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Good morning, and welcome to the Ranpak Holdings Corp. Second Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Sara Horvath, General Counsel. Please go ahead.

Thank you, and good morning, everyone. Before we begin, I'd like to remind you that we will discuss forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K and our other filings filed with the SEC. Some of the statements and responses to your questions in this conference call may include forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. Ranpak assumes no obligation and does not intend to update any such forward-looking statements. You should not place undue reliance on these forward-looking statements, all of which speak to the company only as of today. The earnings release we issued this morning and the presentation for today's call are posted on the Investor Relations section of our website. A copy of the release has been included in a Form 8-K that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non- GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the table and slide presentation accompanying today's earnings release. Lastly, we'll be filing our 10-Q with the SEC for the period ending June 30, 2025. The 10-Q will be available through the SEC or on the Investor Relations section of our website. With me today, I have Omar Asali, our Chairman and CEO; and Bill Drew, our CFO. Omar will summarize our second quarter results and discuss our outlook, and Bill will provide additional detail on the financial results before we open up the call for questions. With that, I'll turn the call over to Omar.

Thank you, Sara, and good morning, everyone. Thank you for joining us today. I wanted to start by saying that despite the slower start to the year, we remain confident in the outlook for the business. We expect that our financial performance will improve meaningfully in the second half of the year as our cost improvement initiatives and structural realignment takes hold, and we target a meaningful ramp-up for our automation revenue, which will be driven by deepening relationships with enterprise customers in North America as well as continued broad-based penetration in Europe. In North America, we're working on a strategic multiyear deal that we believe will be transformational for our business and consume a lot of our capacity in our Shelton facility. We have made substantial investments in the team and solutions over the past few years, and I feel comfortable saying it is now paying off. Outside of our large enterprise customers, the business environment is dynamic with sentiment among individual customers and businesses across regions varying widely and at times changing quickly in reaction to headlines. It has been a challenging start to the year, much more so than I envisioned going into 2025, given the tariffs, but we're taking the hard steps to drive results in this environment. Overall, I believe the actions we have taken this year to improve our margin profile and reduce cost will support a much improved second half. I believe those actions, combined with our expectations to ramp further with enterprise customers, position us very well for sustained growth in upcoming years in PTS and automation. We expect that our cost reduction and margin improvement efforts will start to be really felt in the third quarter, in particular, as it relates to North America, where we have experienced the most meaningful pressure on gross margins to start the year. In the second quarter, we took pricing in North America and we'll get the full benefit for that in the third quarter. We secured more favorable warehousing arrangements beginning in August and optimized our freight and logistics spend through carrier consolidation and investment in our own logistics assets. We executed on targeted headcount reduction programs across the globe and deferred nonessential hires and spend. Across the company, we have reduced headcount by 3% since April. Of the roughly $8 million in annualized identified cost-out initiatives, we expect that approximately $1 million of that will be felt in Q3 and the full run rate of $2 million per quarter will be felt in the fourth quarter. Margins in North America, in particular, have been most challenged, and we believe those initiatives have the potential to improve gross margin ex depreciation by 300 to 500 basis points in the second half of the year. In July, we took steps to realign the organization to what I believe is a more efficient and common structure for a company that is as global as ours. Over the past few years, we have been in the process of moving toward a more global, functionally based organizational structure with many areas such as finance, IT, legal, HR, engineering under global functional leadership. Our regional managing director structure no longer fit in the ecosystem, so we decided to take the final step in globalizing our business by transitioning our commercial and operational functions to a more global structure as well. We recruited a very high-quality Chief Operating Officer to globalize our operations and help us scale efficiently. He joins us in September from Ingersoll Rand and will be based in the Netherlands. We believe he can bring a tremendous amount of value to supply chain, procurement as well as getting operational efficiencies from our