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What changed in Ranpak Holdings Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ranpak Holdings Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+348 added−374 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-31)

Top changes in Ranpak Holdings Corp.'s 2023 10-K

348 paragraphs added · 374 removed · 212 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

73 edited+10 added−29 removed68 unchanged
Biggest changeWe believe that our business benefits from multiple factors that will drive our future growth: • Growth of E-commerce . E-commerce is a significant growth driver in our business. Approximately 31.0% of our net revenue is derived from sales to e-commerce end-users, and the overall e-commerce market demonstrated compound annual growth in the high teens from 2015 to 2019.
Biggest changeThese solutions offer end-users numerous benefits including the reduction of shipping costs, waste, and labor, resulting in improved efficiency. • Multiple Drivers of Growth . We believe that our business benefits from multiple factors that will drive our future growth: • Growth of E-commerce . E-commerce is a significant growth driver in our business.
Our Market Our end-user market consists of any business that sells and ships products requiring packaging. Accordingly, these end-users are highly dependent on their ability to obtain a cost-effective and efficient in-the-box packaging solution. Our end-users operate in a variety of businesses, including e-commerce, the automotive after-market, electronics, machinery/manufacturing, home goods, pharmaceuticals, retail and others.
Our Market Our end-user market consists of any business that sells and ships products requiring packaging. Accordingly, these end-users are highly dependent on their ability to obtain a cost-effective and efficient in-the-box packaging solution. Our end-users operate in a variety of businesses, including e-commerce, the automotive after-market, electronics, machinery/manufacturing, home goods, pharmaceuticals, retail and others. E-commerce .
Additionally, we developed robust anti-bias training to ensure that every potential candidate is given a fair and merit-based evaluation of their skills. 10 We strive to maintain an active dialogue with our employees and provide employees a comprehensive benefits package including competitive wages, medical, life, and accident insurance, incentive bonus programs, and a 401(k) plan with an employer matching contribution.
Additionally, we developed robust anti-bias training to ensure that every potential candidate is given a fair and merit-based evaluation of their skills. We strive to maintain an active dialogue with our employees and provide employees a comprehensive benefits package including competitive wages, medical, life, and accident insurance, incentive bonus programs, and a 401(k) plan with an employer matching contribution.
We do not set minimum annual paper consumption targets for the disposable units, as the full production cost and margin associated with the dispenser is covered with each sale. Included within our Wrapping systems are our Cold Chain products, which are used to provide insulation for goods that require temperatures to be controlled during transport.
We do not set minimum annual paper consumption targets for the disposable units, as the full production cost and margin associated with the dispenser is covered with each sale. 4 Included within our Wrapping systems are our Cold Chain products, which are used to provide insulation for goods that require temperatures to be controlled during transport.
We believe that our distributor-based distribution model is particularly well suited to the highly fragmented nature of the protective packaging solution end-user market we seek to serve by enabling us to reach a broad range of end users across size, industry and geography while maintaining a lean internal salesforce and capital base. End-Users .
We believe that our distributor-based 5 distribution model is particularly well suited to the highly fragmented nature of the protective packaging solution end-user market we seek to serve by enabling us to reach a broad range of end users across size, industry and geography while maintaining a lean internal salesforce and capital base.
We believe 7 that growing environmental awareness world-wide, combined with an increasing regulatory trend to limit the use of polymer-based foams and plastic films in many jurisdictions, present an opportunity for our paper-based protective packaging solutions in an ever-expanding number of geographies. • Grow via partnerships and acquisitions .
We believe that growing environmental awareness world-wide, combined with an increasing regulatory trend to limit the use of polymer-based foams and plastic films in many jurisdictions, present an opportunity for our paper-based protective packaging solutions in an ever-expanding number of geographies. • Grow via partnerships and acquisitions .
We believe that we are well-positioned to execute a growth strategy, targeting acquisitions or partnerships in our key areas of focus and adjacent business lines. In addition to our investment in Pickle and our acquisition of Recycold, in September 2021, we made a strategic investment in Creapaper, the inventor of grasspaper and provider of grasspaper products, a natural paper substrate.
We believe that we are well-positioned to execute a growth strategy, targeting acquisitions or partnerships in our key areas of focus and adjacent business lines. In addition to our investment in Pickle and our acquisition of Recycold, in 2021, we made a strategic investment in Creapaper, the inventor of grasspaper and provider of grasspaper products, a natural paper substrate.
Our Competition We compete with companies producing competing products that are well-established, have significant scale, and have a broad product offering. There are other manufacturers of protective packaging products, some of which are companies offering similar products that operate across regions and others that operate in a single region or single country.
Our Competition 8 We compete with companies producing competing products that are well-established, have significant scale, and have a broad product offering. There are other manufacturers of protective packaging products, some of which are companies offering similar products that operate across regions and others that operate in a single region or single country.
Our December 2021 acquisition of Recycold helps us to provide a more comprehensive sustainable Cold Chain solution for customers. We also have invested in the development of alternative and more sustainable paper pulps and substrates through our investment in Creapaper.
Our 2021 acquisition of Recycold helps us to provide a more comprehensive sustainable Cold Chain solution for customers. We also have invested in the development of alternative and more sustainable paper pulps and substrates through our investment in Creapaper.
We have a long history of continuous systems innovation and product development supported by our comprehensive patent portfolio. We have maintained an extensive patenting program since our inception for our PPS systems 4 and accessories, processes and paper packaging materials.
We have a long history of continuous systems innovation and product development supported by our comprehensive patent portfolio. We have maintained an extensive patenting program since our inception for our PPS systems and accessories, processes and paper packaging materials.
Moreover, substantially all of our net revenue from distributors is generated by those who have agreed to exclusivity with our products and not to sell or promote competitors’ paper-based solutions.
Substantially all of our net revenue from distributors is generated by those who have agreed to exclusivity with our products and not to sell or promote competitors’ paper-based solutions.
Our Automated Paper Solutions (“APS”) and Automated Solutions (“AS”) (collectively, “Automation”) product lines provide end-of-line automation systems that solve two distinct challenges facing end-users of our products: • Automated Dunnage Insertion .
Our Automated Paper Solutions (“APS”) and Automated Solutions (“AS”) (collectively, “Automation”) product lines provide end-of-line automation systems that solve distinct challenges facing end-users of our products: • Automated Dunnage Insertion .
We believe demand for industrial machinery and equipment used in sectors such as agriculture, construction, mining, packaging, and food processing will increase as economies expand, thus requiring additional infrastructure spend as well as increasing the need to feed growing middle-class populations across the globe. Sales to our machinery end-users accounted for approximately 6.4% of our net revenue in 2022.
We believe demand for industrial machinery and equipment used in sectors such as agriculture, construction, mining, packaging, and food processing will increase as economies expand, thus requiring additional infrastructure spend as well as increasing the need to feed growing middle-class populations across the globe. Sales to our machinery end-users accounted for approximately 6.4% of our net revenue in 2023.
In addition to optimizing box-size, our AS solutions can be configured to automatically erect and form corrugated boxes, and apply glued lids to seal the box. Our solutions allow end-users to minimize dunnage use, utilize sustainable dunnage, and improve the speed and efficiency of end-of-line packaging operations as well as help reduce product returns from damage during shipment.
In addition to optimizing box-size, our AS systems can be configured to automatically erect and form corrugated boxes, and apply glued lids to seal the box. Our systems allow end-users to minimize dunnage use, utilize sustainable dunnage, and improve the speed and efficiency of end-of-line packaging operations as well as help reduce product returns from damage during shipment.
We are pursuing expansion of our customer base in several ways. We have a global sales organization that works hand-in-hand with the sales representatives of our approximately 300 distributors to introduce our products and services to potential accounts. Our broad product portfolio allows us to serve any type of business with protective packaging needs across all end markets.
We are pursuing expansion of our customer base in several ways. We have a global sales organization that works hand-in-hand with the sales representatives of our distributors to introduce our products and services to potential accounts. Our broad product portfolio allows us to serve any type of business with protective packaging needs across all end markets.
Our investment and acquisition activity in 2021 demonstrates our continued focus on growing the company through appropriate business acquisition opportunities as well as developing partnerships to expand the scope of our technologies, geographic presence and product offerings.
Our investment and acquisition activity demonstrates our continued focus on growing the Company through appropriate business acquisition opportunities as well as developing partnerships to expand the scope of our technologies, geographic presence and product offerings.
We hold over 774 U.S. and foreign patents and patent applications directed to various innovations related to our business, as well as more than 264 U.S. and foreign trademark registrations and trademark applications that protect our branding. • Focus on Talent and Leadership : We have assembled a strong international team of talented, motivated, inclusive, and diverse employees to maintain our leadership in the industry, drive our growth and to achieve our strategic objectives.
We hold over 684 U.S. and foreign patents and patent applications directed to various innovations related to our business, as well as more than 241 U.S. and foreign trademark registrations and trademark applications that protect our branding. • Focus on Talent and Leadership : We have assembled a strong international team of talented, motivated, inclusive, and diverse employees to maintain our leadership in the industry, drive our growth and to achieve our strategic objectives.
We make available, free of charge, on this website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such reports are available, 11 electronically filed with, or furnished to the Securities and Exchange Commission (“SEC”).
We make available, free of charge, on this website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such reports are available, electronically filed with, or furnished to the SEC.
Our APS solutions utilize proven Ranpak paper converter technology and help end users automate the void filling and box closure processes after product packing is complete.
Our APS systems utilize proven Ranpak paper converter technology and help end users automate the void filling and box closure processes after product packing is complete.
As a result of these and other efforts, we have built and maintained a well-established distributor network that is comprised primarily of long-term business relationships and the continuity of these relationships evidences the strength of our business model, as well as the value proposition for our distributors and end-users.
We have built and maintained a well-established distributor network that is comprised primarily of long-term business relationships and the continuity of these relationships evidences the strength of our business model, as well as the value proposition for our distributors and end-users.
We have recently established a full-service paper conversion facility in Malaysia, which we anticipate to be operational in the second half of 2023.
We have recently established a full-service paper conversion facility in Malaysia, which we anticipate to be operational in the second half of 2024.
Our solutions provide for the capability to insert void and close multiple dimensions of box sizes to suit the end user needs. Our APS solutions can be fully automated or semi-automated, depending on end-user business process requirements.
Our systems provide for the capability to insert void fill and close multiple dimensions of box sizes to suit the end user needs. Our APS systems can be fully automated or semi-automated, depending on end-user business process requirements.
Our Automation products represented only 4.6% of our net revenue in 2022, however, following development through acquisitions and organic growth, we believe it will serve as a platform for expansion to better serve end-users with higher volume requirements and more sophisticated end-of-line needs.
Our Automation products represented only 6.1% of our net revenue in 2023, however, following development through acquisitions and organic growth, we believe it will serve as a platform for expansion to better serve end-users with higher volume requirements and more sophisticated end-of-line needs.
Higher demand for advanced machines spurs increased spending on tools and robotics while higher demand for housing, infrastructure and commercial buildings benefits the tools and construction supplies sectors. Sales to industrial manufacturing end-users accounted for approximately 12.5% of our net revenue in 2022. Automotive Aftermarket .
Higher demand for advanced machines spurs increased spending on tools and robotics while higher demand for housing, infrastructure and commercial buildings benefits the tools and construction supplies sectors. Sales to industrial manufacturing end-users accounted for approximately 12.6% of our net revenue in 2023. Automotive Aftermarket .
These systems allow end-users to minimize labor, optimize their use of dunnage, improve protection for items being shipped, and make end-of-line packaging operations more efficient. Unlike our PPS systems and APS solutions, we do not retain ownership of our AS solutions.
These systems allow end-users to minimize labor, optimize their use of dunnage, improve protection for items being shipped, and make end-of-line packaging operations more efficient. Unlike our PPS systems, we do not retain ownership of our AS systems, and in most cases do not retain ownership of our APS systems.
We intend to maintain and extend our technological leadership, expertise and our environmentally sustainable value proposition through continuous improvement of our product and service offerings to bolster speed, improve efficacy, and decrease packing footprint, as well as by introducing new products that deliver the environmentally friendly solutions customers require for their business needs.
