# Ranpak Holdings Corp.: Form 10-Q for the period ended Sep 30, 2022

- Company: [Ranpak Holdings Corp.](/companies/pack.md) (CIK 1712463)
- Form: 10-Q
- Filed: 2022-11-01
- Accepted by EDGAR: Nov 1, 2022, 09:16 ET
- Period: 2022-09-30
- Accession: 0000950170-22-020715
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1712463/000095017022020715/pack-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1712463/000095017022020715/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $77.8m | us-gaap:Revenues |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $247.1m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $53.4m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $169.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $24.4m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $77.3m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2022-07-01 to 2022-09-30 | $26.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-01-01 to 2022-09-30 | $86.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$11.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$36.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $5.3m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $15.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | −$3.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | −$9.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$8.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$34.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.11 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.42 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.11 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.42 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 81,979,986 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 81,833,718 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$9.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $34.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-09-30 | $61.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $164.4m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $1.14bn | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $46.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $529.0m | us-gaap:Liabilities |
| Long-term debt | at 2022-09-30 | $379.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-09-30 | $400.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-09-30 | $611.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 63,969 characters.

### Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are not historical facts are forward-looking statements. 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. 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.

The forward-looking statements contained in this Quarterly Report on Form 10-Q 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:

- our inability to secure a sufficient supply of paper to meet our production requirements;
- the impact of rising prices on production inputs, including labor, energy, and freight on our results of operations;
- the impact of the price of kraft paper on our results of operations;
- our reliance on third party suppliers;
- the COVID-19 pandemic and associated response;
- the high degree of competition in the markets in which we operate;
- consumer sensitivity to increases in the prices of our products;
- changes in consumer preferences with respect to paper products generally;
- continued consolidation in the markets in which we operate;
- the loss of significant end-users of our products or a large group of such end-users;
- our failure to develop new products that meet our sales or margin expectations;
- our future operating results fluctuating, failing to match performance or to meet expectations;
- our ability to fulfill our public company obligations; and
- 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.

### Management’s Discussion and Analysis of Financial Condition and Results of Operations

*The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with the sections entitled “Risk Factors” and “Forward-Looking Statements,” and our financial statements and related notes included in this Quarterly Report on Form 10-Q as well as the section entitled, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Ranpak included in our 2021 10-K, filed with the SEC on February 28, 2022. Capitalized terms used and not defined herein have the meanings disclosed elsewhere in the Quarterly Report on Form 10-Q.*

*The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of the Company's control. The Company’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk*

*Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q.*

### Overview

Ranpak is a leading provider of environmentally sustainable, systems-based, product protection solutions for e-commerce and industrial supply chains. Since inception in 1972, we have delivered high quality protective packaging solutions, while maintaining commitment to environmental sustainability. We assemble our PPS systems and provide the PPS systems and paper consumables to customers, which include direct end-users and our network of exclusive paper packaging solution distributors, who in turn place the systems with and sell paper to commercial and industrial users for the conversion of paper into packaging materials. We operate manufacturing facilities in the United States and Europe. For our Automation product lines, we currently have dedicated facilities in Virginia and the Netherlands. R Squared Robotics, a division of Ranpak, uses three-dimensional computer vision and artificial intelligence technologies to improve end-of-line packaging and logistics functions. We are currently building one facility in the Netherlands, with dedicated space for Automation functions, and renovating or building two facilities in the United States, one of which will be primarily dedicated to Automation functions. We also maintain sales and administrative offices in Brazil, France, China, Japan, and Singapore. We are a global business that generated approximately 64.9% of our 2021 net revenue outside of the United States.

As of September 30, 2022, we had an installed base of approximately 138.6 thousand PPS systems serving a diverse set of distributors and end-users. We generated net revenue of $247.1 million and $274.8 million in the nine months ended September 30, 2022 and 2021, respectively.

***Effect of Currency Fluctuations***. As a result of the geographic diversity of our operations, we are exposed to the effects of currency translation, which has affected the comparability of our results of operations between the periods presented in this report and may affect the comparability of our results of operations in future periods. Currency transaction exposure results when we generate net revenue in one currency at one time and incur expenses in another currency at another time, or when we realize gain or loss on intercompany transfers. While we seek to limit currency transaction exposure by matching the currencies in which we incur sales and expenses, we may not always be able to do so.

In addition, we are subject to currency translation exposure because the operations of our subsidiaries are measured in their functional currency which is the currency of the primary economic environment in which the subsidiary operates. Any currency balances that are denominated in currencies other than the functional currency of the subsidiary are re-measured into the functional currency, with the resulting gain or loss recorded in the foreign currency (gains) losses line-item in our Unaudited Condensed Consolidated Statements of Operations. In turn, subsidiary income statement balances that are denominated in currencies other than USD are translated into USD, our functional currency, in consolidation using the average exchange rate in effect during each fiscal month during the period, with any related gain or loss recorded as foreign currency translation adjustments in other comprehensive income (loss). The assets and liabilities of subsidiaries that use functional currencies other than the USD are translated into USD in consolidation using period end exchange rates, with the effects of foreign currency translation adjustments included in accumulated other comprehensive income.

We previously hedged some of our exposure to foreign currency translation with cross-currency swaps and may consider entering into such agreements in future periods. Significant currency fluctuations could impact the comparability of results between periods, while such fluctuations coupled with material mismatches in net revenue and expenses could also adversely impact our cash flows. See “*Qualitative and Quantitative Disclosures About Market Risk.”*

***Seasonality***. Approximately 33.8% of our net revenue in 2021, either directly or to distributors, was destined for end-users in the e-commerce sectors, whose businesses frequently follow traditional retail seasonal trends, including a concentration of sales in the holiday period in the fourth quarter. Our results tend to follow similar patterns, with the highest net revenue typically recorded in our fourth fiscal quarter and the slowest sales in our first fiscal quarter of each fiscal year. We expect this seasonality to continue in the future and, as a result, our results of operations between fiscal quarters in a given year may not be directly comparable.

***Impact of the COVID-19 Pandemic***. The COVID-19 pandemic has resulted in changes in market and economic conditions around the world. We believe that these impacts are not unique to us and that our industry competitors have been impacted in a similar fashion. We are deemed an essential business under the *Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response* issued by the United States Cybersecurity and Infrastructure Security Agency and pursuant to state decisions in states where our domestic production and distribution facilities are located. We continue to operate our production and distribution facilities, both domestically and internationally, albeit subject to measures designed to promote a safe operating environment. While we have experienced limited delays in receiving certain supplies we use to assemble our packaging systems, to date, these measures have not materially impacted the cost of producing and distributing our products, the cost and availability of raw materials and components, and we have encountered minimal disruption in our ability to fulfill customer orders. We continue to monitor our liquidity position closely and have extended payment terms to certain of our customers when necessary. While we do not currently expect COVID-19 to have a material impact on our business, results of operations, financial condition or liquidity, at the time of this filing, we cannot predict the extent to which we will ultimately be impacted due to the uncertain nature and duration of the COVID-19 pandemic. See “*Risk Factors”* in the 2021 10-K. We will continue to evaluate the nature and extent of the impact to our business, results of operations, financial condition, and cash flows.