footprint as we scale. Our Head of Automation will assume responsibility for all of our sales efforts and strategy as Chief Revenue Officer going forward. Our MDs in Europe and APAC have done a great job advancing Ranpak in their geographies and leading the local teams. I appreciate their years of great leadership and valuable service to Ranpak and wish them the best. I'm optimistic this new global structure and infusion of talent will enable Ranpak to improve our execution and grow the business profitably over the upcoming years as we have laid the groundwork for growth and expansion. Now moving on to our results. Our volume momentum continued with our eighth quarter in a row of volume growth. Consolidated net revenue increased 3.8% and would have increased 5.2%, excluding the noncash impact of the Amazon warrants on a constant currency basis for the quarter, driven by 5.2% volume growth as e-commerce activity drove growth in North America. North America was the key driver of top line performance with sales up 12.2% and volumes up 14.8% over the second quarter in 2024. Enterprise accounts contributed solid growth, while the distribution channel was less robust compared to the first quarter as trade and tariff uncertainty took a toll on buying behavior. I like what I'm seeing out of our team as the work on trials and closes is strong and believe that the fundamental blocking and tackling we're doing along with our new sales leadership is paving the way for solid profitable growth ahead in our distribution and direct channels. Our relationships with enterprise accounts used to be an area of weakness for us as we were under-indexed to those large high-volume accounts. I'm pleased to say I now view our enterprise account management as a source of strength and are working closely with operations and procurement to take these relationships and extract efficiencies within our processes to make them more profitable for us as I believe the opportunity is there. Europe and Asia Pacific volumes were flat for the second quarter versus the prior year as Europe remains growth challenged and impacted by tariff and trade uncertainty. We saw some sequential improvement in Europe as volumes were down less in the quarter compared to the first quarter and July is showing volume improvement year-over-year, hopefully indicating some signs of stabilization in the region. We were glad to see the trade deal with the EU at 15% tariffs as we hope that striking such a deal will bring stability and predictability to the European markets, which are very important for us. We experienced $1 million to $2 million in destocking in Asia Pacific as our Malaysia factory ramps up SKU production and customers that used to have multi-month lead times have much faster and cheaper access to product. Long term, this is great news for our business opportunities in the region as it will help us penetrate further and have more competitive pricing, but it does create some air pockets as we get ramped up. Automation increased 34% in the quarter versus last year and has a robust backlog, leading us to expect that we will see full year automation revenue of $40 million to $45 million. We saw some projects move from Q2 to Q3 and a handful into next year, but overall, feel really good about the second half of the year and outlook for this business, given the strong payback profile for high- volume customers. In North America, the recently enacted fiscal package allows for bonus depreciation for tax purposes, which should help further improve cash-on-cash returns for customers investing in our automated solutions. On a constant currency basis, adjusted EBITDA declined 18% for the quarter or 12%, excluding a $1.2 million noncash impact of the Amazon warrants. Overall, profitability was negatively impacted by increased input costs and temporary inefficiencies in North America year-over-year, mix headwinds from outsized contribution of Void-fill and lower sales volume in Europe. Again, as more trade deals are agreed to and with the actions we have taken, we expect to improve the top line and margin profile of the business beginning in the third quarter. The input cost environment continues to vary by geography. In the U.S., pricing moved up early in the quarter, but has since been flat. We do not expect to endure further pricing pressure in the second half based on our contracts and negotiations with the mills. The mill disruptions we encountered earlier this year have dissipated and lead times have returned to normal. We felt the effects of these disruptions in our financial profile in the second quarter through more expensive inventory and freight, but expect that will normalize in the third quarter. In Europe, the energy markets were much more favorable compared to the first quarter with Dutch nat gas in the EUR 30 to EUR 40 per megawatt hours range, which is down more than 30% from its early peak in Q1. We expect paper pricing for the second half to be flat with the first half. Overall, in Europe and Asia Pacific, we have maintained an attractive margin profile and are focused on driving volumes further as those markets stabilize. To summarize, our focus is really on a few things: improve margin in North America, drive volumes in Europe and ramp up automation. We're executing on a plan to do all of these. With that, here's Bill with more info on the quarter.