We intend to maintain and extend our technological leadership, expertise and our environmentally sustainable value proposition through continuous improvement of our product and service offerings to bolster speed, improve 6 efficacy, and decrease packing footprint, as well as by introducing new products that deliver the environmentally friendly solutions customers require for their business needs. • Pursue targeted growth opportunities .
Our electronics end-users 9 customarily sell products such as computer hardware and electronics that are often already securely packaged in primary packages by the manufacturer and, as a result, require less robust protective packaging systems from us. Sales to our electronics end-users accounted for approximately 7.3% of our net revenue in 2022. Industrial Machinery .
Our electronics end-users customarily sell products such as computer hardware and electronics that are often already securely packaged in primary packages by the manufacturer and, as a result, require less robust protective packaging systems from us. Sales to our electronics end-users accounted for approximately 7.5% of our net revenue in 2023. Industrial Machinery .
Our packaging solutions are typically designed to integrate into these end-users’ existing industrial processes for the production and distribution of automotive parts. Sales to our automotive after-market end-users accounted for approximately 9.8% of our net revenue in 2022. Electronics .
Our packaging solutions are typically designed to integrate into these end-users’ existing industrial processes for the production and distribution of automotive parts. Sales to our automotive after-market end-users accounted for approximately 9.0% of our net revenue in 2023. Electronics .
Additionally, we further expanded our Cold Chain products with the December 2021 acquisition of Recycold Cool Solutions B.V. (“Recycold”), the manufacturer of Recycold Cool Packs, which are sustainable cool packs made from a biodegradable, plant-based gel. We have an installed base of approximately 22,000 WrapPak ® units, which were predominantly Geami ® converter units, as of December 31, 2022.
Additionally, we further expanded our Cold Chain products with the 2021 acquisition of Recycold Cool Solutions B.V. (“Recycold”), the manufacturer of Recycold Cool Packs, which are sustainable cool packs made from a biodegradable, plant-based gel. We have an installed base of approximately 22,700 Wrapping units, which were predominantly Geami converter units, as of December 31, 2023.
Our Distribution Model We sell the vast majority of our paper packaging materials to an established network of approximately 300 distributors worldwide who, in turn, store, market and sell our products, including bundles and rolls, to end-users.
We sell the vast majority of our paper packaging materials to an established network of approximately 300 distributors worldwide which, in turn, store, market and sell our products, including bundles and rolls, to end-users.
While still relatively small, representing 12.4% of our net revenue in 2022, we believe our Wrapping product line can provide a platform for growth largely due to our Geami ® products, which provide a highly effective and environmentally friendly alternative to plastic bubble wrap, as well as an opportunity to expand our distribution channels into the retail and retail shipping segments.
While still relatively small, representing approximately 10.7% of our net revenue in 2023, we believe our Wrapping product line can provide a platform for growth largely due to our Geami products, which provide a highly effective and environmentally friendly alternative to plastic bubble wrap, as well as an opportunity to expand our distribution channels into the retail and retail shipping segments.
Seasonality We estimate that approximately 31.0% of our net revenue in 2022, 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.
Seasonality We estimate that nearly a third of our net revenue in 2023, 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.
Governmental Regulation Federal, State, Local, and International Regulations We are required to comply with numerous laws and regulations covering areas such as workplace health and safety, data privacy and protection, labor and employment. We monitor changes in these laws to maintain compliance with applicable requirements.
Governmental Regulation Federal, State, Local, and International Regulations We are required to comply with numerous laws and regulations covering areas such as workplace health and safety, data privacy and protection, labor and employment. We are also required to hold various permits to conduct our operations. We monitor changes in these laws to maintain compliance with applicable requirements.
Through our extensive distributor network and select direct sales, we have over 139,100 installed systems serving over 36,000 end-users across diversified and growing end-user markets, as of December 31, 2022. We have a full suite of paper-based PPS systems to meet the needs of a variety of end-users, from small businesses to global corporations.
Through our extensive distributor network and select direct sales, we have approximately 141,200 installed systems serving over 36,000 end-users as of December 31, 2023. We have a full suite of paper-based PPS systems to meet the needs of diversified and growing end-user markets, from small businesses to global corporations.
In 2021, we created R Squared Robotics, a division of Ranpak, that uses three-dimensional computer vision and artificial intelligence technologies to improve end-of-line packaging and logistics functions. Additionally, in July 2021, we advanced our focus on Automation with a strategic investment in Pickle.
In 2021, we created R Squared Robotics, a division of Ranpak, that uses three-dimensional computer vision and artificial intelligence technologies to improve end-of-line packaging and logistics functions and we advanced our focus on Automation with a strategic investment in Pickle. All of these efforts complement and expand our focus on our Automation products.
We primarily sell our products to our network of approximately 300 distributors worldwide. These distributors vary in size and, generally, offer a broad suite of packaging and other warehousing products and services to the end-users they serve, including other protective packaging systems, such as plastic bubble wrap and air pillows.
These distributors vary in size and, generally, offer a broad suite of packaging and other warehousing products and services to the end-users they serve, including other protective packaging systems, such as plastic bubble wrap and air pillows.
For example, the Asia-Pacific region has a large, well-developed parcel shipping business, but currently represents only 10.2% of our net revenue in 2022. We believe that the new Malaysia facility can strengthen our performance in the APAC region.
For example, the APAC region has a large, well-developed parcel shipping business, but currently represents less than 10% of our net revenue in 2023. We believe that the new Malaysia facility can strengthen our performance in the APAC region.
Other . Our end-users also operate in many other industries, including [Warehousing (6.9% of net revenue in 2022), Home Furnishings (4.5%), Printing and Business Services (2.7%), and other various industries (18.8%)]. Our Paper Suppliers We purchase kraft paper from various suppliers for conversion into the paper consumables we sell.
Other . Our end-users also operate in many other industries, including Warehousing (approximately 7.0% of net revenue in 2023), Home Furnishings (approximately 4.8%), Food and Beverage (approximately 2.8%), Printing and Business Services (approximately 2.6%), and other various industries (17.4%). Our Paper Suppliers We purchase kraft paper from various suppliers for conversion into the paper consumables we sell.
Through our robust research and development (“R&D”) pipeline, we plan to continue to improve our value proposition by rolling-out next generation products to improve performance and efficiency as well as expanding product lines adapted to continuously evolving consumer and business preferences.
Our solutions deliver automation, productivity and sustainability enhancements to our end-users’ operations. Through our robust research and development (“R&D”) pipeline, we plan to continue to improve our value proposition by rolling-out next generation products to improve performance and efficiency as 3 well as expanding product lines adapted to continuously evolving consumer and business preferences.
We derive substantially all of our net revenue (over 90% in 2022 and 2021) through the sale of high-margin paper consumables that work exclusively with our PPS systems. These PPS systems, which include the accompanying paper consumables, fall into three broad categories: • Void-Fill .
We derive the majority of our net revenue through the sale of high-margin paper consumables that work exclusively with our PPS systems. These PPS systems, which include the accompanying paper consumables, fall into three broad categories: • Void-Fill .
As the market for our Automation products is rapidly evolving, we have extended our Automation services to offer extended service warranties beyond the initial warranty period, packaging line solutions, and the sale of spare parts. Our Automation products accounted for 4.6% of our net revenue in 2022.
As the market for our Automation products is rapidly evolving, we have extended our Automation services to offer extended service warranties beyond the initial warranty period, packaging line solutions, and the sale of spare parts. Our Distribution Model Distributors.
Our Wrapping products generated $40.5 million in revenue in 2022, which accounted for 12.4% of our net revenue. Geami ® revenue includes sale of tissue rolls in addition to kraft paper. We retain ownership of most of our PPS systems (other than, e.g., certain disposable Wrapping systems and FillPak® Manual).
Our Wrapping products generated $36.0 million in revenue in 2023, which accounted for 10.7% of our net revenue. Geami revenue includes sale of tissue rolls in addition to kraft paper. We retain ownership of most of our PPS systems (other than certain disposable Wrapping systems and FillPak Manual).
We sell our Cushioning products under the brand name PadPak ® and offer a variety of PadPak ® units. We have an installed base of approximately 35,000 PadPak ® units as of December 31, 2022. Our Cushioning products generated $140.3 million in revenue in 2022 and accounted for 43.0% of our net revenue. • Wrapping .
We sell our Cushioning products under the brand name PadPak ® and offer a variety of PadPak units. We have an installed base of approximately 34,800 PadPak units as of December 31, 2023. Our Cushioning products generated $145.8 million in revenue in 2023 and accounted for 43.4% of our net revenue. • Wrapping .
We work hand-in-hand with our distributors or, on a selective basis, directly with some end-users to ensure that end-users obtain a solution that meets their specific needs, whether that be a single unit for a low volume end-user or a highly-customized base of hundreds of units across multiple facilities for a high-volume end-user.
We work hand-in-hand with our distributors or, on a selective basis, directly with some end-users to ensure that end-users obtain a solution that meets their specific needs, whether that be a single unit for a low volume end-user or a highly-customized base of hundreds of units across multiple facilities for a high-volume end-user. 2 Furthermore, through our distributors, we strive to ensure that our end-users are consistently supplied with our paper consumables on-time and that their PPS systems are running with minimal downtime.
Historically, geographic expansion has fueled our growth, and we believe further geographic expansion will continue to drive our future growth. • Keen Focus on Innovation and Strategic Investments . We believe we are a leading innovator in packaging material, packaging systems and manufacturing technologies. Our solutions deliver automation, productivity and sustainability enhancements to our end-users’ operations.
Historically, geographic expansion has fueled our growth, and we believe further geographic expansion and penetration of existing markets will continue to drive our future growth. • Keen Focus on Innovation and Strategic Investments . We believe we are a leading innovator in packaging material, packaging systems and manufacturing technologies.
It is mainly used to fill the empty space between the product/merchandise and exterior carton or container (often referred to as dunnage), or to protect goods during shipment.
Protective packaging is used to store and protect goods during shipping and handling from shock, vibration, abrasion and other damages. It is mainly used to fill the empty space between the product/merchandise and exterior carton or container (often referred to as dunnage), or to protect goods during shipment.
In 2022, we purchased paper from approximately 31 paper suppliers and our largest single source of paper supplies sold us approximately 43.7% and 21.7% of the paper supplies purchased in North America and globally, respectively.
In 2023, we purchased paper from approximately 25 paper suppliers and our largest single source of paper supplies sold us approximately 64% and 26.5% of the paper supplies purchased in North America and globally, respectively.
We also believe significant opportunity exists to sell environmentally friendly packaging alternatives directly to consumers. • Continued Product Development and Innovation . We believe our ability to consistently innovate and add products to our portfolio through internal development and mergers and acquisitions (“M&A”) will provide us with additional growth opportunities. • Geographic Expansion .
We believe our ability to consistently innovate and add products to our portfolio through internal development and mergers and acquisitions (“M&A”) will provide us with additional growth opportunities. • Geographic Expansion .
Our business is global, with a strong presence in the U.S. and Europe along with an expanding footprint in Asia, serving end-users in approximately 57 countries across 6 continents. End-users rely on our paper consumables for use exclusively with our installed base of systems. 2 • Environmentally Sustainable Product Portfolio .
Our business is global, with a strong presence in the U.S. and Europe along with an expanding footprint in Asia. End-users rely on our paper consumables for use exclusively with our installed base of systems. • Environmentally Sustainable Product Portfolio . Our paper packaging materials are fiber-based, biodegradable, renewable, and curb-side recyclable to customers.
We have an installed base of approximately 82,000 FillPak ® units as of December 31, 2022. Our Void-Fill products generated $130.6 million in revenue in 2022, accounting for 40.0% of our net revenue. • Cushioning .
We have an installed base of approximately 83,700 FillPak units as of December 31, 2023. Our Void-Fill products generated $133.9 million in revenue in 2023, accounting for 39.8% of our net revenue. • Cushioning .