### Key Performance Indicators and Other Factors Affecting Performance

We use the following key performance indicators and monitor the following other factors to analyze our business performance, determine financial forecasts, and help develop long-term strategic plans.

***PPS Systems Base —*** We closely track the number of PPS systems installed with end-users as it is a leading indicator of underlying business trends and near-term and ongoing net sales expectations. Our installed base of PPS systems also drives our capital expenditure budgets. The following table presents our installed base of PPS systems by product line as of September 30, 2022 and 2021:

*(in thousands)*

| PPS Systems | September 30, 2022 | September 30, 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Cushioning machines | 35.4 | 34.9 | 0.5 | 1.4 |
| Void-Fill machines | 81.2 | 75.1 | 6.1 | 8.1 |
| Wrapping machines | 22.0 | 19.2 | 2.8 | 14.6 |
| **Total** | **138.6** | **129.2** | **9.4** | **7.3** |

***Paper and Other Costs.*** Paper is a key component of our cost of goods sold and paper costs can fluctuate significantly between periods. We purchase both 100% virgin and 100% recycled paper, as well as blends, from various suppliers for conversion into the paper consumables we sell. The cost of paper supplies is our largest input cost, and we historically have negotiated supply and pricing arrangements with most of our paper suppliers annually, with a view towards mitigating fluctuations in paper cost. Nevertheless, as paper is a commodity, its price on the open market, and in turn the prices we negotiate with suppliers at a given point in time, can fluctuate significantly, and is affected by several factors outside of our control, including supply and demand and the cost of other commodities that are used in the manufacture of paper, including wood, energy and chemicals. The market for our solutions is competitive and it may be difficult to pass on increases in paper prices to our customers immediately, or at all, which has in the past, and could in the future, adversely affect our operating results. In 2021 and 2022, global inflation and other macroeconomic factors, including COVID-19 and the conflict in Ukraine, have contributed to the increases in the cost of paper. Further, the conflict in Ukraine has caused certain headwinds, including (i) increased energy costs, particularly in Europe; (ii) shipping variabilities due to truck driver shortages; (iii) increased pricing for paper products as a result of decreased availability of paper products previously sourced from Russian paper mills; and (iv) increased shipping times for paper products sourced from Russian paper mills. In the third quarter of 2022, we eliminated the last of our paper products sourced from Russia. We are beginning to see stabilization of inflationary conditions regarding paper in North America, however, inflationary pricing conditions in Europe remain unsteady, primarily due to the volatility in energy markets. Where we can, we will look to pass these increased market costs on to our customers to mitigate the impact of these costs. We are unable to predict our ability to pass these costs on to our customers and how much of these increases we will be able to pass on to our customers. As such, we expect some pressure on our gross margin in the medium term relative to our historical margin profile.

### Results of Operations

The following tables set forth our results of operations for the three and nine months ended September 30, 2022 and 2021 with line items presented in millions of dollars.

Our condensed consolidated financial statements are prepared in accordance with GAAP. We have, however, also presented below Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and adjusted EBITDA (“AEBITDA”), which are non-GAAP financial measures. We have included EBITDA and AEBITDA because they are key measures used by our management and Board of Directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating EBITDA and AEBITDA can provide a useful measure for period-to-period comparisons of our primary business operations. Adjusting AEBITDA for comparability for constant currency also assists in this comparison as it allows a better insight into the performance of our businesses that operate in currencies other than our reporting currency. Before consolidation, our Europe/Asia financial data is derived in Euros. To calculate the adjustment that we apply to present AEBITDA on a constant currency basis, we multiply this Euro-derived data by 1.15 to reflect an exchange rate of 1 Euro to 1.15 USD, which we believe is a reasonable exchange rate to use to give a stable depiction of the business without currency fluctuations between periods, to calculate Europe/Asia data in constant currency USD. An exchange rate of 1.15 approximates the average exchange rate of the Euro to USD over the past five years. We also present non-GAAP constant currency net revenue and derive it in the same manner. We believe that EBITDA and AEBITDA provide useful information to investors and others in understanding and evaluating the Company’s operating results in the same manner as our management and Board of Directors.

However, EBITDA and AEBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, EBITDA and AEBITDA should not be viewed as substitutes for, or superior to, net income (loss) prepared in accordance with GAAP as a measure of profitability or liquidity. Some of these limitations are:

- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA and AEBITDA do not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
- EBITDA and AEBITDA do not reflect changes in, or cash requirements for, our working capital needs;
- AEBITDA does not consider the potentially dilutive impact of equity-based compensation;
- EBITDA and AEBITDA do not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to us;
- AEBITDA does not take into account any restructuring and integration costs;
- AEBITDA is presented on a constant currency basis and gives effect to the impact of currency fluctuations
- while EBITDA for all periods herein has been reported without giving effect to constant currency adjustments, we have previously presented EBTIDA on a constant currency basis, which reduces its usefulness as a comparative measure to certain of our historical results that are not presented in this report; and
- other companies, including companies in our industry, may calculate EBITDA and AEBITDA differently, which reduces their usefulness as comparative measures.

***EBITDA —*** EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: benefit from (provision for) income taxes; interest expense; and depreciation and amortization.

***AEBITDA —*** AEBITDA is a non-GAAP financial measure that we present on a constant currency basis and calculate as net income (loss), adjusted to exclude: benefit from (provision for) income taxes; interest expense; depreciation and amortization; stock-based compensation expense; and, in certain periods, certain other income and expense items; as further adjusted to reflect the performance of the business on a constant currency basis.

In addition, in our discussion below, we include certain other unaudited, non-GAAP constant currency data for the three and nine months ended September 30, 2022 and 2021. This data is based on our historical financial statements included elsewhere in this Quarterly Report on Form 10-Q, adjusted (where applicable) to reflect a constant currency presentation between periods for the convenience of readers. We reconcile this data to our GAAP data for the same period under “*Presentation and Reconciliation of GAAP to Non-GAAP Measures”* for the three and nine months ended September 30, 2022 and 2021.

### Comparison of Third Quarter of 2022 to Third Quarter of 2021

|  | Three Months Ended September 30, 2022 | % Net revenue | 2021 | % Net revenue |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $77.8 | ― | $97.1 | ― |
| Cost of goods sold | 53.4 | 68.6 | 59.1 | 60.9 |
| **Gross profit** | **24.4** | **31.4** | **38.0** | **39.1** |
| Selling, general and administrative expenses | 26.8 | 34.4 | 27.1 | 27.9 |
| Depreciation and amortization expense | 7.8 | 10.0 | 8.7 | 9.0 |
| Other operating expense (income), net | 1.5 | 1.9 | (0.1) | (0.1) |
| **Income (loss) from operations** | **(11.7)** | **(15.0)** | **2.3** | **2.4** |
| Interest expense | 5.3 | 6.8 | 5.5 | 5.7 |
| Foreign currency gain | (1.2) | (1.5) | (1.5) | (1.5) |
| Other non-operating income, net | (4.0) | (5.1) | - | - |
| **Loss before income tax benefit** | **(11.8)** | **(15.2)** | **(1.7)** | **(1.8)** |
| Income tax benefit | (3.1) | (4.0) | (0.3) | (0.3) |
| **Net loss** | **$(8.7)** | **(11.2)** | **$(1.4)** | **(1.4)** |
| **Non-GAAP** |  |  |  |  |
| EBITDA | $9.6 |  | $22.3 |  |
| AEBITDA (Constant Currency) | $16.6 |  | $28.5 |  |

