Q1 2024 Graphic Packaging Holding Co Earnings Call

Operator: This is a holding announcement for the Graphic Packaging First Quarter 2024 Earnings Call. The call will begin in approximately one minute. Thank you for your patience.

This is a holding announcement to the graphic packaging first quarter 2024 earnings calls will begin in approximately one minute time. Thank you for your patience.

Adam: Good morning or good afternoon, and welcome to the Graphic Packaging First Quarter 2024 Earnings Call. My name is Adam, and I'll be your operator today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand the call to Melanie Skijus to begin. So, Melanie, please go ahead when you are ready.

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Matthew Burke Roberts: Good morning, good afternoon about come to the graphic packaging first quarter <unk> earnings call. My name is thought to Adobe Roberts its day.

Matthew Burke Roberts: I'd like to ask a question during the Q&A portion of today's call you may do so by pressing star one on your telephone keypad.

Melanie Skijus: I'll now hand, the Coosa melendy ski just to begin so Melanie. Please go ahead when you're ready.

Melanie Skijus: Good morning, and welcome to Graphic Packaging Holding Company's first quarter 2024 earnings call. Joining us on our call today are Mike Doss, the company's President and CEO, and Steve Scherger, Executive Vice President and CFO. To help you follow along with today's call, we will be referencing our first quarter earnings presentation, which can be accessed through the webcast and also the investor section of our website at www.graphicpkg.com. Before I turn the call over to Mike, let me remind you that today's press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Melanie: Good morning, and welcome to graphic packaging holding company's first quarter 2024 earnings call joining us on our call today are Mike Doss, the company's president and CEO, and Steve Scherger Executive Vice President and CFO.

Speaker Change: How do you follow along with today's call, we will be referencing our first quarter earnings presentation, which can be accessed through the webcast and also on the investors section of our website at www dot graphic.

Speaker Change: <unk> Dot com.

Stephen R. Scherger: Before I turn the call over to Mike, Let me remind you that today's press release and the presentations made by our executives include forward looking statements as defined in the private Securities Litigation Reform Act of 1095.

Melanie Skijus: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in this release and in our filings with the Securities and Exchange Commission.

Stephen R. Scherger: Payments are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

Mike: These risks and uncertainties include but are not limited to the factors identified in the release and in our filings with the Securities and Exchange Commission.

Melanie Skijus: With that, let me turn the call over to Mike. Thank you, Melanie. Good morning, everyone. And thank you.

Mike: Let me turn the call over to Mike.

Michael P. Doss: Thank you, Melanie. Good morning, everyone, and thank you for joining us on the call today. As those who joined us for our investor day in February are aware, Graphic Packaging's transformation to a global leader in sustainable consumer packaging is well advanced. We spent the last eight years building a stronger, more diverse consumer packaging portfolio capable of delivering more consistent results, solid growth, and substantial cash flow. During the first quarter, the strength and balance in that portfolio were on full display.

Michael P. Doss: Thank you Melanie and good morning, everyone and thank you for joining us on the call today and for those who joined US for our Investor Day. In February are aware graphic packaging is transformation to a global leader in sustainable consumer packaging is well advanced.

Michael P. Doss: Spent the last eight years building a stronger more diverse consumer packaging portfolio capable of delivering more consistent results solid growth and substantial cash flow during the first quarter the strength and balance in that portfolio was unfolded display as the consumer purchasing patterns continue to shift we moved with them.

Michael P. Doss: As consumer purchasing patterns continued to shift, we moved with them. We were seeing volume improvement in certain markets and customer categories, and excluding the impact of the Augusta Bleach paperboard manufacturing facility sale, we expect to generate positive full-year sales growth in 2024 as we partner with our customers to deliver the sustainable packaging solutions that consumers prefer. Let's start with a brief overview of the results. In the first quarter, graphic packaging sales were $2.3 billion, adjusted EBITDA was $443 million, and adjusted EPS was 66 cents.

Mike: We are seeing volume improvements in certain markets and customer categories and excluding the impact of the Augusta Bleach paperboard manufacturing facility sale, we expect to generate positive full year sales growth in 2024, as we partner with our customers to deliver the sustainable packaging solutions that consumers prefer let's start with a brief.

Mike: Overview of results in the first quarter graphic packaging sales were $2 $3 billion adjusted EBITDA was $443 million and adjusted EPS was <unk> 66.

Michael P. Doss: As Steve will discuss later, the biggest part of the sales decline and essentially all the EBITDA decline was a function of our decision to reduce production of bleached paperboard to match demand. In the context of that decision, an adjusted EBITDA margin down just 30 basis points at 19.6% is an outstanding result that demonstrates the strength of our portfolio and the strong execution our team delivers. Holiday timing and fewer shipping days accounted for about 2% of the sales decline.

Mike: As Steve will discuss later the biggest part of the sales decline and essentially all of the EBITDA decline was a function of our decision to reduce production of bleach paperboard to match demand.

Mike: In the context of that decision adjusted EBITA margin down just 30 basis points at 19, 6% is an outstanding result, and demonstrates the strength of our portfolio and our strong execution our team delivered.

Mike: Holiday timing and fewer shipping days accounted for about 2% of the sales decline.

Michael P. Doss: Starting on slide three, at our investor day in February, we introduced ambitious targets that are better aligned with the sustainable consumer packaging leader that we've become. You can find a replay of each presentation on the Investor Relations website, and I encourage you to listen if you weren't able to join us.

Mike: Turning to slide three in our Investor day in February we introduced ambitious targets that are better aligned with the sustainable consumer packaging leader that we have because.

Mike: You can find a replay of each presentation on the Investor Relations website and I encourage you to listen if you weren't able to join US also in February we announced an agreement to sell our Augusta Bleach paperboard manufacturing facility to Clearwater paper, we expect that sale to close Tomorrow may one at that point open market paperboard.

Michael P. Doss: Also, in February, we announced an agreement to sell our Augusta Bleak paperboard manufacturing facility to Clearwater Paper. We expect that sale to close tomorrow, May 1st. At that point, open market paperboard sales, which have historically been a significant source of earnings volatility for us, will be a very small part of the business. Turning to our recycled paperboard, Steve and I visited our Waco recycled paperboard manufacturing facility site a couple weeks ago, and I am pleased with the progress the team there is making.

Mike: Core sales, which has historically been a significant source of earnings volatility for us will be a very small part of the business.

Mike: Turning to our recycled paperboard system.

Mike: And I have visited our Waco recycled paperboard manufacturing facility side, a couple of weeks ago and I am pleased with the progress the team there is making.

Michael P. Doss: The Waco machine and supporting systems will be nearly identical to what we have at our Kalamazoo facility. That was a strategic decision we made to further increase our competitive advantage in recycled paperboard. The decision not only significantly shortens the project timeline and reduces engineering costs, but it also creates real and valuable synergies in training and operations. In fact, an operator from our Kalamazoo K2 operation could almost immediately step into the same job at Waco, and we plan to train many of our Waco teammates at Kalamazoo prior to Waco's start-up.

Mike: The Waco machine and supporting systems will be nearly identical to what we have at our Kalamazoo facility that was a strategic decision. We made to further increase our competitive advantage and recycled paperboard the decision not only significantly shortens the project timeline and reduces engineering cost, but it also creates real and valuable.

Mike: Synergies and training and operations and in fact, an operator from our Kalamazoo K two operation almost immediately step into the same job at Waco, and we plan to train many of our Waco teammates at Kalamazoo prior to Wingo startup.

Michael P. Doss: Meanwhile, Waco will utilize high-value scrap from our wood fiber paperboard manufacturing facilities, as well as numerous packaging facilities in the region. We're also progressing our plans to collect paper cups, another high-value fiber source within a radius around the Waco facility. We see Waco as a billion-dollar investment in a long-term competitive advantage, taking the advantage we already have in Kalamazoo across all of North America. A broad and diverse portfolio of sustainable consumer packaging solutions really does move with the consumer, allowing us to deliver consistent results even as consumer purchasing patterns and economic conditions change.

Mike: Meanwhile, we will utilize high value scrap from our wood fiber and paperboard manufacturing facilities as well as numerous packaging facilities in the region. We're also progressing our plans to collect paper costs another high value fiber source.

Mike: Within a radius around the Waco facility, we see way, who is a billion dollar investment and long term competitive advantage taken the advantage we already have in Kalamazoo across all of North America.

Mike: <unk> diverse portfolio of sustainable consumer packaging solutions really does move with the consumer, allowing us to deliver consistent results, even as consumer purchasing patterns and economic conditions change that was evident in our first quarter results with continued strength in food service and stronger beverage volumes, helping to offset weak.

Michael P. Doss: That was evident in our first quarter results, with continued strength in food service and stronger beverage volumes, helping to offset weaker results in certain food categories and household products. Some consumers have responded to inflation by shifting to private label products, and we were able to offset some of the declines we saw in grocery with gains in the club channel.

Mike: <unk> results in certain food categories and household products. Some consumers have responded to inflation by shifting to private label products and we were able to offset some of the declines we saw in grocery with gains in the club channel.

Michael P. Doss: The diversity of our product portfolio combined with the agility and execution strength of our team to offset the weakness in one market or channel with the strength in another is exactly what we intended to build, and it is working. Within food and household products, we did see pockets of year-over-year growth. But those of you who follow consumer product markets know that volumes remain sluggish across many consumer staple categories.

Mike: Diversity of our product portfolio combined with the agility and execution strength of our team to offset the weakness in one market or channel with the strength and another is exactly what we intended to build and it is working.

Mike: Within food and household products, we did see pockets of year over year growth, but for those of you who follow consumer product markets know that volumes remain sluggish across many consumer staple categories I do expect to see volumes improve further in the second quarter and anticipate a material acceleration in volume growth in the second half.

Michael P. Doss: I do expect to see volumes improve further in the second quarter and anticipate a material acceleration and volume growth in the second half, with new innovation wins, product launches ramping up, and a broader return to growth across our customers' businesses. We delivered $37 million of innovation sales growth in the first quarter with contributions across all five of our innovation platforms. Key contributions came from our new Nissan noodles cup and our Chick-fil-A cold and go cup, as well as our Bordeaux paperboard canister solution. The cups are replacing foam, while Bordeaux, in these instances, is replacing plastic.

Mike: With new innovation with product launches ramping up at a broader return to growth across our customers' businesses.

Mike: We delivered $37 million of innovation sales growth in the first quarter with contributions across all five of our innovation platforms key contributions came from our new Nissan noodles call and our Chick Fil a closing go call as well as audio paperboard canister solutions. The cops are replacing so while Borneo.

Mike: In these instances is replacing plastic.

Michael P. Doss: Our innovation pipeline is robust, and while we don't control the timing of customer product launches, I'm confident that we will meet our 2% innovation sales growth target for the year. Slide four is a reminder of how broad our packaging portfolio has become. We serve five markets, with food the largest, beverage next, and our growing food service category not far behind. Our investments and new capabilities have taken us further into household products and provided entry into new health and beauty markets, further enhancing our portfolio balance, growth opportunities, and consistency.

Mike: Our innovation pipeline is robust and while we don't control the timing of customer product launches I'm confident that we will meet our 2% innovation sales growth target for the year.

Mike: Slide four is a reminder of how broad our packaging portfolio has become.

Mike: We served five markets with foods, the largest beverage next and our growing foodservice category not far behind our investments in new capabilities have taken us further into household products and provided entry into the new health and beauty markets further enhancing our portfolio of balance growth opportunities and consistency.

Michael P. Doss: Let's go a little deeper into our sales results with slide five. We don't adjust for days the arrows on this chart because we want you to be able to see the performance versus the reported sales. If we did adjust for days, the total sales arrow in the bottom right would be sideways.

Mike: Let's go a little deeper into our sales results with slide five.

Mike: We don't adjust the arrows on this chart because we want you to be able to see the performance versus the reported sales. If we did adjust for days. The total sales arrow in the bottom right would be sideways our days adjusted consumer packaging sales overall were down about 1%.

Michael P. Doss: Our days adjusted consumer packaging sales overall were down about 1%. As in the fourth quarter, our portfolio offset weaknesses in some of the markets with strength in others. I want to take a moment to reflect on that because eight years ago, we couldn't do that.

Mike: As in the fourth quarter, our portfolio offset weaknesses in some of the markets with strength in others I wanted to take a moment to reflect on that because eight years ago. We couldnt do that our portfolio was too narrow and our exposure to a handful of customers was too concentrated today, our portfolio is much better diversified across consumer markets.

Michael P. Doss: Our portfolio was too narrow, and our exposure to a handful of customers was too concentrated. Today, our portfolio is much better diversified across consumer markets, customers, and geographies. This allows us to deliver more consistent results across a wide range of economic conditions. Food saw some modest weakness in the first quarter, with categories like cereal and frozen pizza weaker in both America and our international business. But there were some bright lights, too.

Mike: Customers and geographies. This allows us to deliver more consistent results across a wide range of economic conditions.

Mike: Foods saw some modest weakness in the first quarter with categories like cereal and frozen pizza weaker in both the Americas and in our international business.

Mike: There were some bright lights too we saw improvement in dry foods, including prepared foods and bakery items beverage results showed a rebound even with the impact of fewer shipping days, we saw year over year growth in both beer and soft drinks across both the Americas and international markets.

