Q3 2024 Pactiv Evergreen Inc Earnings Call

Speaker Change: [music].

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Operator: Good day and welcome to the Pactiv Evergreen third quarter 2024 financial results. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Good day and welcome to the passive evergreen third quarter 'twenty 'twenty four financial results all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, and then 2. Please note this event is being recorded.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to ensure your question. Please press Star then two please.

Speaker Change: Please note. This event is being recorded I would now like to turn the conference over to Kurt Worthington Vice President.

Curt Worthington: I would now like to turn the conference over to Curt Worthington, Vice President. Strategy, Investor Relations, please go ahead.

Kurt Worthington: Strategy Investor Relations. Please go ahead.

Curt Worthington: Thank you, operator.

Kurt Worthington: Thank you operator, and good morning, everyone welcome to our third quarter 2024 earnings call.

Curt Worthington: And good morning, everyone. Welcome to our third quarter 2024. With me on the call today, we have Michael King, President and CEO, and John Baksht, CFO. Please visit the events section of our investor relations website at www.pactivevergreen.com. and access our Supplemental Earnings Presentation. Management's remarks today should be heard in tandem with reviewing this presentation.

Kurt Worthington: With me on the call today, we have Michael King President and CEO John box.

Please visit the events section of our Investor Relations website at Www Dot Act of Evergreen Dotcom and access our supplemental earnings presentation.

Kurt Worthington: Management's remarks today should be heard in tandem with reviewing this presentation.

Curt Worthington: Before we begin our formal remarks, I want to remind everyone that our discussions today will include forward-looking statements, including those regarding our Guidance for 2024. These forward-looking statements are not guarantees of future performance, and actual results could differ materially from those contemplated by our forward-looking Therefore, you should not put undue reliance on those. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

Kurt Worthington: Before we begin our formal remarks I want to remind everyone that our discussions today will include forward looking statements, including those regarding our guidance for 2024.

Kurt Worthington: These forward looking statements are not guarantees of future performance.

Kurt Worthington: Actual results could differ materially from those contemplated by our forward looking statements.

Kurt Worthington: Therefore, you should not put undue reliance on those statements.

Kurt Worthington: These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

Curt Worthington: We refer all of you to our recent SEC filings, including our annual report on Form 10-K for the year ended December 31st, 2023, and our quarterly reports on Form 10-Q for the quarters ended March 31st, June 30th, and September 30th, 2024, for a more detailed discussion of those The forward looking statements we make on this call are based on information available to us as of today's date, and we disclaim any obligation to update any forward looking statements except as required by law.

Kurt Worthington: We refer all of you to our recent SEC filings, including our annual report on Form 10-K for the year ended December 31, 2023, and our quarterly reports on Form 10-Q for the quarters ended March 31 June 30 September 32024 for a more detailed discussion of those risks.

Kurt Worthington: The forward looking statements we make on this call are based on information available to US as of today's date and we disclaim any obligation to update any forward looking statements, except as required by law.

Curt Worthington: During today's call, we will discuss certain GAAP and non-GAAP financial measures, which we believe can be useful in evaluating our Our non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP, and reconciliations to the most directly comparable GAAP measures are available in our earnings release and in the appendix to today's presentation. and less otherwise stated, all figures discussed during today's call are for continuing operations Lastly, throughout the remainder of our remarks, we'll refer to Pine Bluffs, Waynesville, and the associated operations we divested on October 1st collectively as Pine Bluffs for ease of With that, let me turn the call over to Pactive Evergreen's President and CEO, Michael King.

Kurt Worthington: During today's call, we will discuss certain GAAP and non-GAAP financial measures, which we believe can be useful in evaluating our performance.

Kurt Worthington: Our non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to the most directly comparable GAAP measures are available in our earnings release and in the appendix of today's presentation.

Kurt Worthington: Yes, otherwise stated all figures discussed during today's call are for continuing operations only.

Kurt Worthington: Lastly throughout the remainder of our remarks, we will refer to pine Bluff Waynesville and the associated operations, we divested on October 1st collectively as timing for Egypt.

Speaker Change: With that let me turn the call over to tax of Evergreens, President and CEO, Michael Mike. Thanks, Kurt Good morning, everyone and thank you for joining our call. This morning.

Michael King: Mike. Thanks, Curt.

Michael King: Good morning, everyone. And thank you for joining our call this morning. I'll start today off with an overview of the key themes for the third quarter and provide an update on the market. I'll also discuss the progress we've made against our strategy, including how we're positioning ourselves for growth in 2025 and beyond. Then I'll turn the call over to Jon to provide an update on our key financial metrics and discuss our outlook for the rest of the year.

Michael Mike: I'll start today off with an overview of the key themes for the third quarter and provide an update on the market I'll also discuss the progress we've made against our strategy, including how we're positioning ourselves for growth in 2025 and beyond.

Then I will turn the call over to John to provide an update on our key financial metrics and discuss our outlook for the rest of the year.

Michael King: At the end of the call, we'll open the line for Q&A. Turning to slide five. In the third quarter, revenues were $1.3 billion and adjusted EBITDA was $214 million. Solid 16% Mark. We delivered adjusted earnings per share of $0.36 and free cash flow of $190 million. Our team maintained a high level of execution in our core operations during the quarter and navigated a dynamic consumer demand backdrop. We also overcame operational challenges at Pine Bluff during our final quarter of owning the mill. As previously announced, on October 1st, we completed the sale of our remaining mill operation.

Michael Mike: At the end of the call will open the line for Q&A.

John Box: Turning to slide five.

John Box: In the third quarter revenues were $1 3 billion.

John Box: And adjusted EBITDA was $214 million, a solid 16% margin.

John Box: We delivered adjusted earnings per share of <unk> 36, and <unk>.

John Box: Free cash flow of $190 million.

John Box: Our team maintained a high level of execution in our core operations during the quarter and navigated a dynamic consumer demand backdrop. We also overcame operational challenges the pine Bluff during the final quarter of owning the mill.

As previously announced on October one we completed the sale of our remaining mill operations.

Michael King: The closing of the transaction marks an important milestone as we focus on our core North American converting operations and progress on our transition to a more capital light business model that we expect will reduce our CapEx requirements and provide more flexibility to invest for growth. Now that we have executed on our strategy to exit paper mill operations, we expect to improve our future profitability while also reducing the volatility in our earnings. We are now positioned to advance to the next phase of our transformational journey, which envisions us aligning with core customers through the cycle, repositioning our product portfolio to increase our presence and select customer channels.

John Box: Closing of the transaction marks an important milestone as we focus on our core North American converting operations and progress on our transition to a more capital light business model that we expect will reduce our capex requirements and provide more flexibility to invest for growth.

John Box: Now that we've executed on our strategy to exit paper mill operations, we expect to improve our future profitability, while also reducing the volatility in our earnings.

John Box: We are now positioned to advance to the next phase of our transformational journey, which envisions us aligning with core customers through the cycle repositioning our product portfolio to increase our presence in select customer channels.

Michael King: Investing in growth initiatives, focusing on innovation, sustainability, and new product development, and improving operational efficiency and lowering our cost. We'll continue to leverage our distinct capabilities to serve our core customers. most of whom are large scale nationally recognized brands and industry leaders that are well positioned in their It's because of our longstanding relationships that we have been able to navigate external challenges and outpace our end mark. Building on that strategy, we continue to focus on innovation and developing new sustainable products. We've also identified new opportunities with attractive growth which we believe will generate momentum into 2025 and 2020.

John Box: Vesting and growth initiatives, focusing on innovation sustainability and new product development.

And improving operational efficiency and lowering our cost to serve.

John Box: We will continue to leverage our distinct capabilities to serve our core customers most of whom are large scale nationally recognized brands and industry leaders that are well positioned in their markets.

Because of our longstanding relationships that we have been able to navigate extreme challenges and outpace our end markets.

John Box: Building on that strategy, we continue to focus on innovation and developing new sustainable products. We've also identified new opportunities with attractive growth prospects, which we believe will generate momentum into 2025 in 2026.

Michael King: From a continuous improvement standpoint, we continue to take actions to flex our cost structure with industry demand. Our footprint optimization, as well as the cost actions we outlined in our last earnings call, continue to build momentum. We remain on track to generate $15 million of cost savings and discretionary spend and SG&A by the end of this year.

John Box: From a continuous improvement standpoint, we continue to take actions to flex our cost structure with industry demand.

John Box: Our footprint optimization as well as the cost actions, we outlined in our last earnings call continued to build momentum.

John Box: We remain on track to generate $15 million of cost savings in discretionary spend and SG&A by the end of this year.

Michael King: In September and October, our communities face the challenges brought by Hurricanes Helene and Milton. We're grateful our employees are safe and we're impressed by how quickly our dedicated teams restore operations in just a matter of days. The determination and resilience shown during this time has been inspiring, and it highlights the strength and spirit of our organization. We are fortunate to also share our business with largely unaffected by the John will touch on this later. From an industry perspective, foot traffic at restaurants and volumes at grocery stores have continued to show the effects of lingering high prices as consumers continue to reduce their spending to fit within their budget.

John Box: In September and October our communities face the challenges brought by Hurricanes Helene and Milton.

John Box: We're grateful to our employees are safe and we're impressed by how quickly our dedicated teams restore operations and just a matter of days.

John Box: The determination and resilience shown during this time has been inspiring and it highlights the strength and spirit of our organization. We are fortunate to also share our business was largely unaffected by the storms John will touch on this later.

Speaker Change: From an industry perspective foot traffic at restaurants and volumes at grocery stores have continued to show the effects of lingering high prices as consumers continue to reduce their spending to fit within their budgets food at home price inflation has moderated more than food away from home prices over the last few years and consumers have responded by <unk>.

Michael King: food at home price inflation has moderated more than food away from home prices over the last few years. And consumers have responded by shifting their spend from restaurants to the grocery store, especially in recent quarters. Within food service, industry volumes in the third quarter were lower than the second quarter. Foot traffic was down over 3% in our end markets. Within the grocery store, consumers continue to prioritize staples like protein and produce. We've continued to execute our value over volume framework and embrace a data centric approach to focus on customers, products and channels aligned with our long term strategy.

Speaker Change: Shifting their spend from restaurants to the grocery store, especially in recent quarters.

Speaker Change: Within foodservice industry volumes in the third quarter were lower than the second quarter <unk>.

Speaker Change: Foot traffic was down over 3% and our end markets within the grocery store consumers continue to prioritize staples like protein and produce.

Speaker Change: We've continued to execute our value over volume frameworks and embrace a data centric approach to focus on customers products and channels align with our long term strategy.

Michael King: On the food service side of the business, this approach has helped us outpace the market over the last several quarters. This is also a testament to our customer mix, which is weighted towards blue chip companies that have the ability to grow share through the On the food and beverage merchandising side of the business, we're in the middle innings of our value over volume playbook. And in recent quarters, we've begun repositioning our portfolio in our go to market strategy. Our objective is to concentrate on areas where we're currently underrepresented, but are well positioned to succeed and grow share.