#### Net Revenue

The following tables and the discussion that follows compare our net revenue by geographic region and by product line for the third quarter of 2022 and 2021 on a GAAP basis and on a non-GAAP constant currency basis as described above and in the discussion below. See also “*Presentation and Reconciliation of GAAP to Non-GAAP Measures”* for further detail:

|  | Three Months Ended September 30, 2022 | % Net revenue | 2021 | % Net revenue |
| --- | ---: | ---: | ---: | ---: |
| North America | $33.4 | 42.9 | $37.3 | 38.4 |
| Europe/Asia | 44.4 | 57.1 | 59.8 | 61.6 |
| **Net revenue** | **$77.8** | **100.0** | **$97.1** | **100.0** |
| Cushioning machines | $33.4 | 42.9 | $40.9 | 42.1 |
| Void-Fill machines | 31.3 | 40.2 | 39.5 | 40.7 |
| Wrapping machines | 9.6 | 12.3 | 12.6 | 13.0 |
| Other | 3.5 | 4.6 | 4.1 | 4.2 |
| **Net revenue** | **$77.8** | **100.0** | **$97.1** | **100.0** |

|  | Non-GAAP Constant Currency Three Months Ended September 30, 2022 | % Net revenue | 2021 | % Net revenue | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $33.4 | 39.7 | $37.3 | 39.0 | $(3.9) | (10.5) |
| Europe/Asia | 50.7 | 60.3 | 58.3 | 61.0 | (7.6) | (13.0) |
| **Net revenue** | **$84.1** | **100.0** | **$95.6** | **100.0** | **$(11.5)** | **(12.0)** |
| Cushioning machines | $36.6 | 43.5 | $40.2 | 42.1 | $(3.6) | (9.0) |
| Void-Fill machines | 33.5 | 39.8 | 39.1 | 40.9 | (5.6) | (14.3) |
| Wrapping machines | 9.9 | 11.8 | 12.5 | 13.1 | (2.6) | (20.8) |
| Other | 4.1 | 4.9 | 3.8 | 3.9 | 0.3 | 7.9 |
| **Net revenue** | **$84.1** | **100.0** | **$95.6** | **100.0** | **$(11.5)** | **(12.0)** |

27

Net revenue for the third quarter of 2022 was $77.8 million compared to net revenue of $97.1 million in the third quarter of 2021, a decrease of $19.3 million or 19.9% year over year. Net revenue was negatively impacted by decreases in cushioning, void-fill, and wrapping. In addition to currency headwinds, which contributed 7.6 points of pressure, revenue from all product categories was negatively affected by lower economic activity; lower e-Commerce use due to the opening up of economies; the impact inflationary pressures are having on consumer and corporate budgets; and tightening inventory management in response to uncertainties in the European economic environment. The impact of the Omicron variant of COVID-19 that previously limited customer visits has waned through the third quarter of 2022. Cushioning decreased $7.5 million, or 18.3%, to $33.4 million from $40.9 million; void-fill decreased $8.2 million, or 20.8%, to $31.3 million from $39.5 million; wrapping decreased $3.0 million, or 23.8%, to $9.6 million from $12.6 million; and other sales decreased $0.6 million, or 14.6%, to $3.5 million from $4.1 million for the third quarter of 2022 compared to the third quarter of 2021. Other net revenue includes automated box sizing equipment and non-paper revenue from packaging systems installed in the field, such as systems accessories. The decrease in net revenue is quantified by a decrease in the volume of sales of our paper consumable products of approximately 26.8 percentage points (“pp”), partially offset by a 14.4 pp increase in the price or mix of our paper consumable products, and an increase of 0.3 pp in sales of automated box sizing equipment.

Net revenue in North America for the third quarter of 2022 totaled $33.4 million compared to net revenue in North America of $37.3 million in the third quarter of 2021. The decrease of $3.9 million, or 10.5%, was primarily attributable to decreases in wrapping and void-fill sales, partially offset by increases in cushioning sales.

Net revenue in Europe/Asia for the third quarter of 2022 totaled $44.4 million compared to net revenue in Europe/Asia of $59.8 million in the third quarter of 2021. The decrease of $15.4 million, or 25.8%, was driven by lower cushioning, void-fill, and wrapping sales as well as currency headwinds. Constant currency net revenue in Europe/Asia was $50.7 million for the third quarter of 2022, a $7.6 million, or 13.0%, decrease from constant currency net revenue of $58.3 million for the third quarter of 2021.

#### Cost of Goods Sold

Cost of goods sold for the third quarter of 2022 totaled $53.4 million, a decrease of $5.7 million, or 9.6%, compared to $59.1 million in the third quarter of 2021. The change was primarily due to lower sales volumes and a decrease in depreciation of $1.5 million over the prior year. Additionally, currency rate fluctuations accounted for approximately 8.6% of the decrease over prior year. We continued to experience increased manufacturing input costs during the third quarter of 2022, primarily driven by increases in the price of paper in North America and Europe. This resulted in our implementation of additional pricing actions in the third quarter of 2022.

#### Selling, General and Administrative Expenses (“SG&A”)

SG&A for the third quarter of 2022 was $26.8 million, a decrease of $0.3 million, or 1.1%, from $27.1 million in the third quarter of 2021. The change in SG&A was primarily due to decreased headcount and associated compensation. Additionally, currency rate fluctuations accounted for approximately 4.8% of the decrease over prior year.

#### Depreciation and Amortization

Depreciation and amortization expenses for the third quarter of 2022 were $7.8 million, a decrease of $0.9 million, or 10.3%, from $8.7 million in the third quarter of 2021 primarily due to a decrease in depreciation of computer software. Additionally, currency rate fluctuations accounted for approximately 4.6% of the decrease over prior year.

#### Other Operating Expense (Income), Net

Other operating expense, net for the third quarter of 2022 was $1.5 million, a change of $1.6 million from income of $0.1 million in the third quarter of 2021. The change in other operating expense (income), net was primarily due to an increase in research and development costs.

#### Interest Expense

Interest expense for the third quarter of 2022 was $5.3 million, a decrease of $0.2 million, or 3.6%, from $5.5 million in the third quarter of 2021. The change was due to a decrease in debt in the third quarter of 2022 compared to the third quarter of 2021. Additionally, currency rate fluctuations accounted for approximately 1.8% of the decrease over prior year.

#### Foreign Currency Gain

Foreign currency gain for the third quarter of 2022 was $1.2 million, a change of $0.3 million, or 20.0%, from foreign currency gain of $1.5 million in the third quarter of 2021 due to the volatility in Euro exchange rates compared to USD.

#### Other Non-Operating Expense (Income), Net

Other non-operating income, net for the third quarter of 2022 was $3.9 million and represents the unrealized gain on our investment in a small private business. Other non-operating income, net was not material for the third quarter of 2021.

#### Income Tax Benefit

Income tax benefit for the third quarter of 2022 was $3.1 million, or an effective tax rate of 26.8%. Income tax benefit was $0.3 million in the third quarter of 2021, or an effective tax rate of 16.1%. The fluctuation in the effective tax rate between periods was primarily attributable to a jurisdictional mix of income. The effective tax rate differs from the U.S. federal statutory rate due primarily to benefits derived from stock-based compensation, the U.S. foreign derived intangible income deduction, tax credits available in the U.S., and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.