Thank you, Omar. In the deck, you'll see a summary of some of our key performance indicators. We'll also be filing our 10-Q, which provides further information on Ranpak's operating results. Overall, net revenue for the company in the first quarter increased 3.8% year-over-year on a constant currency basis, driven by solid volume growth in North America and an increase in automation revenue, offset by a somewhat sluggish environment in Europe and destocking in APAC. For the quarter, in the Europe and APAC reporting division, combined revenue decreased 2.7% on a constant currency basis, driven by price/mix headwinds of 2.9%. Our reported results benefited from 5.4 points of currency as the euro has meaningfully appreciated since start has been the bread and butter for the EMEA business and has been under significant pressure over the past few years as energy markets have weighed on industrial activity. Getting this product line stable to growing would be a real positive for APAC. North America enterprise accounts continue to drive solid volume growth of 14.8% in the region, leading to revenue growth of 12.2%, net of $1.1 million warrant expense, which detracted 2.9 points from reported NOAM results. The distribution channel in NOAM was less robust in the second quarter, which also contributed to some margin pressure. We believe there was some noise in the channel following the paper market disruption as distributors are recalibrating their inventory levels and assessing the environment. We continue to feel very good about our commercial efforts in NOAM and are looking to balance our enterprise growth with a greater contribution from smaller, higher-margin accounts. On a positive note, North American automation is poised to really ramp up in the second half of the year as we ramp up our projects. Gross profit declined 12% in the quarter on a constant currency basis and would have declined 8.2%, excluding the $1.2 million noncash impact of Amazon warrants as lower sales in Europe and APAC, combined with higher production costs drove a 13% decline in gross profit in the region and unfavorable mix and inefficiencies in North America contributed to a lower overall margin profile. As Omar mentioned, we took actions to claw back input cost headwind in North America in the second quarter and believe the inefficiencies due to paper market lead time disruption will be resolved in the second quarter. If you normalize for warrants and what we view to be temporary inefficiencies, gross profit overall would have been down 1% on a constant currency basis as those items contributed about 4.7 points of margin pressure. Overall, we believe we will demonstrate improvement in the NOAM margin profile in the second half of the year as we get more efficient with our operations and our cost reduction actions take hold. In EMEA, we are focused on driving volumes and increasing sales in the region. As we turn around sales there, we expect that any flow-through to profitability should be highly beneficial to the overall margin profile of the business. SG&A, excluding RSU expense of $26.8 million was up versus the prior year, but down 3.6% sequentially versus the first quarter on a constant currency basis as we have chosen to defer nonessential spend until conditions improve and have been executing on structural cost reductions of $8 million. Lower gross profit from both geographies and slightly higher G&A drove a decline in adjusted EBITDA of 18.4% in the quarter on a constant currency basis or 12.4% excluding the $1.2 million noncash impact of Amazon warrants. Moving to the balance sheet and liquidity. We completed the second quarter with a strong liquidity position. We had a cash balance of $49.2 million and no drawings on our revolving credit facility, bringing our reported net leverage to 4.6x on an LTM basis and 3.8x according to our bank leverage ratio. As of June 30, we are carrying $16.4 million more in inventory, largely in North America to insulate ourselves and our customers from potential paper supply disruptions. Given the improvement in the paper market, we expect to reduce inventory in the second half and turn that working capital into cash. We expect to build cash for the remainder of the year given the seasonality of the business and improvements we will make on our cash conversion cycle. Overall, we are expecting to end the year with around $70 million to $75 million in cash on the balance sheet. Our credit facility is all USD, so we utilize cross-currency swaps to hedge $210 million of our capital structure. These swaps replace our USD exposure with euro exposure, reducing our currency risk as it relates to debt service and also enabling us to save interest expense by swapping our SOFR exposure with Euribor, saving us interest on the hedged portion annually. We generate more than half of our revenue and adjusted EBITDA in Europe and APAC. So to the extent the euro continues to rise against the dollar, our profits and cash generated there can be a powerful tool to help us delever. Our CapEx for the quarter was $9.8 million, in line with our expectations and with $7.9 million related to PPS converter spend. Capital expenditures are the area most directly impacted by the evolving tariff landscape. Our spend on converters for use in Europe and APAC is not impacted, but the converters we purchase and build for the U.S. market rely on parts and units sourced from China and other Asia Pacific countries. At this point, the tariff levels in China are roughly in line with where we had budgeted the year. We are in the process of evaluating our strategic sourcing options for converters globally and are focusing our efforts on minimizing impact on CapEx through a greater focus on refabrication and refurbishment of older converters in the field. To reiterate from last quarter, while the environment around this is obviously uncertain, from a paper sourcing perspective, we expect minimal impact as we source locally in our production areas. One final area to mention is that you continue to see warrant expense impacting our P&L. In the short term, these will have a meaningful impact on our P&L. But as we hopefully ramp our business with this customer, the impact will be far less pronounced on the comparisons. Again, these are all noncash impacts that would be added back to the statement of cash flows. But for reporting purposes, we must treat the warrants as a reduction in revenue, which flows throughout the P&L. With that, I'll turn it to Omar.

