Earnings call: Ranpak posts strong Q4, eyes growth in automation for 2024

 

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Ranpak Holdings Corp. (NYSE: NYSE:PACK), a leading provider of paper-based packaging solutions, concluded 2023 with a robust fourth quarter, showcasing significant year-over-year earnings growth. The company reported a 10% increase in consolidated net revenue on a constant currency basis, buoyed by heightened order activity in the United States and an uptick in European market conditions.

Adjusted EBITDA soared by 89% to $24.4 million, yielding an impressive 26% margin. Looking ahead, Ranpak anticipates revenue between $370 million to $390 million for 2024, translating to a growth of 6% to 12%, with adjusted EBITDA expected to rise by 5% to 16%. The company is particularly bullish about its automation business, projecting double-digit growth.

Key Takeaways

• Ranpak’s Q4 2023 earnings highlight a 10% revenue increase and an 89% surge in adjusted EBITDA.
• The company projects 2024 revenues of $370 million to $390 million, with 6% to 12% top-line growth.
• Adjusted EBITDA is expected to grow by 5% to 16% in 2024.
• Ranpak anticipates over 50% growth in automation revenue.
• The company plans to open a new Malaysian production facility in summer 2024 to support the Asia Pacific market.

Company Outlook

• Ranpak expects 2024 to be an inflection year with substantial growth in their automation business.
• The company is focusing on cash generation and reducing debt as capital expenditures decrease.
• Asia Pacific region is projected to become a more significant contributor to Ranpak’s business with the new Malaysian facility.

Bearish Highlights

• Pricing adjustments made in the second half of last year are seen as a potential headwind.
• The company remains cautious due to the uncertain macroeconomic environment.

Bullish Highlights

• Ranpak has successfully regained its gross margin profile after the inflationary period in 2022.
• Strategic accounts in North America are expected to boost second-quarter revenue.
• Automation has reached a commercial inflection point with key mandates won for auto-fill and cut-it products.
• Extended producer responsibility laws, especially in California, are anticipated to drive trial activity and focus on sustainability, providing a tailwind for the company.

Misses

• There were no specific misses reported in the earnings call.

Q&A Highlights

• The company has secured six-month agreements with suppliers to negotiate pricing based on index pricing, expecting stability in the near term.
• Mid-single-digit growth is estimated for the install base in 2024.
• Ranpak is comfortable with their 2024 guidance assuming the macro environment remains consistent.

In summary, Ranpak’s strong performance in the fourth quarter of 2023 sets a positive tone for the year ahead. The company’s strategic focus on automation and sustainability, along with its expansion in the Asia Pacific market, positions it well for continued growth in 2024. Despite potential headwinds from pricing adjustments and a volatile macroeconomic landscape, Ranpak’s guidance reflects confidence in the fundamental strength of its business model and market opportunities, especially in light of evolving sustainability regulations.

InvestingPro Insights

As Ranpak Holdings Corp. (NYSE: PACK) navigates a year of anticipated growth and strategic expansion, particularly in its automation business, it’s crucial for investors to consider various financial metrics and analyst insights. Here’s a snapshot of the company’s financial health and market performance based on real-time data from InvestingPro:

• Market Cap (Adjusted)

: Ranpak’s stock price has shown significant volatility. This is an essential factor for investors who prioritize stability and may prefer to avoid large swings in their portfolio valuations.

Debt Concerns: The company operates with a significant debt burden. This could be a potential risk for investors, especially in an uncertain macroeconomic environment where interest rates and financial leverage are critical factors.

For those looking to delve deeper into Ranpak’s financials and market performance, InvestingPro offers additional insights and tips. With the use of the coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available for Ranpak, providing a comprehensive analysis for informed investment decisions.

Full transcript – One Madison A (PACK) Q4 2023:

Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the Ranpak Fourth Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Sara Horvath, General Counsel. Please go ahead.