Michael P. Doss: We saw improvement in dry foods, including prepared foods and bakery items. Beverage results also showed a rebound, even with the impact of fewer shipping days. We saw year-over-year growth in both beer and soft drinks across both the Americas and international markets, whose service results were strong, marking the ninth consecutive quarter of strong results for us. As you've heard me say before, a third party's lower price declaration and paperboard for COPS are 180 degrees removed from the reality of consistently strong and healthy markets.

Mike: Foodservice results were strong marking the ninth consecutive quarter of strong results for us as you've heard me say before a third party slower price declaration in paperboard for cost is 180 degrees removed the reality of consistently strong and healthy market.

Michael P. Doss: Our customers ultimately want the same thing we want: accurate and transparent pricing. We plan to eliminate third-party indices as a price change mechanism from our customer contracts over time.

Mike: Customers ultimately want the same thing, we want accurate and transparent pricing we plan to eliminate third party indices as a price change mechanism from our customer contracts over time.

Michael P. Doss: Turning to packaging for everyday household products, we have seen growth in some pet care categories and in home air filter frames offset by declines in tissues, soaps, and cleansers. Health and Beauty is the smallest of our five markets but offers very attractive growth opportunities. Most of our current business in this market is in Europe, where we supply many of the leading global brands. As we saw in Q4, there's been a pullback on the healthcare side broadly, with some offsetting strength in the beauty markets. Yet, if we look to the future, our Paycenter Rainier 100% recycled paperboard has opened up a whole new range of customer opportunities here in the Americas, markets that are currently served almost exclusively by Belize Paperboard.

Mike: Turning to packaging for everyday household products, we've seen growth in some pet care categories and in home air filter, France, offset by declines in tissue soaps and classes.

Mike: Health and beauty is the smallest of our five markets, but offers very attractive growth opportunities. Most of our current business. In this market is in Europe, where we supply many of the leading global brands.

Mike: As we saw in Q4, there's been a pull back on the healthcare side broadly with some offsetting strength and beauty markets. Yet if we look to the future our pacesetter in near 100% recycled paperboard has opened up a whole new range of customer opportunities here in the Americas markets that are currently served almost exclusively by bleach paperboard.

Michael P. Doss: With pockets of improvement across our portfolio and a high level of engagement with our customers, we are optimistic that these results will improve as the year progresses. I want to spend a little more time with you on our sales results and where they differ from our expectations. If you join me on slide six, the chart at the top of the page is a summary of typical seasonality across our five markets. And while there are some modest differences in seasonality between our Americas and international businesses, this chart wouldn't change much if we looked at those markets separately.

Mike: Sure.

Mike: With pockets of improvement across our portfolio at a high level of engagement with our customers. We are optimistic that these results will improve as the year progresses.

Speaker Change: I wanted to spend a little more time with you on our sales results and where they are different from our expectations.

Speaker Change: If you join me on slide six the chart at the top of the page is a summary of typical seasonality across our five markets and while there are some modest differences in seasonality between our Americas and international businesses. This chart won't change much if you looked at those markets separately.

Michael P. Doss: Food sales, for example, aren't especially seasonal, but there is a dip most years in the second quarter and a pickup in the third. Again, this is a matter of a couple of percent, so they aren't huge, but they are real, and they are persistent. Perfect seasonality probably won't surprise you. People tend to drink more in warmer, drier months and less in colder, wetter months.

Speaker Change: Food sales for example, especially seasonal but there is a dip most years in the second quarter and a pick up in the third again. These are a matter of a couple of percent. So they arent huge but they are real and they are persistent.

Speaker Change: Seasonality, probably won't surprise you people tend to drink more in warmer drier months, unless and colder wetter months.

Michael P. Doss: Second quarter tends to be so much stronger than third quarter, but both tend to be stronger than the colder parts of the year. So our positive first quarter performance is setting us up well as we move into the strongest part of beverage sales. Food service has the most pronounced quarterly seasonal variation of any of our five markets, which is mostly a function of consumers eating more meals at home during the colder months and after the winter holidays.

Speaker Change: Second quarter tends to be so much stronger than the third quarter, but both tend to be stronger than the older parts of the year sharp positive first quarter performance is setting us up well as we move into the strongest part of the beverage selling season.

Speaker Change: Foodservice has the most pronounced quarterly seasonal variation of any of our five markets, which is mostly a function of consumers eating more meals at home during the colder months after the winter holidays.

Michael P. Doss: So the fact that, for the third year in a row, we've had strong results in what's typically the weakest quarter confirms that the innovation we are bringing to the market is driving real value. Right now, new product introductions like the Chick-fil-A Colding Gold Cup are important growth drivers. One thing we really haven't talked about much in the past is the degree to which sales in a particular month can shape a quarter. February is a shorter month, but even if we adjust for that, February tends to be a slower month.

Speaker Change: So the fact that for the third year in a row. We've had strong results in what is typically the weakest quarter confirmed that the innovation, we're bringing to the market is driving real value.

Speaker Change: Right now new product introductions like the Chick Fil a holding go call are important growth drivers.

Speaker Change: One thing, we really haven't talked about much in the past is the degree in which sales in a particular month can shift quarter February is a shorter month, but it would be.

Speaker Change: Even if we adjust for that February tends to be a slower month March on the other hand, usually has an extra day or two is nearly always the best month of the quarter, but this year March had an extra weekend and with the timing of Easter and particularly good Friday negatively impacting our results in both the U S. Europe.

Michael P. Doss: March, on the other hand, usually has an extra day or two and is nearly always the best month to quarter. But this year, March had an extra weekend, and the timing of Easter, and particularly Good Friday, negatively impacted our results in both the U.S. and Europe. Looking ahead, reports that consumers are feeling the impact of price inflation and are more focused on value are consistent with what we hear from our customers.

Speaker Change: Looking ahead reports that consumers are feeling the impact of price inflation and more focused on value are consistent with what we hear from our customers.

Michael P. Doss: They tend to correlate with higher at-home food and beverage consumption, which is good for us. Meanwhile, as more consumers return to the office, they have less time to prepare meals at home, and that tends to support a rise in prepared foods, convenience items, and on-the-go meal options. We're beginning to see that in our order pattern. Now, let's turn to innovation. Slide 7 comes from our Investor Day presentation, and I included it here as a reminder of just how big our growth potential is.

Speaker Change: And to correlate with higher at home food and beverage consumption, which is good for us. Meanwhile, as more consumers return to the office. They have less time to prepare meals at home and that tends to support a pickup in prepared foods convenience items and on the go meal options, we're beginning to see that in our order patterns.

Speaker Change: Now, let's turn to innovation.

Speaker Change: Slide seven comes from our Investor Day presentation and I included it here as a reminder of just how big our growth potential is the figures represent market opportunities in categories, where we already have a packaging solution in the market or that will be commercialized very soon.

Michael P. Doss: The figures represent market opportunities in categories where we already have a packaging solution in the market or that will be commercialized very soon. Last week, the European Union passed a new packaging and packaging waste regulation called PPWR that will dramatically reshape the European consumer packaging industry. PPWR places significant new restrictions on single-use plastic and a range of other materials and containers.

Speaker Change: Last week, the European Union, passing new packaging and packaging waste regulation called P. P. W. R that will dramatically reshaped the European consumer packaging industry P. P. W. R, but significant new restrictions on single use plastic and a range of other materials and containers, we talked about P. P. W. R.

Speaker Change: At our Investor day, and highlighted our significant investments in innovation and execution capabilities, including our acquisition a few years ago of Europe's best consumer packaging innovator our packaging.

Michael P. Doss: We talked about PPWR at our Investor Day and highlighted our significant investments in innovation and execution capabilities, including our acquisition a few years ago of Europe's best consumer packaging innovator, AR Packaging. Those investments have positioned us very well to partner with customers to deliver the new and better packaging solutions our customers will need to comply with the new regulations. On slide 8, I want to highlight one of the more exciting innovations from our European team contributing to our innovation sales growth. Our Bordeaux paperboard canister was first developed for a French infant formula customer.

Speaker Change: Those investments have positioned us very well to partner with customers to deliver the new and better packaging solution, our customers will need to comply with the new regulations.

Speaker Change: On slide eight I want to highlight one of the more exciting innovations from our European team contributing to our innovation sales grow our boreal paperboard canister was first developed for our French infant formula customer. We then adapted the package for candy and gum and more recently developed a third generation package specifically for coffee.

Speaker Change: Last week, we announced the partnership with mother Parker.

Michael P. Doss: We then adapted the package for candy and gum, and more recently, we developed a third-generation package specifically for coffee. Last week, we announced a partnership with Mother Parker, the largest coffee supplier to private label brands in the United States. Mother Parker will bring our Bordeaux paperboard coffee canister to the U.S. coffee market for the first time through large mass retailers. Our growing penetration of the coffee market really demonstrates the Bordeaux value proposition.

Speaker Change: Largest coffee supplier to private label brands in the United States mother, Parker will bring our ordeal paperboard coffee canister to the U S coffee market for the first time through large mass retailers.

Speaker Change: Our growing penetration of the coffee market really demonstrates the ordeal value proposition for.

Speaker Change: Our customers audio reduces transportation and warehouse space. Meanwhile, our integrated Degassing Bill keeps coffee fresher longer.

Speaker Change: Bourdeo for coffee reduces plastic by roughly half in our container has been verified to be recyclable by two of the leading recycling authorities, so consumers getting attractive convenient and package. It keeps the coffee pressure as a built in live it can be taught them with the rest of your recyclables.

Michael P. Doss: For our customers, OREO reduces transportation and warehouse space. Meanwhile, our integrated degassing bill keeps coffee fresher and longer. Bordeaux for coffee reduces plastic by roughly half, and our container has been verified to be recyclable by two of the leading recycling authorities.

Speaker Change: Finally, before I turn it over to Steve I want to spend just a moment on slide nine which summarizes the four pillars that define who we are and what we aspire to accomplish we are a results driven company with unmatched capabilities in scale and substantial competitive advantages, we really do average life everyday moments for.

Michael P. Doss: So consumers get an attractive, convenient new package that keeps the coffee fresher, has a built-in lid, and can be tossed in with the rest of your recyclables. Finally, before I turn it over to Steve, I want to spend just a moment on slide nine, which summarizes the four pillars that define who we are and what we aspire to accomplish. We are a results-driven company with unmatched capabilities and scale and substantial competitive advantages.

Speaker Change: <unk> future and our products are in consumers' hands throughout the day I'm excited by what I see ahead of us in 2024, and confident that we will drive tremendous value for investors and for all our stakeholders in the years ahead now let me turn it over to Steve Steve.

Michael P. Doss: We really do manage life's everyday moments for a renewable future, and our products are in consumers' hands throughout the day. I'm excited by what I see ahead of us in 2024 and confident that we will drive tremendous value for investors and for all our stakeholders in the years ahead. Now, let me turn it over to Steve.

Stephen R. Scherger: Thank you Mike turning to slide 10 in the first quarter our portfolio did what it was designed to do.

Stephen R. Scherger: Giving consistency and overall sales, while managing changing consumer purchasing patterns.

Stephen R. Scherger: More than half of the 7% drop in reported net sales.

Stephen R. Scherger: Selected our decision to produce and sell less paperboard in the open market.

Stephen R. Scherger: Thank you, Mike. Turning to slide 10. In the first quarter, our portfolio did what it was designed to do, driving consistency in overall sales while managing Changing Consumer Purchasing Patterns. More than half of the 7% drop in reported net sales reflected our decision to produce and sell less paperboard in the open market. A somewhat unusual First Quarter Calendar, with fewer shipping days, even with the leap year, and the timing of the Easter holiday, reduced our packaging volumes by about 2%.

Stephen R. Scherger: It is somewhat unusual first quarter calendar with fewer shipping days, even with leap year and the timing of the Easter holiday.

Stephen R. Scherger: Reduced our packaging volumes by about 2%.

Stephen R. Scherger: The normal pass through of input costs in our European business reduced sales by approximately 1%.

Stephen R. Scherger: On a days adjusted basis, our sales were down about 1% year over year.

Stephen R. Scherger: Good improvement sequentially, but modestly shy of the flattish result, we were expecting.

Speaker Change: Turning to EBITDA.

Stephen R. Scherger: Secondly, all of the decline was a function of our decision to reduce production and open market sales of bleach paperboard for the carbon market.

Stephen R. Scherger: The normal pass-through of input costs in our European business for use sales is approximately 1%. On a days adjusted basis, our sales are down about 1% year over year, a good improvement sequentially, but modestly shy of the slavish result we were expecting. Attorney David Dobbs.

Stephen R. Scherger: With our practice of matching supply with demand.

Stephen R. Scherger: Even with that negative impact we delivered a 19, 6% adjusted EBITDA margin.

Stephen R. Scherger: Just 30 basis points lower than a year ago.

Stephen R. Scherger: Effectively, all of the decline was a function of our decision to reduce production and open market sales of bleached paperboard for the carton market, consistent with our practice of matching supply with demand. Even with that negative impact, we delivered a 19.6% adjusted even dial margin, just 30 basis points lower than a year ago, when our open market paperboard sales were much stronger. That kind of margin consistency is the result of a strong and balanced portfolio with solid execution and cost control. Turning to slide 11.