Thank you, Bill. While the environment has been challenging, we have laid the groundwork for growth and expansion. Our work with large enterprise customers is progressing well and will be a meaningful source of growth for us for the upcoming years in PPS as well as automation. We have launched a new cushioning product recently that we believe will compete effectively with foam in place and contribute to an improved mix profile as it ramps. In automation, our solutions are gaining traction globally and getting the attention of top talent in the industry. Since the start of the year, we have attracted top-notch personnel from some of our biggest competitors because they have seen the breadth and value of our solutions as well as the dedication to cutting-edge innovation and partnerships. We have coupled this best-in-class offering with excellent service and a growing reputation for reliability. For the past 5 years or so, we have been building an automation start-up inside a 50-year-old business. The impact on our consolidated profile has been negative as we have invested in people, innovation and systems ahead of scaling revenue, resulting in more than a $7 million drag on EBITDA for the past couple of years. I firmly believe the second half of this year is going to be the inflection point where you start to see it all come together, though, and we, as shareholders, start to be rewarded for our patience. Automation is the future and industrial automation is at the early innings of adoption and penetration. As we exit this year, it will become clear that we have two solid and really exciting businesses. Our PPS business is a solid cash- generating business it has been known for, generating top line growth of high single digits to low double digits with attractive margins. Automation is the opportunity for a step change in growth, going from north of $40 million in revenue expected this year to a goal of $100 million plus annually and from a $7 million drag on adjusted EBITDA to a $20 million positive contributor annually, assuming we achieve our targeted margin profile. At this point, the market is valuing our automation business as a negative contributor to our enterprise value, given the contribution to adjusted EBITDA. This does not reflect the value of what we are building. We believe we have a major growth engine with cutting- edge technology on the verge of profitability. If you look at where some packaging automation businesses have changed hands over the past couple of years and even a few months ago, you would see there is a substantial hidden value here. This, in conjunction with our ownership in Pickle Robot, Ranpak owns 8.8% of the leading robotic unloading company in the world. Trailer unload is one of the hardest problems to solve in warehouses, and Pickle has successfully rolled out their solution to one of the largest and most demanding customers in the globe. We participated in the latest financing for Pickle in the second quarter because we see the traction they are getting and love what they're doing. We believe this ownership stake has substantial upside and as a shareholder of Ranpak, I'm thrilled to have this exposure. We also believe Pickle solution is very relevant to our enterprise customers. All this being said, I recognize the start to the year has been slower, and it is a challenging environment in the short term. Given the challenging start to the year and movements in currency, we are updating our forward-looking guidance to reflect the latest operating environment and warrant outlook. At a current approximate exchange rate of USD 1.15 to the euro, we're forecasting second half of this year net revenue of $216 million to $230 million and adjusted EBITDA of $44.5 million to $54.5 million, reflecting an estimated $4 million recognition of warrant expense over that period. Using year-to-date actual results and the midpoint of the remaining year guidance range, this implies total 2025 net revenue of $406.5 million, which is within our original guidance and adjusted EBITDA of $83.3 million, which is slightly below our original guidance. This guidance reflects the expectation of a reported noncash net revenue and adjusted EBITDA reduction of between $4 million and $6 million in 2025 related to the recognition of warrant expense against revenue. While we have encountered headwinds to start the year, we believe Ranpak is well positioned to weather the current environment due to the diversity of our operations and global footprint as well as the value-added solutions we provide to businesses across the world. We are building partnerships this year that we believe position Ranpak well for strong growth and increased scale in years to come. At this point, we'd like to open the call up for questions. Operator?