Sara Horvath: Thank you and good afternoon, everyone. Before we begin, I’d like to remind you that we will discuss forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K and our other filings filed at the SEC. Some of the statements and responses to your questions in this conference call may include forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. Ranpak assumes no obligation and does not intend to update any such forward-looking statements. We should not place undue reliance on these forward-looking statements, all of which speak to the company only as of today. The earnings release we issued this afternoon and the presentation for today’s call are posted on the investor relations section of our website. A copy of the release has been included in a Form 8-K that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non-GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the table and slide presentation accompanying today’s earnings release. Lastly, we’ll be filing our 10-K with the SEC for the period ending December 31, 2023. The 10-K will be available through the SEC or on the investor relations section of our website. With me today, I have Omar Asali, our Chairman and CEO; and Bill Drew, our CFO. Omar will summarize our fourth quarter results, provide an update on our growth strategies, and issue our outlook for 2024. Bill will provide additional detail on the financial results before we open up the call for questions. With that, I’ll turn the call over to Omar.

Omar Asali: Thank you, Sara, and Good day, everyone. Thank you all for joining our call. We finished 2023 on a positive note as we built on the momentum from the third quarter and delivered our best quarter of the year. We saw continued general improvements in the operating environment in Europe and the more pronounced holiday season in North America, compared to prior year. Overall, the e-commerce discretionary goods market and manufacturing sectors remain subdued, but we are starting to see general improvement across many of our end users and are encouraged by the seasonal uptick more in line with historical patterns in the fourth quarter. Consolidated net revenue on a constant currency basis increased 10%, driven by volume growth in our different regions as we saw improved order activity among larger e-commerce customers in the U.S. and generally improving conditions in Europe. The volume improvements seen in Q3 and Q4 helped drive 2023 full-year net revenue, up 1% on a constant currency basis, a welcome recovery from a slower start of the year. Europe and APAC finished on a strong note, up 12% on a constant currency basis, driven by 15% volume growth as ordering patterns continued to normalize and general sentiment in the region was stable. The improvement was broad-based as all PPS categories in the region were up year-over-year. De-stocking activity is behind us and in many cases distributors and then customers are working to keep as little inventory on hand as possible. Our North America business also experienced an uptick to finish the year, with sales up 8% driven by improved volumes and contribution from automation sales. Full-year results were up 2% in North America, driven by a larger contribution from automation and improved void-fill performance, offset somewhat by sluggish wrapping and cushioning environment. Adjusted EBITDA of $24.4 million was, up $11.5 million or 89% in constant currency terms year-over-year and resulted in a margin of 26%. The increase in adjusted EBITDA was due to higher sales volumes, compared to a year ago, significant improvement in input costs, and better absorption of our fixed G&A. For the year, adjusted EBITDA increased 14.5% to $76.5 million. Overall, it was a quarter that turned out a better-than-expected and helps us to finish a challenging year on a positive note. Generally speaking, we enter 2024 in a better operating environment than we experienced in 2023. Discretionary goods remain soft, but we are now two years into absorbing the pull forward in demand that impacted performance in ‘22 and ‘23. Strategic account activity in North America is robust, with key players announcing their commitment to eliminating plastic in their fulfillment centers over the next few years. We also have made substantial inroads with our automation business, with key accounts that I think solidifies our position as a true automation player. Our distributors and end users are in tight inventory positions and are likely conservative in their positioning. We continue to monitor the energy environment in Europe. It is far improved from a pricing perspective from a year ago, as Dutch nat gas is at EUR27 per megawatt, down from EUR300 at the peak, and EUR80 at the start of 2023. This has led to a stable paper input cost environment in the region and improved overall sentiment. North America paper pricing also remains stable as we enter into 2024, having clawed back the majority of our gross margin profile that we had sacrificed in ‘22. The regulatory environment continues to position us with a secular tailwind as extended producer responsibility regulation has been enacted or proposed in many states including California, Colorado, Maine, Oregon, Maryland, New Jersey, Washington, and Connecticut. These laws have been in place in Europe for years, but are just gaining traction in the U.S. We’ll take you through our guidance for 2024 after Bill’s remarks, but to summarize, we are focused on accelerating top-line growth this year, double-digit adjusted EBITDA growth, and working the investments we have made to generate cash and delever. Now here’s Bill with more info on the quarter.

