Good morning, and welcome to the Ranpak Holdings Corp. Fourth Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Sara Horvath, General Counsel. Please go ahead.

Thank you, and good morning, everyone. Before we begin, I’d like to remind you that we will discuss forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K and our other filings filed with the SEC. Some of the statements and responses to your questions in this conference call may include forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. Ranpak assumes no obligation and does not intend to update any such forward-looking statements. You should not place undue reliance on these forward-looking statements, all of which speak to the company only as of today. The earnings release we issued this morning and the presentation for today’s call are posted on the Investor Relations section of our website. A copy of the release has been included in a Form 8-K that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non-GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the table and slide presentation accompanying today’s earnings release. Lastly, we’ll be filing our 10-K with the SEC for the period ending December 31, 2024. The 10-K will be available through the SEC or on the Investor Relations section of our website. With me today, I have Omar Asali, our Chairman and CEO; and Bill Drew, our CFO. Omar will summarize our fourth quarter results and issue our outlook for 2025. Bill will provide additional detail on the financial results before we open up the call for questions. With that, I’ll turn the call over to Omar.

Thank you, Sara, and good morning, everyone. Thank you for joining us today. We finished 2024 on a really positive note as we built on the large enterprise account momentum from the third quarter and delivered our best quarter of the year and second best quarterly revenue in the history of Ranpak. We experienced an outstanding e-commerce-led holiday season in North America, which drove double-digit volume growth across the organization in the fourth quarter and pushed us to double-digit volume growth for the year as well. I’m pleased with the way our team has executed this year and the way we have delivered on our key goals going into 2024. At this time last year, I shared a number of key developments we expected to occur in 2024 and that 2024 would be an inflection year related to our business. We said enterprise accounts, which we have been referring to as strategic accounts, would ramp up beginning in Q2. They did, driving double-digit volume growth for the year in a challenging environment. We said automation was going to have an inflection year. It did. We grew automation revenue by more than 40%, and we expect it to grow another 50% in 2025. We said CapEx would step down meaningfully as our major investment cycle is behind us. It did. It declined by 40%, and we got back to the mode of generating cash. We delevered by half a turn and refinanced our term loan. We plan to pay down a portion of our term loan in 2025. We opened up our Malaysia facility to start serving the APAC market, reducing our production and logistics costs to serve the region. We are in ramp-up phase there and excited about what this platform can bring. We said our solution set and execution…

Thank you, Omar. In the deck, you’ll see a summary of some of our key performance indicators. We’ll also be filing our 10-K, which provides further information on Ranpak’s operating results. Overall, net revenue for the company in the fourth quarter increased 17% year-over-year on a constant currency basis, driven by exceptional volume growth in North America and increased automation sales, bringing full year net revenue up 10% on a constant currency basis. For the quarter in the Europe and APAC reporting division, combined revenue increased 1% on a constant currency basis, driven by better automation sales, bringing full year net revenue up 3% on a constant currency basis. North America had its highest net revenue quarter ever, driven by 39% volume growth and increased contributions from automation. Net revenue for the quarter was up 36%, which brought the full year net revenue in the region to growth of 19%. The momentum in North America is excellent as our execution with enterprise accounts continues to deliver results and positions us well for further volume growth in 2025. Gross profit increased 21% in the quarter as reported gross margin of 39.4% for the quarter improved 170 basis points versus the prior year. Improved margins were driven largely by lower COGS depreciation and improved profitability in Europe and APAC as input costs remain favorable. Excluding depreciation, gross profit increased 5.3% year-over-year due to the mix impact of lower-margin enterprise account revenue in North America. We believe we can improve the margin profile of this book of business in 2025 as we get more efficient with our operations. SG&A, excluding RSU expense, was up 1.5% versus prior year at $26.2 million. Controlling our spend and leveraging our G&A investments remains a top priority. We saw some of the savings initiatives we implemented in…