Speaker Change: On the foodservice side of the business. This approach has helped us outpace the market over the last several quarters. This is also a testament to our customer mix, which is weighted towards blue chip companies that have the ability to grow share through the cycle.

Speaker Change: On the food and beverage merchandising side of the business. We're in the middle innings of our value over volume playbook and in recent quarters, we began repositioning our portfolio and our go to market strategy.

Speaker Change: Our objective is to concentrate on areas, where we're currently underrepresented, but are well positioned to succeed and grow share. We expect these actions to translate into volume improvement through 2025 and into 2026 as the composition of the portfolio shifts to attractive new channels and end markets.

Michael King: We expect these actions to translate into volume improvement through 2025 and into 2026 as the composition of the portfolio shifts to attractive new channels and end markets.

Michael King: Screen the slide, sir. Over the last several quarters, an area of focus has been lowering our cost to serve, including managing our fixed costs and discretionary spend. Our team has done an outstanding job this year, executing on several initiatives that position Pactive Evergreen for... We're continuing to manage our costs to align with our longer term strategy and also offset lingering consumer pressures in the near term. For example, last quarter, we initiated a cost reduction plan, which is focused on discretionary spend and SG&A, which is expected to generate roughly $15 million of savings in this year.

Speaker Change: Turning to slide six.

Speaker Change: Over the last several quarters and area of focus has been lowering our cost to serve.

Speaker Change: <unk>, managing our fixed costs and discretionary expense.

Speaker Change: Our team has done an outstanding job this year executing on several initiatives that position pact of evergreen for success.

Speaker Change: We're continuing to manage our cost to align with our longer term strategy and also offset lingering consumer pressures in the near term for example last quarter, we initiated a cost reduction plan, which is focused on the discretionary spend in SG&A, which is expected to generate roughly $15 million of savings in this year.

Michael King: Our footprint optimization program, which we announced earlier in the year, is expected to reduce our overall footprint by approximately 10% over the next two years. We anticipate full run rate cost savings of approximately $35 million by 2026. And finally, operational excellence remains core to the culture we've established at Pactive Evergreen. Our continuous improvement mindset is reflected in our Pactiv Evergreen production. which has helped our plants identify new solutions to unlock productivity and reduce For example, we continue to refine the harmonization of production plans across our network by consolidating certain SKUs at the lowest cost plans and organizing production schedules to optimize our manufacturing costs.

Speaker Change: Our footprint optimization program, which we announced earlier in the year is expected to reduce our overall footprint by approximately 10% over the next two years, we anticipate full run rate cost savings of approximately $35 million by 2026.

Speaker Change: And finally operational excellence remains core to the culture, we have established effective evergreen our continuous improvement mindset is reflected in our pact of evergreen production system, which has helped our plants identify new solutions to unlock productivity and reduce waste. For example, we continue to refine the harmonization of production plans across.

Speaker Change: Our network by consolidating certain skus at the lowest cost plants and organizing production schedules to optimize our manufacturing costs.

Michael King: Another example is streamlining equipment changeovers on our lines to reduce downtime in between production runs. We've been steadily building momentum on these initiatives throughout the year, and we expect them to translate into efficiency gains in Q4 and into next year. As PEPS matures, we continue to identify new ways to improve our operations, and we're confident the program will continue to yield benefits as it becomes a standard across the entire organization.

Speaker Change: Another example is streamlining equipment changeovers on our lines to reduce downtime in between production runs we've been steadily building momentum on these initiatives throughout the year and we expect them to translate into efficiency gains in Q4 and into next year.

Speaker Change: As tubs matures, which is we continue to identify new ways to improve our operations and we're confident the program will continue to yield benefits as it becomes a standard across the entire organization.

Michael King: We look forward to providing more detail, including the benefits, in quarters to come. Turning the slides up. Innovation is at the center of everything we do, whether it's developing advanced substrates, creating new products, or identifying new ways to serve our customers. Innovation is also a critical driver for long term sustainable growth. In September, we announced a new line of reduced density polypropylene protein traits under our Recycleware brand. Our RDPP products are the perfect solution for packer processors looking for sustainable alternatives to foam polystyrene. The new meat trays are vertically integrated, meaning they're extruded, thermoformed, and padded at our facility.

Speaker Change: We look forward to providing more detail, including the benefits in quarters to come.

Speaker Change: Turning to slide seven.

Speaker Change: Innovation is at the center of everything we do whether it's developing advanced substrates, creating new products or identifying new ways to serve our customers'.

Innovation is also a critical driver for long term sustainable growth in September we announced a new line of reduced density polypropylene protein trades under a recycle where brands.

Speaker Change: Our R&D PPE products are the perfect solution for Packer processors looking for sustainable alternatives to phone polystyrene, the NUMMI trades or vertically integrating.

Speaker Change: Meaning they're extruded thermal forming pad at our facilities.

Michael King: These products also run well on existing overwrap equipment, meaning the switching cost for our customers is minimal. Customers have already cited the product's reduced consumption of raw materials versus other sustainable offerings as a key differentiator. We're in the early days, but we're really excited about the future prospects of our meat trays. And we're pleased with the progress so far. We expect the contribution from that product to grow as we ramp up capacity. In addition to our DPP trays, we'll continue to collaborate with our customers and have some exciting value-add projects in the pipeline that we expect will generate momentum through the course of 2020.

These products also run well on existing over wrap equipment, meaning the switching cost for our customers is minimal.

Speaker Change: Customers have already cited the products reduced consumption of raw materials versus other sustainable offerings as a key differentiator. We're in the early days, but we're really excited about the future prospects of our meat trays and we're pleased with the progress. So far we expect the contribution from that product to grow as we ramp up capacity.

Speaker Change: In addition to our DPP trays, we're continuing to collaborate with our customers and have some exciting value add projects in the pipeline that we expect will generate momentum through the course of 2025.

Michael King: Some of our new products concentrate on areas we're currently underrepresented, but well positioned to grow our presence, which is part of our broader effort to reposition the food and beverage merchandising portfolio and gain more exposure to attractive new end markets.

Speaker Change: Some of our new products concentrate on areas, where currently underrepresented, but well positioned to grow our presence, which is part of our broader efforts to reposition our food and beverage merchandising portfolio and gain more exposure to attractive new end markets.

Michael King: For example... We're collaborating with our CPG customers to identify opportunities to develop offerings that help them differentiate their products. In October, we introduced SmartPour. Pourable containers, the patented SmartPour packaging solutions streamlines the pouring process, effectively eliminating the issue of messy bag and box spills. The closure design facilitates pouring and sealing, while the barrier board incorporated into the package extends product freshness. We're enthusiastic about this line of innovative technology and believe it will expand our reach into markets such as premium cereals, baking ingredients, pet food, powdered laundry detergents, and dishwashing liquids. Branded consumer products represent an underpenetrated in market for us, and we believe we're well positioned in the market to generate momentum into 2025 and 2026 from this initiative.

Speaker Change: For example.

Speaker Change: We're collaborating with our CPG customers to identify opportunities to develop offerings that help them differentiate their products.

Speaker Change: In October we introduced smart core portable containers dependent smart core packaging solutions streamlines deploying process effectively eliminating the issue of messy bag in box village. The closure designed facilitates pouring and ceiling, while the barrier board incorporated into the package extends product freshness.

We are enthusiastic about this line of innovative technology and believe it will expand our reach into markets such as premium cereals, baking ingredients pet food powdered laundry detergents and dishwashing liquids.

Speaker Change: Branded consumer products represent an underpenetrated end market for us and we believe we're well positioned in the market to generate momentum into 2025 and 2026 from this initiative.

Michael King: Another initiative for our food and beverage merchandising segment is reducing our reliance on third party distributors and leveraging our longstanding customer relationships to bolster our go to market approach. We believe our broad product portfolio, strategically located distribution network, and ability to innovate on behalf of our customers puts us in a great position to succeed in these categories. We're in the early stages with these initiatives, but we've already seen strong interest from our customers, and we're excited for it. Overall, we're encouraged by the progress we've made in the third quarter. Our operational execution, commitment to driving efficiencies and commitment to innovation are building solid momentum.

Speaker Change: Another initiative for our food and beverage merchandising segment is reducing our reliance on third party distributors and leveraging our longstanding customer relationships to bolster our go to market approach. We believe our broad product portfolio strategically located distribution network and ability to innovate on behalf of our customers puts.

Speaker Change: US in a great position to succeed in these categories.

Speaker Change: We're in the early stages with these initiatives, but we've already seen strong interest from our customers and we're excited for our future.

Speaker Change: Overall, we are encouraged by the progress we've made in the third quarter, our operational execution and commitment to driving efficiencies and commitment to innovation are building solid momentum.

Michael King: Looking ahead, consumers are still absorbing the multi year impact of elevated inflation, and we expect that dynamic will continue in the near That said, over the past quarter, customers have increased their promotional activity in an effort to deliver more value to the consumer and spur demand. Time will tell if the promotions translate into lasting volume growth, but we do believe they've been helpful in stemming the tide in the near term. For now, we're encouraged that restaurants, food companies, and food retailers are taking action to provide some relief to their customers. Overall, we are cautiously optimistic and will continue to focus on the things we can control to position us to emerge stronger operationally and competitively.

Looking ahead consumers are still absorbing the multiyear impact of elevated inflation and we expect that dynamic will continue in the near term.

Speaker Change: That said over the past quarter customers have increased their promotional activity and an effort to deliver more value to the consumer and spur demand.

Speaker Change: Time will tell if the promotions translate into lasting volume growth, but we do believe they have been helpful. In stemming the tide in the near term.

Speaker Change: For now we're encouraged that restaurants food companies and food retailers are taking action to provide some relief to their customers. Overall, we are cautiously optimistic and we will continue to focus on the things, we can control to position us to emerge stronger operationally and competitively.

Michael King: We remain confident in the resilience of our business model and believe the structural improvements we have made to date provide us a solid foundation to build momentum in the fourth quarter and position us for growth in 2025.

We remain confident in the resilience of our business model and believe the structural improvements. We have made to date provides us a solid foundation to build momentum in the fourth quarter and position us for growth in 2025.

Michael King: That concludes my initial remarks.

Speaker Change: That concludes my initial remarks, I will turn the call over to John.

Jonathan Baksht: I will turn the call over to Jon. Jon?

Speaker Change: John.

Jonathan Baksht: Thanks, Mike.

John Box: Thanks, Mike.

Jonathan Baksht: I'll start with our third quarter highlights on slide nine. As Mike outlined, our third quarter results reflect our efforts to right size our operations and manage resources to align with the broader demand environment. These factors, in conjunction with our focus on cost discipline, supported an improvement in adjusted EBITDA margins compared to Q2. We recorded net revenues of $1.3 billion for the quarter, a decrease of about 3% compared to last year. This change was primarily driven by lower sales volume, but was partially offset by favorable pricing due to higher material costs. The volume trend was mostly a combination of the broader demand environment and our own portfolio actions, particularly in food and beverage merchandise.