Most commonly, our e-commerce end-users purchase our Void-Fill solutions, but many also use our Automation, Wrapping, and Cushioning systems. Sales to our e-commerce end-users, directly and through distributors accounted for approximately 31.0% of our net revenue in 2022. The COVID-19 pandemic demonstrated the growing macroeconomic emphasis on e-commerce in the global economy.
Most 7 commonly, our e-commerce end-users purchase our Void-Fill solutions, but many also use our Automation, Wrapping, and Cushioning systems. Sales to our e-commerce end-users, directly and through distributors accounted for approximately 30% of our net revenue in 2023. Industrial Manufacturing.
Furthermore, through our distributors, we strive to ensure that our end-users are consistently supplied with our paper consumables on-time and that their PPS systems are running with minimal downtime. Most importantly, we, either directly or with our distributors, work with end-users to examine their end-of-line operations to maximize throughput, minimize cost and reduce breakage. • Unique Approach to Automation.
Most importantly, we, either directly or with our distributors, work with end-users to examine their end-of-line operations to maximize throughput, minimize cost and reduce breakage. • Unique Approach to Automation.
In addition, approximately 58.3% of our net revenue in 2022 was generated from outside the United States. 6 Our Strategy Our strategy for adding to our customer base includes investing in innovation, our sales force and distributor relationships across all end markets as well as expanding geographically.
Direct sales to end-users accounted for approximately 11% of our net revenue in 2023. Our Strategy Our strategy for adding to our customer base includes investing in innovation, our sales force and distributor relationships across all end markets as well as expanding geographically.
Our Automation Products Our AS solutions are comprised of configurable automated systems that fulfill the needs of end-of-line packaging automation for product distribution and shipping. We utilize one-dimensional box reduction that optimizes the size of corrugated boxes to fit the contents being shipped.
Our PPS systems predominantly use kraft paper of varying weights, sizes, and configurations. Our Automation Products Our AS systems are comprised of configurable automation machines that fulfill the needs of end-of-line packaging automation for product distribution and shipping. We utilize a right-sizing technique that optimizes the size of corrugated boxes to fit the contents being shipped.
Through our proprietary PPS systems and value-added kraft paper consumables, we offer a reliable, fast, and effective suite of protective packaging solutions. We believe that preference for environmentally sustainable packaging solutions will be a key driver of growth moving forward, particularly to the extent plastics and other resin-based solutions come under increasing public scrutiny. • Attractive Financial Profile .
We believe that preference for environmentally sustainable packaging solutions will be a key driver of growth moving forward, particularly to the extent plastics and other resin-based solutions come under increasing public scrutiny. • Attractive Financial Profile . In 2023, we generated net revenue of $336.3 million.
The kraft paper we purchase includes paper that is substantially manufactured from virgin pulp, as well as paper that is substantially manufactured from recycled post-industrial and/or post-consumer waste. Before we determine to purchase paper from any supplier, the supplier must undergo a qualification process to ensure that its product meets our exacting requirements.
Before we determine to purchase paper from any supplier, the supplier must undergo a qualification process to ensure that its product meets our exacting requirements.
The paper rolls are converted at our facilities before sale to our distributors and direct end-users for use with our Void-Fill, Cushioning and Wrapping protective systems.
Once a supplier is qualified, we purchase large rolls of kraft paper from that supplier for integration into our existing supply and production chain. The paper rolls are converted at our facilities before sale to our distributors and direct end-users for use with our Void-Fill, Cushioning and Wrapping protective systems.
We historically have benefited from consistently strong growth in net revenue and our installed base, net revenue that is recurring in nature, attractive profit margins, and substantial free cash flow conversion. Our capital expenditures per PPS system and each system’s long protective useful life result in attractive payback periods and returns on invested capital.
We historically have benefited from net revenue that is recurring in nature with attractive profit margins from our installed base, resulting in attractive payback periods and returns on invested capital per PPS system. • Diversified End-User Base .
We have expanded our offering to include fiber-based liners and sustainable plant-based cool packs to keep perishable goods cool while they are being delivered to consumers. • Expansion into Retail Channel and Consumables . We believe the retail channel provides a substantial opportunity for consumable versions of our existing Wrapping product line.
We believe businesses and consumers are increasingly demonstrating preferences for environmentally sustainable cold chain solutions to keep food and beverages cold during transit. We have expanded our offering to include fiber-based liners and sustainable plant-based cool packs to keep perishable goods cool while they are being delivered to consumers. • Expansion into Retail Channel and Consumables .
Our sales are geographically diverse, with 43.3% of our 2022 net revenue generated from end-users in North America, 46.5% generated from end-users in Europe, and 10.2% generated from end-users in Asia and other locations. • Diversified End-User Base .
Our revenues are geographically diverse, with approximately 41% of our 2023 net revenue generated from end-users in North America, approximately 51% generated from end-users in Europe, and approximately 8% generated from end-users in Asia and other locations.
We have 159 of our employees located in Europe who are covered by collective bargaining agreements. Our Intellectual Property Our intellectual property provides a strong competitive advantage.
As of December 31, 2023, we had approximately 800 full time employees worldwide, approximately 330 of whom were located in the United States. We have approximately 150 of our employees located in Europe who are covered by collective bargaining agreements. Our Intellectual Property 9 Our intellectual property provides a strong competitive advantage.
Depending on the needs of a customer, our APS solutions may consist of components that are sold outright to the customer or may include a mix of components sold outright and components of which we retain ownership.
Rather, we design and sell our AS systems outright to our customers and derive revenue by designing, manufacturing, installing, and servicing AS systems at end-user facilities. Depending on the needs of a customer, our APS systems are sold outright to the customer or may include a mix of components sold outright and components of which we retain ownership.
We are required to hold various permits to conduct our operations. Compliance with, or liability under, these laws, regulations and permits can require us to incur significant costs and have a material adverse effect on our capital expenditures, earnings, and competitive position.
We expect that, beginning in 2026, we will be required to disclose certain environmental, social and governance impacts, risks and opportunities for our fiscal year 2025 pursuant to CSRD. Compliance with, or liability under, these laws and regulations can require us to incur significant costs and have a material adverse effect on our capital expenditures, earnings, and competitive position.
Our paper packaging materials are fiber-based, biodegradable, renewable, and curb-side recyclable to customers. Our paper packaging materials contain little or no plastic or other resin-based inputs. Additionally, a majority of our paper packaging materials are manufactured from entirely or partially recycled content. In 2022, approximately 54.5% of our raw paper supply was Forest Stewardship Council (“FSC”) certified.
Our paper packaging materials contain little or no plastic or other resin-based inputs. Additionally, a majority of our paper packaging materials are manufactured from entirely or partially recycled content.
Additionally, a majority of our paper consumables sold to end-users are created from entirely or partially recycled content. In 2022, 54.8% of the pulp used to manufacture our paper consumables was recycled fiber, with 8.3% recycled from post-industrial waste and 46.5% recycled from post-consumer waste. In 2022, approximately 54.5% of our raw paper supply was FSC certified.
As an example of our continued progress, in 2023, approximately 86% of our raw paper supply was FSC-certified, up from approximately 55% in 2022. Additionally, a majority of our paper consumables sold to end-users are created from entirely or partially recycled content.
We believe our investments into paper innovations help close the price gap for sustainable solutions and provide an important tailwind for continued growth. • Demand for Automation . Our Automation product lines provide significant improvements to end-of-line packaging speed and lower labor costs for many high-volume businesses.
Our Automation and Machine Vision product lines provide significant improvements to end-of-line packaging speed and lower labor costs for many high-volume businesses.
Additionally, we believe both our end-users and consumers, generally, are demonstrating an increasing preference for environmentally sustainable solutions. We believe that these increasing preferences in favor of environmental sustainability will also be a significant driver of our continued growth.
We believe that these increasing preferences in favor of environmental sustainability will also be a significant driver of our continued growth. We believe our investments in paper innovations help close the price gap for sustainable solutions and provide an important tailwind for continued growth. • Demand for Automation and Machine Vision .
We convert the vast majority of raw paper to create rolls and bundles of paper that integrate with our PPS systems and into direct or consumable products. Our PPS systems predominantly use kraft paper of varying weights, sizes, and configurations.
Our consumables ship in bulk, which is efficient for customers in shipping and require less storage space than many competing products. We convert the vast majority of raw paper to create rolls and bundles of paper that integrate with our PPS systems and into direct or consumable products.
As businesses become more sophisticated, we believe many will look for ways to improve production efficiencies driving further demand for automated solutions. • Expansion into Cold Chain . We believe businesses and consumers are increasingly demonstrating preferences for environmentally sustainable cold chain solutions to keep food and beverages cold during transit.
As businesses continue to focus on efficiency and automated solutions, we believe many will look for ways to improve production efficiencies and quality, driving further demand for our automated and machine vision product lines. • Expansion into Cold Chain .
This fragmentation is due primarily to the variety of product types and the myriad of applications in which they are used around the world. Protective packaging is used to store and protect goods during shipping and handling from shock, vibration, abrasion and other damages.
Industry The global protective packaging industry is fragmented and competitive with market leaders accounting for a relatively small share of the market. This fragmentation is due primarily to the variety of product types and the myriad of applications in which they are used around the world.
Our engineering and other teams also assist our direct-sale end-users in ensuring the optimal customized installation of our products at their facilities. Direct sales to end-users accounted for 9.5% of our net revenue in 2022.
In some cases, these end-users operate some of the largest, most complex and sophisticated warehouse operations into which our PPS and Automation systems are integrated. Our engineering and other teams also assist our direct-sale end-users in ensuring the optimal customized installation of our products at their facilities.
These systems allow our end-users to both reduce their void-fill needs and optimize their logistics with smaller boxes while reducing labor costs. These solutions offer end-users numerous benefits including the reduction of shipping costs, waste, and labor, resulting in improved efficiency. • Multiple Drivers of Growth .
These systems allow our end-users to both reduce their void-fill needs and optimize their logistics costs with smaller boxes while reducing labor costs. • Machine Vision Solutions. Our machine vision solutions combine a modular software architecture with the capability to perform machine learning-based machine vision inspections on greyscale or color 2D images and 3D point clouds.
Our field of end-users is diverse and historically stable, with greater than 75.8% of distributor-serviced accounts generating less than $10,000 in annual net revenue in 2022. Our end-users vary in size from extremely small specialty manufacturers or retailers to some of the largest global e-commerce companies.
In 2023, approximately 89% of our net revenue was derived from sales to our distributors. End-Users. In addition, we sell our PPS systems and Automation products directly to certain select end-users. Our end-users vary in size from extremely small specialty manufacturers or retailers to some of the largest global e-commerce companies.
Removed
E-commerce activity increased further beginning in 2020 due to the growth experienced during the ongoing COVID-19 pandemic. While such growth slowed in 2022, we continue to believe that global investment in e-commerce provides a significant tailwind for us. 3 • Focus on Sustainability .
Added
This capability enables both APS and AS customers to increase uptime of their automation machinery by performing an inspection of the boxes prior to being processed. It also helps improve quality and efficiency by performing an inspection of the finished carton to ensure proper sealing and that the package has the correct graphics and necessary labeling.
Removed
Our recent innovations include: • 2022 • Globally launched Flap’it!™, a new solution in our AS product suite • Globally launched the next generation of the Cut’it!™ EVO solution in our AS product suite • 2021 • Launched new PPS Cushioning product, PadPak® Auto-Coiler, in North America • Launched new APS product, AutoFill™, in North America • Formed R Squared Robotics to develop cutting-edge end-of-line packaging systems utilizing the power of artificial intelligence and three-dimensional computer vision combined with robotics In addition to expanding our offerings through internal development, we seek to provide value added solutions to our customers through acquisitions as well as strategic investments and partnerships.
Added
Approximately 30% of our net revenue is derived from sales to e-commerce end-users. While growth slowed in 2022 and 2023, we continue to believe that global investment in e-commerce provides a significant opportunity for us. • Focus on Sustainability . Additionally, we believe both our end-users and consumers, generally, are demonstrating an increasing preference for environmentally sustainable solutions.
