Ranpak Holdings Corp. annual report, FY2021

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Ranpak Holdings Corp. — FY2021 Form 10-K

Reporting period: Fiscal year ended December 31, 2021; filed February 28, 2022. This is an annual report, not a standalone fourth-quarter report. Ranpak supplies paper-based protective packaging systems and consumables, plus end-of-line automation solutions. Its recurring-consumables model relies on a global distributor network and an installed base of approximately 133,200 systems.

Financial performance and liquidity

  • Revenue: $383.9 million, up 28.7% from $298.2 million in 2020; constant-currency revenue rose 26.3%. Growth reflected higher consumables volume, price/mix, and automation equipment sales.
  • Product mix: Cushioning revenue was $162.6 million (42.4% of revenue); Void-Fill $154.5 million (40.2%); Wrapping $52.0 million (13.5%); and Other $14.8 million (3.9%). Paper and machine-lease revenue were $321.4 million and $47.7 million, respectively.
  • Profitability: Gross profit was $148.9 million, or 38.8% of revenue, versus $122.6 million, or 41.1%, in 2020. Operating income was $12.2 million (3.2% margin), compared with $11.7 million (3.9%). Net loss narrowed to $2.8 million, or $0.04 per share, from $23.4 million, or $0.32 per share.
  • Non-GAAP measures: Constant-currency EBITDA was $90.0 million, up 32.5%; adjusted EBITDA (AEBITDA) was $117.8 million, up 25.7%. AEBITDA includes substantial adjustments, including $22.5 million of restricted-stock-unit amortization. These measures are not substitutes for GAAP results or cash flow.
  • Cash flow: Operating cash flow was $54.3 million, down from $63.8 million. Capital expenditures were $54.5 million, leaving operating cash flow less capital expenditures of approximately negative $0.2 million, before acquisitions and investments. Investing cash outflow was $69.8 million; financing cash inflow was $72.0 million.
  • Liquidity: Cash and cash equivalents were $103.9 million, versus $48.5 million; current assets were $191.5 million and current liabilities $71.5 million. No borrowings were outstanding under the $45.0 million revolving facility at year-end.
  • Debt: Debt including finance leases and excluding deferred financing costs was $406.5 million, down from $439.8 million. The balance-sheet long-term debt amount was $400.4 million, net of deferred financing costs and current maturities. The term facilities mature in 2026; the revolver matures in 2024. The company reported compliance with financial covenants at year-end.

Changes versus 2020

  • Revenue increased $85.7 million, led by higher sales across all major product lines and regions. Europe/Asia revenue grew 38.8% on a reported basis; North America grew 15.3%.
  • Cost of goods sold rose 33.8%, faster than revenue, as higher volumes coincided with increased paper and freight costs and depreciation. Gross margin declined 2.3 percentage points on a reported basis; management cited a 2.4-point decline on a constant-currency basis.
  • SG&A rose 35.6% to $98.3 million, including higher compensation and increased stock-based compensation. Stock-based compensation expense increased to $22.5 million from $7.2 million.
  • Interest expense fell 25.8% to $22.4 million, primarily due to lower debt; a favorable foreign-currency gain of $5.3 million replaced a $6.1 million loss in 2020. These factors helped narrow the net loss.
  • The installed PPS base grew 13.5% to 133,200 systems, including 29.7% growth in Wrapping systems and 14.0% in Void-Fill systems.

Outlook, commentary, risks, and notable items

  • Outlook: The filing provides no specific numerical revenue or earnings guidance. Management expects continued opportunities from e-commerce, demand for sustainable packaging, automation, product innovation, and geographic expansion; it also expects medium-term gross-margin pressure as input costs rise.
  • Costs and supply: Paper is the largest input cost. Inflation increased paper costs, and management expects cost of goods sold to rise as supplier arrangements become shorter or less certain. Passing increases on to customers is uncertain. One supplier represented 46.1% of North American paper purchases; a Russian supplier represented approximately 11.4% of global supply, creating added uncertainty amid the Ukraine conflict.
  • COVID-19: Facilities remained operational and customer demand was supported by e-commerce, but pandemic-related restrictions delayed demonstrations and installations; supply, logistics, and workforce disruption remained risks. Management said the ultimate impact could not be reliably predicted.
  • Strategic activity and financing: Ranpak acquired Recycold in December 2021 and invested in Pickle Robot and Creapaper. It raised $103.4 million net through a May 2021 share offering, prepaid $20.9 million of term debt, and paid an $8.2 million lender exit payment. The offering and employee equity awards increased potential shareholder dilution.
  • Other exposures: Foreign-currency translation, variable-rate borrowing and LIBOR transition, distributor dependence, customer price sensitivity, competition, environmental regulation, cybersecurity, and acquisition integration are identified risks. A 100-basis-point interest-rate change would have affected 2021 cash interest expense by approximately $10.7 million before considering hedges.
  • Audit and controls: Deloitte issued an unqualified opinion on the financial statements and internal controls. Goodwill impairment testing was a critical audit matter because it relied on forecasts and discount-rate assumptions; no impairment was recorded.

Investor verification checklist

  • Review the sustainability of revenue growth and consumables volume, including the concentration of sales in e-commerce and Europe/Asia.
  • Track paper, freight, labor, and energy costs; pricing actions; and whether gross margins stabilize or continue to contract.
  • Reconcile reported debt, finance leases, scheduled amortization, interest-rate exposure, hedges, and available revolver capacity.
  • Assess cash conversion after elevated capital spending and determine whether planned automation investments deliver returns.
  • Examine AEBITDA adjustments—especially stock compensation and other adjustments—alongside GAAP operating income, net loss, and cash flow.
  • Monitor paper-supplier concentration and the availability of alternatives, including exposure to the Russian supplier and broader geopolitical disruption.
  • Evaluate dilution from equity issuance and incentive awards, and monitor goodwill valuations and acquisition integration.