Speaker Change: Part with our third quarter highlights on slide nine as Mike outlined our third quarter results reflect our efforts to rightsize, our operations and manage resources to align with the broader demand environment. These factors in conjunction with our focus on cost discipline supported an improvement in adjusted EBITA margins compared to Q2.

Speaker Change: We recorded net revenues of $1 $3 billion for the quarter, a decrease of about 3% compared to last year. This change was primarily driven by lower sales volume, but was partially offset by favorable pricing due to higher material costs.

Speaker Change: Volume trend was mostly a combination of the broader demand environment and our own portfolio actions, particularly in food and beverage merchandising. However.

Jonathan Baksht: However, in food service, we continue to outperform our industry by aligning with our long standing blue chip customers that are well positioned to outpace their end markets over the cycle. Overall volumes are down 5% in the quarter. Food service volumes were down 2%. However, we outpaced broader industry foot traffic trends, which were down over 3%. Food and Beverage Merchandising volumes decreased 8% during the quarter. This reflects consumer spending patterns, as well as the year-over-year impact of our value-over-volume strategy and portfolio repositioning, which includes the initiatives Mike mentioned earlier. As we execute our plan, we anticipate some near-term impacts to volumes, but we expect that to translate to future growth, as well as a more attractive business.

Speaker Change: However in foodservice, we continue to outperform the industry by aligning with our long standing blue chip customers that are well positioned to outpace their end markets over the cycle.

Speaker Change: Overall volumes were down 5% in the quarter foods.

Speaker Change: <unk> volumes were down 2%, however, we outpaced broader industry foot traffic trends, which were down over 3% food.

Speaker Change: Food and beverage merchandising volumes decreased 8% during the quarter. This reflects consumer spending patterns as well as the year over year impact of our value over volume strategy and portfolio repositioning which includes the initiatives Mike mentioned earlier as we execute.

Speaker Change: Our plan, we anticipate some near term impacts to volumes, but we expect that that we expect that to translate to future growth as well as a more attractive business mix.

Jonathan Baksht: Price mix was up 2% during the quarter, reflecting favorable pricing in the food service segment, largely due to the pass-through of higher material costs and favorable product mix in the food and beverage merchandising segment. Adjusted EBITDA was $214 million, representing a 6% decrease compared to the prior year. The decrease in adjusted EBITDA is attributable to higher manufacturing costs and lower sales volume. This is partially offset by lower incentive-based compensation costs, favorable product mix in the food and beverage merchandising segment, and favorable pricing native material costs pass-through in the food service sector. Our manufacturing costs primarily reflect the challenges of Pine Bluffs during our final quarter owning the mill.

Speaker Change: Price mix was up 2% during the quarter, reflecting favorable pricing in the foodservice segment.

Speaker Change: Largely due to the pass through of higher material costs, and favorable product mix and the food and beverage merchandising segment.

Adjusted EBITDA was $214 million, representing a 6% decrease compared to the prior year.

Speaker Change: Decrease in adjusted EBITDA is attributable to higher manufacturing costs and lower sales volume.

Speaker Change: This was partially offset by lower incentive based compensation costs favorable product mix in the food and beverage merchandising segment and favorable pricing net of material cost pass through in the foodservice segment.

Speaker Change: Higher manufacturing costs, primarily reflect the challenges of pine Bluff during our final quarter owning the mill.

Jonathan Baksht: Our adjusted EBITDA margin was 16%, flat compared to last year, but 240 basis points higher than Q2.

Speaker Change: Our adjusted EBITDA margin was 16% flat compared to last year, but 240 basis points higher than Q2, we remain confident in the actions were taking to adjust our cost structure to position us for long term growth and enhanced profitability.

Jonathan Baksht: We remain confident in the actions we're taking to adjust our cost structure to position us for long-term growth and enhanced profitability. From a quarter of a quarter perspective, revenues were effectively flat, with lower sales volume largely offset by favorable pricing in the food and beverage merchandising segment, and favorable mix in the food service segment. Adjusted EBITDA increased 17%, primarily due to lower manufacturing costs as a result of a planned mill outage during the second quarter, favorable pricing, net of material costs passed through, and favorable product mix, partially offset by lower sales volume. We generated free cash flow $190 million, which was a significant increase compared to the second quarter.

Speaker Change: From a quarter over quarter perspective revenues were effectively flat with lower sales volume largely offset by favorable pricing in the food and beverage merchandising segment and favorable mix in the foodservice segment.

Speaker Change: Adjusted EBITDA increased 17%, primarily due to lower manufacturing costs as a result of a planned mill outages during the second quarter favorable pricing net of material cost pass through and favorable product mix, partially offset by lower sales volume.

Speaker Change: We generated free cash flow of $190 million, which was a significant increase compared to the second quarter free cash flow benefited from the timing of cash outflows and higher adjusted EBITDA.

Jonathan Baksht: Free cash flow benefited from the timing of cash outflows and higher adjusted EBITDA.

Jonathan Baksht: Continuing to slide 10, we'll look at results by segment beginning with food service. Segment net revenues decreased just under 1% to $670 million, primarily due to lower sales volume. This was partially offset by favorable pricing resulting from the pass-through of increased material costs. From a volume perspective, the food away from home space is still experiencing declining industry foot traffic as consumers adjust to higher prices. Overall, industry foot traffic was down over 3% during Q3, which was slightly below the roughly 2.5% decline in Q2. However, we're encouraged by three main factors. First, because our business mix is heavily weighted with longstanding blue chip customer relationships, our volumes continue to outpace the industry.

Continuing to slide 10, we'll look at results by segment beginning with foodservice.

Speaker Change: Segment net revenues decreased just under 1% to $670 million, primarily due to lower sales volume. This.

Speaker Change: This was partially offset by favorable pricing, resulting from the pass through of increased material costs.

Speaker Change: From a volume perspective, the food away from home space is still experiencing declining industry foot traffic as consumers adjust to higher prices.

Speaker Change: Overall industry foot traffic was down over 3% during Q3, which was slightly below the roughly two 5% decline in Q2. However, we are encouraged by three main factors first because our business mix is heavily weighted with long standing blue chip customer relationships, our volumes continued to outpace the industry.

Jonathan Baksht: Second, food away from home inflation, while elevated, continues to decline, falling below 4% on an annual basis in September for the first time since April 2021. Third, our customers are leaning in on promotional activity in an effort to deliver more value to consumers and drive volume. Importantly, several leading QSR customers have communicated their intent to extend promotional campaigns into the fourth quarter. Thus far, the increased promotions haven't resulted in year-over-year volume growth, although they have helped offset some of the near-term affordability issues for consumers. Adjusted EBITDA increased 3% compared to last year to $120 million, and adjusted EBITDA margins improved by a little over 50%.

Speaker Change: Second food away from home inflation, while elevated continues to decline falling below 4% on an annual basis in September for the first time since April 2021.

Speaker Change: Third our customers are leaning in on promotional activity and an effort to deliver more value to consumers and drive volumes.

Speaker Change: Importantly, several leading <unk> customers have communicated their intent to extend promotional campaigns into the fourth quarter. Thus far the increased promotions haven't resulted in year over year volume growth. Although they have helped to offset some of the near term affordability issues for consumers.

Speaker Change: Adjusted EBITDA increased 3% compared to last year to $120 million and adjusted EBITDA margins improved by a little over 50 basis points.

Jonathan Baksht: The increase primarily reflects favorable pricing, net and material cost pass-through, and lower incentive-based compensation costs, partially offset by higher manufacturing. Net revenues are flat quarter over quarter primarily due to favorable product mix, largely offset by lower sales life. Adjusted EBITDA increased by 10% and adjusted EBITDA margins increased by 160 basis points. driven by favorable product mix, favorable pricing, net of material costs passed through, and lower incentive based costs, partially offset by higher manufacturing.

Speaker Change: The increase primarily reflects favorable pricing net of material cost pass through and lower incentive based compensation costs.

Speaker Change: Partially offset by higher manufacturing costs.

Speaker Change: Net revenues were flat quarter over quarter, primarily due to favorable product mix largely offset by lower sales volume.

Speaker Change: Adjusted EBITDA increased by 10% and adjusted EBITDA margins increased by 160 basis points, driven by favorable product mix favorable pricing net of material cost pass through and lower incentive based cost partially offset by higher manufacturing costs.

Jonathan Baksht: Turning to slide 11. Food and beverage merchandising results reflect the continuation of trends we observed in second quarter. Industry volumes are closer to break even as consumers continue to shift from eating out to eating at home in order to save money. Consistent with previous quarters, consumers are prioritizing staples like protein and produce, both of which performed well for us during the quarter. Discretionary items, such as bakery, continue to be impacted by the same dynamic. Egg carton volumes were impacted by the bird flu that reduced overall egg production during the quarter, although conditions have mostly normalized through early November.

Turning to slide 11.

Speaker Change: Food and beverage merchandising results reflect the continuation of trends, we observed in the second quarter industry.

Speaker Change: Industry volumes are closer to breakeven as consumers continue to shift from eating out to eating at home in order to save money consistently.

Speaker Change: Consistent with previous quarters consumers are prioritizing staples like protein and produce both of which performed well for us during the quarter.

Speaker Change: Discretionary items, such as bakery continued to be impacted by the same dynamic.

Speaker Change: Carton volumes were impacted by the bird flu that reduced overall egg production during the quarter, although conditions have mostly normalize through early November outside.

Jonathan Baksht: Outside of broader industry demand, the other main volume driver during the quarter was the impact of the year over year effects of our value over volume strategy. As Mike mentioned, we have several exciting initiatives underway that target innovation and expanding our presence in the new and promising markets. We recognize there may be some short term impacts on our volumes. However, we view these adjustments as important steps that will ultimately lay the foundation for future growth and a more favorable business. We are optimistic about the positive effects on the horizon. Taking all this into account, segment net revenues declined 6% year over year.

Outside of broader industry demand. The other main volume driver during the quarter was the impact of the year over year effects of our value over volume strategy as Mike mentioned, we have several exciting initiatives underway that target innovation and expanding our presence in the new and promising markets. We recognize there may be some short term impacts on our volumes. However.

Speaker Change: We view these adjustments as important steps that will ultimately lay the foundation for future growth and a more favorable business mix. We are optimistic about the positive effects on the horizon.

Taking all this into account segment net revenues declined 6% year over year lower sales volume was driven by our focus on value over volume and the broader demand environment, partially offset by favorable product mix.