Thank you, Bill. The past couple of years and 2024 in particular have laid the foundation for the next chapter of Ranpak. We are executing and following our plan. Some of our key accomplishments include: we re-architected the IT system and now have world-class technology driving our decision-making and providing insights. We won enterprise accounts with more to come and have economically aligned ourselves with the largest e-commerce player in the world. We concluded our investment cycle and got back to cash generation mode. For our next chapter, our goal is to deliver the following: automation at scale, that means $100 million plus in sales in the next few years. Two, we have incentivized our largest customer to provide us with hundreds of millions of incremental spend and deepened our relationship with them. Three, we are focused on getting leverage to 2.5x to 3x. Our goal is for our cap structure to not be a topic of discussion. Four, enterprise account wins and the lower leverage profile will enable us to go further on offense and scale the business. Five, as we get closer to our target leverage profile we will have a lot more options on the menu related to capital allocation. Our share price does not reflect the platform we have built and the momentum of this business. I look forward to being able to go on offense, especially when our shares are under pressure. Regarding guidance for the year, on a constant currency basis, we are forecasting net revenue growth in the area of 5% to 11% and adjusted EBITDA growth of 5% to 16% calculated by translating 2025 forecasted metrics at an exchange rate of €1 to $1.08, which represents the average exchange rate of 2024, which results in a range of $387 million to $409…

[Operator Instructions] Our first question will come from Greg Palm from Craig-Hallum. Please go ahead.

Yes. Good morning. Thanks for taking the questions and congrats on doing everything you said you were going to do at the start of the year.

Thank you, Greg. Good morning.

Let’s start with Amazon, if we could, and wanted to get a little bit more color on kind of how you view ‘25 in terms of the ramp-up of the commercial agreement. And specifically, are you able to give us some color on maybe revenue expectations for this year relative to what you reported in 2024?

Yes. Let me start, and then I will ask Bill to chime in. So, we continue to ramp up nicely with Amazon. As you know, Greg, in our business, the second half of the year is always a lot more important than the first half, given seasonality and holiday activity, etcetera. So, right now, we are actually doing quite a bit more with them across different facilities in the U.S. We are also expanding our dialogue outside of the U.S., in Europe and in Asia Pacific with some of their facilities there. And we are expanding dialogue across our different offerings, not just in PPS, but in automation, in cold chain, etcetera. I am expecting as the year goes on that we will continue to ramp up activity with them. So, I am honestly expecting a very busy year for us with them, and we feel that we are pretty aligned given the strategic deal that we got together. I will let Bill maybe talk a little bit about scope. As you know, throughout the year, we may move more and more towards an asset-light model with them, where basically the cost of the paper and the paper buying is not part of the calculation around warrants and revenue. So, that’s something we continue to work, and there will be a transitional period for that in the upcoming months and quarters. But, Bill, I don’t know if you want to add anything about scale.

Yes, sure. So, I think from a volume perspective, right, we are expecting to continue to grow meaningfully with Amazon. We are expecting double-digit volume growth there in a number of different areas. We think that there is really good opportunity to continue to expand with them in North America as well as other parts of the world. So, we are excited about deepening the relationship there. And as the relationship evolves, there is other areas within our product portfolio that we can expand into.

And when you talk about an evolving relationship with them specifically, should that translate into a higher installed base, or is the thought that you are going to continue to sort of refurbish existing machines in the field?

Honestly, I think our hope and expectation is both. We continue to increase our footprint with them. The dialogue, to be quite frank, Greg, is around very, very sizable opportunities. We are not ready to sort of report any numbers per se, but the dialogue is expansive. It’s around a lot of opportunities. It entails increasing PPS and both new as well as refurbished equipment. It entails more consumables, frankly. It entails even some new areas that we want to enter that we believe we can help them with. And we can help them – hopefully, over time, we can build scale in some of these new opportunities. So, I feel like the level of activity and dialogue is very robust. Let us see how the next few months go. And when we have something more definitive to report, we will report back. I will say that we have been talking about enterprise accounts, as you know, for a number of quarters. And as evidenced by, frankly, Q3 and Q4, we were surprised to the upside with the level of activity and volume that was needed to satisfy some of those accounts, and that includes Amazon and other customers. And we are hoping and expecting that, that trend will continue in 2025, and we think we can actually win more enterprise accounts in 2025. So, we are quite – in North America, we are quite encouraged with what we are seeing, Greg.

Okay. Great. Lastly, you pointed out that you have a lot of European exposure today. And that’s, I think recently been quite a big headwind. And you mentioned kind of the whatever it takes some of the proposed stimulus over there. I mean it’s obviously too early to know what will happen. But are you seeing – do you think you could see green shoots? Are you getting any feedback? I am just trying to get a sense of whether this ends up maybe potentially being a source of strength at some point.

