Q1 2024 Ranpak Holdings Corp Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until that time, your lines will again be placed on music. Thank you for your patience. Welcome to the Ranpak Holdings first quarter 2024 earnings.
Ladies and gentlemen, thank you for standing by today's conference call will begin momentarily until that time your lines will again be plays and musicals. Thank you for your patience.
[music].
Speaker Change: Welcome to the Rand pack Holdings' first quarter 'twenty 'twenty four earnings call.
Benjamin: My name is Benjamin, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star one on your touchtone phone. As a reminder, the conference is being recorded. I'll now turn the call over to Sara Horvath, General Counsel.
Benjamin: My name is Benjamin and I'll be your operator for today's call.
Benjamin: At this time all participants are in a listen only mode.
Benjamin: Later, we will conduct a question and answer session during.
Benjamin: During the question and answer session. If you have a question. Please press star one ear Touchtone Touchtone phone.
Speaker Change: As a reminder, the conference is being recorded I will now.
Speaker Change: I'll turn the call over to cycle or Beth General Counsel you may begin sir.
Sara A. Horvath: Thank you and good morning everyone. Before we begin, I'd like to remind you that we will discuss four types of forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K and our other filings with the SEC. Furthermore, some of the statements in response to your questions in this conference call may include forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from those statements. Ranpak assumes no obligation and does not intend to update any such forward-looking statement.
Beth: Thank you and good morning, everyone before we begin I'd like to remind you that we will discuss forward looking statements as defined under the private Securities Litigation Reform Act of 1995 actual results may differ materially.
Speaker Change: Really from those forward looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K, and our other filings filed with the SEC.
Beth: Some of the statements and responses to your questions. In this conference call May include forward looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements.
Beth: But in Pakistan, no obligation and does not intend to update any such forward looking statements.
Sara A. Horvath: You should not place reliance on these forward-looking statements, all of which speak only to the company only as of today. The earnings release we issued this morning and the presentation for today's call are posted on the Investor Relations section of our website. A copy of the release has been included in a Form 8K that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website.
Beth: You should not place undue reliance on these forward looking statements all of which speak to the company only as of today.
Beth: The earnings release, we issued this morning and the presentation for today's call are posted on the Investor Relations section of our website a.
Beth: A copy of the release has been included in a form 8-K that we submitted to the SEC before this call we.
Beth: We will also make a replay of this conference call available via webcast on the company website.
Beth: For financial information that is presented on a non-GAAP basis. We've included reconciliations to the comparable GAAP information.
Beth: Please refer to the table and slide presentation accompanying today's earnings release.
Sara A. Horvath: For financial information that is presented on a non-GAAP basis, we have included reconciliations to the comparable GAAP information; please refer to the table and slide presentation accompanying today's earnings release. Lastly, we'll be filing our 10-Q with the SEC for the period ending March 31st, 2024. The 10-Q will be available through the SEC or on the Investor Relations section of our website. With me today, I have Omar Asali, our chairman and CEO, and Bill Drew, our CFO.
Beth: Lastly, we'll be filing our 10-Q with the SEC for the period ending March 31 2024.
Beth: The 10-Q will be available through the SEC or on the Investor Relations section of our website.
Beth: With me today, I have Omar <unk>, our chairman and CEO and Bill drew our CFO.
Omar: <unk> will summarize our first quarter results and provide commentary on the operating landscape and that will provide additional detail on our financial results before we open up the call for questions.
Sara A. Horvath: Omar will summarize our first quarter results and provide commentary on the operating landscape, and Bill will provide additional detail on the financial results before we open up the call for questions. With that, I'll turn the call over to Omar.
Omar: With that I'll turn the call over to Omar.
Omar Marwan Asali: Thank you, Sara. Good morning, everyone. I appreciate you all joining us today. Our first quarter financial results were largely in line with our expectations, as we experienced 4.4% top-line growth and Meaningfully Improved Profitability to start the year. We are pleased to report that we experienced our third consecutive quarter of volume growth in PPS as activity levels continue to improve. While the overall operating landscape remains uneven, we are pleased to see continued moderate general improvement.
Omar: Thank you Sarah good morning, everyone. I appreciate you all joining us today.
Omar: Our first quarter financial results were largely in line with our expectations as we experienced four 4% top line growth and meaningfully improved profitability to start the year.
Omar: We are pleased to report that we experienced our third consecutive quarter of volume growth and PBS as activity levels continue to improve.
Omar: While the overall operating landscape remains uneven we are pleased to see continued moderate general improvement.
Omar Marwan Asali: Our gross margins on a constant currency basis improved by 400 basis points year over year, and adjusted EBITDA margins improved 500 bps on a constant currency basis due to the favorable paper pricing environment compared to a year ago and higher volumes flowing through the complex.
Omar: Our gross margins on a constant currency basis improved by 400 basis points year over year.
Omar: And adjusted EBITDA margins improved 500 bps, so on a constant currency due to the favorable paper pricing environment compared to a year ago and higher volumes flowing through the complex.
Omar Marwan Asali: Overall, we are happy with the start of the year and believe it sets us on a path to achieve our targeted results for 2024, consistent with much of our recent operating history. We expect the first half of the year will be a lower contributor to 2024 top line performance compared to the back half as we expect more large account activity to ramp up as the year progresses and traditional seasonality to drive higher volumes in the second half of the year.
Omar: Overall, we are happy with the start of the year and believe it sets us on a path to achieve our targeted results for 2024.
Omar: Consistent with much of our recent operating history.
Omar: We expect the first half of the year will be lower contributor to 2020 for topline performance compared to the back half as we expect more large account activity to ramp up as the year progresses and traditional seasonality to drive higher volumes in the second half of the year.
Omar Marwan Asali: North American sales were up 2.6% in the quarter versus last year, driven by improved voice fill and automation sales year over year. At a more macro level, box shipments were flat to slightly up for the quarter, while freight and trucking data remains mixed.
Omar: North American sales were up two 6% in the quarter versus last year, driven by improved whitesville and automation sales year over year.
Omar: At a more macro level.
Omar: Box shipments were flat to slightly up for the quarter, while freight and trucking data remains mixed the industrial and manufacturing sector remained sluggish while we are seeing some improvement in e-commerce activity.