Jonathan Baksht: Lower sales volume was driven by our focus on value over volume and the broader demand environment, partially offset by favorable product mix. Adjusted EBITDA decreased 15% compared to last year, primarily due to higher manufacturing costs, mostly in our mill operations, and lower sales life. This is partially offset by favorable product mix and lower incentive based compensation cost. Adjusted EBITDA margins were down 160 basis points versus the prior year due to higher manufacturing costs, including operational challenges of pine bluffs and lower sales costs. On a sequential basis, net revenues were down 1% due to lower sales volume, which was attributable to seasonal trends, partially offset by favorable pricing due to pricing action.

Speaker Change: Adjusted EBITDA decreased 15% compared to last year, primarily due to higher manufacturing costs, mostly in our mill operations and lower sales volume. This.

Speaker Change: This was partially offset by favorable product mix and lower incentive based compensation costs.

Speaker Change: Adjusted EBITDA margins were down 160 basis points versus the prior year due to higher manufacturing costs, including operational challenges at Pine Bluff and lower sales volume.

Speaker Change: On a sequential basis net revenues were down 1% due to lower sales volume, which was attributable to seasonal trends, partially offset by favorable pricing due to pricing actions.

Jonathan Baksht: Adjusted EBITDA increased 19%, reflecting lower manufacturing costs, mainly a result of a planned mill outage during the second quarter, favorable pricing, net of material costs past due, and lower incentive-based costs, partially offset by lower sales volume.

Speaker Change: Adjusted EBITDA increased 19%, reflecting lower manufacturing costs, mainly a result of a planned mill outages during the second quarter favorable favorable pricing net of material cost pass through and lower incentive based costs, partially offset by lower sales volume.

Jonathan Baksht: On slide 12, we have highlighted balance sheet items and key components of our cash flow. Free cash flow during Q3 was $190 million, benefiting from the timing of corporate cash outflows, such as interest and tax payments, and higher adjusted EBITDA. Our ability to generate strong cash flow allowed us to reduce our net debt by $170 million during the third quarter and decrease our net leverage to 4.3 times, on track with our year-end goal of reaching approximately four times. The step down relative to the second quarter was consistent with our expectations. Our strong cash flow generation also provides us the opportunity to reinvest in our operations to seed future growth and drive margin expansion.

Speaker Change: On slide 12, we have highlighted balance sheet items and key components of our cash flow.

Speaker Change: Free cash flow during Q3 was $190 million that is benefiting from the timing of corporate cash outflows, such as interest and tax payments and higher adjusted EBITDA.

Speaker Change: Our ability to generate strong cash flow allowed us to reduce our net debt by $170 million during the third quarter and decrease our net leverage to four three times on track with our year end goal of reaching approximately four times.

Speaker Change: The step down relative to the second quarter was consistent with our expectations.

Speaker Change: Our strong cash flow generation also provides us the opportunity to reinvest in our operations to seed future growth and drive margin expansion.

Jonathan Baksht: Over the past three years, we've embarked on several strategic initiatives aimed at enhancing productivity, increasing profitability, and achieving significant cost savings. We believe that these concerted efforts will not only improve our ability to meet the diverse needs of our customer base more effectively, but also streamline our operation.

Speaker Change: Over the past three years, we've embarked on several strategic initiatives aimed at enhancing productivity, increasing profitability and achieving significant cost savings.

Speaker Change: We believe that these concerted efforts will not only improve our ability to meet the diverse needs of our customer base more effectively but also streamline our operations.

Jonathan Baksht: Ultimately, we expect these advancements will contribute to enhanced returns for our stakeholders, reinforcing our commitment to sustainable growth and Turning to slide 13. Before I turn to our guidance for the remainder of 2024, I want to briefly touch on pro forma impacts of the divestiture of our Pine Bluff Mill, which we sold on October 1st. The transaction is an important milestone for multiple reasons. First, it allows us to focus on our core North American converting operation. Next, as you can see, our LTM adjusted EBITDA and margin profile improved materially on a proforma basis. Finally, with the net cash proceeds and the removal of the negative adjusted EBITDA attributable to the divested operations, reduce our net leverage ratio from 4.3 times to 4.1 times as of September 30.

Speaker Change: Ultimately, we expect these advancements will contribute to enhanced returns for our stakeholders reinforcing our commitment to sustainable growth and excellence.

Speaker Change: Turning to slide 13.

Before I turn to our guidance for the remainder of 2024 I want to briefly touch on pro forma impacts of the divestiture of our Pine Bluff mill, which we sold on October one.

The transaction is an important milestone for multiple reasons first it allows us to focus on our core North American converting operations next as you can see our LTM adjusted EBITDA and margin profile improve materially on a pro forma basis.

Speaker Change: Finally, with the net cash proceeds and the removal of the negative adjusted EBITDA attributable to the divested operations reduced our net leverage ratio from four three times to four one times as of September 30.

Jonathan Baksht: Turning to slide 14. On the next two slides, I'll cover our guidance for 2024 and also highlight the building blocks for 2025. We're updating our guidance range for full year adjusted EBITDA to be between $800 million and $810 million. This is partially due to operating challenges at Pine Bluff during our final quarter owning the mill, which resulted in adjusted EBITDA that was approximately $17 million lower than our previous 14. It also reflects a sequential uplift in Q4, as industry promotions provide some volume support, along with the continued ramp-up of efficiency gains. Our guidance also assumes that we realize the expected benefits from our footprint optimization and cost-saving initiatives, consistent with what we shared last quarter.

Speaker Change: Turning to slide 14 on the next two slides I'll cover our guidance for 2024 and also highlight the building blocks for 2025.

Speaker Change: We are updating our guidance range for full year adjusted EBITDA to be between 808 hundred $10 million. This was partially due to operating challenges at pine Bluff during our final quarter owning the mill, which resulted in adjusted EBITDA that was approximately $17 million lower than our previous forecast.

Speaker Change: It also reflects a sequential uplift in Q4 as industry promotions provide some volume support along with the continued ramp up of efficiency gains. Our guidance also assumes that we realize the expected benefits from our footprint optimization and cost saving initiatives consistent with what we shared last quarter.

Jonathan Baksht: The expected benefit of $15 million from cost-saving initiatives, combined with our commitment to continuous improvement, positions us to effectively adjust our cost structure in response to industry demand. We've lowered our full year 2024 capital spend guidance to a range of $240 to $250 million compared to our previous expectations of $260 million due to a shift in timing of project spend. Our free cash flow guidance of $180 to $200 million is unchanged. Lastly, we reiterate our expectation to reduce our net leverage ratio to approximately four times by year end.

Speaker Change: The expected benefit of $15 million from cost saving initiatives combined with our commitment to continuous improvement positions us to effectively adjust our cost structure in response to industry demand.

Speaker Change: We've lowered our full year 2020 for capital spend guidance to a range of $240 million to $250 million compared to our previous expectations of $260 million due to a shift in timing of project spend.

Speaker Change: Our free cash flow guidance of $180 million to $200 million is unchanged.

Speaker Change: Lastly, we reiterate our expectation to reduce our net leverage ratio to approximately four times by year end.

Jonathan Baksht: Turning to slide 15, it's important to note that despite the uneven market environment, we have responded and have made significant progress against our strategic objectives, while also emphasizing the significant milestone of closing the sale of our Pine Bluff Looking back to our original 2024 Adjusted EBITDA guidance range, excluding Pine Bluff, we anticipated $843 to $863 million from our core operations. At that time, the expected contribution from Pine Bluff for full year 2024 was approximately $7 million, for a total Adjusted EBITDA range of $850 to $870 million. Over the course of the year, we experienced reliability challenges at the mill, some of which were related to our planned outage in Q2.

Speaker Change: Turning to slide 15, it is important to note that despite the uneven market environment. We have responded and have made significant progress against our strategic objectives. While also emphasizing the significant milestone of closing the sale of our Pine Bluff mill looking.

Speaker Change: Looking back to our original 2024, adjusted EBITDA guidance range, excluding pine Bluff, we anticipated $843 million to $863 million from our core operations at that time, the expected contribution from <unk> for full year 2024 was approximately $7 million for total adjusted EBITDA range of 800.

Speaker Change: 50 data entered $70 million.

Speaker Change: Over the course of the year, we experienced reliability challenges at the mill some of which were related to our planned outage in Q2.

Jonathan Baksht: Additionally, based on the timing of the sale on October 1st, we removed the expected Q4 adjusted EVA dock contribution from Pine Bluff from our full year guidance. The end result is that Pine Bluff generated negative $38 million of adjusted EBITDA for the nine months ended September 30th, which is effectively a $45 million swing, which is factored into our updated guidance. Excluding Pine Bluff, we expect to generate $838 to $848 million of pro forma adjusted EBITDA for 2024, which is comparable to our original guidance. There are puts and takes compared to our initial guidance as the broader macro environment has been challenging.

Speaker Change: Additionally, based on the timing of the sale on October one we removed the expected Q4, adjusted EBITDA contribution from Pine Bluff from our full year guidance.

Speaker Change: End result is that time loss generated negative $38 million of adjusted EBITDA for the nine months ended September 30, which is effectively a $45 million swing, which is factored into our updated guidance range.

Speaker Change: Excluding pine Bluff, we expect to generate $838 million to $848 million of pro forma adjusted EBITDA for 2024, which is comparable to our original guidance range.

Speaker Change: There are puts and takes compared to our initial guidance at the broader macro environment has been challenging. However, we responded by scaling our operations and managing costs to deliver against our strategic priorities.

Jonathan Baksht: However, we responded by scaling our operations and managing costs to deliver against our strategic priorities. Looking ahead to 2025, using the $838 to $848 million range as our pro forma run rate, all else equal, we'd expect to achieve an incremental $15 million in cost savings from our footprint optimization plan. Overall, we think this provides solid earnings momentum and a tailwind heading into next year.

Speaker Change: Looking ahead to 2025, using the $838 million to $848 million range as our pro forma run rate all else equal we would expect to achieve an incremental $15 million in cost savings from our footprint optimization plan.

Speaker Change: Overall, we think this provide solid earnings momentum and a tailwind heading into next year.

Jonathan Baksht: Before I turn the call back over to Mike, I'd like to end by addressing the challenges posed by recent weather events, specifically Hurricane Helene, which occurred in late September, followed by Hurricane Milton in early October, which resulted in unforeseen difficulties. These challenges included significant power outages and flooding, which adversely affected our supply chain. While we encountered marginal repair and cleanup costs and some production loss, our facilities were able to operate on backup power. As you might expect, there was some residual impact that the storms had on broader consumer purchasing patterns and overall restaurant foot traffic in the affected regions we operate.

Speaker Change: Before I turn the call back over to Mike I'd like to end by addressing the challenges posed by recent weather events, specifically hurricane Helene, which occurred in late September followed by Hurricane Milton in early October which resulted an unforeseen difficulties. These challenges included significant power outages and flooding, which adversely affected our supply chain while.

Speaker Change: We encountered marginal repair and cleanup costs and some production loss R. Our facilities, we're able to operate on backup power as you might expect there was some residual impact that the storms had on broader consumer purchasing patterns and overall restaurant foot traffic in the affected regions. We operate however, we do not expect any significant impact from these events.