So, Europe, as we all know, has been a challenge. It’s a very big piece of our footprint. It’s a very important business for us with very attractive margins. If you look at our guide, and I will just make a bit of comment around our guide, you will see our guide for ‘25 has a little bit of a broad range in it, and I would argue has a little bit of conservatism in it. And that conservatism is largely driven by the macro picture and by Europe and uncertainty around Europe. So, we reflected that in our numbers, because frankly, what I am seeing inside the business and what I am seeing with some of our customers is a lot more bullish than our guide, but we tempered it given your question about Europe. The last couple of days, the announcements from Germany around stimulus, around defense, around whatever it takes are very, very encouraging. We are hoping – it’s early days, we are hoping that will translate into economic activity, into more confidence at CEO level. That type of activity can be very important for us. Europe is a very important market. Germany, in particular, is a very important market for Ranpak. So, I am quite encouraged, but it’s early days. And then you will see the reaction, whether it’s in the euro, the last couple of days, whether it’s in a number of basically announcements around, hopefully, a slightly better macro backdrop. All these things will be helpful. And then, of course there is the biggest question around geopolitics and around potential peace. And if all that transpires, that’s going to be a very significant tailwind for us. So, it’s not reflected in our numbers. We are watching things closely. We are talking to our team constantly on the ground. Let’s see how the next few weeks. Again, these are very fresh announcements. Let’s see in the next few weeks what transpires on the ground, but these early signs are pretty positive, Greg.

Yes. That makes sense. Alright. I will leave it there. Thanks.

Thank you.

Our next question comes from Ghansham Panjabi from Baird. Please go ahead. Your line is open.

Yes. Thanks operator. Good morning everybody.

Good morning Ghansham.

Yes. Omar, on the mid to high-single digit volume growth expectation for 2025, how does that break down in terms of contribution from paper versus automation? And also, what are you forecasting for e-commerce versus industrial end markets, because I understand the Amazon sort of relationship expansion, etcetera, but comparisons will be tougher, especially North American e-commerce in the back half of next year or 2025?

Sure. Let me start with just some commentary, Ghansham, and then I will have Bill maybe walk you through a bit more precise numbers. We continue to see attractive sort of backdrop in e-commerce. Amazon by far is the biggest. But as I stated, we are winning other pretty sizable enterprise accounts that we think will ramp up in 2025, and that will drive part of the growth. So, in addition to Amazon, we are expecting more and more activity and ramp up in volume with other sizable accounts. Amazon themselves, we believe there are a lot of opportunities that we can enter and frankly, even other geographies where today we are not active. So, it’s tough beyond the current business that we have with them. We think there is actually – despite the tough comp that you refer, we think there is quite a bit of growth opportunity there. On the industrial side, our forecast has been a little bit muted, frankly, more just given the macro backdrop and given what we are seeing out there in the marketplace. So, we have not ascribed huge growth on the industrial channel, frankly, globally. And then the last piece in automation, you know the size of our business. We expect that in 2025, we will deliver north of 50%, growth and that’s part of our growth algorithm. So, these are sort of the pieces that are coming together that we feel will drive the numbers that we outlined. But Bill, do you want to add any color?

Sure. Yes, Ghansham, just for the building blocks, if you think about the volume, the automation contribution, etcetera, the way that we were trying to break it down was for PPS volume growth to be in that mid to high-single digits, so at the low end and the high end of the range, with automation contributing, call it, 3 points to 5 points, right, at the low to high end. And then we have got 2 points to 3 points really of kind of what we would call price mix headwind with a point of that being the Amazon warrants. So, that’s how you get to kind of that 5% to 11%, Ghansham.

Okay. That’s perfect. And then going back to 4Q, the EBITDA margins come in where you thought they would, 17% core sales growth versus the 8% on EBITDA growth. Yes, just give us some – a little bit more color on that.

Sure. I will be – just to be blunt about where we are, the growth, Ghansham, surpassed our expectations. So, we knew that we were winning business and that we are going to ramp up. We tried to do the best forecasting we could. We tried to basically have our team and our physical footprint ready for meaningful growth and growth ended up being a bit bigger than we expected. And frankly, that meant we were not as efficient as we wanted to be. Our top priority was instead of focusing on efficiency, Ghansham, was focusing on a good customer experience as we are onboarding and ramping up with customers. And that meant some pressure on gross margin. It meant, frankly, a little bit of added resources, etcetera, in our G&A to make sure we are fulfilling customers’ expectations and hopefully surpassing that. I expect now that we have a better handle of that growth, and I feel we have a better handle of the expectation from where we are here going forward, you will start seeing more and more efficiency from us, and that will be reflected in the margin profile. Right now, the top priority at Ranpak is driving growth and making sure our customers are happy. And we believe, over time, as we normalize, you will see more of that growth flow into both gross margin and EBITDA margin.