Omar Marwan Asali: The industrial and manufacturing sector remains sluggish, while we are seeing some improvement in e-commerce activity. The impacts of higher rates constraining housing activity and all of the spending that goes with it, as well as inflationary pressures impacting consumer discretionary spend, remain present. This has led to activity levels in North America being OK, but inconsistent from month to month. On a positive note, more recently, we've seen improvements in consumer confidence, so hopefully that will inspire additional demand for goods. While that is the macro picture, we try to focus on driving outcomes that are within our control at Ranpak, such as executing on our strategic account plan.
Omar: The impacts of higher rates constraining housing activity and all of the spend that goes with it as well as inflationary pressures impacting consumer discretionary spend remained PRASM.
Omar: This has led to activity levels in North America, being okay, but inconsistent from month to month.
Omar: On a positive note more recently, we've seen improvements in consumer confidence so hopefully that will inspire additional demand for goods.
Omar: While that is the macro picture, we try to focus on driving outcomes that are within our control that ran back such as executing on our strategic account plan.
Omar Marwan Asali: We are pleased with our progress. I'm optimistic that the ramp-up in the plastics-to-paper shift provides us with solid volume momentum for the remainder of the year while the macro, hopefully, stabilizes and improves. We said in our first quarter call last year that the plastic-to-paper shift was a longer sales cycle given the complexity of some of the organizations involved but that we believed it was only a matter of time before the volumes start to reflect the Shift in Thinking.
Omar: We are pleased with our progress I'm optimistic about the ramp up in the plastic to paper shift provide.
Omar: <unk> provides us with solid volume momentum for the remainder of the year, while the macro hopefully stabilizes and improves.
Omar: We said in our first quarter call last year that the plastic to paper shift was a longer sales cycle given the complexity of some of the organizations involved but that we believed it was only a matter of time before the volume start to reflect.
Omar: The shift in thinking.
Omar Marwan Asali: I'm pleased to say that in April, we're seeing a pickup in activity from our Strategic Account Initiative, and many accounts are beginning the transition away from plastic. Europe APAC activity levels in the first quarter were solid, with sales up 5.4% versus the prior year, driven by higher volumes in void fill and wrap. Activity levels in the region continue to improve slowly, although manufacturing and industrial activity remain subdued, impacting cushioning utilization. Consumer confidence in the region has been improving since the end of the third quarter, but it's still well below pre-COVID levels.
Omar: I'm pleased to say that in April we're seeing a pickup in activity from our strategic account initiatives.
Omar: And many accounts are beginning the transition away from plastic.
Omar: Europe APAC activity levels in the first quarter were solid with sales up five 4% versus the prior year driven by higher volumes in void fill and wrapping.
Omar: Activity levels in the region continue to improve slowly, although manufacturing and industrial activity remained subdued impacting cushioning utilization.
Omar: Consumer confidence in the region has been improving since the end of the third quarter, but it's still well below pre COVID-19 levels.
Omar Marwan Asali: Geographically speaking, we've seen strength in southern Europe, in countries like Spain and Italy, as well as improvement in the UK, while the central part of Europe that is more manufacturing heavy, like Poland, Belgium, and Germany, is weak. In APAC, Japan and Australia continue to be bright spots.
Omar: Geographically speaking, we've seen strength in southern Europe in countries, like Spain, and Italy, as well as improvement in the U K, while the central part of Europe that is more manufacturing heavy like Poland, Belgium, and Germany are weaker.
Omar: In APAC, Japan on the Australia continued to be bright spots the input cost environment provides us with a benefit for the first half of the year as paper pricing move lower throughout the year before reaching a trough in Q4.
Omar Marwan Asali: The input cost environment provides us with a benefit for the first half of the year as paper pricing moved lower throughout the year before reaching a trough in Q4. We expect paper pricing in the first half of the year to be in line with Q4 as pricing flattens out to start the year. We are, however, seeing some producers in North America and Europe making a push to increase prices as we get deeper into the year.
Omar: We expect paper pricing in the first half of the year to be in line with Q4.
Omar: As pricing flattened out to start the year.
Omar: We are however, seeing some producers in North America and Europe.
Omar: King a push to increase pricing as we get deeper into the year.
Omar Marwan Asali: Overall, we are targeting to maintain a gross margin in 2024 that is in line with our finish in 2023. So we're working closely with our vendors to plan accordingly and determine if we need to make pricing adjustments based on the commodity environment. The freight market has been roughly flat to start the year, and in the U.S., it has remained favorable given the freight recession that has been present for the past two years.
Omar: Overall, we are targeting to maintain our gross margin in 2024 that is in line with our finish in 2023. So we're working closely with our vendors to plan accordingly, and determine if we need to make pricing adjustments based on the commodity environment.
Omar: The freight market has been roughly flat to start the year and in the U S has remained favorable given the freight recession that has been present for the past two years great.
Omar Marwan Asali: Freight market participants have struck a more optimistic tone recently, so we're monitoring that closely to see how potential improvements in freight levels activity, along with rising tensions in the Middle East driving oil hire, may impact pricing and availability. Inventory levels at our distributors and end users remain tight, with many in our value chain in North America and Europe keeping tight lids on the amount of product on hand given the increased cost of capital and uneven environment. De-stocking is no longer an issue, but we continue to watch inventories at our customers across the globe. Now with that, let me turn it over to Bill for some financial details.
Omar: Freight market participants have struck a more optimistic tone recently, so we're monitoring that closely to see how potential improvement in freight level activity along with rising tensions in the middle East driving oil higher may impact pricing and availability inventory levels at our distributors and end users remain tight with many.
Omar: In our value chain in North America, and Europe, keeping tight lids on the amount of product on hand, given the increased cost of capital and uneven environment.
Omar: Destocking is no longer an issue, while we continue to watch inventories at our customers across the globe now.
Omar: Now with that let me turn it over to bill for some financial detail.
William E. Drew: Thank you, Omar. In the deck, you'll see a summary of some of our key performance indicators. We'll also be filing our 10-Q, which provides further information on Ranpak's operating results. Machine placement increased 0.9% year-over-year to approximately 140,800 machines globally. Cushioning systems declined 0.9%, while void-fill installed systems increased 1.3%, and wrapping systems increased 1.8% year-over-year. Growth in the machine field population has been lower this year due to a combination of lower activity levels generally, particularly related to industrial and manufacturing sectors in Europe, as well as our efforts to optimize our fleet.
Bill: Thank you Omar and the deck, you'll see a summary of some of our key performance indicators will also be filing our 10-Q, which provides further information on <unk> operating results.
Bill: Machine placement increased airport, 9% year over year to approximately 140800 machines globally.
Bill: Thanks systems declined <unk>, 9%, while void fill installed systems increased one 3% and wrapping systems increased one 8% year over year.
