estimates, projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this news release include, for example, statements about our expectations around the future performance of the business, including our forward-looking guidance.

The forward-looking statements contained in this news release are based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks include, but are not limited to: (i) our inability to secure a sufficient supply of paper to meet our production requirements; (ii) the impact of the price of kraft paper on our results of operations; (iii) our reliance on third party suppliers; (iv) the COVID-19 pandemic, the Russia and Ukraine conflict, and associated responses; (v) the high degree of competition in the markets in which we operate; (vi) consumer sensitivity to increases in the prices of our products; (vii) changes in consumer preferences with respect to paper products generally; (viii) continued consolidation in the markets in which we operate; (ix) the loss of significant end-users of our products or a large group of such end-users; (x) our failure to develop new products that meet our sales or margin expectations; (xi) our future operating results fluctuating, failing to match performance or to meet expectations; (xii) our ability to fulfill our public company obligations; (xiii) our exposure to changes in interest rates; and (xiv) other risks and uncertainties indicated from time to time in filings made with the SEC.

Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward-looking statements. We are not undertaking any obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.