Ranpak (PACK) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 5.9% year-over-year increase in net revenue for Q2 2024 on a constant currency basis, driven by an 8.8% increase in volumes, offset somewhat by lower pricing [11] - Adjusted EBITDA increased 7.4% year-over-year to $20.4 million, resulting in a 22.8% margin [14] - Gross profit increased 5.4% on a constant currency basis, with a margin of 36.8% compared to 37% in the prior year [13] Business Line Data and Key Metrics Changes - North American net revenue increased 17.1% year-over-year, with volumes up approximately 20%, primarily driven by e-commerce related to strategic account activity [12] - Cushioning Systems experienced a 0.3% decline, while void-fill installed systems increased by 0.7% [11] - In Europe and Asia Pacific, net revenue on a constant currency basis was down 1% year-over-year, despite a volume growth of 3.2% [12] Market Data and Key Metrics Changes - North America saw a 17% increase in sales, driven by improved void-fill activity, while Europe and Asia Pacific had less robust activity with volumes increasing slightly over 3% [6][8] - Strength was noted in Brazil, France, and the Netherlands, while Poland and Germany remained weaker [9] - Japan was highlighted as a significant growth driver in Asia Pacific [9] Company Strategy and Development Direction - The company is focused on winning new large accounts and improving efficiency, which contributed to strong results in North America [6] - The transition from plastic to paper is expected to drive significant volume growth, with public validation from key players in e-commerce [7] - The company aims to scale its Asia Pacific operations, with the Malaysia plant going live in August 2024, which is expected to enhance local production capabilities and reduce logistics costs [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the overall trajectory of the business, anticipating continued volume growth despite a challenging economic backdrop [17] - The company expects to see a normalization in discretionary goods purchases and industrial activity, which could lead to additional EBITDA growth [21] - Management is focused on maintaining a gross margin profile of 37% to 38% for the year, despite anticipated input cost pressures [9][10] Other Important Information - The company completed Q2 with a strong liquidity position, including a$ 65 million cash balance and no drawings on its revolving credit facility [15] - The company is committed to reducing G&A expenses by more than $5 million by the end of the year [20] Q&A Session Summary Question: Pricing headwinds in Europe - Management confirmed that the pricing headwinds of roughly 2% in Europe were in line with expectations and will start to ease in August [23] Question: New wins versus core markets in North America - The majority of the 20% volume increase in North America was attributed to new strategic accounts, with expectations for continued growth in the second half of the year [24][25] Question: Decline in cushioning business - The decline in the cushioning business was attributed to a slowdown in industrial activity, particularly in Europe, but management remains optimistic about maintaining market share [26][27] Question: Revenue growth and EBITDA expectations - Management's view on revenue growth and EBITDA for the year has not changed, with increased confidence due to robust activity with larger accounts [28][29] Question: Automation business growth - Management remains confident in achieving over 50% growth in the automation business for the year, supported by strong bookings activity [39]