Bill: Growth in the machine field population has been lower this year due to a combination of lower activity levels, generally, particularly related to industrial and manufacturing sectors in Europe as well as our efforts to optimize our fleet.
William E. Drew: To maximize capital efficiency, we are focused on getting underutilized converters back and redeploying them to more productive areas. Overall, net revenue for the company in the first quarter was up 4.4% year-over-year on a constant currency basis, driven by increased volumes and contribution from automation, offset by slightly lower prices. North American net revenue increased 2.6% year-over-year, with void fill and automation up versus the prior year, offset by decreases in cushioning and wrapping.
Bill: To maximize capital efficiency, we are focused on getting underutilized converters back and redeploying them to more productive areas.
Bill: Overall net revenue for the company in the first quarter was up four 4% year over year on a constant currency basis, driven by increased volumes and contribution from automation offset by slightly lower price.
Bill: North American net revenue increased two 6% year over year with void fill in automation up versus the prior year.
Bill: By decreases in cushioning and wrapping.
William E. Drew: Volumes were lower versus the prior year, driven by a softer March, but we expect those to pick up in the region as the year progresses, driven by strategic account activity. In Europe and APAC, net revenue on a constant currency basis was up 5.4% year-over-year, driven by void fill, wrapping, and automation, offset by lower cushioning revenue as the industrial sector in Europe remains pressured. We are pleased to see the general continued recovery in this reporting unit as volumes increase 10% year over year and businesses begin to recover.
Bill: Volumes were lower versus prior year, driven by a softer March but we expect those to pick up in the region as the year progresses, driven by strategic account activity.
Bill: In Europe, and APAC net revenue on a constant currency basis was up five 4% year over year, driven by void fill wrapping and automation offset by lower cushioning revenue as the industrial sector in Europe remains pressured.
Bill: We are pleased to see the general continued recovery in this reporting unit as volumes increased 10% year over year and businesses begin to recover.
William E. Drew: We believe a part of the recovery we are seeing is due to increased confidence stemming from the continued favorable natural gas pricing in Europe, with Dutch Nat gas hovering around 30 Euros per megawatt. There has been some volatility recently due to rising geopolitical tensions, but we believe the amount of expected LNG capacity coming online and becoming available to Europe beginning in 2025 should help to keep a lid on prices.
Bill: We believe upon the recovery we are seeing is due to the increased confidence stemming from the continued favorable natural gas pricing in Europe with Dutch Nat gas hovering around 30 euros per megawatt.
Bill: There has been some volatility recently due to rising geopolitical tension, but we believe the amount of expected LNG capacity coming online and becoming available to Europe, beginning in 2025 should help to keep a lid on pricing.
William E. Drew: Our gross profit increased 16.7% on a constant currency basis, implying a margin of 38% compared to 34% in the prior year. This is in line with expectations as we expect the gross margin to be roughly in line with Q4 throughout the year. As Omar mentioned, we're monitoring the commodity environment closely and are extremely focused on maintaining the gross margin profile we sought to regain after 2022. Adjusted EBITDA increased 33.8% year-over-year to $20.2 million, implying a 22.8% margin driven by higher gross profit flow-through and controlled G&A spend.
Bill: Our gross profit increased 16, 7% on a constant currency basis, implying a margin of 38% compared to 34% in the prior year.
Bill: This is in line with expectations as we expected gross margin to be roughly in line with Q4 throughout the year.
Bill: As Omar mentioned, we are monitoring the commodity environment closely and are extremely focused on maintaining the gross margin profile, we thought to regain after 2022.
Bill: Adjusted EBITDA increased 33, 8% year over year to $20 2 million, implying a 22, 8% margin driven by higher gross profit flow through and control G&A spend.
William E. Drew: We are pleased with the continued overall improvement in the financial profile and are optimistic that as more volumes flow through the complex and automation grows, we will continue to work our way back towards an attractive high-margin and cash-generated profile. Capital expenditures for the quarter were $9.8 million, driven by converter placement and investments related to our Malaysian production.
Bill: We're pleased with the continued overall improvement in the financial profile and are optimistic as more volumes flow through the complex in automation grows we will continue to work our way back towards an attractive high margin and cash generative profile.
Bill: Capital expenditures for the quarter were $9 8 million driven by converter placement and investments related to our Malaysia production facility.
William E. Drew: We are keeping tight controls on capital expenditures this year as we are moving beyond our infrastructure investment cycle that brought us a world-class technology platform and fully invested and funded physical infrastructure assets across the globe. Moving briefly to the balance sheet and liquidity. We completed Q1 with a strong liquidity position, including a cash balance of $55 million to end the quarter, and no drawings on our revolving credit facility. We continue to make steady progress on our goal of deleveraging and reach 4.4 turns at the end of the quarter, down from 4.6 times at 2023 year-end and 5.7 times as of Q2 2023.
Bill: We are keeping tight controls on capital expenditures this year as we're moving beyond our infrastructure investment cycle that brought us World class technology platform and fully invested and funded physical infrastructure assets across the globe.
William E. Drew: We expect to build cash in the back half of the year as we enter the traditionally stronger holiday season and volumes pick up. The Malaysia production facility going live this summer marks the end of our multi-year infrastructure investment initiative and enables us to focus on getting the return on our investments as we scale our PPS and automation business. Our capital expenditure plans in 2024 are much more modest compared to recent years, at less than $35 million, which we expect will enable us to generate cash in 2024 and help us deleverage further.
Bill: Moving briefly to the balance sheet liquidity.
Bill: We completed Q1 with a strong liquidity position, including a cash balance of $55 million in the quarter and no drawings on our revolving credit facility.
Bill: We continue to make steady progress on our goal of deleveraging and reached four four turns at the end of the quarter down from four six times at 2023 year and five seven times as of Q2 2023.
Bill: We expect to build cash in the back half of the year as we enter the traditionally stronger holiday season and volumes pick up.
Bill: The Malaysia production facility go live this summer marks the end of our multiyear infrastructure investment initiatives and enables us to focus on getting a return on our investments as we scale, our PPS and automation businesses.
Bill: Our capital expenditure plans in 2020 for a much more modest compared to recent prior years at less than $35 million, which we expect will enable us to generate cash in 2024 and help us deleverage further.