Removed
In 2021, we made two strategic investments to supplement our portfolio: • Pickle Robot Co. (“Pickle”) : Pickle has developed a low cost, collaborative package-handling robot that automates several key tasks along the e-commerce supply chain including sorting, as well as loading and unloading of packaged goods within logistical lines.
Added
We believe the retail channel provides a substantial opportunity for consumable versions of our existing Wrapping product line. We also believe significant opportunity exists to sell environmentally friendly packaging alternatives directly to consumers. • Continued Product Development and Innovation .
Removed
Our investment in Pickle is highly strategic and complements and expands our Automation products. • creapaper GmbH (“Creapaper”) : Creapaper is the inventor of grasspaper and uses a patented process to produce graspap, a raw material required for producing grasspaper.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome of the more significant risks relating to our business include: • We may be unable to secure a sufficient supply of paper to meet our production requirements given the limited number of suppliers that produce paper suitable for our products. • Production inputs, such as labor, energy, and freight costs may negatively impact our results of operations, including our profit margins, and financial condition. • Kraft paper pricing may negatively impact our results of operations, including our profit margins, and financial condition. • If significant tariffs or other restrictions are placed on the import of Chinese goods, or if China places tariffs or other restrictions on the import of U.S. goods, our business, financial condition or results of operations may be materially adversely affected. • We rely on third-party distributors to store, sell, market, service and distribute our products. • We are dependent upon certain key personnel. • Our level of outstanding indebtedness could adversely affect our financial condition and ability to fulfill our obligations. • Certain of our stockholders, including JS Capital, own a significant portion of the outstanding voting stock of the Company. • The price for our securities may be volatile. • Our business is exposed to risks associated with our reliance on third-party suppliers to provide both the components used in our protective packaging systems as well as certain fully assembled protective packaging systems. • Unfavorable end-user responses to price increases could have a material adverse impact on our business, results of operations and financial condition. • Continued consolidation in sectors in which many of our end-users operate may adversely affect our business, financial condition or results of operations. • Our efforts to expand beyond our core product offerings and into adjacent markets may not succeed and could adversely impact our business, financial condition or results of operations. • The global nature of our operations exposes us to numerous risks that could materially adversely affect our financial condition or results of operations. • We face risks related to Russia’s invasion of Ukraine. • Fluctuations between foreign currencies and USD could materially impact our consolidated financial condition or results of operations. • We are subject to a variety of environmental and product registration laws that expose us to potential financial liability and increased operating costs. • If we are not able to protect or maintain our trademarks, patents and other intellectual property, we may not be able to prevent competitors from developing similar products or from marketing their products in a manner that capitalizes on our trademarks, and this loss of a competitive advantage may have a material adverse effect on our business, financial position or results of operations. • Our acquisition and integration of businesses could adversely affect our business, financial condition or results of operations. • Our insurance policies may not cover all operating risks and a casualty loss beyond the limits of our coverage could adversely impact our business. 12 • Our annual effective income tax rate can change materially as a result of changes in our mix of U.S. and foreign earnings and other factors, including changes in tax laws and changes made by regulatory authorities. • The full realization of our deferred tax assets may be affected by a number of factors, including earnings in the United States. • We are subject to taxation in multiple jurisdictions.
Biggest changeSome of the more significant risks relating to our business include: • We may be unable to secure a sufficient supply of paper to meet our production requirements given the limited number of suppliers that produce paper suitable for our products. • Adverse changes in production input costs, such as labor, energy, and freight costs may negatively impact our results of operations, including our profit margins, and financial condition. • Variability in kraft paper pricing may cause volatility in, or may negatively impact, our results of operations, including our profit margins, and financial condition. 10 • If significant tariffs or other restrictions are placed on the import of Chinese goods, or if China places tariffs or other restrictions on the import of U.S. goods, our business, financial condition or results of operations may be materially adversely affected. • We rely on third-party distributors to store, sell, market, service and distribute our products. • Our level of outstanding indebtedness could adversely affect our financial condition and ability to fulfill our obligations. • Certain of our stockholders, including JS Capital, own a significant portion of the outstanding voting stock of the Company. • The price for our securities may be volatile. • We rely on third-party suppliers to provide both the components used in our protective packaging systems as well as certain fully assembled protective packaging systems. • Unfavorable customer or consumer responses to price increases could have a material adverse impact on our business, results of operations and financial condition. • Our efforts to expand beyond our core product offerings and into adjacent markets may not succeed and could adversely impact our business, financial condition or results of operations. • The global nature of our operations exposes us to numerous risks that could materially adversely affect our financial condition or results of operations. • We face risks related to economic, competitive, and market conditions generally, including macroeconomic uncertainty, the impact of inflation, and geopolitical conflicts and other social and political unrest or change. • Fluctuations between foreign currencies and USD could materially impact our consolidated financial condition or results of operations. • We are subject to a variety of evolving environmental, governmental, and product registration laws and regulations that expose us to potential financial liability and increased operating costs. • If we are not able to protect or maintain our trademarks, patents and other intellectual property, we may not be able to prevent competitors from developing similar products or from marketing their products in a manner that capitalizes on our trademarks, and this loss of a competitive advantage may have a material adverse effect on our business, financial position or results of operations. • Our insurance policies may not cover all operating risks and a casualty loss beyond the limits of our coverage could adversely impact our business. • Our annual effective income tax rate can change materially as a result of changes in our mix of U.S. and foreign earnings and other factors, including changes in tax laws and changes made by regulatory authorities. • The full realization of our deferred tax assets may be affected by a number of factors. • We are subject to taxation in multiple jurisdictions.
As a result, we are exposed to currency fluctuations both in receiving cash from our international operations and in translating our financial results back to USD. During periods of a strengthening USD, we reported international net revenue and net earnings could be reduced because foreign currencies may translate into fewer USD.
As a result, we are exposed to currency fluctuations both in receiving cash from our international operations and in translating our financial results back to USD. During periods of a strengthening USD, reported international net revenue and net earnings could be reduced because foreign currencies may translate into fewer USD.
If we lose significant sales volume, are required to reduce our selling prices significantly or are unable to collect amounts due, there could be a negative impact on our 23 profitability and cash flows, which could have a material adverse effect on our business, financial condition or results of operations, including impairment of goodwill, long-lived assets, and intangible assets.
If we lose significant sales volume, are required to reduce our selling prices significantly or are unable to collect amounts due, there could be a negative impact on our profitability and cash flows, which could have a material adverse effect on our business, financial condition or results of operations, including impairment of goodwill, long-lived assets, and intangible assets.
We have outstanding debt, and the outstanding indebtedness may: • adversely impact our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes; • require us to dedicate a substantial portion of our cash flow to payment of principal and interest on our debt and fees on our letters of credit, which reduces the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; • subject us to the risk of increased sensitivity to interest rate increases based upon variable interest rates, including our outstanding borrowings (if any); • increase the possibility of an event of default under the financial and operating covenants contained in our existing debt instruments; and • limit our ability to adjust to rapidly changing market conditions, reduce our ability to withstand competitive pressures and make it more vulnerable to a downturn in general economic conditions of our business than their competitors with less debt.
We have outstanding debt, and the outstanding indebtedness may: • adversely impact our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes; • require us to dedicate a substantial portion of our cash flow to payment of principal and interest on our debt and fees on our letters of credit, which reduces the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; • subject us to the risk of increased sensitivity to interest rate increases based upon variable interest rates, including our outstanding borrowings; • increase the possibility of an event of default under the financial and operating covenants contained in our existing debt instruments; and • limit our ability to adjust to rapidly changing market conditions, reduce our ability to withstand competitive pressures and make it more vulnerable to a downturn in general economic conditions of our business than their competitors with less debt.
Many of our existing competitors also invest substantial resources in ongoing R&D, and we anticipate increased competition as consumer 22 preferences and other trends increase the appeal of our product areas. To the extent that our competitors introduce new products or technologies, such developments could render our products obsolete, less competitive or uneconomical.
Many of our existing competitors also invest substantial resources in ongoing R&D, and we anticipate increased competition as consumer preferences and other trends increase the appeal of our product areas. To the extent that our competitors introduce new products or technologies, such developments could render our products obsolete, less competitive or uneconomical.
Foreign exchange rates can also impact the competitiveness of products produced in certain jurisdictions and exported for sale into other jurisdictions. These changes may impact the value received for the sale of our goods versus those of our competitors.
Foreign exchange rates can also impact the competitiveness of products 14 produced in certain jurisdictions and exported for sale into other jurisdictions. These changes may impact the value received for the sale of our goods versus those of our competitors.
Risks Related to Our Business We may be unable to secure a sufficient supply of paper to meet our production requirements given the limited number of suppliers that produce paper suitable for our products.
Risks Related to Our Business 11 We may be unable to secure a sufficient supply of paper to meet our production requirements given the limited number of suppliers that produce paper suitable for our products.
Economic uncertainty in some of the geographic regions in which we operate, including developing regions, could result in the disruption of commerce and negatively impact our cash flows or operations in those areas.
Economic uncertainty in some of the 13 geographic regions in which we operate, including developing regions, could result in the disruption of commerce and negatively impact our cash flows or operations in those areas.
In order to continue listing our securities on the NYSE, we must maintain certain financial, distribution and share price levels. If the NYSE 20 delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market.
In order to continue listing our securities on the NYSE, we must maintain certain financial, distribution and share price levels. If the NYSE delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we 19 expect our securities could be quoted on an over-the-counter market.
Uncertain global economic conditions have had and may continue to have an adverse impact on our business in the form of lower net revenue due to weakened demand, inflationary pressures, unfavorable changes in product price/mix, or lower profit margins.
Uncertain global economic conditions, inflationary pressures, and geopolitical unrest have had and may continue to have an adverse impact on our business in the form of lower net revenue due to weakened demand, inflationary pressures, unfavorable changes in product price/mix, or lower profit margins.
The global nature of our operations exposes us to numerous risks that could materially adversely affect our financial condition or results of operations. We maintain production facilities in three countries and territories, and our products are distributed to approximately 57 countries and territories around the world.
The global nature of our operations exposes us to numerous risks that could materially adversely affect our financial condition or results of operations. We maintain production facilities in three countries and territories, and our products are distributed to approximately 54 countries and territories around the world.
This could cause the market price of our common stock to drop significantly, even if our business is doing well. 19 Sales of a substantial number of shares of common stock in the public market could occur at any time.
This could cause the market price of our common stock to drop significantly, even if our business is doing well. 18 Sales of a substantial number of shares of common stock in the public market could occur at any time.
If any such expansion does not enhance our ability to maintain or grow net revenue or recover any associated development costs, our business, financial condition or results of operations could be adversely affected. Uncertain global economic conditions have had and could continue to have an adverse effect on our financial condition or results of operations.
If any such expansion does not enhance our ability to maintain or grow net revenue or recover any associated development costs, our business, financial condition or results of operations could be adversely affected. Uncertain global economic conditions, inflationary pressures, and geopolitical unrest have had and could continue to have an adverse effect on our financial condition or results of operations.
These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of December 31, 2022, JS Capital holds approximately 37.2% of our total outstanding shares.
These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of December 31, 2023, JS Capital holds approximately 37.0% of our total outstanding shares.
Disruptions could occur for many reasons, including fire, natural disasters, weather, unplanned maintenance or other manufacturing problems, outbreaks of infectious diseases, including the ongoing COVID-19 pandemic, strikes or other labor unrest, transportation interruption, government regulation, contractual disputes, political unrest or terrorism. For example, we operate in leased facilities worldwide.
Disruptions could occur for many reasons, including fire, natural disasters, weather, unplanned maintenance or other manufacturing problems, outbreaks of infectious diseases, strikes or other labor unrest, transportation interruption, government regulation, contractual disputes, political unrest or terrorism. For example, we operate in leased facilities worldwide.
In any such event, our business could be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, or the imposition of additional tariffs, any of which could cause us to raise prices or make changes to our operations, and could materially harm our business, financial condition or results of operations.
