Ranpak Holdings Corp. — 2022 Form 10-K
Business and period: Annual report for the year ended December 31, 2022. Ranpak sells paper-based protective packaging consumables and systems, plus end-of-line automation solutions, primarily through distributors. More than 90% of 2022 revenue came from paper consumables; the company reported one aggregated segment.
Financial performance
| Metric | 2022 | 2021 |
|---|---|---|
| Net revenue | $326.5 million | $383.9 million |
| Gross profit / gross margin | $99.6 million / 30.5% | $148.9 million / 38.8% |
| Operating income (loss) / margin | $(42.5) million / (13.0)% | $12.2 million / 3.2% |
| Net loss | $(41.4) million | $(2.8) million |
| Basic and diluted loss per share | $(0.51) | $(0.04) |
| EBITDA / adjusted EBITDA, constant currency | $32.9 million / $66.8 million | $91.1 million / $117.8 million |
| Cash from operating activities | $1.1 million | $54.3 million |
| Capital expenditures | $44.8 million | $54.5 million |
| Cash and cash equivalents, year-end | $62.8 million | $103.9 million |
| Debt including finance leases, before deferred financing costs | $396.9 million | $406.5 million |
The 2022 operating cash flow less capital expenditures was approximately negative $43.7 million. Year-end current assets were $139.6 million and current liabilities $39.1 million. The $45.0 million revolving facility had no borrowings; $2.4 million was committed to letters of credit, leaving $42.6 million available. The filing says the company was in compliance with its financial covenants at year-end. Term debt matures in 2026; the revolving facility matures in 2024.
Changes versus 2021
- Revenue declined 15.0% on a reported basis; constant-currency revenue fell 8.8%. Management attributed the decline to lower volumes, currency headwinds, reduced e-commerce activity as economies reopened, inflation and customer inventory controls.
- Paper consumable volume reduced revenue by approximately 24.1 percentage points, partly offset by a 14.4-point benefit from price and mix. Management said price increases partially offset higher input costs.
- Gross margin contracted 8.3 percentage points. Paper, labor, energy, freight and logistics costs pressured profitability, while pricing actions and lower volumes influenced results.
- Operating cash flow dropped from $54.3 million to $1.1 million. Cash declined by $41.1 million during 2022.
- Revenue decreased across cushioning, void-fill and wrapping; other revenue increased slightly. Constant-currency revenue fell in both North America and Europe/Asia.
Management commentary, outlook and risks
- Management expects continued medium-term gross-margin pressure relative to historical levels, particularly while European energy and input-cost conditions remain uncertain. The filing provides no specific revenue or earnings guidance.
- Growth priorities include product innovation, automation, wrapping, cold-chain products, retail consumables and geographic expansion. A Malaysia paper-conversion facility was expected to become operational in the second half of 2023.
- The 2022 ERP implementation disrupted operations, including processing and shipping, and delayed pricing increases. Management attributed part of the revenue decline to these issues.
- Management identified material weaknesses in IT general controls and financial-reporting process controls, and concluded that internal control over financial reporting and disclosure controls were ineffective at December 31, 2022. Certain financial statement errors were corrected before filing; the auditor issued an adverse opinion on internal control, while giving an unqualified opinion on the financial statements. Remediation had begun, but timing was not certain.
- The Europe goodwill reporting unit had a $107.9 million goodwill balance and fair value close to carrying value. Impairment testing found no impairment, but management noted that changes in assumptions or market conditions could lead to a future charge.
- Key risks include paper supply concentration (one supplier represented 21.7% of global paper purchases), commodity and energy cost volatility, customer price sensitivity, distributor reliance, foreign-exchange exposure, competition, debt and interest-rate exposure, and geopolitical and supply-chain disruption. Russian paper sourcing was eliminated in the third quarter of 2022.
- No material litigation or environmental contingency accruals were reported. A $50 million share repurchase authorization was approved in July 2022; no shares were repurchased during the year. The company said it did not intend to pay cash dividends in the foreseeable future.
Investor verification priorities
- Track remediation of the material weaknesses, including ERP-related IT controls, staffing, and process-level controls; verify whether controls become effective and whether future filings are timely.
- Reconcile operating cash generation, capital spending and working-capital movements, and assess whether liquidity remains adequate if cash flow stays weak.
- Review debt balances, variable-rate exposure, refinancing and covenant headroom; the filing estimates a $9.8 million cash-interest impact from a hypothetical 100-basis-point rate change in 2022.
- Monitor paper sourcing concentration, European energy and paper costs, pricing recovery, and the effect of the Malaysia facility on regional costs and growth.
- Assess whether the Europe reporting unit’s performance and valuation assumptions support recorded goodwill, and whether weaker results could trigger impairment.