William E. Drew: Following Quarter End, in April, we settled the litigation matter and sold two patents, which resulted in total cash proceeds of €20 million, bolstering our cash position and implying a pro forma leverage ratio of 4.1 times on a constant currency basis, including the additional cash proceeds. Based on our adjusted EBITDA guide and expected cash generation, we expect leverage to be below four turns on a constant currency basis by year-end, with an ultimate goal to get into three turns or below.
Bill: Following quarter end in April we settled the litigation matter unsold to patents, which resulted in total cash proceeds of 20 million euros, bolstering, our cash position and implying a pro forma leverage ratio of four one times on a constant currency basis, including the additional cash proceeds.
Bill: Based on our adjusted EBITDA Guide and expected cash generation, we expect leverage to be below four turns on a constant currency basis by year end with an ultimate goal to getting to three turns or below.
William E. Drew: We believe our recent commercial and financial progress, along with our focus on deleveraging and cash generation, position us well to address our terminal maturities well before their maturities in June of 2026. Ranpak has a long history in the credit markets from years of private equity ownership and I think it would be well received by credit investors. For those of you who have spent time with us over the past few years, you know our goal is to have the CAHPS structure not be a topic of conversation. This means a simple structure and a conservative leverage profile that addresses needs well in advance. With that, I'll turn it back to Omar before we move on to questions. Thank you.
Bill: We believe our recent commercial and financial progress along with focus on deleveraging and cash generation position us well to address our term loan maturities well before their maturity in June 2026.
Bill: <unk> has a long history in the credit markets from years of private equity ownership and I think would be well received by credit investors.
William E. Drew: For those of you who have spent time with us over the past few years you know our goal is to have the cap structure that will be a topic of conversation. This means a simple structure and a conservative leverage profile that addresses needs well in advance with that I'll turn it back to Omar before we move on to questions.
Omar Marwan Asali: Thank you, Bill. In closing, I'm pleased with the continued progress and third quarter in a row of volume growth. While the macro remains unclear, I believe our company-specific drivers, such as our strategic account activity and momentum in automation, will enable us to continue to drive the top line and improve profitability, driving volumes in PPS. Scaling automation and generating cash are the top priorities at Ranpak in 2024 and going into 2025. Automation continues to get the traction that we are seeking with large accounts as our systems are in facilities this year as the first step to larger follow-through opportunities.
Omar: Thank you Bill in closing I am pleased with the continued progress and third quarter in a row of volume growth.
Omar: While the macro remains unclear I believe our company specific drivers such as our strategic account activity and momentum in automation will enable us to continue to drive the topline and improve profitability.
Omar Marwan Asali: Driving volumes and PPS.
Omar Marwan Asali: Scaling automation and generating cash are the top priorities that ramp back in 2024 and going into 2025.
Omar Marwan Asali: Automation continues to get the traction that we are seeking with large accounts as our systems are in facilities. This year as the first step to larger I'll follow through opportunities. We continue to anticipate revenue growth of more than 50% in automation. This year and I continue to strongly believe the investments we have made in this area.
Omar Marwan Asali: We continue to anticipate revenue growth of more than 50% on automation this year, and I continue to strongly believe the investments we have made in this area will be a critical growth driver and differentiator for Ranpak in the upcoming year. Our long-term objective remains to have a business that is steadily growing revenue in the high single to low double-digit area, gross margins in the high 30 to 40 percent area, and adjusted EBITDA margins in the high 20s to low 30s area, with substantial cash being generated along the way.
Omar Marwan Asali: Area will be a critical growth driver and differentiator for ramp back in the upcoming years.
Omar Marwan Asali: Our long term objective remains to have a business that is steadily growing revenue in the high single to low double digit area.
Omar Marwan Asali: Margins in the high 30% to 40% area and.
Omar Marwan Asali: And adjusted EBITDA margins in the high <unk> to low 30% area with substantial cash being generated along the way.
Omar Marwan Asali: We have a strong platform in place supported by our state-of-the-art digital infrastructure and facilities that can support our growth ambitions. With these multi-year projects behind us, the focus can be solely on the execution of our strategic initiatives and gaining efficiencies. I'm energized by what I see happening within Ranpak and across the world. The team is invigorated by the narrower scope of objectives and what we all read about seemingly every day regarding the tailwinds related to the shift from plastic to paper and warehouse automation needs.
Omar Marwan Asali: We have a strong platform in place supported by our state of the art digital infrastructure and facilities that can support our growth ambitions.
Omar Marwan Asali: With these multiyear projects behind us the focus can be solely on execution of our strategic initiatives and gaining efficiencies.
Omar Marwan Asali: Energized by what I see happening within ramp back on across the world.
Omar Marwan Asali: Team is invigorated by the narrower scope of objectives and what we all read about seemingly every day regarding the tailwind related to the shift from plastic to paper and warehouse automation needs.
Omar Marwan Asali: This year's Earth Day theme is Planet vs. Plastics and has a goal of raising awareness to drive a 60% plastic reduction by 2040. There has been a plethora of great yet alarming content created this year that aims to promote widespread public awareness of the damage done by plastic to human, animal, and all biodiversity health. EarthDay.org is also trying to achieve a phase-out of all single-use plastics by 2030 and achieve that commitment at the United Nations Treaty on Plastic Pollution in 2024. At Ranpak, we are extremely proud to be at the forefront of this movement, and we are doing our part to deliver a better world. With that, let's open the call up for some questions. Operator?
Omar Marwan Asali: This year, it's Thursday theme this planet versus plastics and has a goal of raising awareness to drive a 60% plastic reduction by 2040.
Omar Marwan Asali: There has been a plethora of great yet alarming content created this year that aims to promote widespread public awareness of the damage done by plastic to human animal and all biodiversity as health.
Omar Marwan Asali: Org is also trying to achieve a phaseout of all single use plastics by 2030 and achieving that commitment at the United Nations Treaty on plastic pollution in 2024.
Omar Marwan Asali: At <unk>, we are extremely proud to be at the forefront of this movement and we are doing our part to deliver a better world.
Omar Marwan Asali: With that let's open the call up for some questions operator.
Benjamin: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue, and your first question comes from the line of Greg Palm with Greg Hallum Capital Group.
Speaker Change: Thank you we will now begin the question and answer session if.
Gregory William Palm: If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Benjamin: If you'd like to withdraw your question simply press Star one again.
Gregory William Palm: If you are called upon to ask your question and our listening via a loudspeaker and UA device. Please.
Gregory William Palm: These pick up your handset and ensure that your phone is not on units when asking a question.
Benjamin: Again first I want to join the queue and your first question comes from the line of Greg Palm with Craig Hallum Capital Group.