In any such event, our business could be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, the imposition of additional tariffs, or as a result of increased political tensions, any of which could cause us to raise prices or make changes to our operations, and could materially harm our business, financial condition or results of operations.
These risks include, but are not limited to: • the risk that our supplier agreements will be terminated, or that we will not be able to renew our agreements on favorable economic terms, and as a result our cost of goods will increase; • the risk that our suppliers, including those in China that supply a majority of the components and systems provided to our end-users, will experience operational delays or disruptions, including as a result of the ongoing coronavirus outbreak, that will affect our ability to produce protective packaging systems or provide them to our distributors and end-users; • the risk that our suppliers will fail, or will no longer be able to provide the components which we use to produce our protective packaging systems; • the risk that our suppliers will not be able to meet an increase in demand for the components which we use to produce our protective packaging systems; • the risk that our suppliers’ costs will increase, and that they will increase the prices of components or fully assembled protective packaging systems; • the risk that suppliers of fully assembled protective packaging systems will increase their prices or will no longer be able to provide us with protective packaging systems; and • the risk that our suppliers in China will be subject to increased trade barriers as a result of U.S.-Chinese trade measures, and such trade barriers will increase the costs of these components and systems or negatively impact our ability to purchase these components and systems.
These risks include, but are not limited to: • the risk that our supplier agreements will be terminated, or that we will not be able to renew our agreements on favorable economic terms, and as a result our cost of goods will increase; • the risk that our suppliers, including those in China that supply a majority of the components and systems provided to our end-users, will experience operational delays or disruptions that will affect our ability to produce protective packaging systems or provide them to our distributors and end-users; • the risk that our suppliers will fail, or will no longer be able to provide the components which we use to produce our protective packaging systems; • the risk that our suppliers will not be able to meet an increase in demand for the components which we use to produce our protective packaging systems; • the risk that our suppliers’ costs will increase, and that they will increase the prices of components or fully assembled protective packaging systems; • the risk that suppliers of fully assembled protective packaging systems will increase their prices or will no longer be able to provide us with protective packaging systems; and • the risk that our suppliers in China will be subject to increased trade barriers as a result of U.S.-Chinese trade measures, and such trade barriers will increase the costs of these components and systems or negatively impact our ability to purchase these components and systems. 12 For example, following the outbreak of the COVID-19 pandemic, we experienced delays in the supply of certain components used in the assembly of certain of our protective packaging systems and Automation products.
Risks inherent in our international operations include: • foreign currency exchange controls and tax rates, and exchange rate fluctuations, including devaluations; • the potential for changes in regional and local economic conditions, including regional or local inflationary pressures and/or regional or local energy disruptions or price increases; • laws and regulations governing foreign investment, foreign trade and currency exchange, such as those on transfer or repatriation of funds, which may affect our ability to repatriate cash as dividends or otherwise and may limit our ability to convert foreign cash flows into USD; • restrictive governmental actions such as those on trade protection matters, including antidumping duties, tariffs, embargoes and prohibitions or restrictions on acquisitions or joint ventures; • the imposition of tariffs and other trade barriers, and the effects of retaliatory trade measures; • compliance with U.S. laws and regulations, including those affecting trade and foreign investment and the U.S.
Risks inherent in our international operations include: • foreign currency exchange controls and tax rates, and exchange rate fluctuations, including devaluations; • the potential for changes in regional and local economic conditions, including regional or local inflationary pressures and/or regional or local energy disruptions or price increases; • laws and regulations governing foreign investment, foreign trade and currency exchange, such as those on transfer or repatriation of funds, which may affect our ability to repatriate cash as dividends or otherwise and may limit our ability to convert foreign cash flows into USD; • restrictive governmental actions such as those on trade protection matters, including antidumping duties, tariffs, embargoes and prohibitions or restrictions on acquisitions or joint ventures; • burdens and risks of complying with a number and variety of foreign laws and regulations, including the U.S.
Subject to certain exceptions, such agreements restrict our ability to, among other things: • incur additional indebtedness, issue disqualified stock and make guarantees; • incur liens on assets; • engage in mergers or consolidations or fundamental changes; • sell assets; • pay dividends and distributions or repurchase capital stock; • make investments, loans and advances, including acquisitions; • amend organizational documents; • enter into certain agreements that would restrict the ability to incur liens on assets; • repay certain junior indebtedness; • enter into sale-leasebacks; • engage in transactions with affiliates; and • in the case of our subsidiary Ranger Pledgor LLC, engage in activities other than passively holding the equity interests in the borrowers and their subsidiaries.
Subject to certain exceptions, such agreements restrict our ability to, among other things: • incur additional indebtedness, issue disqualified stock and make guarantees; • incur liens on assets; • engage in mergers or consolidations or fundamental changes; • sell assets; • pay dividends and distributions or repurchase capital stock; • make investments, loans and advances, including acquisitions; • amend organizational documents; • enter into certain agreements that would restrict the ability to incur liens on assets; • repay certain junior indebtedness; • enter into sale-leasebacks; • engage in transactions with affiliates; and • in the case of our subsidiary Ranger Pledgor LLC, engage in activities other than passively holding the equity interests in the borrowers and their subsidiaries. 21 Further, various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants.
For example, in 2022, we purchased approximately 43.7% and 21.7% of our raw paper requirements in North America and globally, respectively, from a single supplier, WestRock Company (“WestRock”). Increasing consolidation among our suppliers or the paper supply market more broadly may increase our reliance on existing suppliers or impact our ability to obtain alternative suppliers, if necessary.
For example, in 2023, we purchased approximately 64.2% and 26.5% of our raw paper requirements in North America and globally, respectively, from a single supplier, WestRock Company (“WestRock”). Increasing consolidation among our suppliers or the paper supply market more broadly may increase our reliance on existing suppliers or impact our ability to obtain alternative suppliers, if necessary.
For example, we could encounter difficulties in attracting new end-users due to lower levels of familiarity with our brand among potential distributor partners and end-users in markets we do not currently serve.
For example, we could encounter difficulties in attracting new end-users due to lower levels of familiarity with our brand among potential distributor partners and end-users in markets we do not 22 currently serve and customer acceptance of our products is not guaranteed.
In addition, the implementation of the new ERP system affected operations, including scheduled downtime, processing and shipping inefficiencies, and the delay of pricing increases. Moreover, as disclosed in “
In addition, the implementation of the new ERP system affected operations, including scheduled downtime, processing and shipping inefficiencies, and the delay of pricing increases.
As a result, any adverse development in the tax laws of any of these jurisdictions or any disagreement with our tax positions could have a material adverse effect on our business, consolidated financial condition or results of operations.
We are subject to taxation in multiple jurisdictions. As a result, any adverse development in the tax laws of any of these jurisdictions or any disagreement with our tax positions could have a material adverse effect on our business, consolidated financial condition or results of operations.
We may continue to experience difficulties with our new enterprise resource planning system. During 2022 we implemented a new enterprise resource planning (“ERP”) system that is used to manage our business and summarize our operating results. The implementation of the new ERP system required the investment of significant financial and human capital resources.
For example, during 2022, we implemented a new enterprise resource planning (“ERP”) system that is used to manage our business and summarize our operating results. The implementation of the new ERP system required the investment of significant financial and human capital resources.
The price of our securities has been and may continue to be volatile. The price of our securities can vary due to general market and economic conditions and forecasts, our general business condition and the release of our financial reports. During 2022, our Class A common shares traded between $2.91 and $39.48 per share.
The price of our securities has been and may continue to be volatile. The price of our securities can vary due to general market and economic conditions and forecasts, our general business condition and the release of our financial reports. During 2023, our Class A common shares traded between $2.69 and $8.21 per share.
Some jurisdictions in which we operate have laws and regulations that govern the registration and labeling of some of our products. For example, we expect significant future environmental compliance obligations for our European operations as a result of the European Union (“EU”) Regulation “Registration, Evaluation, Authorization, and Restriction of Chemicals” (EU Regulation No. 2006/1907) enacted on December 18, 2006.
Some jurisdictions in which we operate have laws and regulations that govern the registration and labeling of some of our products. For example, we are subject to environmental compliance obligations for our European operations under the European Union (“EU”) Regulation “Registration, Evaluation, Authorization, and Restriction of Chemicals” (EU Regulation No. 2006/1907) enacted on December 18, 2006.
Additionally, the advent of emerging or improved technologies, such as the potential widespread availability of lower cost bio-plastics or increased recyclability of resin-based packaging solutions, could satisfy market and consumer demand for environmentally sustainable packaging solutions and negatively impact our business, financial condition or results of operations even if the current trend in favor of environmentally sustainable solutions continues. 14 Continued consolidation in sectors in which many of our end-users operate may adversely affect our business, financial condition or results of operations.
Additionally, the advent of emerging or improved technologies, such as the potential widespread availability of lower cost bio-plastics or increased recyclability of resin-based packaging solutions, could satisfy market and consumer demand for environmentally sustainable packaging solutions and negatively impact our business, financial condition or results of operations even if the current trend in favor of environmentally sustainable solutions continues.
If any applicable tax authorities, including U.S. tax authorities, were to successfully challenge the tax treatment or characterization of any of our transactions, it could have a material adverse effect on our business, consolidated financial condition or results of our operations. Our level of outstanding indebtedness could adversely affect our financial condition and ability to fulfill our obligations.
If any applicable tax authorities, including U.S. tax authorities, were to successfully challenge the tax treatment or characterization of any of our transactions, it could have a material adverse effect on our business, consolidated financial condition or results of our operations.
Additionally, the U.S. government continues to signal that it may alter trade agreements and terms between China and the United States, including limiting trade with China, and may impose additional tariffs on imports from China. In addition, political tensions between the United States and China have escalated in recent years.
Additionally, the U.S. government continues to signal that it may alter trade agreements and terms between China and the United States, including limiting trade with China, and may impose additional tariffs on imports from China.
As a result, any adverse development in the tax laws of any of these jurisdictions or any disagreement with our tax positions could have a material adverse effect on our business, consolidated financial condition or results of operations. • Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations. • Our debt financing may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us. • We may be unable to obtain additional financing to fund our operations or growth. • Provisions in our organizational documents may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.
As a result, any adverse development in the tax laws of any of these jurisdictions or any disagreement with our tax positions could have a material adverse effect on our business, consolidated financial condition or results of operations. • Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations. • Our debt financing may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us. • We may be unable to obtain additional financing to fund our operations or growth. • Our failure to develop new products that meet our sales or margin expectations, or the failure of those products to achieve market acceptance, could adversely affect our financial condition and results of operations. • If we fail to maintain an effective system of internal controls in the future, we may experience a loss of investor confidence and an adverse impact to our stock price. • Provisions in our organizational documents may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.
Moreover, we position ourselves in the protective packaging market as the leading environmentally sustainable protective packaging solutions provider. Although we believe a market and consumer preference for environmentally sustainable solutions is a trend that is likely to continue, there is no guarantee that it will do so or that we will benefit from the continuing trend.
Although we believe a market and consumer preference for environmentally sustainable solutions is a trend that is likely to continue, there is no guarantee that it will do so or that we will benefit from the continuing trend.
Further, various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants. Failure to comply with any of the covenants in our existing or future financing agreements, including with respect to the senior secured credit facilities, could result in a default under those agreements and under other agreements containing cross-default provisions.
Failure to comply with any of the covenants in our existing or future financing agreements, including with respect to the senior secured credit facilities, could result in a default under those agreements and under other agreements containing cross-default provisions.
A substantial portion of our operations are located outside of the United States and 58.3% of our 2022 revenue was generated outside of the United States. These operations, particularly in developing regions, are subject to various risks that may not be present or as significant for our U.S. and European operations.
A substantial portion of our operations are located outside of the United States and 59.0% of our 2023 revenue was generated outside of North America. These operations, particularly in developing regions, are subject to various risks that may not be present or as significant for our North American and European operations.
A major loss of or disruption in our assembly and distribution operations could adversely affect our business, financial condition or results of operations. 16 A disruption in operations at one or more of our assembly and distribution facilities, or those of our suppliers, could have a material adverse effect on our business or operations.
