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Ranpak Holdings Corp. Reports Third Quarter 2021 Financial Results

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·13-min read
In this article:
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  • Packaging System placement up 14.2% year over year to approximately 129,200 machines at September 30, 2021

  • Third quarter net revenue increased 26.4% year over year to $97.1 million and 25.6% year over year on a constant currency basis to $95.6 million

  • Third quarter net loss of $1.4 million compared to net loss of $6.1 million

  • Constant currency Adjusted EBITDA ("AEBITDA") of $28.5 million (which represents approximately a 29.8% margin) is up 20.3%, or $4.8 million, year over year

CONCORD TOWNSHIP, Ohio, October 28, 2021--(BUSINESS WIRE)--Ranpak Holdings Corp (NYSE: PACK) ("Ranpak" or "the Company"), a leading provider of environmentally sustainable, systems-based, product protection solutions for e-Commerce and industrial supply chains, today reported its third quarter 2021 financial results.

Omar Asali, Chairman and Chief Executive Officer, commented, "I am very pleased to report that Ranpak continued its strong momentum into the third quarter and delivered excellent results. Net revenue for the quarter increased 25.6% year over year on a constant currency basis to $95.6 million, driven by strong growth in North America and continued exceptional top-line results in Europe/APAC. We continue to benefit from strong industrial activity and consumption trends, as well as companies integrating sustainability into their packaging decisions. The team has done a terrific job maneuvering in this environment to not only drive the top-line but also to protect our margins in this evolving inflationary environment. We experienced robust growth in our profitability as Adjusted EBITDA increased 20.3% on a constant currency basis to $28.5 million, delivering a strong margin of 29.8%."

"On a year-to-date basis, net revenue is up 28.5% and Adjusted EBITDA is up 35.0% in constant currency terms. I would like to recognize the hard work put forth by all Ranpak employees around the world. Their continued dedication has been the key to our ability to continue to serve our customers effectively while achieving excellent results year to date. Our exceptional profitability in the fourth quarter of 2020 makes for a challenging comparison, but we continue to expect to finish with a record year at Ranpak. We have made strategic investments this year in our people and systems, as well as in areas such as Automation and Material Science that position us well for 2022 and beyond. I am excited to see the impact these investments will have. Our strong balance sheet provides flexibility and value creation activities in the near and long term for our shareholders."

"Across the globe, sustainability continues to be a key value driver and a priority for businesses. Within organizations, steering committees are being formed to examine ways to embed sustainability throughout companies’ operations, gather data, and reach publicly stated goals. Regulators, consumers, employees, and shareholders are increasingly working to drive change globally to reduce plastic pollution, and Ranpak is well positioned to play a meaningful role in that process."

Third Quarter 2021 Highlights

  • Packaging systems placement increased 14.2% year over year, to approximately 129,200 machines as of September 30, 2021

  • Net revenue increased 26.4% and 25.6% adjusting for constant currency

  • Net loss of $1.4 million compared to net loss of $6.1 million

  • AEBITDA1 of $28.5 million for the three months ended September 30, 2021 is up 20.3%

Net revenue for the third quarter of 2021 was $97.1 million compared to net revenue of $76.8 million in the third quarter of 2020, an increase of $20.3 million or 26.4% year over year. Net revenue was positively impacted by increases in cushioning, void-fill, wrapping, and other sales.

1

AEBITDA is a non-GAAP financial measure. Please refer to "Presentation of Combined and Pro Forma Measures and Reconciliation of U.S. GAAP to Non-GAAP Measures" in this press release for an explanation and reconciliations of this non-GAAP financial measure

Cushioning increased $9.1 million, or 28.6%, to $40.9 million from $31.8 million; void-fill increased $6.2 million, or 18.6%, to $39.5 million from $33.3 million; wrapping increased $2.5 million, or 24.8%, to $12.6 million from $10.1 million; and other sales increased $2.5 million, or 156.3%, to $4.1 million from $1.6 million, for the third quarter of 2021 compared to the third quarter of 2020. Other net revenue includes automated box sizing equipment and non-paper revenue from packaging systems installed in the field. Constant currency net revenue was $95.6 million for the third quarter of 2021, a $19.5 million, or 25.6%, increase from constant currency net revenue of $76.1 million for the third quarter of 2020. The increase in net revenue was primarily a result of an increase in the volume of our paper consumable products of approximately 16.7 percentage points ("pp"), a 5.9 pp increase in the price or mix of our paper consumable products, and an increase of 3.0 pp in sales of automated box sizing equipment.