Stephen R. Scherger: When our open market paperboard sales were much stronger.

Stephen R. Scherger: That kind of margin consistency is the result of a strong and balanced portfolio with solid execution and cost control.

Stephen R. Scherger: Turning to slide 11.

Speaker Change: Let me take a few minutes to provide an update on some of our operations and capital investments.

Speaker Change: As we grow our sales and global capabilities, we regularly review our network to make sure it matches our needs.

Speaker Change: We discussed at Investor day, the strategic rationale for the Augusta sale.

Stephen R. Scherger: Let me take a few minutes to provide an update on some of our operations and capital investment. As we grow our sales and global capabilities, we regularly review our network to make sure it matches our needs. We discussed that at investor day the strategic rationale for the Augusta sale, so I'll not repeat that here.

Speaker Change: So I'll not repeat that here.

Speaker Change: We have always run our bleached paperboard manufacturing facilities as a system.

Speaker Change: So during the quarter, we made the necessary preparations to separate Augusta and to align the Texarkana facility.

Stephen R. Scherger: We've always run our bleach paperboard manufacturing facilities as a system, so during the quarter, we made the necessary preparations to separate Augusta and to align the Texarkana facility to support our internal needs. As Mike pointed out earlier, WACO is moving ahead well. Foundations are largely complete.

Speaker Change: To support our internal needs.

Speaker Change: As Mike pointed out earlier, we go with moving ahead well.

Speaker Change: Foundations are largely complete.

Speaker Change: Buildings that will handle incoming fiber and outgoing paperboard or will advance.

Speaker Change: And already in use as staging and assembly facilities for the rest of the construction activity.

Stephen R. Scherger: Buildings that will handle incoming fiber and outgoing paperboard are well advanced and already in use at staging and assembling facilities for the rest of the construction activity. The infrastructure for our new recycled paperboard machine is being moved into place, and framing for that building is on track. As a reminder, once WACO is up and running, we anticipate shutting down our Middletown and East Angus recycled paperboard manufacturing facilities, which will lower our overall cost and reduce future capital requirements.

Speaker Change: The infrastructure for our new recycled paperboard machine is being moved into place.

Speaker Change: And framing for that building is on track.

Speaker Change: As a reminder, once Waco was up and running we anticipate shutting down our Middletown and east Angus recycled paperboard manufacturing facilities.

Speaker Change: Which will lower our overall costs and reduce future capital requirements.

Speaker Change: We continue to expect the Waco investment to deliver an incremental $80 million in EBITDA in each of 2026 and 2027.

Stephen R. Scherger: We continue to expect the Waco investment to deliver an incremental $80 million in EBITDA in each of 2026 and 2027. Our packaging facilities are delivering the results we and our customers expect with excellent performance and cost discipline. One of our key initiatives this year is to build out the capacity to support our cold and go cup, Chick-fil-A, as well as our new Nissan noodle cup. We're one of a very small group of consumer packaging companies who can invest at the scale necessary to support the largest consumer products launch.

Speaker Change: Our packaging facilities are delivering the results, we and our customers expect with excellent performance and cost discipline.

Speaker Change: One of our key initiatives. This year is the build out of capacity to support our Couldnt go Cup AAA as well as our new Nissan noodle car.

Speaker Change: We are one of a very small group of consumer packaging companies, who can invest at the scale necessary to support the largest consumer products launches.

Stephen R. Scherger: In Europe, we opened our new Bristol, UK beverage packaging and innovation facility. Bristol's new space is roughly double the size we had previously, and it is now well positioned to support our growing beverage business in Europe, where products like our Q-Flip are steadily replacing plastic ring carriers. Having a beverage packaging innovation team co-located with a modern new production facility allows us to showcase our capabilities to more customers, more often.

Speaker Change: In Europe, we opened our new Bristol UK beverage packaging and innovation facility.

Speaker Change: Bristol's new space is roughly double the size we had previously.

Speaker Change: It is now well positioned to support our growing beverage business in Europe.

Speaker Change: Products like our Q blip are steadily replacing plastic green carriers.

Speaker Change: Having the beverage packaging innovation team co located with a modern new production facility.

Speaker Change: Laos us to showcase our capabilities to more customers more often.

Stephen R. Scherger: Meanwhile, the Bell Acquisition, which we closed in the third quarter of 2023, has significantly extended our reach and expanded our capabilities in the food service market and our geographic reach in food markets. Another great thing about Bell is that it brings us real opportunities to grow in both of those markets with plenty of room to increase volumes at those locations without significant additional capital. Turning to the outlook on slide 12.

Speaker Change: Meanwhile, the <unk> acquisition, which we closed in the third quarter of 2023.

Speaker Change: Has significantly extended our reach and expanded our capabilities in the foodservice market.

Speaker Change: And our geographic reach and food markets.

Speaker Change: The great thing about Bell is that it brings us real opportunities to grow in both of those markets with plenty of room to increase volumes at those locations.

Speaker Change: Without significant additional capital.

Speaker Change: Turning to the outlook on slide 12.

Stephen R. Scherger: We expect to see an acceleration in volumes as the year progresses and positive sales growth for the full year. That is, of course, excluding the impact of the sale of Gus. As Mike has mentioned, our innovation sales are off to an excellent start, and we are on track to deliver $200 million of innovation sales growth this year. The Augusta sale should close tomorrow, May 1st, and net proceeds are expected to be approximately $550 million.

Speaker Change: We expect to see an acceleration in volumes as the year progresses.

Speaker Change: Positive sales growth for the full year.

Speaker Change: That is of course, excluding the impact of the sale of Augusta.

Speaker Change: As Mike has mentioned our innovation sales are off to an excellent start and we are on track to deliver $200 million of innovation sales growth this year.

Speaker Change: The Augusta sale should close Tomorrow may one.

Speaker Change: Net proceeds are expected to be approximately $550 million.

Stephen R. Scherger: We've made some updates to our guidance on slide 13. As a reminder, the guidance we provided in February included a full year of Augusta production. With the sale expected to close tomorrow, we have updated guidance to reflect expected results for the four months that we will have owned Augusta. Again, keep in mind that we historically operated our bleached paperboard manufacturing facilities as a system, and so the $100 million and $33 million of adjusted EBITDA at the midpoint represent the book of business that we are selling along with the Augusta facility rather than how Augusta might have performed independently. We have also narrowed the guidance range for the business. As such, the only change to the midpoint is to reflect the partial year of ownership of Augusta.

Speaker Change: We've made some updates to our guidance on slide 13.

Speaker Change: As a reminder, the guidance we provided in February included a full year of Augusta production.

Speaker Change: With the sale expected to close tomorrow.

Speaker Change: We have updated guidance to reflect expected results for the four months that we will have owned Augusta.

Speaker Change: Again keep in mind that we historically operated our bleached paperboard manufacturing facilities.

Speaker Change: System.

Speaker Change: And so the $100 million and $33 million of adjusted EBITDA at the midpoint represent.

Speaker Change: Represent the book of business that we are selling along with the Augusta facility rather than how it just might.

Speaker Change: It might have performed independently.

Speaker Change: We have also narrowed the guidance range for the business.

Speaker Change: As such the only change to the midpoint is to reflect the partial year of ownership of Augusta.

Stephen R. Scherger: And while we don't provide quarterly guidance, I do want to point out that we expect our second quarter EBITDA to be impacted by roughly $50 million versus the year-ago quarter, which includes approximately $40 million related to the sale timing and the exclusion of two months of contribution from Augusta and approximately $10 million of higher planned maintenance costs. That will impact the second quarter EBITDA margin, but we continue to expect full-year margins consistent with our guidance and the targets we established with our Vision 2030 long-term financial model.

Speaker Change: And while we don't provide quarterly guidance I do want to point out that we expect our second quarter EBITDA to be impacted by roughly $50 million versus the year ago quarter.

Speaker Change: Which includes approximately $40 million related to the sale timing and the exclusion of two months of contribution from Augusta and approximately $10 million of higher planned maintenance costs that will impact the second quarter EBITDA margin, but we continue to expect full year margins consistent with our guidance.

Speaker Change: And the targets, we established with our vision 2030 long term financial model.

Stephen R. Scherger: Turning to slide 14 and stepping back for a moment, let me remind you of those Vision 2030 financial targets. Our base financial model is about consistent, reflecting the strength of the consumer packaging business we have built. Low Single-Digit Sales Growth, Mid Single-Digit Adjusted EBITDA Growth, and High Single-Digit Adjusted EPS Growth capture our outlook for the business over the next several years. Our customers decide the timing of product

Speaker Change: Turning to slide 14, and stepping back for a moment, let me remind you of those vision 2030 financial targets.

Speaker Change: Our base financial model, it's about consistency.

Speaker Change: Reflecting the strength of the consumer packaging business, we have built.

Speaker Change: Low single digit sales growth mid single digit adjusted EBITDA growth and high single digit adjusted EPS growth.

Speaker Change: Capture our outlook for the business over the next several years.

Speaker Change: Our customers decide the timing of product launches, therefore innovation sales can be lumpy.

Stephen R. Scherger: Therefore, Innovating Sales and Belonging. We could be a little higher or lower than these annual targets in any given year. We have the assets and the capabilities we need to reach these goals. And our 5% of sales target for capital spending leaves plenty of room for discretionary investments that will make us a better and more capable consumer packaging leader. Turning to slide 15.

Speaker Change: So we could be a little higher or lower than these annual targets in any given year.

Speaker Change: We have the assets and the capabilities, we need to reach these goals.

Speaker Change: And our 5% of sales target for capital spending leaves plenty of room for discretionary investments that will make us a better and more capable consumer packaging later.

Speaker Change: Turning to slide 15.

Stephen R. Scherger: We are in transition, between Vision 2025's Substantial Investment Program and Vision 2030's focus on execution and cash flow. That shift really becomes clear as we move past peak capex this year. In 2025, the drop in capex alone should drive a $200 million improvement in cash flow. In 2026 and 2027, we will see the incremental EBITDA benefit from the Waco investment, and through 2030, we expect to generate upwards of $5 billion of

Speaker Change: We are in transition.

Speaker Change: <unk> vision 2025 substantial investment programs.

Speaker Change: In vision 2000, thirteen's focus on execution and cash flow.

Speaker Change: That shift really becomes clear as we move past peak Capex this year in.

Speaker Change: In 2025, the drop in Capex alone should drive a $200 million improvement in cash flow.

Michael P. Doss: In 2026, 27, we will see the incremental EBITDA benefit from the Waco investment.

Michael P. Doss: And through 2030, we expect to generate upwards of $5 billion of cash.

Stephen R. Scherger: We will deploy that cash to drive returns for our stockholders, with benefits for all of our stakeholders. Reinvesting to keep our business strong and to maintain our leadership position will always come first. We believe that a solid dividend that grows over time represents appropriate and responsible capital allocation. Equally important is maintaining a strong financial position. I don't want to be clear about how we think about lime... With the substantial and increasing cash flow we expect to generate, we plan to reduce leverage over time. But we will remain opportunistic, so our debt levels may fluctuate. You saw them rise modestly this quarter, for example.

Speaker Change: We will deploy that cash to drive returns for our stockholders.

Stephen R. Scherger: With benefits for all of our stakeholders.

Speaker Change: Reinvesting to keep our business strong and to maintain our leadership position will always come first.

Speaker Change: We believe that a solid dividend that grows over time represents.

Speaker Change: It's appropriate and responsible capital allocation.

Speaker Change: Equally important is maintaining a strong financial position.

Speaker Change: I don't want to be clear about how we think about leverage.

Stephen R. Scherger: With the substantial and increasing cash flow, we expect to generate.

Stephen R. Scherger: Plan to reduce leverage over time.

Speaker Change: But we will remain opportunistic.

Stephen R. Scherger: Our debt levels may fluctuate you saw them rise modestly this quarter for example.

Stephen R. Scherger: As we see it, we already have a business capable of being investment grade. We will only pursue an investment grade credit rating when doing so brings the most benefit for our stockholders. We view share repurchase as an attractive way to return excess cash to stockholders, and we continue to review every potential capital deployment against the alternative of share repurchase. As I said a moment ago, we have the assets and capabilities we need to reach our financial target. We will, of course, always consider Tuck Under M&A that can make our company's sustainable consumer packaging portfolio even stronger. As we have discussed, the bar for M&A is set fairly high right now.

Stephen R. Scherger: As we see it we already have a business capable of being investment grade.

Speaker Change: We will only pursue an investment grade credit rating when doing so brings the most benefit for our stockholders.

Speaker Change: We view share repurchase as an attractive way to return excess cash to stockholders and.

Stephen R. Scherger: And we continue to review every potential capital deployment against the alternative of share repurchase.

Stephen R. Scherger: As I said, a moment ago, we have the assets and capabilities, we need to reach our financial targets.

Stephen R. Scherger: We will of course always considered tuck under M&A that can make our company's sustainable consumer packaging portfolio even stronger.

Speaker Change: As we have discussed the bar for M&A is set.

Speaker Change: Fairly high right now.

Operator: We've included some supplemental information as an appendix for your use in modeling. That concludes our prepared remarks. Let's turn the call back to the operator to begin the question and answer session.