A disruption in operations at one or more of our assembly and distribution facilities, or those of our suppliers, could have a material adverse effect on our business or operations.
Fluctuations between foreign currencies and USD could materially impact our consolidated financial condition or results of operations. Approximately 58.3% of our net revenue in 2022 was generated outside the United States. We translate net revenue and other results denominated in foreign currency into USD for our consolidated financial statements.
Fluctuations between foreign currencies and USD could materially impact our consolidated financial condition or results of operations. We translate net revenue and other results denominated in foreign currency into USD for our consolidated financial statements.
Adverse changes in input costs, such as kraft paper or energy pricing, may negatively impact our results of operations, including our profit margins, and financial condition. Our primary input is kraft paper, which we purchase from various paper suppliers around the world.
Adverse changes in input costs, such as kraft paper, may negatively impact our results of operations, including our profit margins, and financial condition. Our primary input is kraft paper, which we purchase from various paper suppliers around the world. Increases in global or regional market demand for paper-based products could increase the cost of the kraft paper we purchase.
Additional sales of our common stock into the market may cause the market price of our common to drop significantly. Certain of our stockholders, including JS Capital, own a significant portion of the outstanding voting stock of the Company. As of December 31, 2022, JS Capital holds approximately 37.2% of our total outstanding shares.
Additional sales of our common stock in the market may cause the market price of our common stock to drop significantly. Certain of our stockholders, including JS Capital, own a significant portion of the outstanding voting stock of the Company.
Foreign Corrupt Practices Act of 1977, as amended (the “Foreign Corrupt Practices Act”); 15 • compliance with tax laws, or changes to such laws or the interpretation of such laws, affecting taxable income, tax deductions, or other attributes relating to our non-U.S. earnings or operations; • difficulties of enforcing agreements and collecting receivables through certain foreign legal systems; • difficulties of enforcement and variations in protection of intellectual property and other legal rights; • more expansive legal rights of foreign unions or works councils; • changes in labor conditions and difficulties in staffing and managing international operations; • import and export delays caused, for example, by an extended strike at the port of entry, or major disruptions to international or domestic trade routes due to strikes, shortages, acts of terrorism or acts of war could cause a delay in our supply chain operations; • geographic, language and cultural differences between personnel in different areas of the world; • political, social, legal and economic instability, continued inflationary pressures, civil unrest, war, catastrophic events, acts of terrorism, effects of climate change, and widespread outbreaks of infectious diseases, including the ongoing COVID-19 pandemic; and • compliance with data protection and privacy regulations in many of the countries in which we operate, including the General Data Protection Regulation (“GDPR”) in the EU which has been in effect since May 2018.
Foreign Corrupt Practices Act of 1977, as amended (the “Foreign Corrupt Practices Act”); • compliance with tax laws, or changes to such laws or the interpretation of such laws, affecting taxable income, tax deductions, or other attributes relating to our non-U.S. earnings or operations; • difficulties of enforcing agreements and collecting receivables through certain foreign legal systems; • difficulties of enforcement and variations in protection of intellectual property and other legal rights; • more expansive legal rights of foreign unions or works councils, changes in labor conditions, and difficulties in staffing and managing international operations; • import and export delays or major disruptions to international or domestic trade routes due to strikes, shortages, acts of terrorism or acts of war could cause a delay in our supply chain operations; • geographic, language and cultural differences between personnel in different areas of the world; and • political, social, legal and economic instability, civil unrest, war, catastrophic events, or acts of terrorism could impact our supply chain.
We are subject to a number of federal, state, local and foreign environmental, health and safety laws and regulations that govern, among other things, the manufacture and assembly of our products, the discharge of pollutants into the air, soil and water and the use, handling, transportation, storage and disposal of hazardous materials. 17 Many jurisdictions require us to have operating permits for our assembly and warehouse facilities and operations.
We are subject to a variety of evolving environmental and governmental regulations and product registration laws that expose us to potential financial liability and increased operating costs. 15 We are subject to a number of federal, state, local and foreign environmental, health and safety laws and regulations that govern, among other things, the manufacture and assembly of our products, the discharge of pollutants into the air, soil and water and the use, handling, transportation, storage and disposal of hazardous materials.
Changes in these preferences, as well as changes in consumer behavior generally, could negatively impact demand for our products which could have a material adverse effect on our business, financial condition or results of operations.
Changes in consumer preferences or behavior generally could negatively impact demand for our products which could have a material adverse effect on our business, financial condition or results of operations. Moreover, we position ourselves in the protective packaging market as the leading environmentally sustainable protective packaging solutions provider.
These and other factors may have a material adverse effect on our business, results of operation or financial condition. Demand for our products could be adversely affected by changes in end-user or consumer preferences, which could have a material adverse effect on our business, financial condition or results of operations.
Demand for our products could be adversely affected by changes in end-user or consumer preferences, which could have a material adverse effect on our business, financial condition or results of operations. Our net revenue depends primarily on the volume of purchases by our end-users in the e-commerce industry and other industries it serves.
A decline in the market price for our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future. 21 If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline. 20 The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors.
If significant tariffs or other restrictions are placed on the import of Chinese goods, or if China places tariffs or other restrictions on the import of U.S. goods, our business, financial condition or results of operations may be materially adversely affected.
Legal and Regulatory Risks If significant tariffs or other restrictions are placed on the import of Chinese goods, if China places tariffs or other restrictions on the import of U.S. goods, or if relations between China and the U.S. were to deteriorate as a result of tensions in the South China Sea, with respect to Taiwan or otherwise, our business, financial condition or results of operations may be materially adversely affected.
We may not prevail in any such litigation, and if we are unsuccessful, we may not be able to obtain any necessary licenses on reasonable terms or at all.
We may not prevail in any such litigation, and if we are unsuccessful, we may not be able to obtain any necessary licenses on reasonable terms or at all. Any failure by us to protect our trademarks and other intellectual property rights may have a material adverse effect on our business, financial condition or results of operations.
However, we might not be able to refinance our existing debt or obtain any such new or additional facilities on favorable terms or at all. Risk Related to Ownership of Our Securities A significant portion of our total outstanding shares may be sold into the market in the near future.
Risk Related to Ownership of Our Securities A significant portion of our total outstanding shares may be sold into the market in the near future.
Risks Related to Our Indebtedness Our debt financing may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us.
However, we might not be able to refinance our existing debt or obtain any such new or additional facilities on favorable terms or at all. Our debt financing may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us.
Any failure by us to protect our trademarks and other intellectual property rights may have a material adverse effect on our business, financial condition or results of operations. 18 Our acquisition and integration of businesses could adversely affect our business, financial condition or results of operations.
These and other factors may have a material adverse effect on our international operations and, consequently, on our financial condition or results of operations. A major loss of or disruption in our assembly and distribution operations could adversely affect our business, financial condition or results of operations.
Increased compliance costs, increasing risks and penalties associated with violations, or our inability to market some of our products in certain jurisdictions may have a material adverse effect on our business, financial condition or results of operations.
Increased compliance costs, increasing risks and penalties associated with violations, or our inability to market some of our products in certain jurisdictions may have a material adverse effect on our business, financial condition or results of operations. 16 We face risks associated with ESG matters, including climate change There has been an increased focus, including from investors, customers, regulators, and other stakeholders regarding ESG matters, including with respect to climate change; circular economy; packaging waste; sustainable supply chain practices; biodiversity, deforestation, land, energy, and water use; and diversity, equity, inclusion and belonging and other human capital matters.
Rising political tensions could reduce trade, investment, or other economic activities between the two major economies.
In addition, political tensions between the United States and China have escalated in recent years, including as a result of tensions in the South China Sea and with respect to Taiwan. Rising political tensions could reduce trade, investment, or other economic activities between the two major economies.
For example, since the outbreak of the ongoing COVID-19 pandemic, we have experienced delays in the supply of certain components used in the assembly of certain of our protective packaging systems and Automation products. Should these delays continue or should our supply of such components be interrupted, our business and results of operations may be adversely affected.
Should these delays re-occur or our supply of such components be interrupted, our business and results of operations may be adversely affected. In addition, some of our third-party suppliers for components and fully assembled systems represent our only source for such products.
In addition, some of our third-party suppliers for components and fully assembled systems, including certain suppliers impacted by the ongoing coronavirus outbreak, represent our only source for such products. If we are unable to continue to purchase such components and systems from such suppliers, we may face additional costs or delays, or be unable to obtain similar components and systems.
If we are unable to continue to purchase such components and systems from such suppliers, we may face additional costs or delays, or be unable to obtain similar components and systems. These and other factors may have a material adverse effect on our business, results of operation or financial condition.
Nevertheless, the continuation or expansion of this conflict could constrain our ability to obtain the paper we use in our products, which, in turn, could have a material adverse effect on our business, results of operations and financial condition.
In particular, if additional restrictions on trade with Russia were adopted by the European Union or the United States, and were applicable to our products, we could lose revenue and experience lower growth rates in the future, which could have a material adverse effect on our business, financial condition or results of operations.
We are a borrower under senior secured credit facilities provided by Goldman Sachs Merchant Banking Division consisting of a $250.0 million dollar-denominated first lien term facility, a €135.5 million Euro-denominated first lien term facility and a $45.0 million revolving facility.
We are a borrower under senior secured credit facilities provided by Goldman Sachs Lending Partners LLC.
Removed
Additionally, in 2021, we purchased approximately 18.5% of our raw paper requirements in Europe (which approximated 11.4% of global supply) from a supplier in Russia. However, in response to Russia’s invasion of Ukraine, we eliminated our paper sourcing from Russian suppliers and reallocated our purchases to other mills across the globe in the third quarter of 2022.
Added
Our suppliers rely heavily on the use of certain raw materials, energy sources, and third-party companies for transportation services. Fluctuations in the cost of these inputs may result in variability related to paper costs. In 2023 and 2022, global inflation and other macroeconomic factors, including geopolitical conflicts, contributed to the increases in the cost of paper.
Removed
Increases in global or regional market demand for paper-based products could increase the cost of the kraft paper we purchase. Increases in the price of kraft paper could also result from, among other things, increases in the cost of the raw materials used in paper production or increases in the cost of the energy our suppliers use to manufacture paper.
Added
For example, in 2022, energy prices increased significantly, compared to 2021, before declining throughout 2023 compared to 2022. Because we operate in a highly competitive business, we may not be able to pass these increased market costs on to our customers to mitigate the impact of these or future increases in input costs.
Removed
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.
Added
In addition, increasingly regulators are focusing on ESG matters and related disclosures, and we are subject to changing rules and regulations promulgated by organizations such as the SEC, NYSE and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity, making compliance more difficult and uncertain.
Removed
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.
Added
Further, new and emerging regulatory initiatives in the U.S., European Union (“EU”) and the U.K. related to climate change and ESG could adversely affect our business, including initiatives and regulations deriving from the European Sustainability Reporting Standards promulgated by the EU in July 2023, under the EU’s Corporate Sustainability Reporting Directive (“CSRD”), which will require that we make certain disclosures in 2026 relating to our ESG impacts, risks and opportunities for fiscal year 2025.
Removed
In the third quarter of 2022, we eliminated our paper sourcing from Russian suppliers and reallocated our purchases to other mills across the globe. We began to see stabilization of inflationary concerns regarding paper in North America during the second half of 2022, however, inflationary pricing conditions in Europe remain unsteady, 13 primarily due to the volatility in energy markets.
Added
While we have begun the process of analyzing our business to determine the scope of our required disclosures, CSRD, as well as other sustainability-related disclosure requirements that may be adopted in other jurisdictions in which we operate, could require that we change the processes by which we currently collect sustainability-related data about our business, this increased disclosure regime, which in turn may lead to additional increased compliance costs and have a material adverse effect on our business, financial condition, or results of operations.
Removed
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.
Added
On March 21, 2022, the SEC issued a proposed rule regarding the enhancement and standardization of mandatory climate-related disclosures for investors. The proposed rule would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy and greenhouse gas emissions, for certain public companies.