Jonathan Baksht: However, we do not expect any significant impact from these events and any financial impact has been included in our updated guidance range. Again, speaking to the resilience and durability of our operating model. Importantly, to echo Mike, our employees' safety and well-being are our top priorities.

Speaker Change: And any financial impact has been included in our updated guidance range again speaking to the resilience and durability of our operating model.

Importantly, jacko, Mike our employee safety and wellbeing are our top priorities, we truly appreciate their dedication and resilience in navigating these tough times together.

Jonathan Baksht: We truly appreciate their dedication and resilience in navigating these tough times together.

Michael King: With that, I'll turn the call back over to Mike. Thanks, John. Before we open the line to Q&A, I want to reiterate that we are confident in our robust platform and believe that we are positioned to deliver profitable growth and sustainable returns in the future. Going forward, we remain committed to leveraging the solid foundation we've established, including our diverse portfolio of sustainable products to win new business. We've taken decisive action to strengthen our foundation throughout 2024. We expect the actions we are taking today will drive continued improvement into 2025 as we strive to become a more efficient business partner to those who benefit from the broad range of sustainable product offerings we bring to market.

Speaker Change: With that I'll turn the call back over to Mike.

Mike: Thanks, John.

Mike: Before we open the line to Q&A I want to reiterate that we are confident in our robust platform and believe that we are positioned to deliver profitable growth and sustainable returns in the future.

Mike: Going forward, we remain committed to leveraging the solid foundation, we've established including our diverse portfolio of sustainable products to win new business.

Mike: We've taken decisive action to strengthen our foundation throughout 2024, we expect the actions. We are taking today will drive continued improvement into 2025, as we strive to become a more efficient business partner to those who benefit from the broad range of sustainable product offerings, we bring to market.

Michael King: We are confident that the actions we are taking today will position Pactiv Evergreen to be a fundamentally stronger and more profitable company in the future.

Mike: We are confident that the actions we are taking today will position <unk> to be a fundamentally stronger and more profitable company in the future.

Michael King: I want to thank our employees for their unwavering support and dedication. You all are the reason this journey has been possible.

Mike: Want to thank our employees for their unwavering support and dedication you. All are the reason this journey has been possible.

Michael King: That concludes our prepared remarks. With that, let us open it up to questions.

Mike: That concludes our prepared remarks with that let's open it up to questions operator.

Operator: Operator. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star and then two are.

Anthony Pettinari: Our first question comes from Anthony. Pettinari with Citi. Please go ahead.

Speaker Change: First question comes from.

Anthony.

Speaker Change: <unk> with Citi. Please go ahead.

Anthony Pettinari: Good morning. With food and beverage merchandising, I think you talked about, you know, value over volume. may be in kind of the middle innings, and you also talked about maybe kind of earnings momentum in 25. set up for earnings growth in 2025.

Speaker Change: Hi, good morning.

Speaker Change: Alright.

Speaker Change: Hey, with food and beverage merchandising I think you talked about value over volume maybe in kind of the middle innings and you also talked about maybe kind of earnings momentum in 2005.

Speaker Change: Or a good setup for earnings growth in 'twenty five is it possible to put any kind of finer point on when value over volume value over volume comps become much easier or maybe the program runs runs its course or you expect to see kind of positive contribution from these growth initiatives.

Unknown Executive: Is it possible to put any kind of finer point on when value over volume, you know, value over Unknown Executive, Ghansham Panjabi, Adam Samuelson, Pactiv Evergreen, Unknown Executive, Ghansham I'm wondering if you can put any more details.

Speaker Change: Wondering if you could put any more detail on that.

Unknown Executive: Yeah, I would say at a high level, I would say it's more beverage than the food side, just being in the middle innings. And I would tell you that You know, as we. As we have, you know, looked at that footprint on the beverage business, and we've done things to improve it. We've also unpacked that business to now where we have room to move on prices. We have customer contracts that are eclipsed. and that largely happens in 2025. So we expect. and that's why we're in the middle innings there.

Speaker Change: Yes, I would say at a high level I would say, it's more beverage and the food side and in the middle innings.

Speaker Change: And I would tell you that.

Speaker Change: We.

Speaker Change: As we have.

Speaker Change: We looked at that footprint in the beverage business and we've done things to improve we've also unpack.

Speaker Change: That business to malware.

Speaker Change: We have room to move on price as a customer.

Contracts that are eclipsing.

Speaker Change: That largely happens in 2025, so we expect to see.

Speaker Change: Improvements largely in that business.

Speaker Change: Why we are in the middle innings, there in terms of the print business I think we're much more mature in that.

Unknown Executive: In terms of the food business, I think we're much more matured in that value over volume.

Speaker Change: Value over volume.

And the beverage.

Unknown Executive: Yeah, and Anthony, I think the only piece I would add is just around the Pine Bluff piece, you know, with the divestiture, as we talked about, you know, at a company level, we've got some momentum going into next year in terms of the negative EBITDA contribution, which is clearly to the food and beverage merchandising segment. So that was, you know, roughly $38 million year to date that going into next year, you know, that's going to be a more favorable comp without that negative EBITDA contribution.

Speaker Change: Yes, Anthony I think one piece I would add is just around the pine Bluff piece with the divestiture as we talked about.

Speaker Change: Company level, we've got some momentum going into next year in terms of.

The negative EBITDA contribution, which is clearly to the food and beverage merchandising segment. So that was.

Speaker Change: Roughly $38 million year to date that going into next year.

Speaker Change: It's going to be a more favorable comp without without that.

Speaker Change: That negative EBITDA contribution.

Unknown Executive: got it, got it.

Speaker Change: Got it got it.

Unknown Executive: That's And then in terms of the growth investments, is there any way to quantify, you know, in terms of, you know, product vitality index or percentage of sales from new products, you know, kind of where you are now, you know, where you think you can get in 25. how much growth, you know, new products could add just from a big picture perspective. that from the outside. Yeah, we're still, we're still wrestling internally with the right KPI for that. Quantifying what's new, what's not, and uh...

Speaker Change: That's helpful and then in terms of the growth investments.

Speaker Change: Is there any way to quantify.

In terms of product vitality index or percentage of sales from new products kind of where you are now.

Speaker Change: You think you can get in 'twenty five.

Speaker Change: How much gross new products could add just from a big picture perspective.

Speaker Change: Is there a way that we can kind of track that from the outside or metrics that you use.

Speaker Change: Yes, we're still we're still wrestling internally with the right kpis for that.

Speaker Change: Quantified and what's now and what's not.

Speaker Change: We looked at what could be more open about that but we're not a good fit.

Unknown Executive: Tomorrow. Yeah, Anthony, I think that just the broader way to think about us going into the future, we tend, you know, and this was, you know, I think you should look to our general guidance around, we tend to track GDP and GDP growth. And going into next year, we're looking at that type of level for our core business. So any of these growth initiatives, Mike mentioned in his prepared remarks, would be incremental. We're excited about some of the New Growth Initiatives that we have going and so we would look to those to be in addition to any type of GDP growth for our base business.

Turning to share anything today.

Speaker Change: I think the just the broader way to think about us going into the future. We turn and this was I think.

Speaker Change: Should look to our general guidance around we tend to track GDP and GDP growth and going into next year.

Speaker Change: We're looking at that type of level for our core business. So any of these growth initiatives. Mike mentioned in his prepared remarks will be incremental we're excited about some of these new growth initiatives that we have going and so we would hope we would look to those to me. In addition to any type of GDP growth for our base business, Yes, I guess the other thing just to add.

Speaker Change: And the obvious.

Speaker Change: Yes.

Unknown Executive: Having paper mills, you know, we.

Speaker Change: Having paper mills.

Speaker Change: Turning to the business in terms of our ability to invest.

Speaker Change: <unk>.

Speaker Change: Somewhat freed ourselves up with the divestiture of the mills, our geography and the status is definitely much more geared toward growth linked to innovation and.

Unknown Executive: Our Geography of the Spine is Done. I'd expect to be in a better position in future calls.

Speaker Change: And R&D work, so I would expect to be in a better position in future calls.

Speaker Change: Speak to that.

Unknown Executive: Okay, that's helpful.

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

George Staphos: And the next question comes from George Staphos with Bank of America.

Speaker Change: And the next question comes from George Staphos with Bank of America. Please go ahead.

George Staphos: Please go ahead. Hi, thank you. Hi, guys.

George Staphos: Hi, Thank you hi, guys. Good morning, Thanks for the details.

George Staphos: Good morning. Thanks for the details. How are you?

George Staphos: So look I want to I have three questions. Some piggybacking on what Anthony was getting in at a separate question. So we.

George Staphos: So look, I want to, I have three questions, some piggyback on what Anthony was getting in and add a separate question. So we have a starting point, X pine bluff, this year of between 838 and 848, correct for EBITDA? And that is going to grow called GDP plus, let's call it 3% ish. There's some new products that are layering on to that. So I don't know, 860, 870, then I've got Saving. of whatever $15 million, I think he said sequentially, is my, am I thinking about this the right way in terms of where you can go and or what are the offsets?

George Staphos: We have a starting point ex pine Bluff.

George Staphos: This year of between $8 38, and 848 correct for EBITDA.

George Staphos: And that is going to grow.

George Staphos: GDP plus let's call it 3% ish theres some new products that are layering on to that so I don't know.

George Staphos: 868, 70, then I have got.

George Staphos: Savings.

George Staphos: Of whatever $15 million I think you said sequentially.

Speaker Change: Am I thinking about this the right way in terms of where you can go and or what are the offsets certainly <unk> got volume is still negative which is a little bit remarkable but help me think about 25 versus 24 in that bridge. That's question one.

George Staphos: Certainly you've got volume still negative, which is a little bit remarkable, but help me think about 25 versus 24 in that bridge.

George Staphos: That's question one.

George Staphos: Question two, distribution, right? I mean, this has always been what Pactiv was supposed to do very well, given its hub and spoke capability. How much did you see your products and SKUs and customers move to third-party distribution? What will we see in terms of the swing going back and what does it mean in terms of the outlook for 25?

Speaker Change: Question two.

Speaker Change: Distribution right I mean, this is always been.

Speaker Change: Active was supposed to do very well.

Speaker Change: Given it's hub and spoke capability.

Speaker Change: How much did you see your products and Skus and customers move to third party distribution.

Speaker Change: What will we see in terms of the swing going back and what does it mean in terms of the the.

Speaker Change: The outlook for 'twenty five.

George Staphos: And then lastly, if we didn't have the... I guess as we look out to 25 again back to the bridge, how much was the benefit this year from lower incentive comp and what do we have to sort of and back or take out of earnings for next year for that component. So really back to the bridge on 25.

Speaker Change: And then lastly.

Speaker Change: If we didn't have the.

Speaker Change: I guess as we look out to 'twenty, five and going back to the bridge how much was the benefit this year from lower incentive comp and what do we have to sort of.