Okay. Perfect. And then, Bill, in terms of the EBITDA bridge for ‘25, $88 million to $97 million in terms of how that translates into free cash flow. Can you just give us the parameters associated with that?

Sure. So, from a free cash flow perspective, Omar mentioned and I mentioned in the prepared remarks that generating cash and using that to pay down debt is a top priority for Ranpak. So, there is a tremendous amount of focus on cash generation within the company going into 2025. If you want to do kind of a walk from EBITDA to free cash, right, if you start kind of in that midpoint of the range there, $93 million, $94 million, we are expecting about $36 million, $37 million of CapEx. Cash interest, we expect to be about $34 million on a net basis if rates stay where they are. We expect to have roughly $4 million or so, $5 million of cash taxes and then a slight benefit in working cap to get you to right around that $20 million in free cash.

Okay. Perfect. And then just finally, just so I understand it because it’s new for us in terms of the warrant expense, etcetera. So, the $3 million to $5 million in warrant expense you are embedding for 2025 on EBITDA that assumes an embedded sales contribution from Amazon, is that correct?

That’s correct. So, we have to allocate a portion of our expected sales to that warrant expense.

And so just thinking out to ‘26, would it also be $3 million to $5 million, or would it vary depending on the sales contribution?

It will vary based on the sales contribution. So, hopefully, it grows.

Okay. Thanks so much guys. Thanks for taking my questions.

Thanks Ghansham.

[Operator Instructions] Our next question comes from Troy Jensen from Cantor Fitzgerald. Please go ahead. Your line is open.

Hey gentlemen. Congrats on all the great news here recently.

Thanks Troy. Good morning.

Good morning. So, a quick just clarity here, automation I think, you guys said was $30 million in the quarter, and you expect – excuse me, $30 million in the year and you expect it to grow greater than 50% in ‘25.

That’s exactly right. So, our expectation is somewhere, let’s call it, $45 million plus for 2025 in top line for automation.

Alright. Perfect. And then is there just one or two automation products that’s driving this growth, or is it more broad-based? Is it related to some of these new products you launched in early January?

Yes, that’s – there is a lot of activity in automation. There is a number of what I am going to call, let’s call it, smaller opportunities, a few pieces of equipment here and there. There are a couple of sizable accounts that we have been working with for a number of years. In many cases, Troy, we have installed things in last year and the year before, and we expect to ramp up and provide more automation solutions to some of their other facilities. So, it’s a mix of some large repeated customers as well as some of the smaller orders here and there. There are probably globally close to three or four very large enterprises that are driving part of that growth, not all of it, but a meaningful part of it. And frankly, that’s the nature of the business. If you are not winning with large accounts in automation for e-commerce and for warehouses and fulfillment, then I don’t think you are a real player in this space. The space is a little bit chunky. So, that’s driving part of the growth. The good news is in the majority of these cases, Troy, these are actually existing customers with our solutions installed where we think we can ramp up. These are not completely new customers with new orders and new relationships.

Got it. Perfect. And maybe a couple of questions for Bill here, was there a 10% customer in Q4 or all of 2024?

There was. So, starting in Q3, it got close and then Q4, there was a 10% customer. And then for the full year, there was.

Okay. Perfect. And then just last question. Can you help us out with the revenue seasonality in Q1? I mean kind of coming off a strong Q4? And what does it kind of typically seasonally do in the March quarter?

Sure. So typically, there is a step down from Q4 to Q1, right. And that’s been high-single digits historically and sometimes low-double digit depending on how strong the holiday season. But the way that the seasonality of the business typically works is Q1 is typically the lowest in terms of revenue contribution and then it slowly builds throughout the year. So, it gets a little bit bigger in Q2. And then really, the second half is where you start to see it ramp up, where Q3 is the next largest and then Q4, obviously, with the e-commerce holiday season by far being the largest quarter for us. Typically, for this year, when we are looking at it, we are going to be moving more probably towards a 47%, 53% type first half, second half, maybe a little bit more if you have a bigger holiday season.

Got it. Great. Thanks gentlemen and good luck this year.

Thank you, Troy.

We have no further questions. I would like to turn the call back over to Bill Drew for closing remarks.

Thanks Julianne and thank you all for joining us today. We look forward to speaking again soon for Q1.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.