Removed
Our net revenue depends primarily on the volume of purchases by our end-users in the e-commerce industry and other industries it serves. End-user preferences for packaging formats, as well as the preferences of our end-users, can influence net revenue.
Added
Although the ultimate date of effectiveness and the final form and substance of the proposed rule are not yet known and the ultimate scope and impact on our business is uncertain, compliance with the proposed rule, if finalized, may result in increased legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place strain on our personnel, systems and resources.
Removed
For example, following an increase in e-commerce activity during 2020 and 2021 as a result of the COVID-19 pandemic and associated shutdown measures, e-commerce activity was negatively impacted in 2022 due to the opening up of economies, which negatively impacted revenue from our product categories.
Added
At the state level, in 2023 California enacted legislation that will ultimately require certain companies that do business in California to publicly disclose their Scopes 1, 2 and 3 greenhouse gas emissions, with third-party assurance of such data, and issue public reports on their climate-related financial risk and related mitigation measures; and requires companies that operate in California and make certain climate-related claims to provide enhanced disclosures around the achievement of such claims.
Removed
Many of the sectors in which many of our end-users operate, such as the e-commerce, automotive after-market, electronics, machinery and home goods markets, have been consolidating in recent years, and this trend may continue.
Added
There is also a risk of mismatch between U.S., EU, and U.K initiatives.
Removed
Because our business relies on integrating our protective packaging systems into end-users’ existing operations and generating revenue through the sale of our paper consumables, increased consolidation may have an adverse impact on our or our distributors’ ability to attract additional end-users or retain existing end-users, or on the pricing of our products and services, which could in turn adversely affect our business, financial condition or results of operations.
Added
Outside of the U.S., U.K., and the EU, various government authorities have proposed or implemented carbon taxes, requirements for asset managers to integrate climate risk considerations in investment and risk management processes, and mandatory TCFD-aligned reporting for public issuers and certain asset managers and private companies, among other requirements.
Removed
Under this regulation, our collection, processing storage, use and transmission of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements, differing views on data privacy or security breaches. These and other factors may have a material adverse effect on our international operations and, consequently, on our financial condition or results of operations.
Added
We cannot guarantee that our current ESG practices will meet future regulatory requirements, reporting frameworks, or best practices, increasing the risk of related enforcement, and compliance with new requirements may lead to increased management burden and related costs. Many jurisdictions require us to have operating permits for our assembly and warehouse facilities and operations.
Removed
We face risks related to Russia’s invasion of Ukraine. In February 2022, Russia launched a large-scale military invasion of Ukraine. The U.S. and other countries and certain international organizations have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response, and additional sanctions may be imposed in the future.
Added
This increased awareness may result in more prescriptive reporting requirements, increased expectations with regards to transparency, and increased pressure to set targets and accountability with respect to meeting those targets. We have established and publicly disclosed targets and other commitments related to ESG matters.
Removed
The conflict in Ukraine and resulting sanctions negatively impacted the Company during 2022, including through increased energy costs, particularly in Europe; shipping variabilities due to truck driver shortages; increased pricing for paper products as a result of decreased availability of paper products previously sourced from Russian paper mills; and, prior to the Company’s elimination of paper products sourced from Russia during third quarter of 2022, increased shipping times for paper products sourced from Russian paper mills.
Added
All of our ESG targets and commitments are subject to a variety of assumptions, risks and uncertainties, many of which are outside our control.
Removed
The impact of hostilities and sanctions may also negatively impact countries surrounding Russia and Ukraine in which we have operations.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−1 removed0 unchanged
Biggest changeP ROPERTIES The following table provides our locations and their various functions: Function Location Segment PPS System Assembly Paper Consumables Automation Sales/ Administrative Concord Township, Ohio [1] North America ✓ ✓ ✓ ✓ Heerlen, The Netherlands [2] Europe/Asia ✓ ✓ ✓ ✓ Christiansburg, Virginia North America ― ― ✓ ― Kansas City, Missouri North America ― ✓ ― ― Krimice, Czech Republic Europe/Asia ― ― ― ✓ Laoshan, China Europe/Asia ― ― ― ✓ Moenchengladbach, Germany Europe/Asia ― ― ― ✓ Nyrany, Czech Republic Europe/Asia ✓ ✓ ― ― Paris, France Europe/Asia ― ― ― ✓ Prague, Czech Republic Europe/Asia ― ― ― ✓ Raleigh, North Carolina North America ― ✓ ― ― Reno, Nevada North America ― ✓ ― ― Sao Paulo, Brazil Europe/Asia ― ― ― ✓ Shanghai, China Europe/Asia ― ― ― ✓ Singapore Europe/Asia ― ― ― ✓ Tokyo, Japan Europe/Asia ― ― ― ✓ Iskandar Puteri, Malaysia Europe/Asia ― ✓ ― ― [1] Global headquarters [2] Europe/Asia regional headquarters 28 We have secured lease agreements for new facilities in Shelton, Connecticut; and Eygelshoven, The Netherlands.
Biggest changeP ROPERTIES The following table provides our locations and their various functions: Function Location Segment PPS System Assembly Paper Consumables Automation Sales/ Administrative Concord Township, Ohio [1] North America ✓ ✓ ✓ ✓ Eygelshoven, The Netherlands [2] Europe/Asia ✓ ✓ ✓ ✓ Shelton, Connecticut North America ― ― ✓ ✓ Kansas City, Missouri North America ― ✓ ― ― Krimice, Czech Republic Europe/Asia ― ― ― ✓ Laoshan, China Europe/Asia ― ― ― ✓ Moenchengladbach, Germany Europe/Asia ― ― ― ✓ Nyrany, Czech Republic Europe/Asia ✓ ✓ ― ― Paris, France Europe/Asia ― ― ― ✓ Prague, Czech Republic Europe/Asia ― ― ― ✓ Raleigh, North Carolina North America ― ✓ ― ― Reno, Nevada North America ― ✓ ― ― Sao Paulo, Brazil Europe/Asia ― ― ― ✓ Shanghai, China Europe/Asia ― ― ― ✓ Singapore Europe/Asia ― ― ― ✓ Tokyo, Japan Europe/Asia ― ― ― ✓ Iskandar Puteri, Malaysia Europe/Asia ― ✓ ― ― [1] Global headquarters [2] Europe/Asia regional headquarters
Removed
We anticipate occupying these new facilities in 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed6 unchanged
Biggest changeThe 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. The Company did not repurchase any shares under the repurchase program during the year ended December 31, 2022.
Biggest changeThe 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. There have been no repurchases under the program to-date.
In addition, our Board of Directors is not currently contemplating and does not anticipate declaring stock dividends in the foreseeable future. Our ability to declare dividends is limited by restrictive covenants contained within our senior secured credit facilities. Refer to Note 11, “ Long-Term Debt ” to our consolidated financial statements for further information.
In addition, our Board of Directors is not currently contemplating and does not anticipate declaring stock dividends in the foreseeable future. Our ability to declare dividends is limited by restrictive covenants contained within our senior secured credit facilities. Refer to Note 11— Long-Term Debt to our consolidated financial statements for further information.
The share price performance shown on the graph is not necessarily indicative of future price performance. 29 Issuer Purchases of Equity Securities On July 26, 2022, the Company's Board of Directors approved the repurchase of up to $50.0 million of shares of the Company's Class A common stock, with a 36-month expiration.
The share price performance shown on the graph is not necessarily indicative of future price performance. 28 Issuer Purchases of Equity Securities On July 26, 2022, the Company's Board of Directors approved the repurchase of up to $50.0 million of shares of the Company's Class A common stock, with a 36-month expiration.
The graph below compares the cumulative total return of our common stock from June 3, 2019 through December 31, 2022, with the comparable cumulative return of two indices, the Russell 2000 Index (“RTY”) and the Dow Jones U.S. Containers and Packaging Index (“DJUSCP”).
The graph below compares the cumulative total return of our common stock from June 3, 2019 through December 31, 2023, with the comparable cumulative return of two indices, the Russell 2000 Index (“RTY”) and the Dow Jones U.S. Containers and Packaging Index (“DJUSCP”).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A Common Shares are listed on the NYSE under the symbol, “PACK.” Holders of Record As of March 13, 2023, there were 16 holders of record of our Class A Common Shares and one holder of our Class C Common Shares.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A Common Shares are listed on the NYSE under the symbol, “PACK.” Holders of Record As of March 7, 2024, there were 16 holders of record of our Class A Common Shares and one holder of our Class C Common Shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

73 edited+37 added−97 removed24 unchanged
Biggest changeThese 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. 35 The following tables and related notes reconcile certain non-GAAP measures, including the non-GAAP constant currency measures, to GAAP information presented in this Report for 2022 and 2021: Year Ended December 31, 2022 2021 $ Change % Change Net revenue $ 326.5 $ 383.9 $ (57.4 ) (15.0 ) Cost of goods sold 226.9 235.0 (8.1 ) (3.4 ) Gross profit 99.6 148.9 (49.3 ) (33.1 ) Selling, general and administrative expenses 105.5 98.3 7.2 7.3 Depreciation and amortization expense 32.1 35.0 (2.9 ) (8.3 ) Other operating expense, net 4.5 3.4 1.1 32.4 Income (loss) from operations (42.5 ) 12.2 (54.7 ) (448.4 ) Interest expense 20.7 22.4 (1.7 ) (7.6 ) Foreign currency gain (2.2 ) (5.3 ) 3.1 (58.5 ) Other non-operating income, net (4.3 ) - (4.3 ) ― Loss before income tax benefit (56.7 ) (4.9 ) (51.8 ) 1,057.1 Income tax benefit (15.3 ) (2.1 ) (13.2 ) 628.6 Net loss (41.4 ) (2.8 ) (38.6 ) 1,378.6 Depreciation and amortization expense – COS 36.8 38.6 (1.8 ) (4.7 ) Depreciation and amortization expense – D&A 32.1 35.0 (2.9 ) (8.3 ) Interest expense 20.7 22.4 (1.7 ) (7.6 ) Income tax benefit (15.3 ) (2.1 ) (13.2 ) 628.6 EBITDA (1) 32.9 91.1 (58.2 ) (63.9 ) Adjustments (2) : Unrealized gain translation (2.3 ) (5.5 ) 3.2 (58.2 ) Non-cash impairment losses 1.0 1.7 (0.7 ) (41.2 ) M&A, restructuring, severance 2.0 1.3 0.7 53.8 Amortization of restricted stock units 18.3 22.5 (4.2 ) (18.7 ) Amortization of cloud-based software implementation costs (3) 2.8 - 2.8 ― Cloud-based software implementation costs 7.4 - 7.4 ― Unrealized gain on investment in small private business (3.9 ) - (3.9 ) ― Other adjustments 4.3 8.7 (4.4 ) (50.6 ) Constant currency 4.3 (2.0 ) 6.3 (315.0 ) Constant Currency AEBITDA (1) $ 66.8 $ 117.8 $ (51.0 ) (43.3 ) (see subsequent footnotes) (1) Reconciliations of EBITDA and AEBITDA for each period presented are to net (loss) income, the nearest GAAP equivalent.