[Operator Instructions] Our first question comes from Ghansham Panjabi from Baird.

I guess, first off, there's a ton of moving parts, right? You have obviously, volume variability, price mix, FX has changed quite a bit, the impact of warrants and automation, et cetera. So if you could just, from a high-level standpoint, just give us the bridge on EBITDA between 2024 and 2025, which on a consolidated basis based on the midpoint of your revised guidance looks basically flat year-over- year?

Yes, Ghansham, I can take that one. So versus last year, right, we're expecting volumes to be up, call it, high single digits or so. Gross margin ex depreciation, you're going to see the compression, right? So you'll see that go lower by about 5 points. 1 to 1.5 points of that is related to the warrants. So that's about $5 million off the top, right, that you're going against comparing last year. I would say the other pieces that we just need to bridge towards are the temporary inefficiencies that we talked about on the call, that's about 2 points of pressure. And then the remaining pressure is a little bit of mix, right? So about $2 million in pressure from the EMEA and APAC region. We had expected that to be up a little bit versus prior year. Now we're expecting that to be pressure on EBITDA by about $2 million. In NOAM, we're expecting that to be up versus prior year, even with the warrant expense. So that's kind of the high level, I think, building blocks for you.

Okay. Perfect. And then Omar, I think in your prepared comments, you called out July, did I hear this correctly, it was a little bit better in Europe. Can you just expand on that? I mean, obviously, you're seeing significant monthly variability just like many of your peers across the coverage -- our coverage anyway. I think last quarter, when you reported 1Q, you said that April had started off a little bit better and then things sort of moderated apparently. So what's been going on in the region?

Yes. In Europe, in particular, I think you're spot on. Early indications in April were okay, and then we started seeing more softness in Europe as the quarter progressed. And then you see where we ended up a bit flattish. And obviously, given that's our most profitable region that really impacted the second quarter. July, we started seeing volume growth again in Europe. It is really hard to obviously tell you it's the beginning of a trend. We do think the tariff, if you will, discussion is going to be helpful. I mean we saw a lot of nervousness with CEOs, with companies, with our customers and distributors. Many of them, Ghansham, are holding very, very little inventory and not investing in working capital. So clearly, having some clarity around tariffs may help and sort of we'll see how things progress in August and in September. But again, we saw volume increases in July year-over-year, which we think is a good sign. Let's see how the quarter progresses before we call it a trend.

Okay. And then lastly, on the gross margin decline for 2Q, I think it was 540 basis points year-over-year. You called out product mix in North America. Can you just give us a sense as to how much of that -- how much was that on an impact relative to that 540? And will that be the new baseline going forward given your strategic tie with Amazon and building partnership over the years?

Yes. So Ghansham, I think if you look at kind of the different moving pieces in the quarter, right, about 4.7 points of the margin pressure that you saw was related to either the warrants or what we would consider some of those temporary one-off items that we've been addressing throughout the year. If you exclude depreciation, margins would have been 43.5% versus 47.6% in the prior year as we did get a bit of a benefit from depreciation expense. So you did see some margin pressure there. I would say if you look at the items that created the margin pressure, the warrants were about 1.3 points. And again, that's noncash. The restructuring and those issues that we've been working through in the footprint optimization, that was about another 1.5 points. And then we also had some above-market temporary storage costs that we've since resolved in August. So that was about another point of pressure. So we've been working on the book of business with that large customer, right, and think that we've made some good margin enhancements to that book in the second half just through optimization of freight and sourcing. So we do expect to see some margin improvement building beginning in Q3.

It's important, again, just to reiterate what Bill said, Ghansham, to highlight that on freight and storage and warehouse, a lot of that at this point is completed and done to help sort of recover the margin. So these are not things that we're still working on. These things that at this point, in Q3, they're completed and done. And they clearly had the negative impact in the first 6 months of the year.