#### Net Loss

Net loss for the third quarter of 2022 increased $7.3 million to $8.7 million from a net loss of $1.4 million in the third quarter of 2021. The change was due to the reasons discussed above.

#### EBITDA and AEBITDA

EBITDA for the third quarter of 2022 was $9.6 million, a decrease of $12.7 million, or 57.0%, compared to $22.3 million in the third quarter of 2021. Adjusting for one-time costs, AEBITDA for the third quarter of 2022 and 2021 totaled $16.6 million and $28.5 million, respectively, a decrease of $11.9 million, or 41.8%.

### Comparison of Nine Months Ended September 30, 2022 to Nine Months Ended September 30, 2021

|  | Nine Months Ended September 30, 2022 | % Net revenue | 2021 | % Net revenue |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $247.1 | ― | $274.8 | ― |
| Cost of goods sold | 169.8 | 68.7 | 164.8 | 60.0 |
| **Gross profit** | **77.3** | **31.3** | **110.0** | 40.0 |
| Selling, general and administrative expenses | 86.8 | 35.1 | 70.8 | 25.8 |
| Depreciation and amortization expense | 24.0 | 9.7 | 26.1 | 9.5 |
| Other operating expense, net | 3.4 | 1.4 | 2.0 | 0.7 |
| **Income (loss) from operations** | **(36.9)** | **(14.9)** | **11.1** | 4.0 |
| Interest expense | 15.2 | 6.2 | 17.1 | 6.2 |
| Foreign currency gain | (4.1) | (1.7) | (3.9) | (1.4) |
| Other non-operating income, net | (4.0) | (1.6) | - | - |
| **Loss before income tax benefit** | **(44.0)** | **(17.8)** | **(2.1)** | (0.8) |
| Income tax benefit | (9.9) | (4.0) | (1.8) | (0.7) |
| **Net loss** | **$(34.1)** | **(13.8)** | **$(0.3)** | (0.1) |
| **Non-GAAP** |  |  |  |  |
| EBITDA | $23.9 |  | $69.4 |  |
| AEBITDA (Constant Currency) | $53.9 |  | $82.1 |  |

#### Net Revenue

The following tables and the discussion that follows compare our net revenue by geographic region and by product line for the nine months ended September 30, 2022 and 2021 on a GAAP basis and on a non-GAAP constant currency basis as described above and in the discussion below. See also “*Presentation and Reconciliation of GAAP to Non-GAAP Measures”* for further detail:

|  | Nine Months Ended September 30, 2022 | % Net revenue | 2021 | % Net revenue |
| --- | ---: | ---: | ---: | ---: |
| North America | $98.6 | 39.9 | $101.1 | 36.8 |
| Europe/Asia | 148.5 | 60.1 | 173.7 | 63.2 |
| **Net revenue** | **$247.1** | **100.0** | **$274.8** | **100.0** |
| Cushioning machines | $107.2 | 43.4 | $118.9 | 43.3 |
| Void-Fill machines | 97.4 | 39.4 | 109.3 | 39.8 |
| Wrapping machines | 30.8 | 12.5 | 36.3 | 13.2 |
| Other | 11.7 | 4.7 | 10.3 | 3.7 |
| **Net revenue** | **$247.1** | **100.0** | **$274.8** | **100.0** |

29

|  | Non-GAAP Constant Currency Nine Months Ended September 30, 2022 | % Net revenue | 2021 | % Net revenue | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | $98.6 | 38.1 | $101.1 | 37.7 | $(2.5) | (2.5) |
| Europe/Asia | 160.4 | 61.9 | 167.0 | 62.3 | (6.6) | (4.0) |
| **Net revenue** | **$259.0** | **100.0** | **$268.1** | **100.0** | **$(9.1)** | **(3.4)** |
| Cushioning machines | $113.2 | 43.7 | $115.5 | 43.1 | $(2.3) | (2.0) |
| Void-Fill machines | 101.4 | 39.2 | 107.0 | 39.9 | (5.6) | (5.2) |
| Wrapping machines | 31.5 | 12.2 | 35.7 | 13.3 | (4.2) | (11.8) |
| Other | 12.9 | 4.9 | 9.9 | 3.7 | 3.0 | 30.3 |
| **Net revenue** | **$259.0** | **100.0** | **$268.1** | **100.0** | **$(9.1)** | **(3.4)** |

Net revenue for the nine months ended September 30, 2022 was $247.1 million compared to net revenue of $274.8 million in the nine months ended September 30, 2021, a decrease of $27.7 million or 10.1%. Net revenue was negatively impacted by currency headwinds, as well as decreases in cushioning, void-fill, wrapping, slightly offset by an increase in other sales. Revenue from all product categories was negatively affected by lower economic activity; lower e-Commerce use due to the opening up of economies; the impact inflationary pressures are having on consumer and corporate budgets; and tightening inventory management in response to uncertainties in the European economic environment. In addition to currency headwinds, revenue from all product categories was negatively affected by our global transition to a new cloud-based ERP system, particularly in the first quarter of 2022. The ERP system transition created certain obstacles that affected operations, including scheduled downtime for cutting over to the new ERP system; processing and shipping inefficiencies associated with using a new ERP system; and, while transitioning to the new ERP system, the delay of pricing increases to help offset input cost pressures. Additionally, the impact of the Omicron variant of COVID-19 limited customer visits in the first quarter of 2022; however, this impact waned during the second and third quarters of 2022. Cushioning decreased $11.7 million, or 9.8%, to $107.2 million from $118.9 million; void-fill decreased $11.9 million, or 10.9%, to $97.4 million from $109.3 million; wrapping decreased $5.5 million, or 15.2%, to $30.8 million from $36.3 million; and other sales increased $1.4 million, or 13.6%, to $11.7 million from $10.3 million, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease in net revenue is quantified by a decrease in the volume of sales of our paper consumable products of approximately 21.7 pp, offset by a 17.0 pp increase in the price or mix of our paper consumable products, and an increase of 1.2 pp in sales of automated box sizing equipment. Constant currency net revenue was $259.0 million for the nine months ended September 30, 2022, a $9.1 million, or 3.4%, decrease from constant currency net revenue of $268.1 million for the nine months ended September 30, 2021.

Net revenue in North America for the nine months ended September 30, 2022 totaled $98.6 million compared to net revenue in North America of $101.1 million in the nine months ended September 30, 2021. The decrease of $2.5 million, or 2.5%, was primarily attributable to a decrease in void-fill, wrapping, and other sales, partially offset by an increase in cushioning sales.

Net revenue in Europe/Asia for the nine months ended September 30, 2022 totaled $148.5 million compared to net revenue in Europe/Asia of $173.7 million in the nine months ended September 30, 2021. The decrease of $25.2 million, or 14.5%, was driven by lower cushioning, void-fill, and wrapping sales as well as currency headwinds. Constant currency net revenue in Europe/Asia was $160.4 million for the nine months ended September 30, 2022, a $6.6 million, or 4.0%, decrease from constant currency net revenue of $167.0 million for the nine months ended September 30, 2021.

#### Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2022 totaled $169.8 million, an increase of $5.0 million, or 3.0%, compared to $164.8 million in the nine months ended September 30, 2021. The change was primarily due to increased paper costs and an increase in depreciation of $0.4 million over the prior year, partially offset by an approximate 7.5% decrease due to currency rate fluctuations over prior year. We experienced increased manufacturing input costs in 2022, primarily driven by increased paper costs compared to 2021. As previously noted, we implemented additional pricing actions in the third quarter of 2022.

#### SG&A

SG&A for the nine months ended September 30, 2022 was $86.8 million, an increase of $16.0 million, or 22.6%, from $70.8 million in the nine months ended September 30, 2021. The change in SG&A was largely due to increases in stock compensation expense from the 2021 LTIP PRSUs, increased headcount and associated compensation and ERP system implementation costs, partially offset by an approximate 5.4% decrease due to currency rate fluctuations over prior year. As previously noted, our lower volumes and continued pressure on margins led to headcount reductions and deferral of certain initiatives later in 2022.

#### Depreciation and Amortization

Depreciation and amortization expenses for the nine months ended September 30, 2022 were $24.0 million, a decrease of $2.1 million, or 8.0%, from $26.1 million in the nine months ended September 30, 2021, primarily due to a decrease in depreciation of computer software. Additionally, currency rate fluctuations accounted for approximately 3.1% of the decrease over prior year.

#### Other Operating Expense, Net

Other operating expense, net, for the nine months ended September 30, 2022 was $3.4 million, an increase of $1.4 million, or 70.0%, from $2.0 million in the nine months ended September 30, 2021. The change in other operating expense (income), net was largely driven by increases in research and development costs in 2022, partially offset by an approximate 5.0% decrease due to currency rate fluctuations over prior year.

#### Interest Expense

Interest expense for the nine months ended September 30, 2022 was $15.2 million, a decrease of $1.9 million, or 11.1%, from $17.1 million in the nine months ended September 30, 2021. The change was due to a decrease in debt during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Additionally, currency rate fluctuations accounted for approximately 1.8% of the decrease over prior year.

#### Foreign Currency Gain

Foreign currency gain for the nine months ended September 30, 2022 was $4.1 million, a change of $0.2 million, or 5.1%, from foreign currency gain of $3.9 million in the nine months ended September 30, 2021 due to the volatility in Euro exchange rates compared to USD.

#### Other Non-Operating Expense (Income), Net

Other non-operating income, net for the nine months ended September 30, 2022 was $3.9 million and represents the unrealized gain on our investment in a small private business. Other non-operating income, net was not material for the nine months ended September 30, 2021.

#### Income Tax Benefit

Income tax benefit for the nine months ended September 30, 2022 was $9.9 million, or an effective tax rate of 22.6%. Income tax benefit was $1.8 million in the nine months ended September 30, 2021, or an effective tax rate of 89.1%. The fluctuation in the effective tax rate between periods was primarily attributable to a jurisdictional mix of income. The effective tax rate differs from the U.S. federal statutory rate due primarily to benefits derived from stock-based compensation, the U.S. foreign derived intangible income deduction, tax credits available in the U.S., and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.

#### Net Loss

Net loss for the nine months ended September 30, 2022 increased $33.8 million to $34.1 million from net loss of $0.3 million in the nine months ended September 30, 2021. The change was due to the reasons discussed above.

#### EBITDA and AEBITDA

EBITDA for the nine months ended September 30, 2022 was $23.9 million, a decrease of $45.5 million, or 65.6%, from $69.4 million in the nine months ended September 30, 2021. Adjusting for one-time costs, AEBITDA for the nine months ended September 30, 2022 and 2021 totaled $53.9 million and $82.1 million, respectively, a decrease of $28.2 million, or 34.3%.

### Presentation and Reconciliation of GAAP to Non-GAAP Measures

As noted above, we believe that in order to better understand the performance of the Company, providing non-GAAP financial measures to users of our financial information is helpful. We believe presentation of these non-GAAP measures is useful because they are many of the key measures that allow management to evaluate more effectively our operating performance and compare the results of our operations from period to period and against peers without regard to financing methods or capital structure. Management does not consider these non-GAAP measures in isolation or as an alternative to similar financial measures determined in accordance with GAAP. The computations of EBITDA and AEBITDA may not be comparable to other similarly titled measures of other companies. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, measures of financial performance as determined in accordance with GAAP or as indicators of operating performance.

The following tables and related notes reconcile certain non-GAAP measures, including the non-GAAP constant currency measures, to GAAP information presented in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2022 and 2021:

|  | Three Months Ended September 30, 2022 | 2021 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $77.8 | $97.1 | $(19.3) | (19.9) |
| Cost of goods sold | 53.4 | 59.1 | (5.7) | (9.6) |
| **Gross profit** | **24.4** | **38.0** | **(13.6)** | **(35.8)** |
| Selling, general and administrative expenses | 26.8 | 27.1 | (0.3) | (1.1) |
| Depreciation and amortization expense | 7.8 | 8.7 | (0.9) | (10.3) |
| Other operating expense (income), net | 1.5 | (0.1) | 1.6 | (1,600.0) |
| **Income (loss) from operations** | **(11.7)** | **2.3** | **(14.0)** | **(608.7)** |
| Interest expense | 5.3 | 5.5 | (0.2) | (3.6) |
| Foreign currency gain | (1.2) | (1.5) | 0.3 | (20.0) |
| Other non-operating income, net | (4.0) | - | (4.0) | ― |
| **Loss before income tax benefit** | **(11.8)** | **(1.7)** | **(10.1)** | **594.1** |
| Income tax benefit | (3.1) | (0.3) | (2.8) | 933.3 |
| **Net loss** | **(8.7)** | **(1.4)** | **(7.3)** | **521.4** |
| Depreciation and amortization expense – COS | 8.3 | 9.8 | (1.5) | (15.3) |
| Depreciation and amortization expense – D&A | 7.8 | 8.7 | (0.9) | (10.3) |
| Interest expense | 5.3 | 5.5 | (0.2) | (3.6) |
| Income tax benefit | (3.1) | (0.3) | (2.8) | 933.3 |
| **EBITDA(1)** | **9.6** | **22.3** | **(12.7)** | **(57.0)** |
| **Adjustments(2):** |  |  |  |  |
| Unrealized gain translation | (1.3) | (1.6) | 0.3 | (18.8) |
| Non-cash impairment losses | 0.3 | 0.3 | - | - |
| M&A, restructuring, severance | 0.1 | 0.1 | - | - |
| Amortization of restricted stock units | 6.7 | 6.9 | (0.2) | (2.9) |
| Amortization of cloud-based software implementation costs(3) | 0.7 | - | 0.7 | ― |
| Cloud-based software implementation costs | 1.7 | - | 1.7 | ― |
| Unrealized gain on investment in small private business | (3.9) | - | (3.9) | ― |
| Other adjustments | 0.8 | 0.9 | (0.1) | (11.1) |
| Constant currency | 1.9 | (0.4) | 2.3 | (575.0) |
| **Constant Currency AEBITDA(1)** | **$16.6** | **$28.5** | **$(11.9)** | **(41.8)** |

