Ranpak Holdings Corp. Q3 FY2024 earnings call

• Strategic account activity in North America is a bright spot, with continued progress in deepening relationships. - Europe and APAC showed sequential improvement but remain cautious due to stagnant economic conditions. - Input costs were a tailwind but margins were impacted by a mix shift towards more void-fill and less cushioning/wrapping. - Inventory levels in the channel are tight, with distributors facing product shortfalls during the holiday season. - Machine placement increased slightly globally, with void-fill and wrapping machines seeing more growth than cushioning systems.

North America: Net revenue increased 15.5% year-over-year on a constant currency basis, with volumes up 26.1% driven by e-commerce plastic to paper switching. Void-fill drove outperformance, offset slightly by decreases in cushioning and wrapping. Europe and APAC: Net revenue on a constant currency basis increased 7.1% year-over-year, driven by 9% volume growth, offset partially by pricing give back and void-fill mix headwinds. Automation contributed 40.7% year-over-year growth to the top line in the region, but the pressured industrial sector in Europe led to a slight decline in cushioning business. Revenue contribution: North America's growth was significant due to void-fill, while Europe/APAC saw growth from volume and automation but was impacted by pricing and mix.

• Confident in achieving the full-year gross margin target of 37% to 38%. - Q4 expected to benefit from the full ramp-up of strategic account activity. - Automation bookings year-to-date are up 60% year-over-year, with expectations of record Q4 bookings and strong growth in 2025 due to high backlog.

• Global economic uncertainty affecting performance in Europe and Asia Pacific. - Volatility in energy pricing in Europe, though the continent remains in a solid storage position. - Tight inventory levels and potential distributor product shortfalls during the holiday season.

Q: Sales were up $6 million sequentially from 2Q to 3Q, but EBITDA didn't show as much operating leverage. What's the reason?

A: Mix is part of it with more growth in void-fill than other areas. Strategic account activity started later in Q2 and continued ramping in Q3, with more benefit expected in Q4 as accounts are fully ramped.

Q: Any surprises in the quarter, especially with strategic accounts and automation?

A: Pleasantly surprised by volume growth and the size/frequency of large accounts' volume needs. Automation bookings are up 60% YTD, with record Q4 bookings expected and high visibility/backlog for 2025.