Ranpak Holdings Corp. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. Amounts are in U.S. dollars unless noted. Ranpak provides protective packaging systems and paper consumables for e-commerce and industrial supply chains.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Net revenue | $87.7 million | $63.4 million | +38.3%; +31.2% at constant currency |
| Gross profit / margin | $36.3 million / 41.4% | $26.8 million / 42.3% | Margin down 0.9 percentage points |
| Operating income (loss) | $7.7 million | ($0.6 million) | Improved |
| Net income (loss) | $6.3 million | ($3.6 million) | Improved by $9.9 million |
| Diluted earnings (loss) per share | $0.08 | ($0.05) | Improved |
| Operating cash flow | $12.5 million | $11.6 million | + $0.9 million |
| Capital expenditures | $10.9 million | $10.3 million | + $0.6 million |
| Cash and cash equivalents | $40.5 million | $48.5 million at Dec. 31, 2020 | Down $8.0 million |
| Debt | $434.4 million | $439.8 million at Dec. 31, 2020 | Down $5.4 million |
Debt is stated including finance lease liabilities and before deferred financing costs; $2.2 million was classified as short-term. The $45 million revolving facility was undrawn at quarter-end. Current assets were $108.8 million and current liabilities were $55.4 million.
Constant-currency EBITDA, a non-GAAP measure, was $28.5 million versus $15.5 million; constant-currency adjusted EBITDA was $28.0 million versus $18.1 million. The filing cautions that these measures are not substitutes for GAAP results and may not be comparable with similarly named measures at other companies.
Changes versus prior comparable period
- Growth was led by cushioning revenue (+39.3% to $39.7 million), void-fill (+38.9% to $34.3 million), and wrapping (+46.8% to $11.6 million). Other revenue declined 8.7% to $2.1 million.
- Europe/Asia revenue rose 64.2% reported, while North America revenue increased 3.7%. At constant currency, total revenue increased 31.2%.
- Paper consumable volume supported growth, but management reported a 6.8 percentage-point decrease in paper product pricing on a constant-currency basis.
- Gross margin declined as cost of goods sold grew faster than revenue. SG&A decreased 2.6% reported, reflecting reduced travel and remote working during COVID-19 and prior-year transaction costs.
- Net income included a $3.6 million foreign currency gain, compared with a $1.5 million gain in Q1 2020. Interest expense decreased to $5.6 million from $6.2 million.
- Financing cash outflow included an $8.2 million exit payment accrued in 2020 and paid in Q1 2021. Operating cash flow was partly offset by working-capital investment, including increased inventory and receivables.
Outlook, risks and other matters
- Outlook: The filing provides no specific revenue, earnings, or cash-flow guidance. Management expects capital expenditures to increase with business growth and believes operating cash flow and available revolver capacity can meet current requirements.
- Input-cost pressure: Paper prices and freight costs had increased. As supply arrangements are renegotiated, management expects higher cost of goods sold and gross-margin pressure, and says it cannot predict how much of the increase can be passed to customers.
- COVID-19: E-commerce demand was strong, offsetting weaker demand in some other industries. Restrictions delayed equipment demonstrations and installations; management said operations and order fulfillment had faced minimal disruption to date, but the pandemic’s eventual effects remained uncertain.
- Other principal risks: Paper supply availability and pricing, reliance on suppliers, competition, customer price sensitivity, changing preferences, loss of significant customers, product development, and foreign-currency exposure. The company does not hedge foreign-exchange transaction or translation exposure. A 10% euro movement would have changed reported Q1 revenue by approximately $6.0 million.
- Debt and contingencies: The company reported compliance with financial covenants at March 31, 2021. Debt agreements impose restrictions on activities including additional borrowing, investments, dividends, and asset sales. Management reported no material accrued litigation or environmental contingencies; ordinary-course proceedings remain possible.
- Other items: Ranpak adopted lease accounting standard ASC 842 on January 1, 2021, with no material impact. Management concluded disclosure controls were effective and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether paper and freight cost increases are passed through to customers, and the resulting effect on gross margin.
- Whether revenue growth persists across regions and product lines, particularly given North America’s comparatively modest growth and normal first-quarter seasonality.
- Cash generation after capital expenditures, working-capital needs, and debt service; also confirm available revolver capacity and covenant headroom.
- The contribution of foreign-currency gains to reported earnings and the sensitivity of future results to euro exchange rates.
- How much the non-GAAP EBITDA and adjusted EBITDA gains reflect operating improvement versus adjustments and currency effects.