Net revenue in North America for the third quarter of 2021 totaled $37.3 million compared to net revenue in North America of $33.3 million in the third quarter of 2020. The increase of $4.0 million, or 12.0%, was attributable to an increase in cushioning, void-fill, wrapping, and other sales.

Net revenue in Europe/Asia for the third quarter of 2021 totaled $59.8 million compared to net revenue in Europe/Asia of $43.5 million in the third quarter of 2020. The increase of $16.3 million, or 37.5%, was driven primarily by increases in cushioning, void-fill and wrapping product categories, partially offset by a decline in automation revenue. Constant currency net revenue in Europe/Asia was $58.3 million for the third quarter of 2021, a $15.5 million, or 36.2%, increase from constant currency net revenue of $42.8 million for the third quarter of 2020.

Net loss for the third quarter of 2021 decreased $4.7 million to $1.4 million from a net loss of $6.1 million in the third quarter of 2020. Constant currency net loss was $1.4 million in the third quarter of 2021 compared to constant currency net loss of $6.2 million for the third quarter of 2020.

Year-to-Date 2021 Highlights

  • Net revenue increased 33.2% and 28.5% adjusting for constant currency

  • Net loss of $0.3 million compared to net loss of $18.2 million

  • AEBITDA of $82.1 million for the nine months ended September 30, 2021 is up 35.0%

Balance Sheet and Liquidity

Ranpak completed the third quarter of 2021 with a strong liquidity position, including a cash balance of $110.4 million and no borrowings on its $45 million available Revolving Credit Facility.

As of September 30, 2021, the Company had First Lien Term Loan facilities outstanding consisting of $250.0 million USD-denominated term loan and €137.2 million euro-denominated first lien resulting in a Bank AEBITDA leverage ratio of 2.3x. In September, we entered into a cross-currency swap agreement to hedge the variability of exchange rate impacts between the United States dollar and the Euro. The cross-currency swap agreement was executed at a spot exchange ratio of 1.1835, resulting in $80 million USD notional term loan being exchanged for €67.6 million EUR notional term loan. This transaction saves us 82 bps annually on interest expense on the swapped notional and better hedges our exposure to cash flows associated with our Europe/APAC operations. This cross-currency swap agreement has been designated as a net investment hedge and will expire in June of 2024.

The following table presents Ranpak’s installed base of protective packaging systems by product line as of September 30, 2021 and 2020:

September 30, 2021

September 30, 2020

Change

% Change

Protective Packaging Systems

(in thousands)

Cushioning machines

34.9

33.2

1.7

5.1

Void-fill machines

75.1

65.5

9.6

14.7

Wrapping machines

19.2

14.4

4.8

33.3

Total

129.2

113.1

16.1

14.2

Conference Call Information

The Company will host a conference call and webcast at 8:30 a.m. (ET) on Thursday, October 28, 2021. The conference call and earnings presentation will be webcast live at the following link: https://event.on24.com/wcc/r/3408978/6757D493C20CB3F4052AB91C94C3928A. Investors who cannot access the webcast may listen to the conference call live via telephone by dialing (844) 200-6205 or (929) 526-1599 and use the Conference ID: 430411.

A telephonic replay of the webcast also will be available starting at 11:30 a.m. (ET) on Thursday, October 28, 2021 and ending at 11:59 p.m. (ET) on Thursday, November 4, 2021. To listen to the replay, please dial (866) 813-9403 or 44-204-525-0658 and use the Conference ID: 188283.

Note Regarding Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. Statements that are not historical facts, including statements about the parties, perspectives and expectations, are forward-looking statements. In addition, any statements that refer to estimates, projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "intend," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this news release include, for example, statements about our expectations around the future performance of the business, including our forward-looking guidance.

The forward-looking statements contained in this news release are based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks include, but are not limited to: (i) our inability to secure a sufficient supply of paper to meet our production requirements; (ii) the impact of the price of kraft paper on our results of operations; (iii) our reliance on third party suppliers; (iv) the COVID-19 pandemic and associated response; (v) the high degree of competition in the markets in which we operate; (vi) consumer sensitivity to increases in the prices of our products; (vii) changes in consumer preferences with respect to paper products generally; (viii) continued consolidation in the markets in which we operate; (ix) the loss of significant end-users of our products or a large group of such end-users; (x) our failure to develop new products that meet our sales or margin expectations; (xi) our future operating results fluctuating, failing to match performance or to meet expectations; (xii) our ability to fulfill our public company obligations; and (xiii) other risks and uncertainties indicated from time to time in filings made with the SEC.

Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward-looking statements. We are not undertaking any obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.

Ranpak Holdings Corp.

Unaudited Condensed Consolidated Statements of Operations

and Comprehensive Income (Loss)

(in millions, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Paper revenue

$

81.2

$

64.9

$

229.5

$

171.2

Machine lease revenue

11.8

10.4

35.0

28.3

Other revenue

4.1

1.5

10.3

6.8

Net revenue

97.1

76.8

274.8

206.3

Cost of goods sold

59.1

46.6

164.8

122.3

Gross profit

38.0

30.2

110.0

84.0

Selling, general and administrative expenses

27.1

16.6

70.8

56.9

Transaction costs

-

1.2

-

1.2

Depreciation and amortization expense

8.7

7.7

26.1

22.9

Other operating expense (income), net

(0.1

)

1.9

2.0

2.9

Income from operations

2.3

2.8

11.1

0.1

Interest expense

5.5

4.9

17.1

16.6

Foreign currency (gain) loss

(1.5

)

3.2

(3.9

)

3.1

Loss before income tax expense (benefit)

(1.7

)

(5.3

)

(2.1

)

(19.6

)

Income tax expense (benefit)

(0.3

)

0.8

(1.8

)

(1.4

)

Net loss

$

(1.4

)

$

(6.1

)

$

(0.3

)

$

(18.2

)

Two-class method

Loss per share

Basic

$

(0.02

)

$

(0.08

)

$

-

$

(0.25

)

Diluted

$

(0.02

)

$

(0.08

)

$

-

$

(0.25

)

Class A – earnings (loss) per share

Basic

$

(0.02

)

$

(0.08

)

$

-

$

(0.25

)

Diluted

$

(0.02

)

$

(0.08

)

$

-

$

(0.25

)

Class C – earnings (loss) per share

Basic

$

(0.03

)

$

(0.08

)

$

-

$

(0.26

)

Diluted

$

(0.03

)

$

(0.08

)

$

-

$

(0.26

)

Weighted average number of shares outstanding - Class A and C

Basic

81,396,832

72,396,183

77,579,205

71,401,580

Diluted

81,396,832

72,396,183

77,579,205

71,401,580

Other comprehensive income (loss), before tax

Foreign currency translation adjustments

$

(4.9

)

$

8.4

$

(11.1

)

$

7.9

Interest rate swap adjustments

0.8

(0.5

)

4.0

(12.2

)

Cross currency swap adjustments

1.4

-

1.4

-

Total other comprehensive income (loss), before tax

(2.7

)

7.9

(5.7

)

(4.3

)

Provision (benefit) for income taxes related to other comprehensive income (loss)

0.5

0.1

1.3

(2.1

)

Total other comprehensive income (loss), net of tax

(3.2

)

7.8

(7.0

)

(2.2

)

Comprehensive income (loss), net of tax

$

(4.6

)

$

1.7

$

(7.3

)

$

(20.4

)

Ranpak Holdings Corp.

Unaudited Condensed Consolidated Balance Sheets

(in millions, except share data)

September 30, 2021

December 31, 2020

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

110.4

$

48.5

Accounts receivable, net

44.8

39.1

Inventories, net

30.2

16.1

Income tax receivable

9.2

0.1

Prepaid expenses and other current assets

4.1

3.4

Total current assets

198.7

107.2

Property, plant and equipment, net

126.5

124.4

Operating lease right-of-use assets, net

6.8

-

Goodwill

452.1

458.4

Intangible assets, net

413.9

440.6

Other assets

24.6

2.9

Total assets

$

1,222.6

$

1,133.5

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable

$

34.7

$

24.9

Accrued liabilities and other

31.6

30.7

Current portion of long-term debt

1.1

0.5

Operating lease liabilities, current

2.4

-

Deferred machine fee revenue

1.7

1.4

Total current liabilities

71.5

57.5

Long-term debt

403.9

432.7

Deferred tax liabilities

105.4

109.6

Derivative instruments

4.9

9.6

Operating lease liabilities, non-current

-

Other liabilities

0.9

1.2

Total liabilities

591.0

610.6

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