Stephen R. Scherger: We've included some supplemental information as an appendix for use in modeling.

Speaker Change: That concludes our prepared remarks, let's turn the call back to the operator to begin the question and answer session operator.

Operator: Thank you. If you would like to ask a question during today's call, please press star one on your telephone keypad now. When preparing to ask your question, please ensure you are unmuted locally. Politely asked questioners limit themselves to one question and one follow-up each so that we may process the queue in good time. Our first question comes from Mark Weintraub from Seaport Research Partners. Mark, your line is open, please go ahead.

Speaker Change: Thank you.

Mark Adam Weintraub: Like to ask a question on todays call. Please press star one on your telephone keypad now with the parents ask two questions. Please ensure you should Luckily Columbia ask questioners to limit themselves to one question and one follow up each process to queue in good time.

Operator: Our first question comes from Mark Weintraub from Seaport Research Partners. Your line is open. Please go ahead.

Mark Adam Weintraub: Thank you. First, a real quick and simple math question. So it seems that Augusta, balance of the year, 65 to 70, I'm sorry, 70, a 65 to 70 million impact on EBITDA. Since you highlighted 40 million in the second quarter, does that mean the second half is only 25 to 30 million? Hey, Mark, Mark, and Steve, I think your math is directionally right, most of the time.

Mark Adam Weintraub: Thank you first of all real quick simple math question.

Mark Adam Weintraub: So it seems that Augusta.

Speaker Change: Balance of the year 65 to 70, I'm sorry 70.

Speaker Change: A $65 million to $70 million impact on EBITDA since you highlight $40 million in the second quarter does that mean, the second half, it's only $25 million to $30 million.

Speaker Change: Hey, Mark to market, Steve I think.

Mark Adam Weintraub: That's directionally right most of the earnings profile last year with our bleach paperboard facilities incurred in the first half of the year.

Mark Adam Weintraub: Hey, Mark, Mark, and Steve, I think your math is directionally right. Most of the earnings profile last year with our lead paperboard facilities incurred in the first half of the year; we took very meaningful market-related downtime in the second half of the year. We had almost $100 million of market-related downtime in the second half of the year. So, yes, second half EBITDA is much more modest. Most of the comparisons are relative to the.

Mark Adam Weintraub: We took very meaningful market related downtime in the second half of the year, we had almost $100 million of.

Mark Adam Weintraub: Market related downtime in the second half of the year. So yes second half EBITDA is much more modest.

Mark Adam Weintraub: Most of the comparisons relative to the.

Mark Adam Weintraub: Earnings decline here in Q1, as well as in Q2, where we also begin to not own the facility, is where you see most of the reduction. Okay, thank you. And then second, at the start of the year, you guys announced

Mark Adam Weintraub: Earnings declined here in Q1 as well as in Q2, where we also begin to knock on the facility.

Mark Adam Weintraub: And where do you see most of the reduction.

Mark Adam Weintraub: Yeah.

Speaker Change: Okay. Thank you and then second.

Mark Adam Weintraub: Started the year, you guys announced February price hikes on the U K in CRB.

Mark Adam Weintraub: Okay, thank you. And second, you know, at the start of the year, you guys announced February price hikes on CUK and CRB. To date, these increases have not been reflected in pulp and paper week. So there are two related questions on that one. How do business dynamics look to you now versus how they did when you made those announcements? And then, second, practically speaking, if they still look as good or better than they did then, would you need to announce again, or do you consider the February increases to still be in effect? Yeah, thanks, Mark. So, you know, from a business perspective.

Mark Adam Weintraub: To date these increases have not been reflected in pulp and paper week.

Mark Adam Weintraub: So kind of two two related questions on that one how do business dynamics look to you know versus how they did when you made those announcements.

Mark Adam Weintraub: And then.

Speaker Change: Practically speaking.

Mark Adam Weintraub: They still look as good or better than they did then would you need to be announcing again or do you consider that February increases to still be live.

Speaker Change: Yeah. Thanks, Mark So you know.

Mark Adam Weintraub: From a business standpoint, we as you've seen it in the guidance that we just kind of laid out today, we expect a continuing strengthening in the second quarter and then in the second half of the year. So at a high level, that's how we're viewing the markets.

Michael P. Doss: of the Year. So at a high level, that's how we view the markets that we sell in. And again, by way of reminder, when we talk about markets, we're talking about the 95% of everything we sell that winds up in a package. And we're not specifically speaking about paperboard. I think that's an important distinction to make, particularly now, given, as we've talked about today, that tomorrow, the Augusta Mill will no longer be something that we own. You know, we choose to make paperboard, where we have higher ROIC and a competitive advantage. But we also buy a lot of paperboard on the open market, both here and in Europe.

Michael P. Doss: That we sell it at a time and again by way of reminder, when we talk about markets, we're talking about the 95%.

Michael P. Doss: Everything we sell this mindset that a package.

Michael P. Doss: And we're not specifically speaking about paperboard I think that's an important distinction to make particularly now given the.

Michael P. Doss: <unk> talked about today that come tomorrow.

Michael P. Doss: Thus no longer would be something that we own.

Michael P. Doss: We choose to make paperboard, where we have higher ROIC.

Michael P. Doss: The competitive advantage, but we also buy a lot of paperboard on the open market both here and in Europe, and so as you kind of think about what that looks like that's.

Michael P. Doss: And so, as you kind of think about what that looks like, that's how I think you really have to model it going forward, or how I'd ask you to model it going forward. Regarding the announcements that we made earlier this year, we're still actively implementing those, and the agreements that we have, and we have had success. So I'm going to leave it at that. We don't talk about future pricing actions that we might take, so I'm not going to do that here.

Michael P. Doss: That's how I think you really got to model it going forward or how I'd ask you to modeling going forward in regards to the.

Michael P. Doss: The announcements that we made earlier this year we are still.

Michael P. Doss: Actively implementing dose.

Michael P. Doss: The agreements that we have.

Michael P. Doss: <unk> had success so I'm.

Michael P. Doss: I'm going to leave it at that I don't we don't talk about future pricing actions that we would take so I'm not going to do that here, but.

Michael P. Doss: But in general, you see it. And I think I'd also point back to the fact that, with that strategy and that execution, we generated a 19.6% EBITDA margin in the first quarter. So it's working. We really are moving with the end-use consumer, and we are finding ways

Michael P. Doss: And generally you see it and I think I'd also point back to the fact that it.

Michael P. Doss: With that strategy and that execution, we generated a 19, 6% EBITDA margin in the first quarter. So it's working we really are moving with the end use consumer and we are finding ways to pass along our input cost inflation to customers over time, which is what you'd expect us to.

Michael P. Doss: Okay. I appreciate this. Just to clarify, if I could. Because I know you talked about you're moving towards eliminating third-party indexes as well. It's not necessarily clear from the outside how much of that's been accomplished and what replaces it, but am I right to understand that with the price increases that you've announced, perhaps some of them you might be getting from your customers, whether or not it's reflected by pulp and paper week, and that being distinct from cost inflators?

Michael P. Doss: Okay. I appreciate that just like just to clarify if I could so because I know you talked about youre moving towards eliminating third party indexes as well not clear enough to say from the outside how much of that's been accomplished and what replaces it but.

Michael P. Doss: Am I right to understand that.

Michael P. Doss: With the price increases that you've announced that perhaps some of them.

Michael P. Doss: You might be getting from your customers, whether or not it's reflected by pulp and paper week and that being distinct from cost and flavors and things like that but from price increase announcements that you come to them with it.

Michael P. Doss: That'd be a safe assumption for you to make. And again, all those relationships are proprietary. So we're not going to break out percentages, but we are actively implementing those increases where we have the opportunity to do so. Okay.

Michael P. Doss: That'd be a safe assumption for you to make and again all of those relationships are proprietary so we're not going to break out percentages, but we are actively implementing those increases but we are we have the opportunity to do so.

Michael P. Doss: Okay, I appreciate that. Thank you.

Speaker Change: Okay I appreciate that thank you.

Operator: The next question comes from Lewis Merrick from BNP Paribas. Lewis, your line is open, please go ahead. Good morning, and thank you for taking my question.

Lewis Merrick: The next question comes from Louis <unk> from BNP Paribas.

Lewis Merrick: Line is open. Please go ahead.

Operator: Yeah.

Lewis Merrick: Good morning, and thank you for taking my question.

Lewis Merrick: Good morning, and thank you for taking my question, too, if I may. Focusing on the food service end market, we've heard from some of the major food service players talk about this slowdown in customer traffic growth and a shift to cheaper menu items. How does the shift from the premium end of food service to the more value end of food service impact you? I'll leave my follow-up question after this question.

Lewis Merrick: If I may.

Lewis Merrick: Focusing on the food service end market.

Lewis Merrick: Some of the major foodservice place to talk about the business slowdown in customer traffic growth.

Lewis Merrick: Shifting to cheat and menu items.

Lewis Merrick: The shift from the premium end of foodservice.

Lewis Merrick: You and foodservice.

Speaker Change: Okay My follow up.

Speaker Change: Next question.

Speaker Change: Okay. So from our standpoint, there was as you saw in Q1, we still are seeing an acceleration our ninth quarter in a row of quarter on quarter gains.

Michael P. Doss: Our ninth quarter in a row of quarter-on-quarter gains, you know, in sales and that category. So we have not seen a trade-down there per se, at least in the products that we're selling to our customers.

Michael P. Doss: Sales in that category. So we have not seen a trade down there per say at least in the products that we're selling to our customers.

Lewis Merrick: Okay, that's clear. Thank you for that.

Michael P. Doss: Okay.

Speaker Change: Yeah. Thank you for that.

Lewis Merrick: And also, you flagged that WACO will be at 160 million EBITDA run rate after two years of operations. Is that the fully ramped contribution? Or can we expect a bit more trailing into the third year for that project?

Speaker Change: And also you've flagged the Waco $160 million EBITDA run rate she has operations.

Speaker Change: Not fully ramped contribution can we expect more.

Lewis Merrick: Right.

Lewis Merrick: Yes.

Lewis Merrick: Yeah.

Stephen R. Scherger: Dale Lewis and Steve, the 160 million is what we have direct line of sight to in the first two years of the ramp up, similar to what we saw with Kalamazoo. And given that we'll be utilizing a lot of the same capabilities, we see the kind of vertical ramp that we saw with Kalamazoo occurring in Waco. It'll be a combination of cost to take out, and overall lower cost to produce and support some of our growth.

Speaker Change: Yeah look Steve.

Speaker Change: 160 million is what we have direct line of sight to in the first two years.

Stephen R. Scherger: The ramp up similar to what we saw with Kalamazoo with given that will be utilized at a lot of the same capabilities. So we see a kind of vertical ramp that we saw with Kalamazoo occurring in Waco, it'll be a combination of cost take out overall lower cost to produce.

Stephen R. Scherger: And to support some of our growth beyond that you would expect to continue to see us to improve upon the business year over year through our own productivity initiatives.

Stephen R. Scherger: Beyond that, you would expect to continue to see us improve the business year over year through our own productivity initiatives and more efficiencies. But the line of sight to that first 160 million over the first two years is what we can see through cost and supportive of our growth.

Stephen R. Scherger: More efficiencies, but that's a line of sight to that first time 60 million over the first two years.

Stephen R. Scherger: What we can see through cost and supportive of our growth.

Operator: The next question comes from Ghansham Panjabi from Baird. Ghansham, your line is open, please go ahead.

Stephen R. Scherger: Yeah.

Ghansham Panjabi: Many thanks.

Ghansham Panjabi: Thank you.

Operator: The next question comes from Ghansham Panjabi from Baird Ghansham. Your line is open. Please go ahead.

Ghansham Panjabi: Thank you. Good morning, everybody. Alright, I've got you. Good morning. So I guess, you know, if we go back to slide five, we have all the breakdowns across the end markets and so on, you know, beverage and food service, clearly, we're improving in the first quarter, at least year over year. But are you surprised given the level of destocking that was in food and some of the other categories like household, etc., that Q1 did not track a little bit better?

Ghansham Panjabi: Thank you good morning, everybody.

Speaker Change: I gotcha okay.

Speaker Change: Morning, So.

Ghansham Panjabi: I guess, if we go back to slide five we have all the breakdown across the end markets and so on.

Ghansham Panjabi: Beverage and food services, clearly were improving in the first quarter at least year over year.

Ghansham Panjabi: Are you surprised given the level of Destocking that was in food and some of the other categories like household et cetera that Q1 did not track a little bit better.

Michael P. Doss: Well, certainly from the standpoint that we were 1% off of where we kind of indicated we'd be. Yeah, I mean, there was a little bit there that was specifically on the food side of the business; we saw a little weaker, you know, cereal and frozen pizza market, both in the Americas and internationally. We did see some improvement, though, in dry foods and bakery items, you know, so it was kind of a little bit of a mixed bag there, for sure.

Ghansham Panjabi: Well certainly from the standpoint Europe.

Michael P. Doss: But 1% off of where we are.

Michael P. Doss: Kind of indicated we'd be yeah, I mean, there was a little bit there that was specifically on the food side the business, we saw a little weaker.

Michael P. Doss: Weaker cereal and frozen pizza market, both in the Americas and international.