Speaker Change: Add back or take out of earnings for next year for that components are really back to the bridge on 25. Thank you.

George Staphos: Thank you.

Unknown Executive: Yeah, I'll start, George, and just give you some bridge-level information. So, I think you are thinking about it generally the right way. It's, you know, we do have the 838 to 848 as a starting point, as we pointed out. The 15 million, I'll just deconstruct that a little bit. You know, we talked about, when we launched the Footprint Optimization Initiative, we talked about $20 million of footprint benefit into 2025, and then $35 million into 2026. And so, we're still looking at that as the right ramp going into next year. It will be, it will scale throughout the year, so it will be more back-end weighted, but $20 million is the right way to look at that.

Speaker Change: Yeah, I'll start George and just give you. Some soon reach level of information. So I think you are thinking about it generally the right way.

Speaker Change: We do have the $838 million 48, as a starting point as we pointed out the $15 million I'll, just deconstruct that a little bit we talked about.

Speaker Change: At launch the footprint optimization initiative, we talked about $20 million.

Speaker Change: Footprint benefit into 2025, and then $35 million into 'twenty six and so we're still looking at that as the right ramp going into next year. It will be it will scale throughout the year. So it'll be more back end weighted in the $20 million is correct way to look at that and then we subtracted five off of that so that got you to that 15, which was the <unk>.

Unknown Executive: And then, we subtracted five off of that, so that got you to the 15, which was the $15 million of SG&A benefit we're expecting to incur this year. Five million of that won't be repeating into next year, so take off five. So, that gets you the 20 minus the five is the 15 I mentioned in the prepared remarks.

Speaker Change: $15 million of SG&A benefit in <unk>.

Speaker Change: Second to incur this year 5 million of that won't be repeating into next year. So we'll take all five that gets you to 20 minus the $5 15, I mentioned in the prepared remarks.

Unknown Executive: So, your third question was on the incentive comp. So the incentive comp benefit this year is $7 million. So that's, you know, apples to apples. If you could take, you know, if we were incentive compensation and target would be a $7 million deduct to that level for next year. Now, GDP is the right way to think about growth in volume for next year. So we're still looking at that as the general guidance. Now, the other thing to keep in mind is we're still in an inflationary environment and inflationary environment, there's some headwinds from that from a cost standpoint.

Speaker Change: Your third question was on the incentive comp piece, so the incentive comp benefit this year is $7 million so thats.

Apples to apples that you could take if we were incentive compensation at target would be about $7 million deduct to that level for next year now GDP is the right way to think about growth in volumes for next year. So we're still looking at that as the.

Speaker Change: General guidance now do you think you keep in mind is we're still in an inflationary environment inflationary environment. There are some headwinds from that from a cost standpoint, how much of that translate to Q2.

Unknown Executive: How much of that translates? to EBITDA.

Unknown Executive: We still have to give you some proper guidance on that, which we'll do at the next quarterly call. We do have efficiencies and operations that will offset that inflation, which will also help offset a lot of that inflation going into next year. So there's some puts and takes as we build out our detailed budgeting plan for next year, and also factor in our capital plan growth initiatives to give you a proper guide that those are the right.

Speaker Change: <unk> EBITDA, we still have too.

Speaker Change: Give you the proper guidance on that which we'll do with the next quarterly call we do at <unk>.

Speaker Change: Patient needs and operations that will offset that inflation, which were also.

Speaker Change: It will help offset a lot of that inflation going into next year. So there are some puts and takes as we build out our detailed budgeting plan for next year and also factor in our capital plan and growth initiatives, taking into a proper proper guide that those are the right.

Speaker Change: Pieces to construct a 25 model.

Unknown Executive: Instructor 25 model. I mean, should we land at north of 860 for next year, given your preliminary budgeting for EBITDA? or is that too difficult to call?

Speaker Change: I mean should we land at North of 860 for next year, given your preliminary budgeting for.

For EBITDA.

Speaker Change: Or is that too difficult to call at this juncture.

Unknown Executive: I don't think it's an unreasonable number to think about. and on distribution. Yeah, so I think your question was around the $25.

Speaker Change: I don't think you're somewhat reasonable number to think about.

Speaker Change: Okay.

And on distribution.

Speaker Change: Yes. So I think your question was around the 25 outlook.

Unknown Executive: Yeah, and no, really more the distribution point you were making earlier, Mike, in terms of I think you're moving some product back into you know, owned in-house distribution versus third party. And, you know, you know, having covered Pactiv for a long time, you know, the distribution of the company, the hub and spoke model, the regional mixing centers, this was all strength to the company. So I was just curious, how much move, if I'm if I'm correct with my premise, how much had moved, sort of third party? And what are you bringing back? What's that look like?

Speaker Change: Yes, no really more the distribution point you were making earlier Mike in terms of I think you are moving some product.

Speaker Change: Back.

Speaker Change: Into.

Speaker Change: Owned in house distribution versus third party.

Speaker Change: Having covered packed it for a long time in the distribution.

Speaker Change: Of the company as a hub and spoke model the regional mixing centers. This was all strengths of the company. So I was just curious how much if I'm correct with my premise how much had moved sort of third party and what are you bringing back what's that path.

Unknown Executive: What does it mean for earnings?

Speaker Change: It looked like it was I mean for earnings yes.

Unknown Executive: Yeah, so, you know, I just want to clarify. So when we when we talked about Redistributors, not like 3PLs or third-party distributors. And we're talking about really more of our core value over volume strategy. And so to say it plainly, instead of selling. You know, businesses that would compete against us, we're going to go direct. And so we've had some customers that, you know. will sell more broad line products, but also other. other vendor products. So we've elected to stop that and go direct. And so we'd expect that while there was a near-term volume dip, and you've seen that.

Speaker Change: I just wanted to clarify so when we talk about.

Speaker Change: Redistributed.

Speaker Change: Three pls or third party distributors.

Speaker Change: We're talking about really more of our core value over volume strategy.

Speaker Change: So.

To say it plainly instead of selling to.

Speaker Change: <unk>.

Speaker Change: Businesses that we compete against US we're going to go direct.

Speaker Change: And so we've had some customers that.

Speaker Change: Sell more broad line products.

Speaker Change: But also.

Speaker Change: Sell directly against our products with other.

Speaker Change: Other.

Speaker Change: Other vendor products. So we've elected to stop that and go direct and so we would expect that while there was some near term volume deaf and you've seen that.

Unknown Executive: We've rebounded and we've seen that come back. We forecast that in 2025. That's really what that was. So you had it right.

Speaker Change: That we rebound and we've seen that come back.

Speaker Change: We forecast that in 'twenty five and beyond.

Speaker Change: That's really what that was so you had it right.

Unknown Executive: You know, our hub and spoke model is is the strength of the business and certainly something we wish to leverage.

Speaker Change: Our hub and spoke model is the strength of the business and certainly something we wish to leverage.

We continue to leverage with a direct sale or re distributor sale.

Unknown Executive: Unknown Executive, Ghansham Panjabi, Curt Worthington, Adam Samuelson, Pactiv Evergreen, Okay, thank you.

Speaker Change: Okay. Thank you I'll turn it over.

Joshua Spector: I'll turn it over. And the next question comes from Josh Spector with UBS.

Speaker Change: And the next question comes from Josh Spector with UBS. Please go ahead.

Joshua Spector: Please go ahead. Hi, good morning. Apologize if I missed this.

Josh Spector: Hey, good morning, I apologize if I missed this but did you guys talk about what your volume expectations are that underpin your <unk> guidance and I guess relative to that as you look at how <unk> played out on the volume front.

Joshua Spector: But did you guys talk about what your volume expectations are that underpin your 4Q guidance? And I guess relative to that, as you look at how 3Q played out on the volume front, was that in line with your expectations or meaningfully different? Sure. You know, starting off with our guidance for Q4 for volume, we didn't really touch on it on the call. I would say that just to give you some broader views on volumes for the year, for the full company, we're still guiding to kind of low single digits for the whole year, as you look at the full year versus last year.

Josh Spector: In line with your expectations or meaningfully different.

Speaker Change: Sure starting off with.

Speaker Change: With our guidance for Q4 for volume, but we didn't really touch on it on the call I would say that just Asia.

Speaker Change: Broader views on island.

Speaker Change: Volumes for the year.

Speaker Change: Perfect.

Speaker Change: Full company, we're still guiding to kind of low single digits for the whole year as you look at the full year versus last year for Q4, specifically.

Joshua Spector: For Q4 specifically, we're going to be down low single digits in food service and up low single digits in food and beverage merchandising is our expectation. But I would say for Q3, we were fairly in line. So, it was a... A positive result looking at prior quarters and what the trend is.

Speaker Change: We're going to be down low single digits in foodservice and up low single digits.

Speaker Change: Food and beverage merchandising is our expectation.

Speaker Change: Yes.

Speaker Change: And I would say for Q3, and we are fairly in line.

Speaker Change: What we what we had anticipated so it was.

Speaker Change: A positive result, looking at prior quarters with the trending was.

Joshua Spector: Okay, yeah, that's helpful. I guess just for context, obviously, the food and merchandise volume seemed meaningfully below what consensus was expecting. So I guess we had it wrong in terms of timing there. I guess I'll maybe leave it if there's any follow up to that.

Speaker Change: Okay. Yeah. That's helpful. I guess just for context, obviously, the food and merchandise volume seemed meaningfully below what consensus was expecting so I guess, we had it wrong in terms of timing there I guess I'll maybe leave it if there is any follow up to that but what I wanted to ask separately with Jess Pine Bluff specifics.

Joshua Spector: But what I wanted to ask separately was just time bluff specifically, when you talked about a negative $17 million versus expectations, was that all in 3Q? Or is that a comment for the year? And I don't know if now since you've divested it, can you give us the contributions, the negative impacts each quarter so we can make sure we're sequencing 2025 correctly at this point? Sure. The $17 million comment was for the Q3 in terms of some of the operational inefficiencies that we had in the quarter. So that was versus our guidance from last quarter's call.

When you talked about a negative $17 million versus expectations was that all in <unk> or is that a comment for the year and I don't know if now since you've divested. It can you give us the contributions the negative impacts each quarter. So it can make sure. We're sequencing 2025 correctly at this point thanks.

Speaker Change: Sure.

Speaker Change: The $17 million comment large for the Q3 in terms of some of the operational inefficiencies that we had.

Speaker Change: In the quarter, so that was versus our guidance from last quarter's call.

Joshua Spector: $17 million also happens to be what our expected Q4 contribution would have been. And so if you deconstruct that portion of it, since we closed that sale before the end of the year, that was the Q4 expectations. The year-to-date is $38 million. I would have to – I don't have the quarterly breakdown here in front of me. We can follow up with you to get you the quarterly breakdown of the negative $38 million. It was distributed – it was a little bit more heavily distributed in Q2 with the cold mill outage. And in Q1, we had some weather events that also impacted the quarter.