Danny James Eggerichs: Thanks. This is Danny Eggerich on for Greg today. I was hoping to maybe just start with a little bit more on the strategic accounts. I guess it seems like it's improved, but how would you say your visibility into those accounts has changed over, say, the last couple months? It seems like it's improved, and does it feel like you're even more confident on that second half step up, especially with the, I guess, comments on a few of these accounts already beginning to transition away from Plastic and Q2?
Benjamin: Hi, Thanks. This is Danny aggregate John on for Greg today.
Omar Marwan Asali: Yeah, sure. I feel, and obviously, as I said, some of these conversations, in particular with very large, sizable accounts, take some time. I said in our last quarter call that we expect things to start ramping up in early Q2. And as I said on the call today, in April, we're starting to see that. So I would say the level of activity in strategic accounts moving from trial, pipeline, funnel, sort of early install activity to accounts purchasing our product, expanding the installation, and scaling up, that's starting to occur this quarter in Q2. We feel really good about, you know, the visibility that we have. Obviously, the macro environment is always a factor.
Danny James Eggerichs: I was hoping to maybe just start with a little bit more on the strategic accounts.
Speaker Change: I guess it seems like it's improved but how would you say your visibility into those accounts has changed over say the last couple of months.
Omar Marwan Asali: It seems like it's improved and does it feel like you're even more confident on kind of that second half step up, especially with with the I guess comments on on few of these accounts already beginning the transition away from plastic in Q2.
Omar Marwan Asali: Yes, sure I feel and obviously as I said some of these conversations in particular with very large sizable accounts.
Omar Marwan Asali: It takes some time I said in our last quarter call that we expect things to start ramping up in early Q2.
Omar Marwan Asali: And as I said on the call today in April we're starting to see that so I would say the level of activity in strategic accounts moving from trial pipeline funnel sort of early install activity to accounts purchasing our product expanding the installed and scaling up that's starting to occur in this quarter.
Omar Marwan Asali: Q2.
Omar Marwan Asali: We feel really good about.
Omar Marwan Asali: The visibility that we have obviously the macro environment is always a factor.
Omar Marwan Asali: But in terms of large accounts, in particular in the U.S., making meaningful moves and switching from plastic to paper, that's occurring. And we think, frankly, every month, you know, starting in, again, the beginning of Q2, that that ramp-up will continue. So we feel we've made tremendous progress, and as we've said for a while, we're hoping that you're going to start seeing that in the volume and results starting in Q2 of this year.
Omar Marwan Asali: But in terms of large accounts in particular in the U S, making meaningful moves on switches from plastic to paper.
Omar Marwan Asali: And we think frankly every month.
Omar Marwan Asali: Starting in again, the beginning of Q2 that that ramp up will continue so we feel we've made tremendous progress and as we've said for a while.
Omar Marwan Asali: We're hoping to that youre going to start seeing that in the volume and results starting in Q2 of 'twenty four.
Omar Marwan Asali: Got it. And then I guess just in terms of Q2, you know, normal seasonality, kind of some moderate sequential growth. I guess as we think about that and some of these strategic accounts starting in Q2, is it fair to say that there could be some incremental revenue on top of that typical seasonality there in Q2?
Speaker Change: Got it.
Omar Marwan Asali: And then I guess just in terms of Q2.
Omar Marwan Asali: In a normal seasonality kind of some moderate sequential growth I guess as we think about that and some of these strategic accounts starting in Q2.
Omar Marwan Asali: I guess is it is it fair to say that there could be some some incremental revenue on top of that typical seasonality there in Q2.
William E. Drew: I'll let Bill provide a bit more detail, but I would just say where we are again. We provided the guidance for the year early on. We're just sticking to that guidance. We feel pretty confident. I think I said in the last quarter that we felt there was even upside, so that's how we continue to view the world. I'll let maybe Bill provide a bit more color, yeah Danny.
Speaker Change: I'll, let bill provide a bit more detail, but I would just say where we are again, we provided the guidance for.
Bill: For the year.
Bill: Early on we're just sticking to that guidance, we feel pretty confident I think I've said in the last quarter that we feel there's even upside so that's how we continue.
William E. Drew: So our view of the world, but I'll, let may be bill provide a bit more color, yes, Danny I'd say typically what you see in Q2 is the build in North America, and then somewhat of a step down.
William E. Drew: Typically, what you see in Q2 is build in North America and then somewhat of a step down at times in Europe and APAC, just given the seasonality. I think for us, we are expecting something similar like that to continue. But again, as Omar mentioned, we're expecting a little bit more of a 47%, 48% contribution to the top line, first half versus back half. So getting back to that kind of cadence.
William E. Drew: At times in Europe, and APAC, just given that seasonality I think for US we are expecting something similar like that to continue but again as Omar mentioned, we're expecting a little bit more of the 47, 48% contribution.
William E. Drew: Two two of the top line versus the first half versus back half so getting back to that kind.
William E. Drew: Kind of cadence.
Speaker Change: Okay. That's that's helpful. Maybe one more for me on.
Danny James Eggerichs: Okay, that's helpful. Maybe one more for me on automation, I guess.
William E. Drew: On automation I guess, maybe an update on the pipeline there order activity.
Omar Marwan Asali: Maybe an update on the pipeline there, order activity. I don't know if I missed it, but how are the bookings this quarter? I know we've kind of been seeing record bookings over the last couple, so any additional color there would be helpful.
Omar Marwan Asali: I don't know if I missed it but how are the bookings this quarter I know, we've kind of been seen seen record bookings over the last couple so any additional color there would be helpful. Yes.
Omar Marwan Asali: Yeah, honestly, we continue to perform very, very well. In Q1, we did have another record booking.
Omar Marwan Asali: Honestly, we continue to perform very very well.
Omar Marwan Asali: In Q1, we did have another rare.
Omar Marwan Asali: Our record booking our level of activity our funnel activity is pretty high we.
Omar Marwan Asali: Our level of activity, our funnel activity, is pretty high. We feel very confident that for the year, top-line growth and automation globally will be north of 50%, which is important for us. And frankly, our visibility, as you can imagine, we're working with our funnel and our pipeline towards some 25 activities, and that activity is looking good as we keep sort of, you know, ramping up our install base and hopefully have more and more repeat customers, which is really important in automation, in particular with large customers. So I would say we're on track in automation, and the level of activity is good. You know, our bookings continue to be very healthy, and we're pretty confident in the 50% plus growth profile this year.
Benjamin: Okay, great; I will leave it there, thanks. Thank you, Danny.