Michael P. Doss: Did see some improvement, though in dry foods bakery items. So it was kind of a little bit of a mixed bag there.

Speaker Change: For sure but yeah.

Michael P. Doss: But yeah, you know, I think as we look at it, Easter was really just the way it played out this year. Some years, Easter is really busy. On Friday, we're shipping strong and hard. Our customers are running this year. They didn't. And so it impacted us in the quarter, but we've seen a good correction on that here in April.

Michael P. Doss: As we look at Easter was really just the way. It played out this year. Some years Easter is really busy Friday, we're shipping strong and hard our customers are running this year they did not.

Michael P. Doss: So it impacted us in the quarter, but we've seen a good correction on that here in April and our confidence is high it will inflect growth.

Ghansham Panjabi: Okay, thanks for that, Mike. And then, in terms of inflation, so you know, clearly, we're seeing a sort of a sequential pulse of inflation across many different upstream inputs, OCC, energy, and so on and so forth. You know, what are the offsets? I mean, I know you're sort of reiterating guidance on an EBITDA basis for the rest of the year, if you're just out for Augusta, etc. But, you know, if inflation is a little bit higher, maybe volumes are tracking a little bit lower, what are the positive offsets that give you comfort on EBITDA?

Mike: In the second quarter in the second half of this year Ghansham.

Ghansham Panjabi: Okay. Thanks for that Mike and then in terms of inflation. So clearly, we're seeing a sort of a sequential pulse of inflation across many different upstream inputs OCC energy and so on and so forth.

Ghansham Panjabi: What are the offsets I mean, I know you're sort of reiterating guidance on an EBITDA basis for the rest of the year, if you adjust out for a guest et cetera.

Ghansham Panjabi: It's a little bit higher maybe volumes are tracking a little bit lower what are the positive offsets that give you comfort on the EBITDA.

Stephen R. Scherger: Yeah, Ghansham and Steve, I think you've touched on it. In the first quarter, as an example, we had inflation.

Ghansham Panjabi: Yeah, Ghansham, it's Steve I think you touched on it in the first quarter as an example, we had inflation as you noted.

Stephen R. Scherger: We had inflation, as you noted, OCC obviously up, some logistics costs were up. For us, those were more than offset by deflation that we saw in wood, energy, primarily NatGas, and overall in our chemicals and residents. So those were playing, you know, relatively modest. The mark-to-market today remains relatively modest. That being said, you're correct.

Stephen R. Scherger: OCC, obviously off some logistics costs.

Stephen R. Scherger: We're up for us those were more than offset by deep.

Stephen R. Scherger: Deflation that we saw at wood.

Stephen R. Scherger: Energy, primarily Nat gas and overall in our chemicals and resins. So those were playing.

Stephen R. Scherger: Relatively modest mark to market today remains a relatively modest that being said you are correct. There is some inflation out there that we are actively looking to and we will continue.

Stephen R. Scherger: There's some inflation out there that we're actively looking to manage. As Mike said, volumes were about 1% shy of our expectations. Overall, everything else on the top line played out as we expected, and we were very pleased with the nearly 20%, even dollar, margins. Inside the business, overall productivity was very good. Obviously, we were matching demand with supply on the open market paperboard side, which was well documented, but the core packaging business performed very well in terms of across all our packaging platforms. Productivity was strong, and it successfully offset other inflationary items.

Stephen R. Scherger: To manage.

Stephen R. Scherger: As Mike said volumes were about 1% shy of our expectations overall everything else on the top line played out.

Stephen R. Scherger: We expected and we were very pleased with the nearly 20% EBITDA margins.

Stephen R. Scherger: Inside of the business overall productivity was very good obviously, we were matching.

Stephen R. Scherger: Demand was supply on the open market paperboard side, which was well chronicled but the core packaging business performed very well in terms of across our packaging platforms productivity was strong and successfully offset other inflationary items.

Michael P. Doss: I think maybe just a little bit to add to that; we tried to give you a little insight into the seasonality of our business, which is, you know, kind of. The 23-24 setup, really, because of the stocking that occurred in 23, really kind of sets itself a little bit more than we usually would see for a first half and second half, you know, for our business. And that's one of the things that gives us a fair amount of confidence too, because as you heard Steve say, we took a fair amount of market-related downtime, economic downtime, in the second half of last year. Based on what we see now on the back orders that we have and how we're running, we don't see that.

Mike: And I think maybe just a little bit to add onto that if we tried to give you a little insight.

Michael P. Doss: And then to the seasonality of our business, which just kind of.

Michael P. Doss: Distinct it's not major in a normal year, but the 'twenty three 'twenty four set up really because of the destocking that occurred in 23 really kind of set to sell a little bit more than we usually would see for a first half second half for our business and that's one of the things that gives us a fair amount of confidence too because as you heard Steve say, we took a fair amount of it.

Michael P. Doss: Market related downtime economic downtime in the second half of last year based on what we see now with back orders that we have and how we're running we don't see that and again against exposure to bleached paperboard on the open market side.

Michael P. Doss: Is that going to be something that we manage going forward with so you put all those things together, we see a nice setup for the balance of the year.

Operator: The next question is from Phil Ng from Jeffreys. Phil, your line is open. Please go ahead.

Philip H. Ng: Thank you for that.

Philip H. Ng: The next question is from <unk> <unk> from Jefferies.

Philip H. Ng: Good morning. This is actually John Lennigan on for Phil.

Philip H. Ng: Is open please go ahead.

John Robert Dunigan: Good morning. This is actually John on again on for Phil. Thank you for taking the time.

John Lennigan: Thank you for taking the time. I wanted to first ask about how much visibility you have into those innovation sales. I mean, it would be a little bit lighter than I would have thought to just start off the year. But obviously, it's got to be ramping up. And you talked about some of the wins that you already have. Are those already locked in? Or is there just some conversations that are ongoing at this point that give you some assurance in the pipeline for the back half? I appreciate the question, John. I mean, in terms of those kind of sales and innovation sales, and you mentioned 37 million we achieved in Q1, you know, the selling.

John Lennigan: Wanted to first ask about how much visibility you have into those innovation sales.

John Lennigan: Yeah.

John Lennigan: It's a little bit lighter than I would've thought to just start off the year, but obviously, it's got to be ramping up and you talked about some of the wins that you already have.

John Lennigan: Are those are those already locked in or is there just.

John Lennigan: Some conversations that are ongoing at this point that gives you some assurance in the pipeline for the back half of the year.

Speaker Change: No. Appreciate the question John I mean in terms of those kind of sales of innovation sales and you mentioned 37 million we achieved in Q1.

John Lennigan: The selling cycle on that is out six to nine months. So we got really good visibility into kind of the flow through of what that looks like and our confidence level is high we will meet our 200 million dollar number that we put out there for 2024.

John Lennigan: I appreciate the question, John. I mean, in terms of those kind of situations,

John Lennigan: Okay, great. And then at the Augusta sale, if I remember correctly, the transaction value was at 700. I think you were expecting a little bit over 100 million in tax. The net proceeds are calling out now at 550, a little bit lower than I had been expecting, although I know the number was supposed to be somewhere in the 500 range. I was thinking more of a high five. Is there something that that changed there? Yeah, John and Steve, I think at our investor day, we were at 550 million in net proceeds, and there was no change to that. So 700 million

John Lennigan: Okay, Great and then on the.

John Lennigan: Augusta sale if.

Speaker Change: If I remember correctly the the transaction value was at 700, and I think you were expecting a little bit over $100 million in tax net proceeds you're calling out now of $5 50, a little bit lower than I had been expecting although I know that number was supposed to be somewhere in the 500 range I was thinking more high five.

Speaker Change: Is there something that changed there.

Speaker Change: Anything to note or call out or that was kind of inline with your expectations originally.

Stephen R. Scherger: Yeah, John and Steve, I think on investor day, we were at $550 million in net proceeds, and there was no change to that. So $700 million transaction, $550 million after the taxes associated with the tax gain on the business. So no change relative to the $550 million that we'll have available to us tomorrow.

John Lennigan: Yes, John It's Steve I think at our Investor Day, we were at $550 million in net proceeds and no change to that $700 million transaction and $5 50.

Stephen R. Scherger: After the taxes associated with the <unk>.

Stephen R. Scherger: Gain on the business so no change relative to the $550 million that we will have available to us tomorrow.

John Lennigan: Got it. All right. Thank you very much. I'll turn it over.

Speaker Change: Got it alright, thank you very much I'll turn it over.

Scott: Thanks Scott.

Operator: The next question comes from George Staphos from Bank of America. George, your line is open. Please go ahead.

John Lennigan: The next question comes from George Staphos from Bank of America. Your line is open. Please go ahead.

George Leon Staphos: Thanks very much. Hi guys. Thanks for the detail.

George Leon Staphos: Thanks very much.

George Leon Staphos: Hi, guys. Thanks for the detail.

George Leon Staphos: I guess maybe.

George Leon Staphos: I guess maybe a different take on a similar question you had earlier today, as you look at the first quarter and the volume that you ultimately had across the end market, where was the biggest surprise? And who are you attributed to? And you said you've had a nice rebound into April and the second quarter. Can you tell us what types of volumes you're seeing early in the quarter across your big end markets? Yeah, we can give you a little insight into that, George.

George Leon Staphos: Different take on a similar question you've had earlier today.

George Leon Staphos: And as you looked at the first quarter.

George Leon Staphos: And the volume that you ultimately had across the end markets, where it was the biggest surprise and what do you attribute it to and you said you've had a nice.

George Leon Staphos: Rebound into April and the second quarter can you tell us what types of volumes Youre seeing.

George Leon Staphos: Early in the quarter across your your big end markets.

Michael P. Doss: Yeah, give you a little insight into that, George. So again, at a high level, you know, we talked about in our prepared comments and with Ghansham, we saw stronger food service and beverage, and beverage was a strong quarter for us. And we got a couple things emailed to us around, you know, was that some pull forward. The reality of it is, for us, it was pretty de minimis. So our beverage is off to a very solid start in the second quarter. So we expect that to be good food service continues to, you know, ramp up. I mean, it's really about food, you know, in many ways.

Michael P. Doss: Yes, it can be a little insight into that George So again at a high level, we talked about.

Michael P. Doss: Baird Tom mentioned with John So you know, we saw stronger foodservice and beverage beverage was a strong quarter for us.

Michael P. Doss: Hi.

Michael P. Doss: We got a couple of things emailed into us around that some pull forward. The reality of it is for US It was pretty de Minimis. So our beverage is off to a very solid start to go to the second quarter. So we expect that to be good foodservice continues to.

Michael P. Doss: Ram.

Michael P. Doss: It's really a bulk food in many ways and as Scott said with the Destocking you're.

Michael P. Doss: And as Ghansham said, with, you know, the stocking being largely behind us, "Why didn't you see more?" And all I can tell you is that the categories, as I mentioned, cereal and frozen pizza, usually those are big categories for us. They were a little slower in Q1.

Michael P. Doss: Being largely behind us.

Michael P. Doss: Why did you see more and all I can tell you said the categories as I mentioned cereal and frozen pizza, usually those big categories for us they were a little slower in Q1.

Michael P. Doss: We expect them to bounce back during the course of the year because consumption doesn't change that much. Sometimes it can be how, you know, our customers choose to run their production schedules and those types of things. So that can have an impact on it. In terms of households, we saw some declines in tissue, soaps, and cleansers.

Michael P. Doss: We expect them to bounce back during the course of the year.

Michael P. Doss: Range that much sometimes it can be how our customers choose to run their production schedules and those types of things. So that can have an impact on it.

Michael P. Doss: Terms of household we saw some declines in tissue soaps and cleansers.

Michael P. Doss: The more detail that we usually give you there. But on the other side of that, we saw, you know, a strong market for air filter frames. So, you know, there tends to be a bit of a mixed bag.

Speaker Change: A little more detailed than we usually give you there but.

Michael P. Doss: But on the other side of that we saw a strong market for air filter frame. So there tends to be a bit of a mixed bag and I think it's important to remember relative to where we were in the middle of February we're off about 1% from what we thought we'd be which is pretty darn close at the end of the day.

George Leon Staphos: And I think it's important to remember, relative to where we were in the middle of February, we're off about 1% from what we thought we'd be, which is pretty darn close, you know, at the end of the day, and George. I'm not picking at Mike, Mike, if I may, I'm not trying to pick at you guys about how you guys were on or off from your forecast. I'm trying to figure out from what you reported, what may be going on underneath the hood from your customers' perspective so that we can model on a going forward basis.

George Leon Staphos: And George mentioned the second half.

George Leon Staphos: I'm not picking on Mike, Mike If I may I'm not trying to pick on you guys were on or off for me forecast I'm trying to figure out.

George Leon Staphos: From what you reported what maybe going on underneath the hood from your customers' perspective.

George Leon Staphos: We model on a going forward basis, so it sounds like cereal and frozen were weak, but your customers don't see then this is really what I'm getting at don't see a change in underlying consumption from what they're seeing.

George Leon Staphos: So it sounds like Cereal and Frozen were weak, but your customers don't see that, and this is really what I'm getting at, don't see a change in underlying consumption from what they're seeing, i.e. versus in relative inflation or anything like that. I'm sorry, go ahead. No, that's a fair statement. That's what we've heard. And of course, we, like you, have read many of their releases and their prints that have been coming out here over the last week or so.

