PACK

• Overall Operating Performance: Management reported stronger-than-expected Q2 2026 results amid a volatile macro environment, with particularly strong momentum across the automation segment in both North America and Europe. Year-to-date performance meets management expectations, and cost discipline remains a top company priority. SG&A (excluding RSU expense) decreased 3% year-over-year on a constant currency basis, in line with the firm's focus on margin expansion.

• Automation Growth Strategy: RANPAC is building an integrated end-of-line warehouse automation ecosystem with in-house solutions and strategic partnerships (including Pickle Robot) that combines physical AI, vision technology, and access to large, unique real-world operational datasets to maximize customer throughput, reduce labor dependency, and improve accuracy. Management believes this integrated ecosystem is strategically unique and positioned to capture large, unmet demand for warehouse bottleneck reduction. The firm has already invested in required facilities, and can support over $100 million in automation revenue within its existing footprint, so capex as a percentage of sales is expected to decline sharply as the segment scales.

• PPS Portfolio and Sustainability Initiatives: The firm is actively pruning lower-margin PPS business to improve overall profitability, while scaling higher-value sustainable packaging offerings. Management is accelerating the industry transition from plastic to paper packaging, leveraging ongoing resin price increases to gain market share, particularly in North America. The Climaliner Plus sustainable cold chain packaging product has received strong market feedback, and management expects it to reach an inflection point with significant step-change growth. In Europe, a temporary energy surcharge was implemented to protect margins amid volatile natural gas prices, and will be removed once market conditions normalize.

• Balance Sheet and Liquidity: The firm ended Q2 with a strong liquidity position, holding $43.2 million in cash and no drawings on its revolving credit facility. LTM net leverage decreased 0.2 turns from Q1 to 4.5x. Capex for Q2 was $6.6 million, $3.2 million lower than the prior year, reflecting disciplined capital allocation. Cash flow is expected to improve meaningfully in the second half of 2026 due to seasonality and working capital optimization. The long-term target is to reach a net leverage ratio of 2.5x to 3.0x within 24 months.

• Full-year 2026 revenue guidance is maintained, with management confirming it remains on track to hit the full-year automation revenue target of ~$60 million, and to reach adjusted EBITDA break-even for the automation segment by the end of 2026. Automation is expected to become an EBITDA positive contributor starting in 2027.
• Management expects improved performance in the North American PPS distribution channel in the second half of 2026, as tough year-over-year comparisons normalize and new product initiatives gain traction. Gross margins are expected to continue improving in the second half, driven by efficiency gains from Lean and Six Sigma initiatives, planned price increases in North America, and full benefit of the EMEA energy surcharge.
• The firm's long-term target of $800 million in consolidated annual revenue by 2030 is maintained, supported by the scaling of high-growth automation and sustainable cold chain packaging.
• A slight currency headwind is expected for year-over-year comparisons in Q3 2026, due to euro-dollar exchange rate movements starting in Q3 2025.

1. Automation Segment: Global revenue grew 139% year-over-year (constant currency, excluding warrant impacts). In North America, automation revenue grew over 250% year-over-year (excluding warrants); in Europe/APAC, automation revenue grew 103.7% year-over-year. It is the fastest-growing segment, on track to hit ~$60 million in full-year 2026 revenue, and currently contributes a larger share of consolidated revenue with a lower near-term margin profile than the PPS segment. 2. Protective Packaging Solutions (PPS) Segment: Global volumes increased 2.4% year-over-year, marking growth in 11 of the last 12 quarters. In Europe/APAC, PPS volumes grew 4.2% year-over-year; in North America, PPS was a slight revenue detractor as the distribution channel faced tough year-over-year comparisons after 14.8% volume growth in Q2 2025. PPS margin improved more than 250 bps year-over-year (excluding depreciation) in North America; EMEA PPS margins faced temporary pressure from timing differences between input cost increases and the implementation of a temporary energy surcharge. 3. Geographic Segments: North America total revenue increased 8.5% year-over-year (9.4% excluding warrants); Europe/APAC total revenue increased 15.4% year-over-year (constant currency). 4. Consolidated Performance: Consolidated reported net revenue grew 14% year-over-year (12.2% constant currency, 12.6% excluding warrant impacts). Adjusted EBITDA increased 13.9% year-over-year (constant currency, 15.8% excluding warrant impacts) to $19.1 million reported. Gross margin improved 150 bps year-over-year on a constant currency basis.

• Ongoing macroeconomic volatility: High energy and oil prices, persistent broad inflation, stretched consumer finances at lower income levels, and renewed heightened geopolitical tensions create uncertainty around customer demand and input costs. Customers are currently nervous about future conditions and maintaining conservative inventory and spending plans.
• Regional energy market volatility: European natural gas prices have remained volatile since the start of the Ukraine conflict, creating ongoing input cost pressure for European paper producers that can impact RANPAC's margins if cost increases cannot be fully passed through immediately.
• Market uncertainty: Recent improvements in consumer confidence are encouraging, but management has cautioned that it is too early to confirm sustained improvement in durable sectors like housing and industrial activity.
• The lower-margin profile of the fast-growing automation segment currently masks underlying margin improvements in the core PPS business, though margins are expected to improve for automation as it scales.

Q: What is the split between existing customer expansion and new customer acquisition for automation, and what is the pipeline outlook for coming years? / A: Automation growth is coming from both existing large enterprise customers expanding rollouts to additional facilities, and new customers. The firm has recently formed key partnerships with large systems integrators that are opening new large accounts. Most of the 2026 revenue needed to hit the $60 million target is already contracted, and the pipeline for 2027 and 2028 is very robust. Large enterprises will continue to drive the majority of volume over the next few years, but new customer activity is strong.

Q: Is the PPS portfolio pruning strategy shrinking the install base to improve margins, and how should this strategy be understood? / A: The pruning is part of the broader strategy to improve the firm's overall margin and financial profile. It consists of cutting lower-margin, less attractive business while growing higher-value accounts. It will not have a material noticeable impact on top-line growth, but will improve bottom-line results. The pruning includes rationalizing the install fleet to eliminate low-return accounts, which is a prudent adjustment to enhance the firm's financial position amid current market conditions.

Q: What is the outlook for margin improvement in the second half of 2026, given ongoing input cost inflation, and what drove the recent margin performance? / A: Gross margins improved 150 bps year-over-year overall, with North America PPS margins improving over 300 bps driven by efficiency and cost reduction initiatives. EMEA faced temporary margin pressure because the energy surcharge implemented in May lagged April input cost increases, and there was minor mix pressure from customer trade down to lower-margin SKUs. Management expects continued gross margin improvement in the second half: North America will see further gains from efficiency and planned price increases against rising resin-based product prices, and the full impact of the EMEA surcharge will be felt. Ongoing Lean and Six Sigma continuous improvement initiatives are also expected to drive visible margin improvement in H2 2026.

Q: What is the outlook for EBITDA breakeven for automation in 2026, and were there changes to PPS volume trends between EMEA and North America? / A: Management confirms it remains on track to reach adjusted EBITDA breakeven for the automation segment by the end of 2026, and the segment will become EBITDA positive starting in 2026 as scaling continues. For PPS, North America has strong enterprise segment growth but softer distribution channel performance, though management expects a distribution pickup in H2 with very low current inventory levels. EMEA has broader overall PPS strength, with low customer inventory and no significant pre-buy build-up ahead of price increases, as customers remain cautious amid geopolitical and energy uncertainty.