Omar Marwan Asali: We feel very confident that for the year topline growth in automation globally will be north of 50%.
Speaker Change: Which is important for us and frankly, our visibility as you can imagine we're working with.
Benjamin: With our with our funnel and our pipeline towards some twenty-five activity and that activity is looking good as we keep sort of ramping up our installed base on hopefully up more and more repeat customers, which is really important in automation in particular with large customers. So I would say we're on track in automation level of <unk>.
Speaker Change: <unk> is good.
Benjamin: Our bookings continue to be very healthy and we're pretty confident in the 50% plus growth profile. This year.
Speaker Change: Okay, Great I'll leave it there thanks.
Benjamin: Danny.
Ghansham Panjabi: Your next question comes from the line of Ghansham Panjabi with Barrett.
Benjamin: Your next question comes from the line of Ghansham Panjabi with Baird.
Ghansham Panjabi: Please go ahead.
Ghansham Panjabi: Thank you, operator. Good morning, everybody. Morning, Ghansham. Good morning. I guess, you know, Omar, maybe stepping back a little bit, you know, just from a macroeconomic standpoint, we saw what you did in the first quarter with North America, Europe, and AIPAC, etc. But from an end market standpoint, you know, adjusting for some of the new initiatives and so on and so forth that you have underway, especially in North America, how do you see the momentum across the end markets as you think about the regions
Ghansham Panjabi: Thank you operator, and good morning, everybody.
Ghansham Panjabi: Gotcha.
Ghansham Panjabi: Hey.
Ghansham Panjabi: I guess, you know Omar maybe stepping back a little bit just from a macroeconomic standpoint.
Ghansham Panjabi: We saw what you did in the first quarter with North America, Europe, and APAC et cetera.
Ghansham Panjabi: But from an end market standpoint, adjusting for some of the new initiatives and so on and so forth that you have underway.
Ghansham Panjabi: Especially North America, how do you see the momentum across the end markets as you think about the regions globally.
Omar Marwan Asali: Yeah, I think, from an end market standpoint, and this applies to North America and, frankly, other geographies, we continue to see healthy trends and recovery in e-commerce, Ghansham. We continue to see relatively decent activity with retailers doing more with shipping and sort of building their online capabilities. I think industrial activity is a little bit more uneven, frankly; the largest probably sluggishness we see is in markets like Germany and Central Europe. I visited the regions a couple of times already this year.
Speaker Change: Yes, I think.
Omar Marwan Asali: From an end market standpoint, and this applies to North America, and frankly other geographies, we continue to see healthy trends and recovery in E Commerce Ghansham.
Omar Marwan Asali: We continue to see relatively decent activity.
Omar Marwan Asali: With retailers doing more with shipping and sort of building their online capabilities.
Omar Marwan Asali: I think industrial activity.
Omar Marwan Asali: Yes.
Omar Marwan Asali: A little bit more uneven frankly, the largest probably.
Omar Marwan Asali: The sluggishness, we see our end markets like in Germany, and Central Europe.
Omar Marwan Asali: I visited the regions a couple of times already this.
Omar Marwan Asali: This year I do think yes.
Omar Marwan Asali: I do think CEOs are nervous in some of these markets, given the macro backdrop, etc., but there's a lot of chatter in Europe about how important manufacturing and industrial activity is. And I'm expecting that we will start seeing some pickup and some improvement, whether it's driven by companies, by governments, by both. I don't expect Europe to just accept that, you know, their most important sector is going to be slow. So I think we're expecting that the level of activity will become a little bit better.
Omar Marwan Asali: Ceos are nervous and some of these markets given the macro backdrop et cetera.
Omar Marwan Asali: But there is a lot of chatter in Europe about how important manufacturing and industrial activity is and I am expecting that we will start seeing some pick up and some improvement whether it's driven by by companies by governments by both.
Omar Marwan Asali: I don't expect Europe to just accept that their most important sector is going to be slow. So I think we're expecting that that level of activity will become a little bit better.
Omar Marwan Asali: But there's no doubt what we're seeing some strength in is more around e-commerce and around different areas in e-commerce, whether you're seeing that in books and in publishing, whether you're seeing it at some level in beauty or in guys that are just general merchandise, that level of business feels a little bit better than where it was a few quarters ago.
Omar Marwan Asali: But theres no doubt what what we're seeing some strength that is more around e-commerce and around different areas in e-commerce, whether youre seeing that in books and publishing whether youre seeing it in some level in beauty are guys that are just general merchandise that level of business.
Omar Marwan Asali: Feels a little bit better than where it was a few quarters ago.
Ghansham Panjabi: And then in terms of, you know, your market positioning, right, because you have a, you know, you had a very strong first-to-market advantage, the markets have normalized, your competitors, including those that sell different substrates, have been kind of reorganizing and trying to come back with some sort of fiber-based offering for protective packaging, etc. Just your thoughts in terms of, you know, any change in the competitive backdrop as you think about your major end markets.
Omar Marwan Asali: And then in terms of.
Ghansham Panjabi: Your market positioning right because you have a you had a very strong first to market advantage.
Ghansham Panjabi: The markets have normalized your competitors, including those that sell different substrates have been kind of reorganizing and I'm trying to come back with some sort of fiber based offering for protective packaging et cetera, just your thoughts in terms of any changes the competitive backdrop.
Ghansham Panjabi: And then just lastly, you know, in terms of raw material cost inflation, I mean, upstream pulp prices have picked up quite a bit. And I know you've been benefiting from some level of deflation, and rightfully so, just given how you came off the peak inflation cycle from a few quarters back. But just your thoughts in terms of the forward-looking indicators for inflation specific to Ranpak.
Ghansham Panjabi: As you think about your major end markets and then just lastly.
Ghansham Panjabi: In terms of.
Ghansham Panjabi: Raw material cost inflation, I mean upstream pulp prices have picked up quite a bit.
Ghansham Panjabi: And I know you've been benefiting from some level of deflation and rightfully. So just given that you know how he came off the peak inflation cycle from a few quarters back, but just your thoughts in terms of the forward looking indicators for inflation specific around pack as well.
Omar Marwan Asali: Sure. So on the first point, Ghansham, let's call it the competitive landscape. I really like where we are for a couple of reasons. One, I am convinced we're in the right substrate, and that gives us a competitive advantage. Paper and fiber-based solutions are 100% of our thinking and execution, and we continue to see the shift from plastic to paper. Frankly, it's very pronounced in the U.S. now.