Speaker Change: E versus you know relative to inflation or anything like that.

George Leon Staphos: Sorry.

Speaker Change: No. That's it that's a fair statement, that's what we've heard and of course, we we like you read many of their leases and their prints that have been coming out here over the last week or so and we will see some more over the next week and we've not seen anything to suggest diff.

Speaker Change: Difference from kind of the recovery.

George Leon Staphos: From the Destocking that occurred in 2023, largely for many of those customers I think the question becomes well.

George Leon Staphos: And we'll see some more over the next week. And we've not seen anything to suggest, you know, a difference from kind of the recovery and from the stocking that occurred in 2023, largely for many of those customers. I think the question becomes, how fast does it bounce back? I know everybody wants it to bounce back really, really quickly. But in terms of how we're thinking about it, it's a pretty conservative view. Okay

George Leon Staphos: Fast does it bounce back I know everybody wants it to bounce back really really quickly.

George Leon Staphos: From our standpoint, right now we've kind of modeled in kind of a steady state in the second quarter, we will see some improvement and we do expect it to accelerate quite a little bit in the second half of the year and again that's off of a lot easier comps I mean, if you remember last year, our comps were 5% I think 6% respectively in Q.

George Leon Staphos: Three in Q4 year on year, So when you model that in.

George Leon Staphos: Okay, Mike, just to that point, and then I had my second following the you said steady state. So we should assume that so far in April, you're running relatively flat, or you're actually up a little bit. And then my second question Understandably, because of Augusta, you're going to have a 50 million impact on EBITDA. So when we look either year on year or versus the first quarter sequentially, are we somewhere in the low 400s in EBITDA in terms of what you're sort of expecting for the quarter? Yeah, thanks, George. I'll take the first part of it. And the answer is yes, we're up a little bit here in April as we

Speaker Change: A three 4% bounce back for 2024, which is kind of how we're thinking about it it's pretty conservative.

Mike: A conservative view.

George Leon Staphos: Okay, Mike just to that point and then I had my second follow up the you said steady state. So we should assume that so far in April youre running relatively flat, where you are actually up a little bit and then my second question.

George Leon Staphos: Understandably because of Augusta youre going to have largely because of the gas so you're going to have a $50 million impact on EBITDA. So when we look either year on year or versus the first quarter sequentially or are we somewhere in the low four hundreds in EBITDA in terms of what you're sort of expecting for the quarter. Thank you.

Speaker Change: Yeah. Thanks, George I'll take the first part of it and the answer is yes, we're up a little bit here in April as we expect it to be on our company.

Mike: The Easter holiday weekend, and I'll, let Steve put a little finer point on Q2.

Stephen R. Scherger: Yeah, no George, you summarized it. Low fours in Q2. By reminder, it's a pretty intensive planned maintenance downtime quarter for us. We have two of our wood fiber facilities, ExarCana being one of them, down for normal planned maintenance. So that's a normal activity in the quarter, and then we have very limited planned maintenance downtime in the second half of the year. And what we expect is the elimination of other supply-demand market-related downtime in the second half of the year, of which we had significant amounts in the second half of last year.

Mike: Yeah, No George you summarized it low fours in Q2 five reminder.

Stephen R. Scherger: It's a pretty intensive planned maintenance downtime quarter for us we have two of our wood fiber facilities.

Stephen R. Scherger: <unk> being one of them down.

Stephen R. Scherger: Down for normal planned maintenance, so that's a normal activity in the quarter.

Stephen R. Scherger: Then we have very limited plant maintenance downtime in the second half of the year and what we expect is the elimination of other supply demand market related downtime in the second half of the year of which we had significant amounts.

Speaker Change: In the second half of last year so.

Stephen R. Scherger: So yes, you can do the midpoints on the EBITDAs. You can kind of see an 840, 940 kind of midpoint. And that holds up very well from what Mike just indicated. You know, 3-4% volumetric growth, good, strong productivity, and the ability to run our overall manufacturing facilities on demand. And that gives us confidence in the retention of the midpoint of the guide and the expectations we have for margins to continue to be in the 20% range on EBITDA.

Speaker Change: Yes, there's a you can do the midpoint on the Ebitdas kind of CNA 40, 940 kind of midpoint in.

Stephen R. Scherger: And that holds up very well from what Mike just indicated three 4% volumetric growth.

Stephen R. Scherger: Good strong productivity and ability to run our overall manufacturing facilities to demand and that gives us confidence.

Stephen R. Scherger: And the retention of the midpoint of the guide and the expectations. We have for margins continued to be in.

Stephen R. Scherger: In the 20% range on EBITDA.

Stephen R. Scherger: Yeah.

Operator: The next question comes from Matt Roberts from Raymond James. Matt, your line is open, please go ahead.

Speaker Change: Thank you gentlemen.

Stephen R. Scherger: Yeah.

Operator: Yeah.

Matthew Burke Roberts: Next question comes from Matt Robbins from Raymond James Your line is open. Please go ahead.

Matthew Burke Roberts: Hey, good afternoon, everybody. Thanks for the question.

Matthew Burke Roberts: Hey, good afternoon, everybody and thanks for the question.

Matthew Burke Roberts: If I could touch a little bit on the pricing strategy, have you seen any near-term interest?

Matthew Burke Roberts: If I could touch a little bit on the pricing strategy have you seen any near term impact on your market share or has there been any near term trade off in volumes for price and when you do present, new initiatives customers are there any certain metrics or cost inputs that you're able to demonstrate to warrant.

Michael P. Doss: Any near-term impact on your market share, or has there been any near-term tradeoff between volumes for price when you do present? Initiatives to customers, are there any certain metrics or cost inputs that you're able to demonstrate to warrant this price? Yeah, so the way I'd answer that question, Matt, is look, it's a competitive marketplace; we compete with a variety of different substrates and with different competitors that make the same things that we do. But that's not new.

Michael P. Doss: Those price changes.

Michael P. Doss: Okay.

Michael P. Doss: Yes, so the way I'd answer that question, Matt is look at <unk>.

Michael P. Doss: Marketplace, we compete with a variety of different substrates hand with different competitors that make the same things that we do but that's not new that's really been the competitive backdrop that we faced.

Michael P. Doss: You know, that's really been the competitive backdrop that we've faced ever since I started in this industry, you know, almost 35 years ago now. So what we have is, you know, we've got a very broad-based converting network that tends to be able to take care of what our customers need, and we have the capabilities in those package manufacturing facilities to be able to sell them the wraps, the trays, the cartons, different things that they need and, you know, really provide them with exceptional service and quality.

Michael P. Doss: Ever since I started in this industry.

Michael P. Doss: 35 years ago now so we.

Michael P. Doss: We have as you know.

Michael P. Doss: We've got a very broad base converting network it tends to be able to take care about what our customers need have the capabilities in those packaged manufacturing facilities to be able to sell them.

Michael P. Doss: <unk> cartons for things that they need.

Michael P. Doss: And you know really provide them exceptional service quality beyond that as we've talked about where it makes sense, where it can drive powerful higher ROIC fees and create competitive advantage we've invested.

Michael P. Doss: Beyond that, as we talked about, where it makes sense, where we can drive higher ROICs and create competitive advantage, we've invested, you know, in paperboard manufacturing. And then the grades that we manufacture post-Augusta, we are clearly the low-cost producer of those grades. And that allows us to be able to get an acceptable cost cap for return, the types of margins that Steve talked about, and be able to deal with, you know, a competitive situation that we face each and every day.

Michael P. Doss: And paperboard manufacturing.

Michael P. Doss: And then the grades that we manufacture post Augusta, we are clearly the low cost producer of those grades and that allows us to be able to get it.

Michael P. Doss: Acceptable cost of capital return and the types of margins that Steve talked about and be able to deal with.

Michael P. Doss: The competitive situation there.

Michael P. Doss: We do each and every day and so in terms of share loss, it's pretty de Minimis. You know there are some of those things that you would take a few next year are there.

Michael P. Doss: And so in terms of share loss, it's pretty de minimis. You know, there are some of those things that you take a few nicks here or there, but you also get some wins. And so really, from that standpoint, I won't spend a lot of time thinking about that dynamic. It's really our future, and our success will be driven by our innovation and our ability to drive new product sales. And as you know, our target this year is $200 million that we've got going there.

Michael P. Doss: So get some wins and so really from that standpoint, I won't spend a lot of time thinking about that dynamic, it's really our future and our success will be driven by our innovation and our ability to drive new product sales.

Michael P. Doss: You know our target this year is $200 million that we've got going there and then the balance of that is something that we just kind of do day in and day out.

Matthew Burke Roberts: And then, you know, the balance of that is something that we just kind of do day in and day out. That's helpful. Thank you, Mike. I appreciate that.

Matthew Burke Roberts: Yeah.

Matthew Burke Roberts: That's helpful. Thank you might appreciate that made me think of thinking a little longer term about Waco.

Unknown Attendee: [inaudible]

Unknown Attendee: , Mark Rueckert, Michael Rueckert, Anthony Pettinari, Mark Weintraub, Gabriel Hajde, Arun Viswanathan, Kieran Brun, Stephen Scherger, Matthew Roberts, Michael Roxland, Kieran Brun, Stephen Scherger, Matthew Roberts,

Unknown Attendee: Talk about the $50 million cut per day recycling capabilities what percent of your output does that represent and whats the cost trade off like versus existing procurement methods are there any incremental cost with procuring those cuts that we should consider I'm trying to think about the potential margin tradeoffs there.

Unknown Attendee: I'm trying to think about the potential margin trade-offs there. Take a step back and really think about how we price for value with our customers. And ultimately, the end-use consumer and our customers are driving for more circularity, more sustainability, and more convenience, our ability to work with our customers. And in the case of Waco, think about that Texas triangle we've talked about.

Unknown Attendee: take a step back and really think about how we price for value with our customers. And ultimately, the end-use consumer and our customers are driving for more circularity, more sustainability, and more convenience, our ability to work with our customers. And in the case of Waco, think about that Texas Triangle we've talked about collecting the cups that are within that region. Your customers will get some revenue just like the retailers get some revenue for OCC.

Speaker Change: Thank you.

Unknown Attendee: Take a step back and really think about how we price for value with our customers and ultimately the end use consumer and our customers are driving for more circularity more sustainability and more convenience our ability to work with our customers and in the case Waco think about that Texas triangle, we've talked about collecting cups that are within there.

Unknown Attendee: That region.

Unknown Attendee: Our customers will get some revenue just like the retailers get some revenue for OCC.

Unknown Attendee: So that's a positive for them. And they like that because it's also an answer, you know, for their ability to show their consumers they've got a license to use that cup without feeling guilty about it not being recycled. It's going to go back to us and Waco.

Unknown Attendee: So that's a positive for them and they like that because it's also an answer for you on ability to show their consumers they've got a license to use that call without feeling guilty, but not being recycled to just kind of go back to us in Waco, and I think part of it it's really not completely understood at a high level that's kind of.

Unknown Attendee: And I think the part of it that's really not completely understood at a high level is that it's going to be the first fiber source that we put down when we clean that paper cup up. It's incredibly high-value, bleached fiber, and we'll lay that fiber down on the very top of the paperboard that we manufacture in Waco. And historically, producers that make coated recycled paperboard have had to buy sorted office paper, and sorted office paper is increasingly becoming difficult to get.

Unknown Attendee: The first fiber source that we put down to clean that up.

Unknown Attendee: The paper Cup, it's incredibly high value bleached fiber and we'll lay that fiber down on the very top of the paperboard that we're manufacturing in Waco.

Unknown Attendee: And historically producers that make coated recycled paperboard or pad by sorted office paper sorted office paper has increasingly become difficult to get and when things get difficult to get it gets more expensive, which.

Unknown Attendee: And when things get difficult to get, they get more expensive, which is exactly what has been happening. So from our standpoint, over a multi-decade period of time, our ability to control our own destiny through stable pricing, helping our customers with their circularity and their sustainability goals really helps us, you know, create a competitive advantage there. And it's a very differentiated model than really any of our competitors are doing, and that's really what gets us so excited. So we'll see some cost stability there, work with our customers, and ultimately, we'll create a more sustainable package. And it's really exciting.

Unknown Attendee: Which is exactly what has been happening so from our standpoint over a multi decade period of time, our ability to control our own destiny with stable pricing, helping our customers with their circularity and their sustainability goal really helps us create competitive advantage there and it's a very differentiated model.

Unknown Attendee: Really any of our competitors are doing and that's really what gets us. So excited so we will see some cost stability. There we work with our customers and ultimately will create a more sustainable package and it's really exciting.

Unknown Attendee: Certainly. Thank you all again for your time.

Speaker Change: Certainly thank you all again for the time.

Operator: The next question comes from Arun Viswanathan from RBC Capital Markets. Maren, your line is open, please go ahead. Great, thanks.

Arun Shankar Viswanathan: The next question comes from Iron Viswanathan from RBC capital markets.

Arun Shankar Viswanathan: Please go ahead.

Arun Shankar Viswanathan: Great. Thanks.