Bill Drew: Thank you, Omar. In the deck you’ll see a summary of some of our key performance indicators. We’ll also be filing our 10-K, which provides further information on Ranpak’s operating results. Machine placement continued its increase, up 1.5% year-over-year, to over 141,200 machines globally. Cushioning systems declined 1.4%, void-fill installed systems grew 2.6%, and wrapping grew 2.3% year-over-year. We continue our fleet optimization efforts to identify opportunities to move less productive converters in the field to higher utilization locations, and further that our efforts to refurbish and refabricate older converters for redeployment to save on CapEx. Overall, net revenue for the company in the fourth quarter increased 10% year-over-year to $93.9 million on a constant currency basis, driven by volume growth in all regions and increased automation sales, bringing full-year results, up 1% on a constant currency basis. For the quarter in the Europe and APAC reporting division, combined revenue increased 12% on a constant currency basis. The better second-half drove net revenue on a constant currency basis to finish up 1% to the year in the region, driven by volume growth and increased contribution from automation, offset somewhat by pricing give back due to raw material input cost relief after achieving our targeted margin profile. North America also finished on a positive note, driven by better volumes and increased contributions from automation. Net revenue for the quarter was up 8%, which brought the full-year results in the region to growth of 2%. We are encouraged by what we see in the region and are looking forward to strategic account activity driving volume acceleration as the year progresses. Reported gross margins of 37.7% for the quarter improved more than 950 basis points versus the prior year, with input costs peaked and volumes were lower, resulting in an increase in gross profit on a constant currency basis of $11.5 million, or 48% year-over-year. Gross margins in the Europe and APAC reporting unit stayed flat with a third quarter at 39%, while North America was approximately 35.5%, although we do expect to have some upside going forward in North America as additional volumes flow through. As we enter 2024, paper pricing has stabilized, although we have seen some market participants publicly vocal about their desire to raise price. SG&A excluding RSU expense was in line with the previous two quarters at $26.7 million on a constant currency basis. Controlling our spend and leveraging our G&A investments are a top priority. We expect that as the volume environment improves, we will better absorb our overhead as you have seen in the fourth quarter, as well as higher volume quarters in the past. Headcount was roughly flat year-over-year and on the personnel front we have over 140 people dedicated to automation currently, obviously resulting in a substantial drag on our profitability profile. As that business scales we expect to have a much improved financial profile with our adjusted EBITDA margins on a consolidated basis, getting back to the mid to high 20% area overall. As a result of the improved sales volumes and improved gross profit in the fourth quarter, adjusted EBITDA improved 89% in the quarter to $24.4 million on a constant currency basis, or a 26% adjusted EBITDA margin. This brings the full-year’s results to up 14.5% to $76.5 million on a constant currency basis, implying a 21.9% adjusted EBITDA margin for the year. Moving to the balance sheet and liquidity, we completed 2023 with a strong liquidity position, including a cash balance of $62 million and no drawings on a revolving credit facility, bringing our reported net leverage to 4.6 times on an LTM basis or 5.0 times according to the definition of adjusted EBITDA in our credit agreement. A recent peak for leverage was 5.7 times in the June quarter, and our short-term target was to get below 5 turns by year-end. We are pleased to make progress, but our ultimate goal remains to return to a leverage ratio of 3 turns or less. 2024 is the year where we expect to continue to grow our adjusted EBITDA and generate cash to delever. Major CapEx cycle of investing in digital and physical infrastructure is largely complete. The final remaining $1.5 million from Malaysia to be funded in 2024. With that, I’ll turn it to Omar.