Speaker Change: Sure. So on the first point Ghansham on let's call. It the competitive landscape I really like where we are for a couple of reasons one.
Omar Marwan Asali: I am convinced we are in the right substrate.
Omar Marwan Asali: And that gives us a competitive advantage.
Omar Marwan Asali: Paper and fiber based solutions are 100% of our thinking and execution.
Omar Marwan Asali: And we continue to see.
Omar Marwan Asali: The shift from plastic to paper frankly, it's very pronounced in the U S. Now it's been pronounced in other geographies.
Omar Marwan Asali: It's been pronounced in other geographies that I visited, and we've been seeing those trends there for a while. So I like how we're positioned there. I also like that our investment cycle is behind us. From a strategic standpoint, Ranpak, you know, is stable, we're in execution mode, we're very focused on driving key initiatives like driving PPS volume, driving automation, and generating cash flow. I feel our team is focused, and our organization honestly has not been in a better spot in a long time than the spot that we're in right now. It's literally down to execution, execution, execution.
Omar Marwan Asali: No that I visited.
Omar Marwan Asali: And that we've been seeing those trends there for a while so I like how we're positioned there I also like that our investment cycle is behind us.
Omar Marwan Asali: From a strategic standpoint.
Omar Marwan Asali: Ram pack.
Omar Marwan Asali: A stable we're in execution mode.
Omar Marwan Asali: We're very focused on driving key initiatives like driving PPS volume driving automation and generating cash flow I feel our team is focused and our organization.
Omar Marwan Asali: Honestly has not been in a better spot in a long time that the spot that we're in right now, it's literally down to execution execution execution, and I think that sets us apart.
Omar Marwan Asali: And I think that sets us apart. I do see that in a lot of account activity, some of it large strategic account activity that we mentioned a lot on this call, some of it is small and medium-sized, where I feel our ability to win these accounts, to expand our business with them, is terrific. And I feel competitively that we're very well positioned. I think the combination of PPS and automation is going to add a lot more value for us. We are truly a full service solution for end of line needs in automation.
Omar Marwan Asali: I do see that in a lot of account activity and some of it large strategic account activity that we mentioned a lot on this call. Some of it is small and medium sized.
Omar Marwan Asali: Where I feel our ability to win these accounts to expand our business with them.
Omar Marwan Asali: Is terrific and I feel competitively, we're very well positioned.
Omar Marwan Asali: I think the combination of PPS and automation is going to equate to a lot more value for us we are truly a full service solution for end of line needs for automation, where a full solution for bps. That's fiber based for needs for so many industries and I think what we bring to the table to a lot of our customer.
Ghansham Panjabi: We're a full solution for PPS that's fiber-based for needs in so many industries. And I think what we bring to the table to a lot of our customers, and I see it in our dialogue with Ghansham, I think it's very compelling. And now it's up to us as a team to basically work our asset base and execute on the plan that's ahead of us. As far as your second question on inflation and pricing, I would say from a ramp-up perspective, the first half of the year, we pretty much have very good visibility in terms of pricing and the environment and where our deals are from a commodity standpoint.
Ghansham Panjabi: And I see it in our dialogue ghansham.
Ghansham Panjabi: I think it's very compelling and now it's up to us as a team.
Ghansham Panjabi: To basically work our asset base and execute on the plan Thats ahead of us.
Ghansham Panjabi: As far as your second question on inflation and pricing I would say from a ramp back perspective, the first half of the year.
Ghansham Panjabi: We pretty much have very good visibility in terms of pricing and the environment and where our deals are from a commodity standpoint, and we feel very very good about how we're positioned we have secured supply for part of our needs for the second half of the year. We are negotiating other parts I would say the landscape is a lot of it shifting.
Ghansham Panjabi: And we feel very good about how we're positioned. We have secured supply for part of our needs for the second half of the year. We are negotiating other parts. I would say the landscape is a little bit shifting, as we mentioned in the call, where you're starting to see with consolidation in the paper industry, the dynamic, with geopolitical risks, and the dynamic of, frankly, the switch to paper. You're starting to see some pricing pressure and increases.
Ghansham Panjabi: As we mentioned in the call where youre starting to see with.
Ghansham Panjabi: With consolidation in the paper industry, whereas the dynamic with geopolitical risks and the dynamic of frankly to switch to paper Youre starting to see.
Ghansham Panjabi: Some pricing pressure and increases I feel very good ghansham that we will be able to negotiate and secure the supply that we want in the second half of the year given our size that we will be able to.
Ghansham Panjabi: I feel very good, Ghansham, that we will be able to negotiate and secure the supply that we want in the second half of the year, given our size, and we will be able to get sort of the cost structure that we want. And if there is a little bit of pressure from a cost standpoint, we will react from a pricing standpoint. So our expectations are that we will be able to deliver the margin profile that, as Bill said, we fought so hard to get to.
Ghansham Panjabi: To get sort of the cost structure that we want and if there is a little bit of pressure from a cost standpoint, we will react from a pricing standpoint.
Ghansham Panjabi: So our expectations is that we will be able to deliver the margin profile that as Bill said, we fought so hard to get to.
Ghansham Panjabi: And I think this is a year where we will be able to manage what happens in the landscape, but it may require a little bit more work in the second half of the year than in the first half. Does that give you a good sense? Yes, it does.
Ghansham Panjabi: And I think this is a year, where we will be able to manage.
Ghansham Panjabi: What happens in the landscape, but it may require a little bit more work in the second half of the year than in the first half.
Speaker Change: Does that does that give you a good sense. It does it does thank you Omar I appreciate that.
Adam L. Samuelson: And your next question comes from the line of Adam Samuelson with Goldman Sachs.
Ghansham Panjabi: And your next question comes from the line of Adam Samuelson with Goldman Sachs.
Adam L. Samuelson: Please ask ACH.
Adam L. Samuelson: Yes, thank you. Good morning, everyone. Morning, Adam. Good morning.
Adam L. Samuelson: Yes, Thank you and good morning, everyone.
Adam L. Samuelson: Maybe first, something that Bill alluded to in the prepared remarks. I just wanted to clarify. So there was a litigation settlement that was 20 million euros of cash that you received in April. Can you just maybe elaborate a little bit on that? Is there a tax on that, and is there a tax impact on that? Just to make sure we're clear, not something that has been previously in any of the filings, so any additional clarification. Sure.
Adam L. Samuelson: Good morning, Adam.
Adam L. Samuelson: Morning.
Adam L. Samuelson: Maybe first something that.