Arun Shankar Viswanathan: I just wanted to get your thoughts on

Arun Shankar Viswanathan: Great, thanks. I just wanted to get your thoughts on, again, going back to some of the volume developments that we've observed and how you think about the rest of the year. So it seems like there was a little bit of a slowdown versus your commentary in February at Investor Day in certain of these categories, maybe including, as you noted, frozen and food and so on. As you look out into the rest of the year, are you hearing from your customers that, you know, potentially that was transitory and maybe that there will be some increased promotional activity?

Arun Shankar Viswanathan: Just wanted to get your thoughts on again going back to some of the volume developments that we've observed and how you think about the rest of the year. So it seems like there was a little bit of a slowdown versus your commentary in February at the Investor day in certain of these categories, maybe including as you noted.

Arun Shankar Viswanathan: Rosen and in food and so on.

Arun Shankar Viswanathan: As you look out into the rest of the year are you hearing from your customers that you know potentially that was transitory and maybe that there will be some increased promotional activity and related to that point.

Arun Shankar Viswanathan: And related to that point, when you think about the rest of the year, do you think that Q2 is going to look, you know, a lot like Q1 and maybe the second half is going to be higher as you, you know, get some of those gains back on the volume side? Thanks, Arun. So from our standpoint, really, our, our miss to our expectation that we talked about at the investor meeting.

Arun Shankar Viswanathan: When you think about the rest of the year do you think that Q2 is going to look.

Arun Shankar Viswanathan: Like Q1, and maybe the second half is going to be higher as you.

Arun Shankar Viswanathan: Get some of those gains back in on the volume side or it will be will it be different just given the sale of Augusta.

Speaker Change: Thanks, Arun so from our standpoint really are.

Arun Shankar Viswanathan: Our visit to our expectation that we talked about at the Investor day that 1% was really all about Easter I mean at the end of the day was around customers, taking a little bit more production downtime around the Easter holiday than we had anticipated they would bounce back here in April as we talked about we expect we expect the second quarter to be sequentially stronger than Q1.

Michael P. Doss: [inaudible] That's a little unusual, as I mentioned to Gansham, but it's really a function of the 23-24 stocking phenomenon that occurs. And based on everything that we've heard from our customers, and we're pretty close with them, as you know, in terms of managing their supply chains, making sure they have what they need, driving innovation, and new products that we're selling to them, that all seems Great, thanks. And then, if I could just have one follow-up question.

Michael P. Doss: But our strongest quarters will be in Q3, four and you'd expect that to be the case, given the comps that I kind of ran through for George a few minutes ago. So second half will definitely be volumetric Lee are strongest.

Michael P. Doss: A little unusual.

Michael P. Doss: As I mentioned ghansham, but it's really a function of the 'twenty three 'twenty four destocking phenomenon that occurs and based on everything that we've heard from our customers and we're pretty close with them as you know in terms of managing the supply chain, So I'm, making sure they have what they need driving innovation.

Michael P. Doss: New products that we're selling to them.

Michael P. Doss: <unk> seem to square up pretty well.

Michael P. Doss: Okay.

Speaker Change: Great. Thanks, and then if I could just have one follow up.

Arun Shankar Viswanathan: So, you know, you will be getting the cash from Augusta, and I guess you're going to be winding down the Waco investment over the next year or two. So as you look out in the future, I guess you've laid out, you know, a nice Vision 2030 plan that's potentially more aggressive. How does that relate to maybe how you're thinking about leverage and capital return? So you think next year you could pivot to maybe a stronger capital return profile, or what are your thoughts there? Thanks.

Michael P. Doss: You will be getting the cash.

Arun Shankar Viswanathan: From Augusta, you know I guess youre going to be winding down the Waco investment over the next a year or two so.

Arun Shankar Viswanathan: As you look out in the future I guess, you've laid out a nice vision 2030 plan, that's potentially more aggressive.

Arun Shankar Viswanathan: How does that relate to maybe how youre thinking about leverage and capital returns. So do you think next year you could pivot to maybe.

Arun Shankar Viswanathan: Stronger capital return.

Arun Shankar Viswanathan: Profile or what are your thoughts there. Thanks.

Stephen R. Scherger: primarily supported by the very significant cash flow generation that we are on the way to generating more in 2025 and then significantly more in 26 and beyond. But overall, you know, we are comfortable with the levels that we have today. That's a good thing, because it gives us the optionality that we've shared with you around capital allocation trade-offs.

Speaker Change: Yes, Steve I think as we discussed in the prepared remarks.

Stephen R. Scherger: Obviously, we measure our capital allocation decisions against share repurchase as we always have.

Stephen R. Scherger: And in the context of the.

Stephen R. Scherger: Funds from Augusta as an example, sitting here today with the confidence that we have in the business.

Stephen R. Scherger: The forwards that were conveyed to you today.

Stephen R. Scherger: Comparable with our debt levels and so we will of course make.

Stephen R. Scherger: Decisions around that for share repurchase as we always do whether it's from funds that come in tomorrow or on a go forward basis, primarily supported by the very significant cash flow generation.

Operator: The next question comes from Anthony Pettinari from City. Anthony, your line is open. Please go ahead.

Anthony James Pettinari: We are on the way to generating more than 2025, and then secondly, more in 2006 and beyond but overall.

Anthony James Pettinari: You know, we've heard a lot about imports impacting SBS, and I'm just wondering if you've seen, you know, any meaningful impact on CRB or CUK from imports of those or other grades. And, you know, with the box board hikes not being reflected in Pullman Paper Week, I mean, the CRB, and CUK, I mean, there's really a relatively small number of domestic producers. So I'm just wondering if there's anything about the competitive environment that's different, and if the import dynamic is meaningful or different than in previous years.

Anthony James Pettinari: We are comfortable with the debt levels that we have today and that's a good thing because it gives us the optionality that we've shared with you around our capital allocation tradeoffs.

Anthony James Pettinari: Yeah.

Speaker Change: Thank you.

Anthony James Pettinari: Yeah.

Anthony James Pettinari: The next question comes from Anthony Pettinari from Citi. Anthony Your line is open. Please go ahead.

Speaker Change: Good morning.

Anthony James Pettinari: We've heard a lot about imports.

Anthony James Pettinari: <unk> SBS and I'm, just wondering if you've seen any meaningful impact on CRB or C U K from imports.

Anthony James Pettinari: Those are other grades.

Anthony James Pettinari: And what's the box board hikes, not being reflected in pulp and paper weak I mean.

Anthony James Pettinari: CRB. So you came in just really relatively small number of domestic producers. So I'm just wondering if there's anything about the competitive environment that's different.

Anthony James Pettinari: Thanks for that, Anthony. I'll take that. I think, look, if you take a step back, since you asked the question, I'll give you one.

Michael P. Doss: Thanks for that, Anthony. I'll take that. I think look, if you take a step back, since you asked the question, I'll give you a complete answer. I mean, if you really look at the imports, which are primarily from the Nordic countries, you know, wood, energy, transportation are all up, right? I mean, the producers we're talking about on their Q1 calls and all through last year, the structural reset of wood costs that they're dealing with in those markets, and ultimately, as you know, support issues here this year.

Speaker Change: Just the important dynamic is meaningful or different than in previous years.

Michael P. Doss: Thanks for that Anthony I'll take that I think let me take a step back.

Michael P. Doss: The question I'll give you a complete answer I mean, if you really look at the imports, which is primarily from the Nordic countries.

Michael P. Doss: Wood energy and transportation are all right I mean, the producers we're talking about a nerve Q1 calls and all through last year, the structural reset of wood cost that they're dealing with in those markets.

Michael P. Doss: And ultimately as you know.

Michael P. Doss: The port issues here this year, so imports as a category actually tracked down year on year.

Michael P. Doss: And so imports actually tracked down year on year in Q1. And the other thing to remember about that is that many of those grades don't even compete in the marketplace where we're competing. So it's different things. And I'll give you an example: the little blue top sheet is a big item that comes in there.

Michael P. Doss: In Q1.

Michael P. Doss: The other thing to remember about that is that many of those grades don't even compete in the marketplace, where we're competing.

Michael P. Doss: So it's different things and I'll give you an example, like little flu top sheet.

Michael P. Doss: Big item that comes in there and I know you understand what that category. That's so I'll give you a little color on that but.

Michael P. Doss: And I know you understand what that category is, so I'll give you a little color on that. But, you know, from our standpoint, you guys and Ritzy spent a lot more time thinking about it than we do. We buy FTB in Europe, and we have normal pass-throughs that pass through, you know, into our contracts. This quarter, they were down a little bit because prices had gone down. But they're starting to announce increases, and our normal pass-throughs in Europe will allow us to pass those through like we always do. And in North America, we hardly ever run into anybody competing for that, to be fair.

Michael P. Doss: From our standpoint, you guys and Richie spent a lot more time thinking about it than we do we buy F.

Michael P. Doss: F N b in Europe, and we have normal pass throughs that pass through.

Michael P. Doss: Into our contracts this.

Michael P. Doss: This quarter, they were down a little bit because the prices had gone down they're starting to announce increases in our normal pass throughs in Europe will allow us to pass those through like we always do.

Michael P. Doss: And in North America, we hardly ever run into anybody competing with that to be fair.

Michael P. Doss: If it is, it's some really small packaging converter that, you know, they have reasons for using that, but it's a pretty small part of what we see. And so from that standpoint, I don't see it impacting CRB or, excuse me, our coated recycled paper board or our unbleached paper board markets that you passed the question on. And as I indicated earlier, we're actively implementing the increases that we put out there. So that's our approach, and that's how we're managing it. And, you know, there are pluses and negatives that always occur.

Michael P. Doss: It is some really small packaging converter.

Michael P. Doss: They are the reasons for using that but so a pretty small part of what we see and so from that standpoint, I don't see it impacting CRP or excuse.

Michael P. Doss: Excuse me, our coated recycled paperboard or unbleached paperboard market said you've passed the question as I indicated earlier, we're actively implementing the increases that we put out there so.

Michael P. Doss: That's our approach and that's how we're managing it.

Michael P. Doss: There's pluses and negatives that always occur, but I'll point back to again, we were able to grow the revenue.

Michael P. Doss: But I'll point back to, again, you know, we were able to grow the revenue, you know, top line the way we did it and ultimately generate, you know, 19.6% EBITDA margin with all those things that are going on. I think that's the most important takeaway to think about the company we've become. Now, with 95% of all our sales being a package of some kind, whether that's a tray, a bowl, a wrap, or a folding carton or cup, all those things are what we sell to customers.

Michael P. Doss: Top line the way, we did it and ultimately generate a 19, 6% EBITDA margin with all of those things that are going on and I think that's the most important takeaway to think about the company we'd be calm now with 95% of all of our sales being a package of some kind whether that's a tray of all a wrapper of folding carton.

Michael P. Doss: All of those things are what we sell to customers and.

Michael P. Doss: And that's really where our focus is, as opposed to, you know, kind of the supply and demand dynamics where we can actually, in some cases now, win some of those dislocations just given how we've set up the company in terms of our purchases and how we operate it. So it's different than it was in the past, And it will take a little while for you guys to see that.

Michael P. Doss: That's really where our focus is as opposed to you know kind of the supply and demand dynamics, where we actually in some cases now can we use some of those dislocations just given.

Michael P. Doss: How we've set up the company in terms of our purchases and how we operate it so it's different than it was in the past and it will take a little while for you guys to see that but.

Anthony James Pettinari: Got it, got it. That's very helpful. And then just quickly on your European business in the quarter, I mean, you talked a little bit about, I think, a healthcare pullback in the EU. Generically, like how has that business performed in terms of sort of end market demand year to date, Europe specific? You can appreciate that healthcare.

Michael P. Doss: <unk>.

Anthony James Pettinari: Tomorrow, So big day for us.

Anthony James Pettinari: Got it got it that's very helpful. And then just quickly on your European business in the quarter. I mean, you talked a little bit about I think that health care pullback in EU.

Anthony James Pettinari: Generically like how is that business performed in terms of sort of end market demand year to date Europe specifically.

Michael P. Doss: You can appreciate that health care in general tends to be pretty stable. I asked our European President, Joe Yost, a little bit about that. His view is that this was just largely timing how they chose to produce. We don't expect it to materially change with the demographics of people continuing to age in both North America and Europe. Those are going to be good markets going forward.

Michael P. Doss: You can appreciate that health care in general tends to be pretty stable I asked our European President, Joe you're a little bit about that.

Michael P. Doss: His view was this was just largely timing how they chose to produce we don't expect it to materially change with the demographics of.

Michael P. Doss: People continuing to age in both North America and in Europe, those are going to be good markets going forward.

Michael P. Doss: Sure.

Anthony James Pettinari: Okay, that's helpful. I'll turn it over.

Speaker Change: Okay. That's helpful I'll turn it over.

Operator: The next question comes from Gabe Hajde from Wells Fargo. Gabe, your line is open. Please go ahead. Mike, Steve, good morning. I want to revisit the price.

Operator: Yeah.

Gabe Hajde: The next question comes from Gabe Husky from both small okay. Gabe. Your line is open. Please go ahead.

Gabe Hajde: Hi, Steve Good morning.

Gabe Hajde: I'm wondering David.

Gabe Hajde: Mike, Steve, good morning. Um, I want to revisit the price. Thank you, Steve.

Operator: Pricing.