Okay. And then, Bill, did you update us on free cash flow as well versus your initial expectation?

Yes, Ghansham, I think this year, just given the start, right, and the lower EBITDA estimate and some of these inefficiencies that we've been talking about, which are obviously cash cost for us. We're looking to finish the year in that $70 million to $75 million of cash range versus at the beginning of the year when we were expecting to build cash, right, and be $15 million to $20 million higher. So we are still expecting to pay down about $4 million in debt this year, which is lower than our original expectations, but we're continuing to chip away at it. But overall, we're expect it to be about flattish. And I think the biggest moving pieces there are, again, the EBITDA, the inefficiencies and then also some working capital assumptions. I think going into this year, we were expecting about a $3 million to $4 million source of working capital. At this point, we're expecting it still to be a slight use just given where we are in some of the discussions that we have with customers on contracts.

Our next question comes from Greg Palm from Craig-Hallum Capital Group.

This is Danny Eggerichs on for Greg today. Hoping to just kind of hit on kind of the second half outlook, obviously, implies kind of a decent-sized step-up even when you exclude automation. So maybe if you can just give kind of any more color on how you saw the quarter progress. I appreciate some of the color you gave on July so far, but maybe just some factors that give you confidence in that PPS business stepping up in the second half in order to kind of achieve that outlook.

Yes, sure. Let me start, and then I'll have Bill fill in. Number one, we still have a number of, in particular, in North America, large enterprise wins that are either installed or that we're installing as we speak that we think are going to help us in this upcoming holiday and peak season. So we continue to have some large wins that we think are going to drive volume, which will be helpful in terms of the second half of the year. We talked a little bit about Europe where, again, July seems a little bit healthier. And now hopefully -- and again, this is not within our control, but if the tariff and trade picture is a little bit more stable, we're hoping that, that will inject some stability and predictability in Europe that could drive some volume. And then we're also seeing some wins in Asia Pacific in Japan, for instance, and a couple of other markets that we think could drive some of the volume trends. And in many cases, these things are either existing installs or things that we're installing as we seek in anticipation of sort of the peak season. Bill, I don't know if you want to chime in on this.

Yes. I think just a couple of things, right? As Omar pointed out, we've had some good enterprise account success over the past year with certain installs, right, even some at the beginning of this year that we expect will have a nice contribution during peak season for North America. So we are expecting North America to be up a little bit versus prior year, even with the tougher comparison just given the contribution from those accounts. In Europe, we're expecting it to be slightly up given a little bit more improved outlook and just some certainty in the markets. And then as you pointed out, right, automation, right, is the big growth driver from a contribution standpoint year-over-year in the second half versus prior. And I think we feel really good about the backlog there, most of that business is contracted at this point. So we feel good about that ramp.

There are two things, if I may add, that I want to highlight on automation. One, as Bill said, the backlog is robust. The majority of it is contracted already. We're just building and trying to install and deliver the equipment. So we have very good visibility for the second half of the year. And then as I mentioned in the opening comments, we are working and are pretty close on signing a multiyear deal with one of the largest customers in North America, where they would be buying equipment from us for the next couple of years that would consume the bulk of our capacity in Connecticut. So this will be a contract that's north of $100 million of equipment that we're working on that we believe we will be announcing in the upcoming weeks. And we've been working on this for the last number of years. All the testing, validation, initial installs are all done, and that is giving us quite a bit of confidence and boost for the second half of the year.

Okay. Yes, that sounds very promising. I guess just sticking with automation, just being that $5 million drag on EBITDA to start the year. I guess, assuming you hit that midpoint for full year automation, what does that drag look like for the second half? Are we still seeing a drag? Or is there a quarterly breakeven point that we may hit? Or any other detail you can give there?

Yes, Danny, I would say you'll have a little bit of a drag in Q3 and then should be about breakeven in Q4, which is really great to see. That's something we've been working towards for a long time and getting that business to scale will be huge for us from a consolidated financial profile standpoint.

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

Great. Thank you, Julianne, and thank you all for joining us. Look forward to catching up for Q3.