Omar Asali: Thanks, Bill. This year was a pivot year, and I’m happy to report that we took critical steps required to position us well in 2024 and to scale Ranpak. In ‘23, we successfully clawed back the majority of our gross margin profile after investing in our customer relationships during the significant input cost inflation of ‘22. We also made meaningful inroads with key strategic accounts in North America in PPS, which will show up beginning in the second quarter of this year. I believe automation has hit the commercial inflection point we have been working towards as we’ve won key mandates for our auto fill and cut it products that solidify Ranpak as a top tier automation player. We have completed the expansion of our production capabilities to be able to serve over $100 million annually in revenue. We believe these signature wins will serve as a baseline for automation growth over the next few years and also be a strong signal to the market of the quality and robustness of our solutions. This is what we have been building towards in automation and are excited to be at a point where we believe the step change in the top line is here. Regarding guidance for the year, on a constant currency basis, we’re anticipating revenues of $370 million to $390 million, reflecting top-line growth in the area of 6% to 12%, and adjusted EBITDA growth of 5% to 16%, implying a range of $80 million to $89 million. Our top line growth for the year reflects our expectations of a slow, but continuing return to a more normal operating environment as e-commerce buying patterns normalize and industrial activity remains somewhat pressured. We expect to achieve volume growth in PPS, building on the momentum that started in the second-half of the year, and automation revenue to be up more than 50%. Our growth in adjusted EBITDA of 5% to 16% reflects the contributions from the expected top line increase and steady margin profile. We expect that capital expenditures will step down as we exit our major investment cycle and be in the area of $35 million, enabling us to focus on cash generation and deleveraging. Generally speaking, we believe this guidance reflects a level of conservatism and continue somewhat challenging near-term backdrop. Our bottom up fundamental view is giving us more optimism. Hence, we believe our guidance has some upside depending on the timing and speed with rich key strategic accounts ramp up their plastic to paper shift. ‘24 is an inflection year for Ranpak in general and for automation in particular. I feel better about our company now than I have at any point in the past two years. We have solid momentum in the business with potential step change opportunities in PPS and automation about to kick in. We have seen some of the largest e-commerce players publicly announce this year they have begun a multi-year transition to eliminate plastic delivery packaging and replace it with paper. We are part of that switch. Industrial automation is a mega theme in an environment where labor costs and other rising inputs, pressure margins. Companies are willing to spend on projects that deliver an attractive ROI and we believe our end of line solution portfolio is able to deliver what customers need, specifically in the form of reduced labor costs, reduced logistics costs, and lower waste. We have the solutions, people, and facilities to scale this business and look to nearly double our sales and automation in ‘24. The input cost environment remains pretty balanced. North America added craft paper capacity in ‘23 and pricing has stabilized in recent months. Additional volumes should help us drive efficiencies and better absorb our overhead in ‘24, especially as strategic account activity really kicks in, in the second-half of the year. In Europe, the energy markets have been favorable and we were able to emerge from winter without a large spike and excessive draw on reserves. We believe that positions us well in 2024 to maintain our margin profile in Europe and Asia Pacific. Expanding our presence in Asia Pacific is a key milestone for us this year, as we will go live with our Malaysian production facility this summer. APAC is currently served out of Europe, which adds significant cost and lead time to getting product to our end users. This facility will enable us to take meaningful freight time and cost out. We believe our go-to-market network and strategy in this region, coupled with our local manufacturing footprint, will result in our ability to sell at much more attractive prices to fuel growth without negatively impacting our margin. With the size of the economies there and growing importance of sustainability in places like Australia and Japan, we believe Asia Pacific should become a more meaningful contributor to our PPS business globally. Thank you all again. At this point, we’d like to open up the line for questions. Operator?

Operator: Thank you. The floor is now open for your questions. [Operator Instructions] Your first question comes from the line of Ghansham Panjabi with Baird. Your line is open.

Ghansham Panjabi: Thank you, operator. Hello, everybody. Omar, just kind of specific to the fourth quarter, as you think back, maybe you can give us a sense of which end markets were better than perhaps your initial forecast? And then as it relates to the guidance for 2024 on an EBITDA basis, how should we sort of think about phasing and seasonality between the first-half and second-half?