32

|  | Nine Months Ended September 30, 2022 | 2021 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $247.1 | $274.8 | $(27.7) | (10.1) |
| Cost of goods sold | 169.8 | 164.8 | 5.0 | 3.0 |
| **Gross profit** | **77.3** | **110.0** | **(32.7)** | **(29.7)** |
| Selling, general and administrative expenses | 86.8 | 70.8 | 16.0 | 22.6 |
| Depreciation and amortization expense | 24.0 | 26.1 | (2.1) | (8.0) |
| Other operating expense, net | 3.4 | 2.0 | 1.4 | 70.0 |
| **Income (loss) from operations** | **(36.9)** | **11.1** | **(48.0)** | **(432.4)** |
| Interest expense | 15.2 | 17.1 | (1.9) | (11.1) |
| Foreign currency gain | (4.1) | (3.9) | (0.2) | 5.1 |
| Other non-operating income, net | (4.0) | - | (4.0) | ― |
| **Loss before income tax benefit** | **(44.0)** | **(2.1)** | **(41.9)** | **1,995.2** |
| Income tax benefit | (9.9) | (1.8) | (8.1) | 450.0 |
| **Net loss** | **(34.1)** | **(0.3)** | **(33.8)** | **11,266.7** |
| Depreciation and amortization expense – COS | 28.7 | 28.3 | 0.4 | 1.4 |
| Depreciation and amortization expense – D&A | 24.0 | 26.1 | (2.1) | (8.0) |
| Interest expense | 15.2 | 17.1 | (1.9) | (11.1) |
| Income tax benefit | (9.9) | (1.8) | (8.1) | 450.0 |
| **EBITDA(1)** | **23.9** | **69.4** | **(45.5)** | **(65.6)** |
| **Adjustments(2):** |  |  |  |  |
| Unrealized gain translation | (4.2) | (4.2) | - | - |
| Non-cash impairment losses | 0.5 | 1.0 | (0.5) | (50.0) |
| M&A, restructuring, severance | 1.7 | 0.4 | 1.3 | 325.0 |
| Amortization of restricted stock units | 20.8 | 14.3 | 6.5 | 45.5 |
| Amortization of cloud-based software implementation costs(3) | 2.1 | - | 2.1 | ― |
| Cloud-based software implementation costs | 6.5 | - | 6.5 | ― |
| Unrealized gain on investment in small private business | (3.9) | - | (3.9) | ― |
| Other adjustments | 3.3 | 3.3 | - | - |
| Constant currency | 3.2 | (2.1) | 5.3 | (252.4) |
| **Constant Currency AEBITDA(1)** | **$53.9** | **$82.1** | **$(28.2)** | **(34.3)** |

#### (see subsequent footnotes)

(1) Reconciliations of EBITDA and AEBITDA for each period presented are to net (loss) income, the nearest GAAP equivalent.

(2) Adjustments are related to non-cash unusual or infrequent costs such as: effects of non-cash foreign currency remeasurement or adjustment; impairment of returned machines; costs associated with the evaluation of acquisitions; costs associated with executive severance; costs associated with restructuring actions such as plant rationalization or realignment, reorganization, and reductions in force; costs associated with the implementation of the global ERP system; and other items deemed by management to be unusual, infrequent, or non-recurring.

(3) Represents amortization of capitalized costs related to the implementation of the global ERP system, which are included in SG&A.

### Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, capital expenditures, debt service, acquisitions, other commitments and contractual obligations. We evaluate liquidity in terms of cash flows from operations and other sources and the sufficiency of such cash flows to fund our operating, investing and financing activities.

We believe that our cash balances together with borrowing capacity under the revolving portion of the Facilities will provide us with sufficient resources to cover our current requirements. Our main liquidity needs relate to capital expenditures and expenses for the production and maintenance of PPS systems placed at end-user facilities, working capital, including the purchase of paper raw materials, and payments of principal and interest on our outstanding debt. We expect our capital expenditures to increase as we continue to grow our business, expand our manufacturing footprint, and upgrade our existing systems and facilities. We continue to evaluate our inventory requirements and adjust according to our volume forecasts. Our future capital requirements and the adequacy of available funds will depend on many factors, and if we are unable to obtain needed additional funds, we may have to reduce our operating costs or incur additional debt, which could impair our growth prospects and/or otherwise negatively impact our business. Further, volatility in the equity and credit markets resulting from the COVID-19 pandemic, the conflict in Ukraine, or other macroeconomic factors could make obtaining new equity or debt financing more difficult or expensive.

We had $61.3 million in cash and cash equivalents as of September 30, 2022 and $103.9 million as of December 31, 2021. We sold approximately 5.3 million shares of Class A common stock in the May 2021 Equity Offering for net proceeds of $103.4 million. We used $70.0 million of proceeds from the May 2021 Equity Offering to invest in a money market fund to generate short-term cash returns. Additionally, we prepaid $20.9 million of principal on the First Lien Dollar Term Facility in the June 2021 Prepayment.

Including finance lease liabilities and excluding deferred financing costs, we had $384.7 million in debt, $2.0 million of which was classified as short-term, as of September 30, 2022, compared to $406.5 million in debt, $2.2 million of which was classified as short-term, as of December 31, 2021. At September 30, 2022, we did not have amounts outstanding under our $45.0 million revolving credit facility, and we had no borrowings under such facility through November 1, 2022.

### Share Repurchase Program

On July 26, 2022, the Directors authorized a general share repurchase program of our Class A common stock of up to $50.0 million, with a 36-month expiration. These Class A common stock repurchases may occur in transactions that may include, without limitation, tender offers, open market purchases, accelerated share repurchases, negotiated block purchases, and transactions effected through plans under Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and actual amount of shares repurchased will depend on a variety of different factors and may be modified, suspended or terminated at any time at the discretion of the Directors.

### Debt Profile

The material terms of the Facilities are summarized in Note 7, “*Long-Term Debt”* to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In June 2019, Holdings, the U.S. Borrower, and the Dutch Borrower entered into the Facilities. The First Lien Term Facility matures in 2026 and the Revolving Facility matures in 2024. As of September 30, 2022 and December 31, 2021, no amounts were outstanding under the Revolving Facility.

Borrowings under the Facilities, at the Borrowers’ option, bear interest at either (i) an adjusted eurocurrency rate or (ii) a base rate, in each case plus an applicable margin. The applicable margin is 3.75% with respect to eurocurrency borrowings and base rate borrowings as of September 30, 2022 and December 31, 2021, (in each case, assuming a first lien net leverage ratio of less than 5.00:1.00), subject to a leverage-based step-up to an applicable margin equal to 4.00% for eurocurrency borrowings. Global interest rates have risen meaningfully in 2022 and we expect interest on our Facilities to increase.

The Revolving Facility includes borrowing capacity available for standby letters of credit of up to $5.0 million. Any issuance of letters of credit will reduce the amount available under the Revolving Facility. As of September 30, 2022, we had $1.8 million committed to outstanding letters of credit, leaving net availability under the Revolving Facility at $43.2 million.

