Ranpak Holdings Corp. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report; it does not provide separate fourth-quarter results in the supplied text. Amounts below are in U.S. dollars unless noted.
Business context
Ranpak supplies paper-based protective packaging systems and consumables, plus end-of-line automation solutions. Its recurring-revenue model primarily places proprietary systems with customers and earns revenue from compatible paper consumables. Approximately 89% of 2023 revenue came through distributors. The company reported about 141,200 installed systems and more than 36,000 end-users at year-end.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net revenue | $336.3 million | $326.5 million |
| Gross profit / gross margin | $123.3 million / 36.7% | $99.6 million / 30.5% |
| Operating loss | $7.5 million | $42.5 million |
| Net loss | $27.1 million; $0.33 per share | $41.4 million; $0.51 per share |
| EBITDA (non-GAAP) | $62.6 million | $32.9 million |
| Adjusted EBITDA, constant currency (non-GAAP) | $76.5 million | $66.8 million |
| Cash from operating activities | $52.6 million | $1.1 million |
| Capital expenditures | $55.3 million | $44.8 million |
Revenue increased 3.0% reported, but 1.4% on a constant-currency basis. Paper consumables volume rose about 1.9%; price/mix declined 1.7%. Revenue by product was cushioning $145.8 million, void-fill $133.9 million, wrapping $36.0 million, and other $20.6 million. Europe/Asia generated $199.0 million and North America $137.3 million.
Cash and cash equivalents were $62.0 million at year-end, down from $62.8 million. Operating cash flow improved substantially, mainly due to working-capital changes and lower input costs, while investment outflows were $52.4 million. Cash flow from operations less capital expenditures was approximately negative $2.7 million, calculated from the reported figures.
Debt was reported at $407.4 million including finance leases and excluding deferred financing costs; $2.5 million was classified as short-term. No revolving loans were outstanding, and net availability under the $45 million revolving facility was $41.3 million after letters of credit. Term debt matures in June 2026; scheduled term-facility maturities include $399.7 million in 2026. The company reported covenant compliance and no mandatory prepayments due at year-end. Interest rates at year-end were 9.44% on the dollar term facility and 7.86% on the euro term facility.
Current assets were $124.9 million and current liabilities $48.0 million. Goodwill was $450.1 million and intangible assets, net, were $345.4 million. The North America goodwill reporting unit’s estimated fair value was close to its carrying value, though no impairment was recorded.
Changes versus FY2022
- Gross profit increased $23.7 million, primarily reflecting lower raw-material costs and favorable currency effects.
- SG&A fell 13.0% to $91.8 million, largely because of lower stock-based compensation expense. A 2023 assessment of performance criteria for 2021 LTIP awards reduced stock-compensation expense by approximately $19.5 million.
- Interest expense rose 17.4% to $24.3 million as borrowing rates increased; the $50 million notional interest-rate swap matured in June 2023.
- Cushioning and void-fill revenue grew 3.9% and 2.5%, respectively; wrapping revenue fell 11.1%. Other revenue rose 36.4%.
- Reported revenue growth included currency tailwinds: constant-currency revenue growth was lower at 1.4%.
Outlook, risks and unusual items
- Management gave no numerical revenue or earnings guidance. It expects continued medium-term pressure on gross margins relative to historical levels, citing paper costs, inflation, competition, and limits on passing through cost increases. It also expects capital expenditures to increase as the business expands and facilities are upgraded.
- A new paper-conversion facility in Malaysia was expected to become operational in the second half of 2024, with management anticipating shorter lead times and improved regional cost competitiveness.
- Key operating risks include paper-supplier concentration: one supplier accounted for approximately 26.5% of global paper purchases and 64.2% of North American purchases in 2023. Most facilities held only about one to three weeks of paper-production inventory.
- Interest-rate exposure is material: management estimated a 100-basis-point rate change would affect 2023 cash interest expense by $10.0 million. Euro-denominated revenue was 59.2% of the total; a 10% change in the euro-dollar rate would have changed reported revenue by about $19.9 million.
- Management and the auditor concluded that internal control over financial reporting was ineffective at December 31, 2023 because of material weaknesses in IT general controls and financial-reporting process controls. The auditor issued an adverse opinion on internal controls but an unqualified opinion on the financial statements. Remediation is ongoing; timing is uncertain.
- Ordinary-course litigation and environmental matters had no amounts accrued in the financial statements; management said known contingencies were not expected to materially affect financial condition, liquidity, or cash flows.
- Cash dividends have not been paid and are not anticipated in the foreseeable future. The authorized $50 million share-repurchase program had no repurchases to date.
Important facts for investors to verify
- Progress and independent validation of remediation of the reported internal-control material weaknesses.
- Paper-supply continuity, supplier concentration, inventory coverage, and the company’s ability to pass input-cost changes through to customers.
- Debt refinancing and repayment plans ahead of the June 2026 term-facility maturity, including sensitivity to floating interest rates.
- Whether operating cash generation can sustainably cover capital expenditures, debt service, and planned capacity expansion.
- Execution, timing, and expected costs or returns of the Malaysia facility, and whether wrapping and automation growth can offset softness in core demand.
- Key assumptions supporting goodwill valuations, particularly the North America reporting unit, which had limited valuation headroom.