Speaker Change: $17 million also happens to be what our expected Q4 contribution would have been.

Speaker Change: And so if you deconstruct that portion of it.

Speaker Change: As we close that sale before the end of the year that was the Q4 expectation the year to date is $38 million I'll lead acid.

Speaker Change: Have the quarterly breakdown here in front of me, we can follow up with you to get you the quarterly.

Speaker Change: Breakdown of the negative $38 million. It was it was distributed.

Speaker Change: A little bit more heavily distributed in Q2 with the coal mill outage in Q1, we had some weather events that also impacted the quarter Q3 for the mill for Pine Bluff was negative three three so the rest was the first two quarters of the year.

Joshua Spector: Q3 for the mill, for Pine Bluff, was negative 3.3. So the rest was the first two quarters. Okay, no, appreciate that.

Speaker Change: Okay. No I appreciate that if I could squeeze in one more last quarter call you talked about some more competitive intensity I think within some of the grocery channel than some of the less differentiated products.

Joshua Spector: If I could squeeze in one more. Last quarter call, you talked about some more competitive intensity, I think, within some of the grocery channels and some of the less differentiated products. Has that stabilized? Anything changed there? And I assume this is obviously directly related with some of your value over volume. So just wondering how we should think about that trend this quarter versus last quarter, and what that might mean for the outlook. We missed the front end of your question. I apologize. Oh, sorry, I was asking if there's been any any change in the competitive comments prior on competitive intensity.

Speaker Change: Stabilized.

Speaker Change: <unk> change there and I assume this is obviously directly related with <unk>.

Speaker Change: Our value over volume. So just wondering how we should think about that trend this quarter versus last quarter and what that might mean for the outlook.

We missed the front end of your question I apologize.

Speaker Change: Oh, sorry, I was asking if there's been any any change in the competitive comments prior on competitive intensity.

Joshua Spector: So basically, some of the pricing pressure in the grocery channels for some of the non-differentiated products, if that's changed at all, better, worse, unchanged versus prior quarter. No, it's really unchanged for us. We're not seeing any. And Josh, I pulled your Pine Bluff answers by quarter, so Q1 was negative 11, Q2 was negative 24. And then Q3 was the negative three I mentioned. Got it.

Speaker Change: So basically some of the pricing pressure in the grocery channels for some of the non differentiated products.

Speaker Change: It's changed at all better or worse unchanged versus prior quarter.

Speaker Change: No it's really unchanged for us, we're not seeing any any sporadic pricing competition or anybody being irresponsible or anything like that.

Josh Spector: And Josh.

Josh Spector: I pulled your pine Bluff, the answers by quarter. So Q1 was negative <unk> 11 in Q2 was negative 24.

Josh Spector: And then Q3 was a negative three I mentioned.

Speaker Change: Got it thank you.

Philip Ng: Thank you. And the next question comes from Phil Ng with Jeffreys, please go ahead.

Speaker Change: And the next question comes from Phil <unk> with Jefferies. Please go ahead.

Philip Ng: Hey, guys. If I look at your implied fourth quarter EBITDA guidance, it assumes a noticeable step up sequentially, typically when it's down seasonally, and then it's certainly above consensus. So, John, I guess to kind of help us bridge the fourth quarter numbers, what are some of the puts and takes?

Speaker Change: Hey, guys.

Speaker Change: If I look at your implied fourth quarter EBITDA guidance guidance. It assumes a noticeable step up sequentially typically wanted to down seasonally and then it certainly above consensus so.

John Box: John I guess to kind of help us bridge.

Speaker Change: The fourth quarter numbers.

Philip Ng: Maybe it's just pint and buff being really bad in 3Q and that goes away. But if I heard you correctly, John, I think you're pointing to perhaps volumes being up in the fourth quarter, low single digits in food. So, that's a big improvement in how much of that is contract wins that you kind of have in the bag. Yeah, no, thanks, Bill. I can walk you through that and give you a bit of a bridge. So let's just start on the sequential view because you're right, seasonally Q4 is a bit lower, but this year we do have some benefits we're expecting to get in Q4 and get some good momentum going into next year.

Speaker Change: And that puts and takes in it.

Speaker Change: Maybe it's just pipe Bos being really bad and <unk> and that goes away.

Speaker Change: I heard you correctly, John I think youre, pointing to perhaps volumes being up in the fourth quarter low single digits in food. So that's.

Speaker Change: A big improvement how much of that is contract wins that you kind of have in the bag.

Speaker Change: Yeah, no. Thanks Bill.

Speaker Change: I can I can walk you through that and give you a bit of a bridge. So let's just start on the sequential eight because you are right seasonally Q4 is a bit lower but this year. We do have some benefits we're expecting to get in Q4 and get some good momentum going into next year I would say if you look at it from a sequential basis about a third of it is coming from volume.

Philip Ng: I would say if you look at it from a sequential basis, about a third of it is coming from volume price mix. If you look outside of Pine Bluff, we are expecting some growth in volumes in food and beverage merchandising. We do have some seasonal declines in food service, as you might expect, but it's partially offset by customer wins. And so it should be lower than we might have seen in the past. And we've been talking about in food service and customer wins that we'd see ramping into the end of the year. And to note also, we're still expecting to outpace the industry as it relates to food service, even though there is a slight decline there.

Speaker Change: Price mix.

Speaker Change: If you look outside of Pine Bluff, we are expecting some growth in volumes in food and beverage merchandising.

Speaker Change: We do have some seasonal declines in foodservice as you might expect but it's partially offset by customer wins and so it should be.

Speaker Change: Then we might have seen in the past and we've been talking about in foodservice and customer wins that would be ramping into the end of the year and.

Speaker Change: To note also we're still expecting to outpace the industry as it relates to foodservice, even though there is a slight decline there for seasonal reasons.

Philip Ng: I think the other piece to think about in terms of the price mix standpoint outside of volumes is we are getting a benefit from raw material costs in the fourth quarter and some of our COLA ramp-ups, as you think about those, they'll continue to build into the end of the year and so we will see some favorability there. And then there is some favorable seasonal mix as it relates to some of the food and beverage pieces. We get into kind of the food at home season, so that's helping those volumes. I think the other side, about two-thirds of it, is just manufacturing costs and SG&A gains.

Speaker Change: I think the other piece too.

Speaker Change: Think about in terms of the price mix standpoint outside of volumes as we are getting a benefit from raw material cost in the fourth quarter and some of our Cola ramp ups. As you think about those they'll continue to build into the end of the year and so we will see some favorability there.

Speaker Change: And then and then there is some favorable seasonal mix as it relates to.

Speaker Change: Out of the food and beverage piece as we get into.

Speaker Change: Got it.

Speaker Change: Food at home season, so that's helping those volumes.

Speaker Change: The other side about two thirds of it is just manufacturing costs in SG&A gains. So we do have some efficiency gains that we're expecting to see is some of our initiatives around manufacturing also ramp up into the beginning of it into the end of the year.

Philip Ng: So we do have some efficiency gains that we're expecting to see as some of our initiatives around manufacturing also ramp up into the end of the year. And some of those cost-efficiency savings that we mentioned on the last call, we'll have a full quarter benefit of those in Q4. So on the cost side, about two-thirds of that uplift. Okay. And the volume uptick in food and beds? I mean, you're down 8% in 3Q. And I think you're, if I heard you correctly earlier, John, you're expecting low single digit crowds. Give us a little perspective on what's driving that strength, because that's a pretty sharp rebound.

Speaker Change: Those cost efficiency savings that we mentioned on the last call.

Speaker Change: We'll have a full quarter benefit of those in Q4, so on the cost side about two thirds of that uplift.

Speaker Change: Okay, and then the volume uptick in food and Bev.

Speaker Change: You're down 8% in <unk> and I think if I heard you correctly earlier, John you're expecting low single digit crowd gave us a little perspective on.

Speaker Change: What's driving that strength.

Speaker Change: A pretty sharp rebound.

Philip Ng: Sure, yeah, it's a lot of it is around our food segment and food and beverage segment within food. There was a bit of a delay to ag season this year, so some of that was pushed off into Q4, so versus our normal seasonal dynamics in Q3. We're also expecting to see a bit of strength in Mexico. And then there is, you know, and then the bakery season tends to be more Q4 focused. and the bird flu impact on the egg business in Q3 going into Q4 should be a benefit.

Speaker Change: Sure Yes.

Speaker Change: A lot of it is around our <unk> segment, and food and beverage segment within within food.

Speaker Change: Bit of a delay to AG season. This year. So some of that was pushed off into Q4 seven versus our normal seasonal dynamics. In Q3, we're also expecting to see a bit of strength.

Speaker Change: In Mexico, and then there is.

Speaker Change: And then the bakery season tends to be more about Q4.

Speaker Change: And the bird flu impact sorry, the durbin impact on the AG business in Q3 going into Q4 should be a benefit.

Michael King: Okay, that's helpful. And I guess, Mike, you may have teased this earlier, but when I think about your value over volume approach in food service years past, we see the hit on volumes, but price and EBITDA actually surprises the upside, and it tends to be a good guy. When we think about your food and beverage value over volume approach, at least early in 3Q, we saw the hit in volumes and decrementals were pretty heavy. But I think you kind of teased that, when you go out to 25, you have some contracts that are resetting, that could be opportunity, and perhaps even on the volume side, with wins with the right mix.

Speaker Change: Okay. That's helpful. And then I guess, Mike you may have teased asked earlier, but when I think about your volume.

Speaker Change: Volume approach and foodservice years passed we see the hit on volumes, but pricing EBITDA actually surprised to the upside and it tends to be a good guy.

Speaker Change: When we think about your food and beverage value over volume approach at least early in <unk>, we saw the hidden volumes and Decrementals were pretty.

Speaker Change: Heavy civil.

Speaker Change: Thank you kind of tease that.

Speaker Change: Go out 25, you had some contracts that are resetting that could be opportunity and perhaps even on the volume side.

Speaker Change: Wins with the right mix, so kind of help us think through the opportunity in 2025 should we expect.

Michael King: So to kind of help us think through the opportunity 2025, should we expect a nice bump in profitability EBITDA with perhaps some of these contracts resetting and then potentially some wins with a more favorable mix? Yeah, I think generally you got it right. You know, in terms of scoring the numbers, you know, we're not we're not there yet. We want to get through some of that. But you've, you've characterized it absolutely correctly. And that, you know, We've had to shrink with some to grow and we've also in terms of just better price mix with the current customer base, we will absolutely see a better quality.

Speaker Change: A nice bump in profitability EBITDA with perhaps some of these contracts resetting and then.

Speaker Change: Some wins with a more favorable mix.

Speaker Change: Yes, I think generally you've got it right.

Speaker Change: In terms of square and the numbers, we're not we're not there yet we want to get through some of that but.

Speaker Change: You've characterized it absolutely correctly.

We've had to shrink with some to grow and we've also in terms of just.