The Facilities will provide the Borrowers with the option to increase commitments under the Facilities in an aggregate amount not to exceed the greater of $95.0 million and 100% of trailing-twelve months Consolidated EBITDA (as defined in the definitive documentation with respect to the Facilities), plus any voluntary prepayments of the debt financing (and, in the case of the Revolving Facility, to the extent such voluntary prepayments are accompanied by permanent commitment reductions under the Revolving Facility), plus unlimited amounts subject to the relevant net leverage ratio tests and certain other conditions.

The obligations of (i) the U.S. Borrower under the Facilities and certain of its obligations under hedging arrangements and cash management arrangements are unconditionally guaranteed by Holdings and the Guarantors, in each case, other than certain excluded subsidiaries. The Facilities are secured by (i) a first priority pledge of the equity interests of the Borrowers and of each direct, wholly-owned restricted subsidiary of any Borrower or any Guarantor and (ii) a first priority security interest in substantially all of the assets of the Borrowers and the Guarantors (in each case, subject to customary exceptions), provided that obligations of the U.S. Borrower and U.S. Guarantors under the Facilities were not secured by assets of the Dutch Borrower or any Dutch Guarantor.

The Facilities impose restrictions that require the Company to comply with or maintain certain financial tests and ratios. Such agreements restrict our ability to, among other things: (i) declare dividends or redeem or repurchase capital stock, including with respect to Class A common stock; (ii) prepay, redeem or purchase other debt; (iii) incur liens; (iv) make loans, guarantees, acquisitions and other investments; (v) incur additional indebtedness; (vi) engage in sale and leaseback transactions; (vii) amend or otherwise alter debt and other material agreements; (viii) engage in mergers, acquisitions and asset sales; (ix) engage in transactions with affiliates; and (x) enter into arrangements that would prohibit us from granting liens or restrict our ability to pay dividends, make loans or transfer assets among our subsidiaries.

#### Amendment to First Lien Credit Facilities

On February 14, 2020, the U.S. Borrower, the Dutch Borrower, Holdings, certain other subsidiaries of Holdings, certain lenders party to Amendment No. 1 and the Administrative Agent entered into Amendment No. 1.

Among other things, the Amendment No. 1 amends the Facilities such that (x) the requirement of the Borrowers to apply a percentage of excess cash flow to mandatorily prepay term loans under the Facilities commences with the fiscal year ending December 31, 2021 (instead of the fiscal year ending December 31, 2020) and (y) the aggregate amount per fiscal year of capital stock of any parent company of the U.S. Borrower that is held by directors, officers, management, employees, independent contractors or consultants of the U.S. Borrower (or any parent company or subsidiary thereof) that the U.S. Borrower may repurchase, redeem, retire or otherwise acquire or retire for value has been increased to the greater of $10.0 million and 10% of Consolidated AEBITDA (as defined in the Facilities) (increased from the greater of $7.0 million and 7% of Consolidated AEBITDA) as of the last day of the most recently ended quarter for which financial statements have been delivered.

#### Borrower Assumption Agreement

On July 1, 2020, contemporaneously with the Reorganization, Ranger Packaging LLC, Ranpak Corp., Ranger Pledgor LLC, certain other subsidiaries of Ranger Pledgor LLC and Goldman Sachs Lending Partners LLC entered into the Borrower Assumption Agreement whereby, among other things, Ranpak Corp. assumed all obligations, liabilities and rights of Ranger Packaging LLC as the U.S. Borrower under the Facilities.

#### Permitted Exit Payment

Additionally, as a result of making the Exit Payment to our lenders, we became eligible to enter into the Permitted Exit Payment Amendment (as defined in the Credit Agreement) to the Credit Agreement which, among other things, would introduce additional exceptions to the negative covenant that restricts the ability of the Borrowers and their restricted subsidiaries from paying dividends and distributions or repurchasing capital stock. On July 28, 2021, the Permitted Exit Payment Amendment to the Credit Agreement became effective.

### Cash Flows

The following table sets forth our summary cash flow information for the periods indicated:

|  | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $(9.5) | $40.8 |
| Net cash used in investing activities | (27.1) | (50.7) |
| Net cash provided by (used in) financing activities | (4.3) | 72.6 |
| Effect of Exchange Rate Changes on Cash | (1.7) | (0.8) |
| **Net Increase (Decrease) in Cash and Cash Equivalents** | **(42.6)** | **61.9** |
| Cash and Cash Equivalents, beginning of period | 103.9 | 48.5 |
| **Cash and Cash Equivalents, end of period** | **$61.3** | **$110.4** |

#### Cash Flows Provided by (Used in) Operating Activities

Net cash used in operating activities was $9.5 million in the nine months ended September 30, 2022. Cash provided by operating activities was $40.8 million in the nine months ended September 30, 2021. The changes in operating cash flows are largely due to the decreases in cash earnings due to increased input costs, increased SG&A, currency headwinds, investments in working capital, and the unrealized gain on our investment in a small private business.

#### Cash Flows Used in Investing Activities

Net cash used in investing activities was $27.1 million in the nine months ended September 30, 2022 and reflects cash received in termination of our cross-currency swaps, cash used for production of converter equipment and the renovation of our global headquarters in Concord, Ohio, and an investment in a small private business. Cash used in investing activities was $50.7 million in the nine months ended September 30, 2021 and reflects cash used for production of converter equipment, technology infrastructure improvements, and our investments in small private businesses.

#### Cash Flows Provided by (Used in) Financing Activities

Net cash used in financing activities was $4.3 million in the nine months ended September 30, 2022 and reflects debt repayments, payments on finance lease liabilities, and tax payments for withholdings on stock compensation. Net cash provided by financing activities was $72.6 million in the nine months ended September 30, 2021 and reflects the May 2021 Equity Offering net proceeds of $103.4 million, offset by the June 2021 Prepayment of $20.9 million, and the $8.2 million Exit Payment.

### Contractual Obligations and Other Commitments

We lease production and administrative facilities as well as automobiles, machinery and equipment. We have various contractual obligations and commercial commitments that are recorded as liabilities in our condensed consolidated financial statements. Other items, such as purchase obligations and other executory contracts, are not recognized as liabilities, but are required to be disclosed. There have been no significant changes outside the ordinary course of business to our “*Contractual Obligations”* table in “*Management’s Discussion and Analysis of Financial Condition and Results of Operations”* of the 2021 10-K.

### Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2022.

### Critical Accounting Policies

Our unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe that the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience and various other assumptions that we believe are reasonable under the circumstances. All of our significant accounting policies, including certain critical accounting policies and estimates, are disclosed in our 2021 10-K.

### Impairment of Goodwill, Indefinite-Lived Intangible Assets, and Long-Lived Assets

We periodically review goodwill and indefinite-lived intangible assets for possible impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value of our goodwill reporting units or identifiable indefinite-lived intangible assets may be less than their fair values. Additionally, we review our long-lived asset groups whenever there is evidence that events or changes in circumstances indicate the carrying value of our asset groups may not be recoverable. If events or circumstances exist, including a continuation of current market conditions, that indicate that the carrying value of our goodwill reporting units or identifiable indefinite-lived intangible assets may be less than their fair values, or the carrying amount of our long lived-asset groups may no longer be recoverable, we may recognize a non-cash impairment of goodwill, identifiable indefinite-lived intangible assets, or long-lived asset groups, which could have a material adverse effect on our consolidated financial condition or results of operations in future periods. For additional information on our accounting principles with respect to goodwill, identifiable indefinite-lived intangible assets, and long-lived assets, please see “*Management Discussion & Analysis – Critical Accounting Policies”* in our 2021 10-K.