Omar Asali: Sure. Yes, thanks, Ghansham. I would say in the fourth quarter, the holiday season, in particular in the e-commerce, was a little bit healthier than we had anticipated going into the quarter. Maybe we were a little bit too cautious given the prior year. We didn’t see that seasonality uptick. And then in reality, what we saw, frankly, across different geographies in the U.S., in Europe, and in Asia Pacific, was a stronger holiday season. So I think that really helped. In terms of 2024 and seasonality, this is a year where we think the large accounts and strategic accounts that I’ve been discussing on a number of these calls are going to kick in, in a meaningful way. I’ve mentioned in prior calls that we have a number of them in our trials and in our pipeline. Well, I’m happy to report as of now, we have been successful in converting some of these trials and pipeline into wins and closes, we’re installing some of that equipment in this quarter. And from a seasonality standpoint, I would expect that you’re going to start seeing some pickup in the second quarter of 2024. And again, given some of these wins and given what we saw this past quarter, I’m expecting a pretty strong second-half of the year, based on both of these wins and the switch from plastic to paper, as well as the holiday and peak season later in the year.

Ghansham Panjabi: Okay, so would that by definition imply an acceleration in the machine placement side too then as we progress?

Omar Asali: I think it’ll play some to be honest. We — through our systems and through optimization and refab and refurbishing, we have been moving more equipment within our system than ever. So it may not be reflected in a lot of new CapEx and new equipment. I think you may see a number of these dispensers and converters being a little bit more optimized, as Bill highlighted in the call. That’s a pretty big initiative, given the large investments we’ve done the last couple of years in converters. So the short answer is you’ll see some incremental CapEx and new equipment, but you’re also going to see some movement to optimize our network between existing converters and dispensers.

Ghansham Panjabi: Okay, that’s fantastic to hear. And maybe a follow-up for Bill in terms of some of the moving parts, Bill, on free cash flow and also the swap expiration in June of 2024 and the impact on interest expense on the second-half versus the first-half?

Bill Drew: Yes, Ghansham, so you’re asking about free cash flow expectations for ‘24?

Ghansham Panjabi: Yes, yes.

Bill Drew: Yes, so I think Ghansham, the way that we think about it, if you look at the guide, the mid-range, you know, we call it around $85 million or so. For us, we’ve got pretty sizable cash balance that we’re getting some nice income on. So if you include the interest income that we collect, as well as obviously the cash interest expense, we’re looking at around $29 million, $30 million for 2024. Cash taxes, we would assume to be kind of in that mid-single-digits in millions. And then from a working capital standpoint, a slight use, right? Well, I think we’ll be making some investments in working cap this year to invest in some of the strategic account activity that Omar highlighted. So kind of all in that gets you in the double-digit millions of free cash flow generation.

Ghansham Panjabi: Okay, okay, perfect. Thank you so much. Okay, I’ll turn it over. Thanks a lot. That’s very helpful.

Omar Asali: Thanks, Ghansham.

Operator: Our next question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open.

Adam Samuelson: Yes, thank you. Good afternoon, everyone.

Omar Asali: Hi, Adam.

Bill Drew: Hi, Adam.

Adam Samuelson: Hi. So, I guess first question is going back to the point on maybe repositioning more converters than you had in the past. I think this was the first time and really any point in that can see in the model where the installed base and especially the installed base in void-fill had actually decreased sequentially? So can you talk maybe a little bit more about the magnitude of those actions? How much you’re repositioning? Is it largely void-fill? Are you doing it in wrapping and cushioning as well? And what is the expectation for installed base growth in 2024 in aggregate with I think you said $35 million of total CapEx bill? So just kind of make sure to tie that all those pieces together?