Adam L. Samuelson: Bill you alluded to in the prepared remarks, just want to clarify. So there was a litigation settlement that was it was 20 million euros of cash that you received in April can you just maybe elaborate a little bit on that as their attacks and is there a tax impact on that just to make sure we're clear.
Adam L. Samuelson: That's not something that had been previously in any of the filing so any additional color would be helpful.
William E. Drew: Sure, Adam. So, this was a litigation matter that had been ongoing for a number of years, just related to some patent infringement. So, it was great to get this settled, get it behind us, and get the cash proceeds in. At this point, right, the proceeds are gross. So, you know, we'll have the tax impact when we go to file our tax returns in the following year. But for now, that cash goes straight to the balance sheet. So, you know, it's nice to get some additional yield on that cash and be able to maximize liquidity ahead of any potential refinancing later this year.
Bill: Sure Adam. So this was litigated litigation matter that had been ongoing for a number of years was related to some patent infringement. So it was great to get this settled and get it behind us get the cash proceeds and at this point right. The proceeds our gross so we will have the tax impact when we go to file our tax returns.
William E. Drew: Following year, but for now that cash go straight to the balance sheet.
William E. Drew: So it's nice to get some additional yield on that cash and be able to maximize liquidity ahead of any potential refinancing later this year.
Omar Marwan Asali: And Adam, just to add, the 20 million euro settlement is 15 million euros for the settlement on the litigation and about 5 million euros for us giving them some rights to a couple of patents we have. So the total proceeds will be, you know, as Bill said, it's the 20 million euros, but it's these two separate things that got us there. And then in terms of tax impact, obviously, that's something that we'll be assessing based on the two transactions that I outlined for the rest of the year. But this was a really good conclusion for us, and we get to move on, and, as I said a little bit earlier, just execute on our business plan and not have too many open matters.
Speaker Change: And Adam just to add the 20 million Euro settlement is $15 million settlement under litigation and about 5 million euros on us giving them some rights to a couple of patents. We have so the total proceeds will be.
Omar Marwan Asali: As Bill said is in the $20 million euros, but it's at least two separate things that got US there and then in terms of tax impact obviously, that's something that we'll be assessing based on the two transactions that I outlined for for the rest of the year.
Omar Marwan Asali: Okay.
Omar Marwan Asali: This was a real good conclusion for us and we got to move on and as I said, a little bit earlier, just execute on our business plan and not have too many open matters.
Adam L. Samuelson: Okay, now that's very helpful. And then, if you think about some of the strategic accounts, Omar, that are starting to kind of come to fruition in the core business in the second quarter, how should we think about installed base trends rolling forward? Is that going to drive a pickup in void fill and in-cushioning machine placements through the year, or is there a little bit further decline before those start to re-
Speaker Change: Okay now thats that.
Omar: That's very helpful and then.
Adam L. Samuelson: If you think about some of the strategic accounts.
Omar: Are there that are that are starting to kind of come to fruition.
Adam L. Samuelson: And the core business and.
Adam L. Samuelson: In the second quarter, how should we think about installed base trends.
Adam L. Samuelson: Rolling forward is that going to drive.
Adam L. Samuelson: A pickup in void fill and cushioning machine placements through the year or is there a little bit further decline before those start to reaccelerate.
Omar Marwan Asali: We have been, you know, laser-focused, Adam, as you know, about redeploying, refurbishing, and working our asset base to the extent possible, and that continues to be our priority given the last couple of years. We did feel that some accounts were overcapitalized, and the world changed, and we needed to react, and we continue to do that. So that's priority one.
Omar: We have been.
Omar Marwan Asali: Laser focused Adam as you know about.
Omar Marwan Asali: Redeploying refurbishing and working our asset base on extent possible and that continues to be our priority given in the last couple of years, we did feel that some accounts we're overcapitalized.
Omar Marwan Asali: And the world changed and we needed to react and we continue to do that so thats priority one with some of the large strategic accounts.
Omar Marwan Asali: With some of the large strategic accounts, and as we're ramping those up, just given the scale of some of these accounts, redeploying and refurbing, etc., it may not be enough to meet the demands that we're seeing. So you will see some pickup that we've already planned for in Q1 because we're frankly ramping up as we speak at some of these accounts. I don't think you're going to see anything, you know, that's going to move the needle at 140,000, you know, installed base.
Omar Marwan Asali: And as we are ramping those up just given the scale of some of these accounts are redeploying and refurbishing et cetera may not be enough to meet the demands that we're seeing so you will see some pickup that we've already planned for.
Omar Marwan Asali: In Q1, because we're frankly ramping up as we speak at some of these accounts.
Omar Marwan Asali: I don't think youre going to see something.
Omar Marwan Asali: That's going to move the needle at 140000.
Omar Marwan Asali: Installed base will be may be a modest increase from the last couple of quarters for us to fulfill the needs of these customers, but we're trying to be very very prudent with our capex and how we fulfill these customer demands and the beauty of some of these large accounts Adam is the efficiency per converted or the.
Omar Marwan Asali: It will be maybe a modest increase from the last couple of quarters for us to fulfill the needs of these customers, but we're trying to be very, very prudent with our CapEx and how we meet these customer demands. And the beauty of some of these large accounts, Adam, is the efficiency per converter, the efficiency per machine given volume, sometimes tends to be above, you know, what we've offered other customers just given sheer needs. So they tend to be pretty efficient from a CapEx standpoint.
Omar Marwan Asali: Efficiency for our machine given volume.
Omar Marwan Asali: Sometimes tends to be above.
Omar Marwan Asali: What we've offered other customers just given share needs. So they tend to be pretty efficient from a capex standpoint.
Adam L. Samuelson: All right, Chris, that's all very helpful color information. I'll pass it on. Thank you.
Adam L. Samuelson: All right, Chris, that's all.
Speaker Change: Alright, great that's that's.
Speaker Change: Very helpful color I'll pass it on thank you.
Speaker Change: Thank you.
William E. Drew: That concludes our Q&A session. I will now turn the conference back over to Bill Drew for closing remarks.
Adam L. Samuelson: That concludes our Q&A session I will now turn the conference back over to Bill <unk> for closing remarks.
William E. Drew: Thanks, Benjamin, and thank you everybody for joining us today. We look forward to catching up next quarter.
William E. Drew: Thanks, Benjamin and thank you everybody for joining us today, we look forward to catching up next quarter.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
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Operator: Yes.
William E. Drew: Thank you.
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Operator: Okay.