Ranpak Holdings Corp. Q1 2023 Earnings Call

As you know putting in new technology systems and switching the way we operate that that was a lot right. Now we don't have to deal with these issues. We are executing in a new environment with state of the art technology, we're more focused on being sharper in our execution, which I think will help. So this gives us some confidence on.

Achieving our numbers on the top line and the volume trends.

On the one hand, yes, the macro environment is a challenge on the other hand, I will tell you our trial activity. Our pipeline is super robust, it's pretty strong globally, and we have a number of dialogue in today's environment.

Advanced large accounts that are talking about meaningful switches from plastic to paper.

So all of that I think could offset part of the the macro weakness if you will and again when you put it altogether, we did not assume robust volume trends.

Okay, great. Thank you.

And then in terms of just the operating environment at current I mean, clearly everybody's sort of thing it across the consumer supply chain industrial supply chain et cetera.

And I would assume that there's going be more of a focus on cost is just like youre doing youre.

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Is mix issue to keep in mind for the future as it relates to your customers' decisions on maybe trading down a little bit just to kind of keep costs in check or is that not really a risk.

Perspective for you.

Honestly costs.

This has been an issue for for a while for a number of quarters and we're seeing.

A lot of customers focus on that.

And part of what we're doing with a lot of customers is making sure. We're very articulate in specific about where we are helping them in terms of speed reliability and total cost of ownership to make sure that we are helping them with their own bottom line. So.

That trend continues given the inflationary environment.

We are seeing in some cases.

The mix of people trading down a little bit.

Is it a bigger driver right now.

Not really I think for us the.

The biggest driver is just articulating how we're helping these customers from an efficiency speed and total cost of ownership and that's typically how we win so I'm not expecting drastic moves on mix.

That could go against US I do expect as we have more and more dialogue with some of these large customers that are in our pipeline about the switch from plastic to paper.

Theyre going to be very very price sensitive in this environment. So they want sustainability ghansham, but they want to make sure it's not coming at a premium for them.

Okay.

Thank you. Your next question comes from the line of Adam Samuelson of Goldman Sachs. Please go ahead.

Yes, Thank you and good morning, everyone.

Good morning.

So I guess the first question is maybe kind of continuing on something Ghansham was asking about that I think about.

The installed base.

Actually you did see some declines in the installed base on the cushioning side sequentially in the quarter, how do we think about.

You're being more proactive in pulling machines from existing from existing customers and better utilizing kind of the installed base of.

Of machines that you have out there are redeploying those.

It helped to limit incremental capital spend in the near term.

Sure I'll start and then I'll have bill chime in Adam So as you know in the past.

12, 14 months, we've continued to invest in Capex and converters and equipment and did not get the commensurate sort of volume help.

Today.

Sort of starting really at the beginning of this year, we have been laser focused on just optimizing the fleet that we have.

So in many cases, we see opportunities to move certain pieces of equipment from one account to another where we think it could help the volume down. The road also we and our customers are learning in this environment that may be the new normal for the near term is lower than what we had expected a year ago or six months ago. So.

Adjusting accordingly, so we believe there continues to be an opportunity from here to drive our growth.

Without just 100% incrementally investing in new Capex, and adding new converters. So part of the thing that youre seeing from us is optimizing the existing fleet.

So you will see as we launch new products that maybe our fleet of equipment is increasing a little bit.

Those were actually in line with where we were in Q1 'twenty two so from a gross shipments basis.

<unk> mentioned has been making a concerted effort to optimize the fleet looking at lower margin business and getting some of that equipment back.

Cushman.

Cushioning is one area actually where we can try and get machines back because there is actually really really solid demand in the industrial sector. Just given how competitive we are from a pricing standpoint, so trying to get some of those machine back pre fabricate those and get those deployed out to the field.

It's a big effort of ours so.

I would expect that to pick back up in future quarters.

Okay No. That's that's very helpful. So.

Think about just for the year.

Sure so the capex for the year.

You said at the beginning.

Beginning of the year that will be about 55 million all in Capex I think just given what we're seeing in some of the.

Discretionary spend will be taking that down a little bit.

Pretty close to 50, if you think about the split between the conversion expense.

Can be 25 to.

$30 million of converters, maybe we could get a little bit better than that managed tighter.

Our jobs are redeploying existing equipment, and then on that real estate investment front that was running around $25 million.

So.

And that we're operating now currently and then the shelf facility. So most of that will be complete by the end of Q2.

Okay.

And again on the operating expense question I think you were asking about kind of cash operating from a G&A perspective that should be running around 25% of sales.

Thank you again, if you'd like to ask a question press star one on the telephone keypad.

A follow up question from the line of Greg Palm of Greg Hallum Capital Group. Please go ahead.

Maybe give us a sense of where we're at what gives you the confidence that.

Yes, I think Greg look last year like any other year, we were chasing a number of these accounts and of course, we were pushing to the case for our products over over a plastics and I would say we were doing a bunch of meetings amongst the discussions but not exactly trials what has.

Change this year with a number of these accounts our equipment is in their facilities.

Being tried out.

Our buying obviously small amounts from us right now to consume paper that equipment, we like sort of feedback that we're hearing about these trials in today's environment and I've said this before trials take a little bit longer than we like.

Given the soft macro environment, so trials might be a little bit prolonged however, the feedback that we continue to see on the ground with a number of these important accounts is they like the product. They are interested in the switch I would not say the switch is going to be 100%.

In our fair share and that would be driving incremental volume now again, a lot of these large accounts because they may take longer.

What I am saying will happen you will see that in the second half of the year more than the first half of the year, but in the first half of the year. We have placed the equipment. We are in these warehouses and facilities and they are using our product and trial. Yet. So this is why I feel pretty good about where we're headed and this isn't materially different.

Then last year, where we were not having the trials in action with some of these large accounts. It was more conversation now we're seeing some action and hopefully that action will translate into business activity for us in the second half of this year.

There are no further questions at this time I will now turn the call over to Bill for closing remarks.

Thank you and thank you all for joining US today, we look forward to speaking again following Q2.

Yeah.

Okay.