Ranpak Holdings Corp. Q2 FY2025 earnings call

• Despite a slower start, the company remains confident in the business outlook. Cost improvement initiatives and structural realignment are expected to improve financial performance in the second half. - Took pricing in North America in Q2 and will benefit in Q3. Secured more favorable warehousing arrangements and optimized freight/logistics spend. - Executed headcount reduction programs globally, reducing headcount by 3% since April. - Realigned the organization globally, recruiting a Chief Operating Officer and repositioning the Head of Automation as Chief Revenue Officer. - Volume momentum continued with eighth consecutive quarter of volume growth. Automation has a robust backlog.

Consolidated net revenue increased 3.8%. Excluding the noncash impact of Amazon warrants on a constant currency basis, it would have increased 5.2%. North America was the key driver with sales up 12.2% and volumes up 14.8% compared to Q2 2024. Enterprise accounts contributed solid growth. Europe and APAC volumes were flat. Automation increased 34% in the quarter with full-year automation revenue expected to be $40 million to $45 million. In terms of revenue contribution, North America was a significant driver, while Europe and APAC had different performance trends with automation showing strong growth potential.

• Forecasts second half of 2025 net revenue of $216 million to $230 million and adjusted EBITDA of $44.5 million to $54.5 million, reflecting estimated $4 million recognition of warrant expense. - Total 2025 net revenue expected to be $406.5 million (within original guidance) and adjusted EBITDA of $83.3 million (slightly below original guidance).

• Tariff uncertainty impacts CapEx, especially for converters for the U.S. market which rely on parts from China and other APAC countries. - Currency fluctuations, such as the euro rising against the dollar, can affect profits and cash generated in Europe and APAC. - Inventory management, with increased inventory in North America to insulate from paper supply disruptions, but expecting to reduce inventory in the second half.

Q: From a high-level standpoint, give the bridge on EBITDA between 2024 and 2025.

A: Volumes expected to be up high single digits. Gross margin ex depreciation to be compressed by about 5 points, with about $5 million off due to warrants, 2 points from temporary inefficiencies, and about $2 million pressure from EMEA and APAC region.

Q: Expand on July being a bit better in Europe.

A: Early indications in April were okay, then softness in Europe during the quarter, but July saw volume growth again, though it's too early to call it a trend and tariff and trade clarity may help.

Q: Sense of impact on gross margin decline in 2Q and if it's the new baseline.

A: About 4.7 points of margin pressure related to warrants or temporary one-off items. Excluding depreciation, margins would have been 43.5% vs 47.6% in prior year. Warrants were about 1.3 points, restructuring and footprint optimization about 1.5 points, and above-market temporary storage costs about another point, with margin improvement expected in Q3.

Q: Update on free cash flow vs initial expectation.

A: Expect to finish the year in $70 million to $75 million cash range, lower than initial expectations due to lower EBITDA estimate, inefficiencies, and working capital assumptions.

Q: Color on second half outlook for PPS business.

A: Large enterprise wins in North America, improved outlook in Europe with tariff stability potential, and wins in Asia Pacific markets, with some installs or ongoing installations for peak season.

Q: Drag on EBITDA from automation in second half.

A: Little drag in Q3 and expected to be about breakeven in Q4.