Bill Drew: Sure, I mean, I would say the converter refabrication and refurbishment is a major initiative for us, right? We want to make sure that we’re maximizing free cash flow, especially in this environment. And I think with the number of converters that we deployed right over recent years, there’s the ability for us to reposition a number of those. So we’re working actively with the sales team and also using the analytics that we’ve put in place in the past couple of years to really look at accounts, make sure that, you know, the way that deals were underwritten, if the performance isn’t matching what was originally expected, that we have those conversations and redeploy those converters elsewhere. And I think the team’s been doing a good job with that. And I think, you know, other things that you’re probably seeing just in the placement account numbers is related to some of the macro activity, particularly in Europe on the cushioning side. You’re just seeing some of those accounts that have been under pressure, right? So we’re going and getting machines back from some of those more industrial areas that have just been hit harder by the last couple of years. So I think it’s an initiative that’s across the board, right across all categories to maximize our free cash flow. And we’ll continue to do that and use the analytics to really make sure that we’re maximizing the return on the capital that we’ve deployed. As far as ‘24 goes, if you’re looking for kind of a modeling estimate, I think for us we’re estimating kind of that mid-single-digit growth in the install base, if that’s helpful.

Adam Samuelson: No, that is. And maybe just a follow-up as we think about pricing and kind of the confidence on the gross margin outlook, especially where you might have seen — you might see kraft paper inch higher in North America. I think Europe, it’s been weaker and certainly the inflationary environment there with energy has backed off. Just help us think about your visibility on your kraft paper purchases and your ability to consistently price that up through distribution, where I think pre-COVID, pre-Europe inflation, the business had operated on kind of annual kind of paper purchases. And I can’t imagine you’re getting fixed price paper purchases from your suppliers anymore?

Omar Asali: Yes, I think that’s right Adam. What we are seeing in this environment and frankly it’s applying to different geographies obviously our largest being Europe and in the U.S., is pretty much we are coming up with agreements that on average I would say are around six months in duration. So think that the price resets twice a year rather than the annual agreements that we used to have a couple of years ago. And that reset might be related to sort of some index pricing. So in general, we feel pretty good about getting some visibility, even though it’s not for the full-year. It’s not super volatile with a lot of frequent resets, if you will. Now, the tone out there in the market is, look, obviously the space now is facing a lot of consolidation and discussion around consolidation with the large corrugated and paper players. We’re in close touch with all of our suppliers. They continue to push that if we can do more volume, they’re willing to work with us on price. And frankly, we think with some of these strategic account activity that we’re winning, and hopefully will move the needle in 2024, we have been negotiating pricing, et cetera, to fulfill the rest of the year. So I feel near-term in both geographies in Europe and in the U.S., we’re seeing some stability in pricing that I think hopefully will last throughout the year. But my guess is in the second-half of the year, there’ll be a set of negotiations that we will have given the recess and depending on where the index pricing is, we’ll see how the second-half of the year plays out. And then to your point on energy, I mean, that seems to be a lot more subdued in terms of volatility in Europe, compared to where we were and from everything we’re hearing there’s more supply coming to Europe from other sources that hopefully that energy stability will last for a while

Adam Samuelson: And that’s helpful. And if I could just squeeze one more in on the automation equipment side, talking about 50% plus growth, which would be over $10 million. I mean, how much of that do you have in backlog today? Or how would you frame the confidence level in that 50% growth just in terms of fixed orders versus kind of you have the lead generation, but you have to convert those into orders and the timing of backlog conversion to orders?

Omar Asali: I would say the confidence is relatively high about that number. That’s why we’re comfortable sharing it. The way our business works, and obviously, you know, there is peak season and sort of early in the year, it’s a bit different. But think about once we get these orders and these bookings, we’re fulfilling those sometime in the next six to nine and [Indiscernible] months. So I would say our visibility for the next couple of quarters is pretty decent. Later in the year, we still need to increase our bookings now to help hit those numbers that are later in the year, given the six to nine month average period, if you will. But I mean, last quarter, I think I mentioned we had record bookings. I mean, we continue to sort of have very, very elevated levels of bookings, which is increasing our confidence in hitting that number this year.

Adam Samuelson: That’s very helpful. I’ll pass it on. Thank you.

Omar Asali: Thanks, Adam.

Operator: Next question comes from the line of Greg Palm with Craig-Hallum Capital Group. Your line is open.