As previously noted, declining market conditions and the decline in our share price triggered interim testing for impairment as of September 1, 2022. The test for goodwill used unobservable inputs that required significant judgement and were performed using a combination of the Discounted Cash Flow Method and the Guideline Public Company Method in order to determine fair value. The test for indefinite-lived intangible assets also used unobservable inputs that required significant judgement and were performed using the Relief from Royalty Method in order to determine fair value. The evaluation of our asset groups used unobservable inputs that required significant judgement and were performed using an undiscounted cash flow analysis. Upon completion of these tests, we concluded that each area was not impaired. However, the test for one of our goodwill reporting units that encompasses our business in Europe indicated that fair value of the reporting unit was close to approximating carrying value.

The unobservable inputs that required significant judgment include estimates and assumptions affected by conditions specific to our businesses, economic conditions related to the industries in which we operate, and conditions in the global economy. Changes in these estimates and assumptions, especially considering the volatility in European markets in 2022, may result in an impairment charge for the goodwill reporting unit that encompasses our business in Europe. The assumptions that have the most significant effect on the fair values of our goodwill reporting units derived using the Discounted Cash Flow Method are (i) the expected long-term growth rate of our reporting units’ cash flows and (i) the weighted average cost of capital (“WACC”) for each reporting unit. A hypothetical decrease in the expected long-term growth rate by approximately 92 basis points would have resulted in a charge in the reporting unit that encompasses our business in Europe. Separately, a hypothetical increase in the WACC by approximately 74 basis points would have resulted in a charge in the reporting unit that encompasses our business in Europe.

We believe that our estimates and assumptions are reasonable but are subject to change from period to period. Actual results of operations and other factors may differ from the estimates used and it is possible that differences could be significant. A change in the estimates we use could result in a decline in the estimated fair values derived as of the September 1, 2022 interim testing. If we fail an impairment test, any non-cash impairment charge may have an adverse effect on our results of operations and financial condition. We will continue to monitor events and circumstances for indicators of impairment in our reporting units, indefinite-lived intangible assets, and asset groups.

### Recently Issued and Adopted Accounting Pronouncements

For recently issued and adopted accounting pronouncements, see Note 2, “*Basis of Presentation and Summary of Significant Accounting Policies”* to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 5,859 characters.

### Interest Rate Risk

Changes in interest rates affect the amount of interest income we earn on cash, cash equivalents and short-term investments and the amount of interest expense we pay on borrowings under the floating rate portions of our Facilities. A hypothetical 100 basis point increase or decrease in the applicable base interest rates under our Facilities would have resulted in a $5.9 million impact on our cash interest expense for the nine months ended September 30, 2022. We use interest rate swap agreements to manage this exposure.

In March 2020, we entered into the Second Amended January 2019 Swap, which amended the Amended January 2019 Swap to a lower rate of 2.1% and extend its maturity to June 1, 2024. In July 2020, we entered into the Borrower Assumption Agreement, which details the Reorganization and the assumption of obligations, liabilities and rights under the Facilities. In July 2021, we entered into the Permitted Exit Payment to the Credit Agreement, which, among other things, would introduce additional exceptions to the negative covenant that restricts the ability of the Borrowers and their restricted subsidiaries from paying dividends and distributions or repurchasing capital stock. Refer to Note 7, “*Long-Term Debt”* and Note 8, “*Derivative Instruments”* to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. It is expected that most, if not all, banks currently reporting information to set LIBOR will stop doing so at such time, which could either cause LIBOR publication to stop immediately or cause LIBOR’s regulator to announce the discontinuation of its publication (and, during any such transition period, LIBOR may perform differently than in the past).

On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021.

These reforms may also result in new methods of calculating LIBOR to be established, or alternative reference rates to be established. For example, in the U.S., a group convened by the Federal Reserve Board and the Federal Reserve Bank of New York, called the Alternative Reference Rate Committee (“ARRC”) and comprised of a diverse set of private sector entities, has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for the U.S. LIBOR and the Federal Reserve Bank of New York has begun publishing SOFR daily, and central banks in several other jurisdictions have also announced plans for alternative reference rates for other currencies. Our existing indebtedness and interest rate swaps are based on one-month and three-month USD LIBOR tenors, which will transition in June 2023, therefore, these reforms are not applicable at this time. However, the potential consequences of these changes cannot be fully predicted and could have an adverse impact on our interest payment obligations under the Facilities and related interest rate swaps.

There were no other changes to our debt and interest rate swap agreements from those disclosed in the 2021 10-K.

### Foreign Currency Exchange Rate Risk

We are exposed to foreign currency exchange risk related to our transactions and subsidiaries’ balances that are denominated in currencies other than USD, our functional currency. See “*Effect of Currency Fluctuations”* in Item 2 previously for more information about our foreign currency exchange rate exposure. We seek to naturally hedge our foreign exchange transaction exposure by matching the transaction currencies for our cash inflows and outflows and maintaining access to credit in the principal currencies in which we conduct business. We previously hedged some of our exposure to foreign currency translation with cross-currency swaps. Refer to Note 8, “*Derivative Instruments”* to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

For the nine months ended September 30, 2022, net revenue denominated in currencies other than USD amounted to $147.4 million or 59.7% of our net revenue for the period. Substantially all of this amount was denominated in Euro. A 10% increase or decrease in the value of the Euro to the USD would have caused our reported net revenue for the nine months ended September 30, 2022 to increase or decrease by approximately $14.9 million.

### Commodity Price Risk

While our business is significantly impacted by price fluctuations related to the purchase, production and sale of paper products, we are typically not directly exposed to market price fluctuations in paper purchase or sale prices as we historically have negotiated prices with suppliers on an annual basis and negotiate prices with distributors reflecting competitive market terms. Our strategy has generally been to obtain competitive prices for our products and services and allow operating results to reflect market price movements dictated by supply and demand. However, due to global inflation and other macroeconomic factors, including COVID-19 and the conflict in Ukraine, we may be subject to significantly more commodity price volatility than we have historically experienced.

## Controls and procedures

As filed, 2,251 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our management, with the participation of the CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. Based on this evaluation of our disclosure controls and procedures, our management, with the participation of the CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 30, 2022.

### Changes in Internal Control Over Financial Reporting

In the first quarter of 2022, we implemented a new ERP system globally across our Company that will be used to better manage our business and summarize our operating results. This ERP system implementation affects multiple financial reporting functions, including accounts receivable, fixed assets, project accounting, accounts payable, and general ledger applications. As a result of this ERP system implementation, we revised certain existing internal controls, processes, and procedures. While we do not believe this ERP system implementation will have an adverse effect on our internal control over financial reporting, there are inherent risks in implementing an ERP system. Accordingly, we will continue to evaluate the design and operating effectiveness of these controls.

Other than this ERP system implementation, there were no changes during the third quarter of 2022 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 176 characters.

Information about our risk factors is contained in Item 1A of the 2021 10-K as supplemented by Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2022.

Filed Nov 1, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-020715. Last ingested by Listed: Nov 6, 2026, 16:47 ET. No prices; not investment advice.