Speaker Change: Better price mix with the current customer base, we will absolutely see a better quality of earnings.

Michael King: And Mike, would we see that out of the gate to start next year?

Speaker Change: And Mike would we see that out of the gate to start next year, it's going to.

Michael King: It's going to largely back. I appreciate the color.

Speaker Change: Largely back half.

Okay I appreciate the color. Thank you.

Michael King: Thank you.

Arun Viswanathan: And the next question comes from Arun Viswanathan with RBC Capital Markets.

Speaker Change: And the next question comes from Arun Viswanathan.

Speaker Change: <unk> with RBC capital markets. Please go ahead.

Arun Viswanathan: Please go ahead. Great. Thanks for taking my question. I guess I just wanted to get back to a couple of comments you mentioned earlier. So, as far as, you know, some of those trends that you saw with food service still underperforming and maybe, you know, food and some of those other exposures outperforming, could you just provide some more detail there? Where in your portfolio are you seeing strength? And maybe if you could quantify that, maybe is it a third of your portfolio and maybe two-thirds in food services seeing some weakness? And, you know, last quarter you spoke heavily about the value meal initiatives of some of your customers.

Speaker Change: Great. Thanks for taking my question I guess I just wanted to get back to you a couple of comments you mentioned earlier so.

Speaker Change: As far as some of those trends that you saw.

Speaker Change: With foodservice still underperforming and maybe.

Speaker Change: Food.

Speaker Change: And some of the other exposures outperforming could you.

Speaker Change: Just to provide some more detail there.

Speaker Change: Where in your portfolio or are you seeing strength and maybe if you could quantify that maybe is it a third of your portfolio or maybe two thirds in foodservice is seeing some weakness and last quarter you spoke heavily about the value meal initiatives that some of your customers.

Michael King: Have you seen any positive impact from that and do you expect a positive impact in the future? Thanks. Yeah, so if you if you look at You know, the way we kind of characterize it is, you know, on the food service side, foot traffic stuff, it would definitely be worse. That wasn't an issue either. And I think the fact that many of our customers have. you know, made announcements that they're going to continue that into Q4, you know, we kind of view that as a positive. In terms of, you know, how that manifests itself in the volume, we're not seeing a a big rebound or anything, but we do think it would be worse.

Do you have you seen any positive impact from that and do you expect a positive impact in the future. Thanks.

Speaker Change: Yes so.

If you look at it.

The way, we kind of characterize it is on the foodservice side foot traffic definitely it would definitely be worse.

Speaker Change: Has the promotional activity.

Speaker Change: If it wasn't initiated.

Speaker Change: And I think the fact that many of our customers.

Half.

Made announcements that they are going to continue that into Q4, we kind of view that as a positive.

Speaker Change: In terms of how that manifests itself in volume we're not seeing.

Speaker Change: A big rebound or anything, but we do think it would be worse. So it is starting to have an impact on the consumer.

Michael King: So it is starting to have an impact on the consumer. I think I think as prices continue to come down in more time, more time with lower prices. It's going to be a good thing for the consumer. As far as the food and beverage side of our business... You know, this is where the consumers. Spending their dollars to get their calories today. We're seeing that we're seeing that that manifests itself in all of our fresh channels. So protein, produce, those are still staples that we're Egg, you know, John I would say that those are. very, very good.

Speaker Change: I think I think as <unk>.

Speaker Change: Prices continue to come down and more time.

Speaker Change: More time with lower prices.

Speaker Change: It's going to be a good thing for the consumer as far as the food and beverage side of our business.

Speaker Change: This is where the consumers.

Speaker Change: Spending their dollars to get their calories today largely in.

Speaker Change: Yes, we're seeing that we're seeing that.

Speaker Change: Manifests itself in all of our our fresh channels. So protein produce those are still staples that we're seeing and strengthen.

Speaker Change: As John mentioned.

I would say that those are.

Speaker Change: Very very good for us right now.

Michael King: and Reed Spector. And when you talk about kind of food service underperforming, I just clarified some of the comments we made in our prepared remarks, right? The food traffic is down 3%, over 3% in the quarter and for the year across our client base there. And we're actually trending better than that. And so we do feel like the strength of our relationships with blue chip customers that we align with and some of our competitive strengths there are helping us outperform the marketplace. It's just, it is a challenging environment. And as it relates to the promotional activity, you know, there was some benefits there that we saw, but it's still a bit muted given the food traffic dynamic.

Speaker Change: And we expect that to continue into Q4.

Speaker Change: When you talk about kind of foodservice underperforming I would just just clarify some of the comments I made in our prepared remarks right.

Speaker Change: Foot traffic down it was down 3% over 3% in the quarter and for the year across our client base, there and we're actually trending better than that and so we do feel like our the strength of our relationships with blue chip customers that we align with and some of our.

Speaker Change: Competitive strengths there are helping us outperform the marketplace.

In a challenging environment and as it relates to the promotional activity.

Speaker Change: There were some benefits there that we saw but it's still a bit muted.

Speaker Change: Given the foot traffic dynamic and we're hoping to see some momentum there in Q4 as some of those promotional.

Michael King: And we're hoping to see some momentum there into Q4 as some of those promotional, those promotions have been extended. And we have seen some shift there to more food and beverage merchandising. But again, just to reiterate, we have been taking a value over volume approach. And some of the repositionings Mike talked about earlier is what's driving some of those volume declines, which we feel are going to be transient in nature. Got it. Okay, that's helpful. And then just to put a finer point on that, so is it maybe a third of your food service business that's really tracking with that down 3% foot traffic?

Speaker Change: Promotions have been extended.

Speaker Change: And we have seen some shift there to more food and beverage merchandising, but again just to reiterate we we have been taking of life value over volume approach in some of the repositioning as Mike talked about earlier.

Speaker Change: What's driving some of those those volume declines, which we feel are going to be transient in nature.

Speaker Change: Yes.

Speaker Change: Got it okay, that's helpful and.

Speaker Change: And then just just to put a finer point on that.

Speaker Change: So is it maybe a third of your foodservice business that's really.

Speaker Change: Tracking with that down 3% foodservice foot traffic.

Michael King: And maybe more of your food service business is above that, or is it half? And then similarly with food Bev, merchandising, are you kind of in line with the market or above? Yeah, I mean, I don't know if we really think about it that way. More from a portfolio standpoint, there's a lot of elements that are driving the overall outperformance of the industry. It's, again, aligning with some customers that are winning in the marketplace is probably the biggest factor. And we do index pretty well to those customers that are doing well in the marketplace. So I'd say there's a good portion of our portfolio, but it's not like we bifurcate in their sum that's that's Is it materially overperforming and some bits materially underperforming that it blends out to better than the market?

Speaker Change: And maybe.

Speaker Change: More of your foodservice business is above that.

Speaker Change: That half or and then similarly with food Bev merchandising are you kind of in line with the market or are above.

Speaker Change: Yes, I mean, I don't know if we really think about it that way it's more from a portfolio standpoint. There is a lot of elements that are driving driving the overall outperformance of the industry.

Speaker Change: Again aligning with some customers that are winning in the marketplace is probably the biggest factor in we do index pretty well to those those customers that are that are doing well in the marketplace I would say.

Speaker Change: There's a good portion of our portfolio, but it's not like there.

Speaker Change: Bifurcated and there are some that that's.

Speaker Change: Materially over performing and some that materially underperforming that it blends out to better than the market I would say generally our customers tend to attract better than the marketplace would be the way I think about it.

Michael King: I would say generally, our customers tend to track better than the marketplace would be the way we think about it. And then just last quarter, you mentioned maybe some customers trading down away from Earth Choice and maybe some of the higher, you know, mix-driven items. Do you still see that continuing? And then if I could just squeeze in one more, do you feel that your leverage is tracking in line with your expectations and you still expect to be in the low fours at the end of this year and maybe below four at the end of next year?

Speaker Change: And then just.

Speaker Change: Last quarter, you mentioned, maybe some customers trading down away from Alright choice and maybe some of the higher.

Speaker Change: Yeah mix driven items.

Speaker Change: Are you still see that continuing and then if I could just squeeze in one more.

Do you feel that your leverage is tracking in line with your expectations and you still expect to be in the low fours at the end of this year and maybe below four at the end of next year.

Michael King: Thanks. Yeah, on the trade down, I don't remember disclosing anything like that about what I can tell you is I think, and maybe what you're referencing is, you know, on the value menu, trade down where, you know, instead of the customer getting a 32 ounce drink, they're going to get a 16 ounce drink. So there's, you know, there's certainly. , and the Value Meal and Burger War Front, there's definitely a trade-down happening. So that's coming through in some of our mix. But outside of that, we don't have customers on the distribution side or any of our...

Speaker Change: Yes on the trade down I don't remember disclosing anything like that but what I can tell you is I think and maybe what you are referencing is.

Speaker Change: On the value menu trade down.

Speaker Change: Instead of the customer getting the 32 ounce drink theyre going to get a 16 ounce drink or so.

Speaker Change: Certainly.

And the value meal.

Speaker Change: Berger Warfront Theres definitely.

Speaker Change: A trade down happening.

Speaker Change: And so that's coming through in some of our mix, but outside of that we don't have customers on the distribution side or any of our.

Jonathan Baksht: Branded side trading down our brands for other products. We don't see that. And then Jonathan, will you talk to the leverage? Yeah, on the leverage front, I think you're thinking about it the right way. So we're on track with our expectations. We said that we want to be around four by the end of the year, and we still expect to be around four by the end of the year. That's not the destination. By next year, we will continue to do Evergreen and anticipate being in the threes. And so to your point on where will we be at the end of the year, we haven't put out official guidance there, but I'd expect to have a three in front of it.

Speaker Change: Branded side trading down or.

Speaker Change: Brands for other product, we don't see that.

Speaker Change: And then generally talk to deliberate on the leverage front I think youre thinking about the right way. So we're on track with our expectations.

Speaker Change: <unk> said that we want to be at around four by the end of the year and where can we still expect to be around four by the end of the year.

Speaker Change: The destination.

By next year.

Speaker Change: We will continue to delever and anticipate being in the threes and so to your point, where will we be at the end of the year, we havent put out official guidance, there, but I would expect to have a three in front of it.

Unknown Executive: Thanks.

Speaker Change: Thank you.

Operator: This concludes our question and answer session.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mike King for any closing remarks.

Michael King: I would like to turn the conference back over to Mike King for any closing remarks. As we close today, I want to thank the entire Pactive Evergreen team for their hard work during the Dirk quarter. We are executing on our strategy and are confident we will continue to progress on our transformational journey in 2020. We look forward to updating you during the fourth quarter conference call.

Mike King: Thank you.

Mike King: As we close today I want to thank the entire package of evergreen team for their hard work during the third quarter. We are executing on our strategy and are confident we will continue to progress on our transformational journey in 2024.

Mike King: We look forward to updating you during the fourth quarter conference call next year.

Mike King: Yes.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: You may now disconnect.