Danny Eggerichs: Thanks. This is Danny Eggerichs on for Greg today. Congrats on the good quarter. Good to see the volumes kind of come back a little bit. I guess from maybe what you’ve seen in Q4 and quarter date on the volumes, just overall visibility and sounds like you’re pretty confident in the guide, as well as those larger strategic accounts [wrapping] in the second-half. I guess does the macro have to improve much from here for you to feel pretty good about those or regardless you feel comfortable there and then kind of any continuation in macro recovery provides even some potential upside from there?

Omar Asali: Yes, let me start, it’s Omar and then I’ll have maybe Bill chime in. I would say the micro and the fundamental picture that we see in our business we really like. So whether that’s volume trends, whether that’s what we’re seeing in gross margin and stability in our largest input costs, which is paper, whether that’s sort of the trial activity, the switch from plastic to paper, and our pipeline activity. All these are trending really well. I wouldn’t say that we’re banking on the macro environment to improve. I would say we’re saying that things maybe stay the same from a macro environment. And probably given the macro environment, we’ve decided, you know, to give a guide that we feel confident in but reflects a little bit of conservatism, not because of what we’re seeing inside our business, but more because of what’s happening, all around us with the macro backdrop. So whether it’s geopolitics, whether it’s about where inflation is headed or interest rates where, you know, we don’t have any unique insight or views. I think that’s the stuff that’s causing us to be a little bit cautious. So I would say we’re assuming a macro environment that will go throughout the year that’s similar to where we are today. And if that’s the case, given the fundamentals that we’re seeing in our business, we have very high confidence in our guide. Bill, I don’t know if you have something to add.

Bill Drew: Yes, I mean, I can give a little bit more detail as to how we’re thinking about maybe the top line growth, if that’s helpful. So just from a volume standpoint, at the low-end of the guide, we’re assuming kind of a low to mid-single-digit volume growth with the high-end being kind of mid to high-single-digit. Automation, we’re assuming is roughly 2.5 points to 3.5 points. And then a little bit of the pricing headwind is what we’ve built in as we lap some of the pricing adjustments we made in the second-half of last year. So, you know, from a volume perspective, you know, with the strategic account activity that Omar has mentioned, we’re not baking in a meaningful improvement in operating activity. So I think for us, we feel like it will continue to get better throughout the year, right, as the operating environment continues to slightly improve, which is kind of what we’re seeing. And then this account activity kicks in.

Danny Eggerichs: Yes, got it. That all makes sense. Maybe just touching quickly on kind of sustainability trends. It kind of feels like we’re seeing more and more companies coming out with new initiatives or state regulations. I guess from your guys’ seat, you feel like you’re seeing that kind of accelerate and is there potential for overall sustainability to be a bigger driver this year, maybe relative to last?

Omar Asali: You know, I think, and I highlighted it on the call, I think extended producer responsibility laws and regulations that have been passed in a number of states, probably most importantly, California are really playing an important role in having a number of these companies go maybe beyond the conversation around sustainability and start taking action. I really attribute that as a key driver to increasing some of our trial activity. And then obviously once our equipment is there, it’s up to us to prove ourselves and our solutions and hopefully convert these trials into closes. So I think what you were seeing in the U.S., in particular with the larger accounts, I believe a big driver behind the switch is driven by new regulations, discussions around these new regulations, and maybe a bit more of a focus around sustainability. Now those rules have been enacted in Europe for a while, and we’ve seen the benefit of those over the last number of years. The new thing that we’re seeing is really this spike in discussion and in activity in the U.S., which I think hopefully will give us a tailwind for the next number of years, because many of these EPR rules are, you know, going to start being implemented over the next number of years, which I think is good for us.

Danny Eggerichs: Yes, absolutely. All right, I’ll leave it there. Thanks.

Omar Asali: Thank you.

Operator: There are no further questions at this time. Mr. Bill Drew, I turn the call back over to you.

Bill Drew: Thank you, Desiree and thank you all for joining the call today. I look forward to talking about Q1 with you next earnings call.

Operator: This concludes today’s conference call. You may now disconnect.

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