Gabe Hajde: Thank you, Steve the price concept and I appreciate that the proprietary on individual basis, but just for the benefit of all of us in the outside World can you describe for us.

Gabe Hajde: The price concept, and I appreciate that they're proprietary on an individual basis. But just for the benefit of all of us from the outside world, can you describe for us how much of your domestic converting business is today conducted on an indice versus non-index based? And then, as you do find success with your strategy to migrate away from these, when do you imagine not having to announce public price increases for third-party recognition?

Gabe Hajde: How much of your domestic converting business today conducted on an industry.

Gabe Hajde: Versus non index space and then as you do find success with with your strategy to migrate away from these.

Gabe Hajde: When do you envision maybe not having to announce public price increases for third party recognition.

Gabe Hajde: And then the last one is, it sounds like, Mike, from your commentary that the sales ramp in the second half will be kind of a combination of all three. So in other words, additional innovation sales, you guys are able to monetize price being positive, as well as volumes being positive on a year over year basis. And I'm talking about sales volume versus production volume, which I appreciate will likely be up given the downtime that you took.

Gabe Hajde: And then the last one is it sounds like Mike from your commentary that.

Gabe Hajde: The sales ramp in the second half will be kind of a combination of all three so in other words.

Gabe Hajde: Additional innovation sales.

Gabe Hajde: They are able to monetize price being positive as well as volumes and positive on a year over year basis, and I'm talking about sales volume versus I. Appreciate production volume will likely be up given the downtime that you took.

Speaker Change: Yeah look I think you answered the second part of the question.

Mike: Accurately that's exactly how we expected to play out in regards to kind of pricing.

Michael P. Doss: We're just not planning to disclose percentages anymore relative to how it all works, whether it's a cost index model that we've got with our customers or some other form of Index Model that we work with them, because we do view them as proprietary. And I think it's demonstrated by the fact that it's working. Take a look at our EBITDA margin, how we've been able to have consistency there and continue to perform at the type of target that we put out there, the 20% target that we've got as part of our vision 2030. It's going to be a variety of things.

Gabe Hajde: Gabe as we talked about at our Investor day.

Michael P. Doss: We're just not planning to disclose.

Michael P. Doss: Just any more relative to how it all works, whether it's a cost index model that we've got with our customers or.

Michael P. Doss: Some other form of.

Michael P. Doss: <unk> model that we work with them because we do view them as proprietary and I think it's demonstrated by the fact, it's working take a look at our EBITDA margin to how we've been able to have consistency there and continued to perform at that type of target that we put out there the 20% target that we've got as part of our vision 2030, it's going to be a variety of things.

Michael P. Doss: And maybe the best way that I can do to kind of give you a little bit more color on it is to talk about how it actually works. So the mechanism itself isn't something that you know is the first thing we talk about with customers; we contract with customers on a renewal or in a new situation at prices that we establish both with them and with us. What we're really talking about is how input cost inflation moves over time, up or down. And there are a variety of different methodologies to do it. We've been moving away from third-party indexes for years.

Michael P. Doss: The best way that I can do to kind of give you a little bit more Colorado just talk about how it actually works. So what's the mechanism itself isn't something that.

Michael P. Doss: <unk> is the first thing we talked about with customers, we contract with customers on a renewal or a new situation with pricing that we establish both with them and with US what we're really talking about is how input cost inflation moves over time up or down and there's a variety of different methodologies to do it we've been moving away from third party.

Stephen R. Scherger: As you know, we've been very public about that, and now we're just going to accelerate that process going forward. And so we're working with a number of customers on different ideas that we have and they have for how to provide better transparency between the two parties, more accuracy between the two parties, and an agreement that shares the value that we bring and that they ultimately want from us. And so that's really how we're approaching it.

Michael P. Doss: Texas for years as you know we've been very public about that.

Stephen R. Scherger: And now we're just going to accelerate that process going forward and so we're working with a number of customers.

Stephen R. Scherger: Our ideas that we have and they have for how to provide better transparency between the two parties more accuracy between the two parties.

Stephen R. Scherger: And agree with this year is the value that we bring and that's ultimately want from us and so that's really how we're approaching it its a multifaceted commercial process that we've gotten beyond that we're just not going to get into kind of an economic downturn.

Stephen R. Scherger: It's a multifaceted commercial process that we have. And beyond that, we're just not going to get into kind of necking it down to the finite center percentages because that's really not... That doesn't help you understand the business better in our. And just repeating a key point that Mike's making, the vast majority of the pricing-related discussions we have with our customers are focused on the value of the package. A vast majority.

Stephen R. Scherger: Finite set of percentages, because that's really not.

Stephen R. Scherger: It doesn't help you understand the business better and are in our opinion.

Stephen R. Scherger: Dave just repeating a key point that Mike's, making the vast majority of the pricing related discussions we have with our customers are focused on the value of the package.

Stephen R. Scherger: They're constantly renegotiating with customers, whether you're on a one-year contract, a two-year contract, a three-year contract, and the minority of the discussions are about the price change mechanism, which is what you're asking about. And so we'll just continue to talk about how we're operating and running the business holistically as a consumer packaging business, obviously with the margin profile that we're committed to continuing to maintain and grow.

Stephen R. Scherger: Majority of that cost.

Speaker Change: Currently renegotiated with customers, whether they are on a one year contract two year contract a three year contract and the majority of the discussions are about the price change mechanism, which is what you're asking about and so we'll just continue to.

Stephen R. Scherger: Talk about how we're operating and running the business Holistically as a consumer packaging business, obviously with the margin profile of that.

Stephen R. Scherger: We're committed to continuing to maintain and grow.

Gabe Hajde: Okay, now I appreciate the margin comment, guys. Real quick point of clarification, Steve, I think you responded to an answer or to a question about the Augusta Mill, 100 million of EBITDA. Did you mean 100,000 tons of downtime? And I apologize, I just missed it. 100,000 tons of downtime in the second half. We did it last year.

Gabe Hajde: Okay. I appreciate the margin comment real quick point of clarification, Steve I think you responded.

Gabe Hajde: So in answer to a question about the Augusta mill.

Gabe Hajde: $100 million of EBITDA did you mean 100000 tons of downtime and I apologize I just I.

Gabe Hajde: I missed that 100000 upon the downtime in the second half.

Stephen R. Scherger: Last year we had about $100 million of market-related downtime in the second half of the year that we do not expect to repeat this year. I think to Mark Weintraub's question Mark was just providing some context around kind of the earnings profile first half, second half. Last year, the bleach paperboard business, as we ran it as a system, generated significantly more profitability in the first half of the year than in the second half of the year.

Gabe Hajde: We last year, we had about $100 million of market related downtime in the second half of the year that we do not expect to repeat this year I think to Mark wind drops question Mark was.

Stephen R. Scherger: Just providing some context around kind of the earnings profile first half second half last year, the bleach paperboard business as we ran as a system Jenna.

Stephen R. Scherger: Generated significantly more profitability in the first half of the year than in the second half of the year, hence the negative comp here that were managing through in the first half which becomes much more de minimis in the second half of the year as we operate what will be the texarkana facility.

Stephen R. Scherger: The negative comp here that we're managing through in the first half, which becomes much more de minimis in the second half of the year as we operate what will be the Texarkana facility with our own internal needs being run quite full to support our own packaging needs from that facility.

Stephen R. Scherger: With our own internal needs be Rotten quite full.

Stephen R. Scherger: To support our own up our own packaging needs from that facility effective literally tomorrow.

Gabe Hajde: Yep, I understand. Thank you.

Speaker Change: Yep understood. Thank you.

Operator: Our final question today comes from Adam Samuelson from Goldman Sachs. Adam, your line is open, please go ahead.

Gabe Hajde: Okay.

Operator: Our final question today comes from Adam Samuelson from Goldman Sachs. Adam Your line is open. Please go ahead.

Adam L. Samuelson: Yes, thank you. Good morning, everyone.

Adam L. Samuelson: Yes. Thank you good morning, everyone Theres been a lot of ground covered today, so I'll try to be brief the as we think about the innovation sales growth for the year $200 million of which realized $37 million in the first quarter.

Adam L. Samuelson: There's been a lot of ground covered today, so I'll try to be brief. As we think about innovation, sales growth for the year, $200 million, of which you realize $37 million in the first quarter, implies a ramp up in the back half of the year. Can you just share with us how much of that is pay set or in here at this juncture versus just doesn't seem like some of the big items, whether it's the Chick-fil-A or Nissan or Bordeaux, would be applicable to that?

Adam L. Samuelson: Implies a ramp through the back half of the year can you just share with us how much of that.

Adam L. Samuelson: Is pay center an ear at this juncture versus just doesn't seem like some of the big items and others.

Speaker Change: Sure Chick Fil, a or this in or Bourdeo, we would we'd be applicable on that and are you actually seeing incremental value uplift from pacesetter in here at this juncture or is that still incremental ones in the future may be dependent on a second source of supply in Waco.

Adam L. Samuelson: And are you actually seeing incremental value uplift from pay set or in here at this juncture? Is that still incremental into the future and maybe dependent on a second source of supply and wait? Yeah, thanks for the question.

Michael P. Doss: Yeah, thanks for the question, Adam. We are, and continue to see traction with Paysette-Rendier. We actually have three commercial applications. We've got, you know, a dozen or more in testing, and I think that's an important distinction to make. Since it is a new grade of paperboard, we've got, you know, trials and qualifications that ultimately have to take place, and we're in the midst of doing those. But we do expect it to make a contribution to that $200 million total because it already is. Admittedly, it won't be a huge chunk of it in 2024, but momentum building into 2025 and 2026, absolutely yes. The balance of the $200 million is the types of things you just described.

Speaker Change: Yes. Thanks for the question Adam we are continue to see traction with pace set around here, we actually have three commercial applications Scott.

Michael P. Doss: But does that or more in testing and I think that's an important distinction to make since it is a new grade of paper Board, we've got trials and pulse.

Michael P. Doss: Qualifications that ultimately have to take place and we're in the midst of doing those we do expect it to make a contribution to that $200 million totaled because it already does.

Michael P. Doss: Admittedly it won't be a huge chunk of it in 2024.

Michael P. Doss: Building into 'twenty five 'twenty six absolutely, yes, the balance of the $200 million just the types of things you. Just described it's you know.

Michael P. Doss: It's, you know, foam to paper conversions for cups, trays, and bowls, and Bordeaux. We're really excited about Bordeaux. You look at Bordeaux, you know; it started as a French infant formula.

Michael P. Doss: Two paper conversions for Cups trays bowls audio we're really excited about or do you look at audio.

Michael P. Doss: It is our friendship and tough formula anything that's kind of that granular.

Michael P. Doss: Anything that's that granular, you know, like coffee we have, or rigid, like gum or confectionery items, I mean, it really fits it well. It's a $2.5 billion opportunity for us, and we're quite confident we'll wind up with over $200 million worth of sales in the next couple of years for that category alone. And it's a sticky sale. There's a machine that goes in with our customers and really helps them with merchandising and branding, and so that's really where our focus is, you know, to drive that stuff. But yeah, very excited about Paysette-Renier, and ultimately, as you correctly pointed out, in 2026, we'll have another paperboard.

Michael P. Doss: Like coffee, we've got or are Richard like gum, or confectionery items, I mean, it really fits well, it's $2 5 billion dollar opportunity for us and we're quite confident we'll wind up with over $200 million worth of sales in the next couple of years for that category alone and it's a it's a sticky sale is a machine that goes in with our customers and it really helps them with merchandising and <unk>.

Michael P. Doss: So that's really where our focus is to drive that stuff, but yes very excited about.

Michael P. Doss: Pacesetter Rainier and ultimately as you correctly pointed out in 'twenty six we will have another paperboard.

Michael P. Doss: Machine capable of making that a greater paperboard, which is very exciting.

Adam L. Samuelson: Okay. Okay.

Adam L. Samuelson: I appreciate the color. I'll pass it on. Thank you.

Speaker Change: Okay I appreciate the color I'll pass it on thank you.

Operator: This concludes today's Q&A session, and I would now like to hand the call back to Mike Doss for closing remarks. Thank you all.

Adam L. Samuelson: Yeah.

Operator: This concludes today's Q&A session I would now like to hand, the call back to Microsoft for closing remarks.

Michael P. Doss: Thank you all for joining us on the call today. I'm optimistic about our growth outlook and pleased with the progress we are making with innovation sales. Vision 2030 is about execution, and we're off to a good start. As I mentioned earlier, if you missed our investor day, I hope you'll take the time to listen to the replay, which you can find on our investor relations website. Graphic Packaging is a much different company today than it was just a few years ago, and I truly believe our value creation story is just getting started. Thank you. Have a safe and very good day.

Michael P. Doss: Thank you all for joining us on the call today I'm optimistic about our growth outlook and pleased with the progress, we're making with innovation sales.

Michael P. Doss: In 2030 is about execution and we were off to a good start as I mentioned earlier, if you missed our Investor day, I hope, you'll take the time to listen to the replay, which you can find on our Investor Relations website graphic packaging is a much different company today than it was just a few years ago and I truly believe in our value creation story is just getting started thank you.

Michael P. Doss: Have a safe and a very good day.

Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Operator: This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.

Operator: [music].