Biggest changeThese 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. 34 The following tables and related notes reconcile certain non-GAAP measures, including the non-GAAP constant currency measures, to GAAP information presented in this Report for 2023 and 2022: Non-GAAP Measures Year Ended December 31, 2023 2022 $ Change % Change Net revenue $ 336.3 $ 326.5 $ 9.8 3.0 Cost of goods sold 213.0 226.9 (13.9 ) (6.1 ) Gross profit 123.3 99.6 23.7 23.8 Selling, general and administrative expenses 91.8 105.5 (13.7 ) (13.0 ) Depreciation and amortization expense 33.8 32.1 1.7 5.3 Other operating expense, net 5.2 4.5 0.7 15.6 Loss from operations (7.5 ) (42.5 ) 35.0 (82.4 ) Interest expense 24.3 20.7 3.6 17.4 Foreign currency gain (0.3 ) (2.2 ) 1.9 (86.4 ) Other non-operating income, net (0.2 ) (4.3 ) 4.1 (95.3 ) Loss before income tax benefit (31.3 ) (56.7 ) 25.4 (44.8 ) Income tax benefit (4.2 ) (15.3 ) 11.1 (72.5 ) Net loss (27.1 ) (41.4 ) 14.3 (34.5 ) Depreciation and amortization expense – COS 35.8 36.8 (1.0 ) (2.7 ) Depreciation and amortization expense – D&A 33.8 32.1 1.7 5.3 Interest expense 24.3 20.7 3.6 17.4 Income tax benefit (4.2 ) (15.3 ) 11.1 (72.5 ) EBITDA (1) 62.6 32.9 29.7 90.3 Adjustments (2) : Unrealized gain translation (0.3 ) (2.3 ) 2.0 (87.0 ) Non-cash impairment losses 1.5 1.0 0.5 50.0 M&A, restructuring, severance 5.8 2.0 3.8 190.0 Amortization of restricted stock units (10.2 ) 18.3 (28.5 ) (155.7 ) Amortization of cloud-based software implementation costs (3) 3.0 2.8 0.2 7.1 Cloud-based software implementation costs 4.3 7.4 (3.1 ) (41.9 ) Unrealized gain on investment in small private business - (3.9 ) 3.9 (100.0 ) SOX remediation costs 4.2 - 4.2 - Other adjustments 2.5 4.3 (1.8 ) (41.9 ) Constant currency 3.1 4.3 (1.2 ) (27.9 ) Constant Currency AEBITDA (1) $ 76.5 $ 66.8 $ 9.7 14.5 (see subsequent footnotes) (1) Reconciliations of EBITDA and AEBITDA for each period presented are to net (loss) income, the nearest GAAP equivalent.
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 inflationary pressures, supply and demand and the cost of other commodities that are used in the manufacture of paper, including wood, energy and chemicals.
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 inflationary pressures, supply and demand 29 and the cost of other commodities that are used in the manufacture of paper, including wood, energy, and chemicals.
When we estimate our rebate accruals, we consider customer-specific contractual commitments including stated rebate rates and history of actual rebates paid. Our rebate accruals are reviewed at each reporting period and adjusted to reflect data available at that time. We adjust the accruals to reflect any differences between estimated and actual amounts.
When we estimate our rebate accruals, we consider customer-specific contractual commitments 38 including stated rebate rates and history of actual rebates paid. Our rebate accruals are reviewed at each reporting period and adjusted to reflect data available at that time. We adjust the accruals to reflect any differences between estimated and actual amounts.
Inflationary pressures and associated increases in interest rates and borrowing costs may also impact the ability of some of our end-users and suppliers to obtain funds for operations and capital expenditures, which could negatively impact our ability to obtain necessary supplies as well as the sales of materials and equipment to affected end-users.
Inflationary pressures and associated increases in interest rates and borrowing costs may also impact the ability of some of our end-users or suppliers to obtain funds for operations and capital expenditures, which could negatively impact our ability to obtain necessary supplies as well as the sales of materials and equipment to affected end-users.
Effects 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.
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.
For information on our significant accounting policies, including the policies discussed below, see Note 2, “ Basis of Presentation and Summary of Significant Accounting Policies ” to the audited consolidated financial statements included elsewhere in this Report. Revenue Recognition .
For information on our significant accounting policies, including the policies discussed below, see Note 2 — Basis of Presentation and Summary of Significant Accounting Policies to the audited consolidated financial statements included elsewhere in this Report. Revenue Recognition .
However, our ability to predict or further offset inflationary cost increases in the future or during economic downturns or recessions may be limited or impacted by heightened competition for net revenue, an unwillingness by our customers to accept price increase or pressure to reduce selling prices if end-users reduce their volume of purchases.
Our ability to predict or further offset inflationary cost increases in the future or during economic downturns or recessions may be limited or impacted by heightened competition for net revenue, an unwillingness by our customers to accept price increases or pressure to reduce selling prices if end-users reduce their volume of purchases.
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 36 business.
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 35 growth prospects and/or otherwise negatively impact our business.
Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2022. Critical Accounting Policies and Estimates Our accounting principles and the methods of applying these principles are in accordance with U.S. GAAP, which often require the judgment of management in the selection and application of certain accounting principles and methods.
Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2023. Critical Accounting Policies and Estimates Our accounting principles and the methods of applying these principles are in accordance with U.S. GAAP, which often require the judgment of management in the selection and application of certain accounting principles and methods.
Refer to Note 12, “ Derivative Instruments” to the consolidated financial statements included elsewhere in this Report for additional information. Significant currency fluctuations could impact the comparability of our results between periods, while such fluctuations coupled with material mismatches in net revenue and expenses could also adversely impact our cash flows.
Refer to Note 12 — Derivative Instruments to the consolidated financial statements included elsewhere in this Report for additional information. Significant currency fluctuations could impact the comparability of our results between periods, while such fluctuations coupled with material mismatches in net revenue and expenses could also adversely impact our cash flows.
This could also result in reduced or delayed collections of outstanding accounts receivable from end-users, which could impact our cash flows. As a result, to the extent inflationary pressures continue, we expect additional pressure on our net revenue and gross margin.
This could also result in reduced or delayed collections of outstanding accounts receivable from end-users, which could impact our cash flows. As a result, to the extent inflationary pressures continue, we expect additional pressure on our net revenue and gross margin. We will continue to evaluate the impact of inflationary pressures on our profitability and cash flows.
In addition, in our discussion below, we include certain other unaudited, non-GAAP constant currency data for 2022 and 2021. This data is based on our historical financial statements included elsewhere in this Report, adjusted (where applicable) to reflect a constant currency presentation between periods for the convenience of readers.
In addition, we include certain other unaudited, non-GAAP constant currency data for 2023 and 2022. This data is based on our historical financial statements included elsewhere in this Report, adjusted (where applicable) to reflect a constant currency presentation between periods for the convenience of readers.
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 audited consolidated financial statements included elsewhere in this Report.
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 of the Notes to consolidated financial statements included elsewhere in this Report.
Including finance lease liabilities and excluding deferred financing costs, we had $396.9 million in debt, $2.4 million of which was classified as short-term, as of December 31, 2022, compared to $406.5 million in debt, $2.2 million of which was classified as short-term, as of December 31, 2021.
Including finance lease liabilities and excluding deferred financing costs, we had $407.4 million in debt, $2.5 million of which was classified as short-term, as of December 31, 2023, compared to $396.9 million in debt, $2.4 million of which was classified as short-term, as of December 31, 2022.
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.
However, the test for one of our goodwill reporting units that encompasses our business in North America indicated that fair value of the reporting unit was close to approximating carrying value.
Cash Flows Used in Investing Activities Net cash used in investing activities was $37.9 million in 2022 and reflects cash received in termination of cross-currency swaps, cash used for production of converter equipment and the renovation of our global headquarters in Concord, Ohio, and an investment in Pickle.
Cash used in investing activities was $37.9 million in 2022 and reflects cash used for production of converter equipment and the renovation of our global headquarters in Concord, Ohio, and an investment in Pickle, partially offset by cash received in termination of cross-currency swaps.
Comparison of 2021 to 2020 Discussions of 2020 items and comparisons between 2021 and 2020 that are not included in this Report can be found in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of our Annual Report on Form 10-K for 2021.
Comparison of 2022 to 2021 Discussions of 2021 items and comparisons between 2022 and 2021 that are not included in this Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for 2022.
The following table presents our installed base of PPS systems as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Change % Change PPS Systems (in thousands) Cushioning machines 35.3 35.2 0.1 0.3 Void-Fill machines 81.6 77.5 4.1 5.3 Wrapping machines 22.2 20.5 1.7 8.3 Total 139.1 133.2 5.9 4.4 Paper Costs .
The following table presents our installed base of PPS systems as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Change % Change PPS Systems (in thousands) Cushioning machines 34.8 35.3 (0.5 ) (1.4 ) Void-Fill machines 83.7 81.6 2.1 2.6 Wrapping machines 22.7 22.2 0.5 2.3 Total 141.2 139.1 2.1 1.5 Paper Costs.
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 Europe reporting unit.
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 may result in an impairment charge for the North America reporting unit.
The Facilities also require the borrowers to make mandatory prepayments of the term loans upon the occurrence of certain events, consisting of (i) an annual excess cash flow sweep of 50% of excess cash flow (as defined in the agreement governing the facilities) with step-downs to 25% if the first lien leverage ratio is less than or equal to 4.50:1.00 and greater than 4.00:1.00 and 0% if the first lien leverage ratio is less than or equal to 4.00:1.00, subject to certain deductions; (ii) the receipt of certain insurance/condemnation proceeds or net proceeds from specified asset sales and sale-leasebacks, subject to step-downs based on the company’s first lien leverage ratio; provided that in lieu of a prepayment we may instead reinvest such proceeds in specified assets subject to certain conditions, and (iii) the incurrence or issuance of non-permitted debt, following which we must pay 100% of specified net proceeds received in connection therewith.
The First Lien Term Facility also requires us to make mandatory prepayments of term loans upon the occurrence of certain events, including (i) the requirement to apply 50% of excess cash flow (as defined in the Credit Agreement), subject to step-downs to 25% if the first lien leverage ratio is less than or equal to 4.50:1.00 and greater than 4.00:1.00 and 0% if the first lien leverage ratio is less than or equal to 4.00:1:00 and additional deductions, to mandatorily prepay term loans under the Credit Agreement (ii) the receipt of certain insurance/condemnation proceeds or net proceeds from specified asset sales and sale-leasebacks, subject to step-downs based on our first lien leverage ratio; provided that in lieu of a prepayment, we may instead reinvest such proceeds in specified assets subject to certain conditions, and (iii) the incurrence or issuance of non-permitted debt, following which we must pay 100% of specified net proceeds received in connection therewith.
This “springing” financial covenant is tested on the last day of each fiscal quarter, but only if on such date the sum of (i) the principal amount of outstanding revolving loans under the Revolving Facility, (ii) drawings on letters of credit under the Revolving Facility and (iii) the face amount of non-cash collateralized letters of credit under the Revolving Facility in excess of an amount to be set forth in the definitive documentation with respect to the debt financing exceeds 35% of the total revolving commitments under the Revolving Facility.
This “springing” financial covenant is tested on the last day of each fiscal quarter, but only if on such date the sum of (i) the principal amount of outstanding revolving loans under the Revolving Facility, (ii) drawings on letters of credit under the Revolving Facility, and (iii) the face amount of non-cash collateralized letters of credit under the Revolving Facility in excess of $2.5 million exceeds an amount equal to 35% of the total revolving commitments under the Revolving Facility.
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 reconcile this data to our GAAP data for the same period under “ Presentation and Reconciliation of GAAP to Non-GAAP Measures ” for 2023 and 2022. 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.
In addition, the debt financing provides the borrowers with the option to increase commitments under the debt financing in an aggregate amount not to exceed the greater of $95.0 million and 100% of consolidated EBITDA for the four consecutive fiscal quarters most recently ended, plus any voluntary prepayments of the First Lien Term Facility (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 Facilities also provide us with the option to increase commitments under the Facilities in an aggregate amount not to exceed the sum of (i) the greater of $95.0 million and 100% of Consolidated Adjusted EBITDA (as defined in the Credit Agreement) for the four consecutive fiscal quarters most recently ended, plus (ii) the amounts of any voluntary prepayments of the First Lien Term Facility (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 (iii) additional amounts subject to the relevant net leverage ratio tests and other conditions specified in the Credit Agreement.
Goodwill is not subject to amortization but is tested for impairment annually as of October 1 st , through a qualitative or quantitative assessment and when events and circumstances indicate that the estimated fair value of a reporting unit may no longer exceed its carrying value.
Goodwill is not subject to amortization but is tested for impairment annually at a reporting unit level (October 1 st ) and between annual tests if events and circumstances indicate that the estimated fair value of a reporting unit may no longer exceed its carrying value.
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.
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 revenue growth rate, (ii) gross margin, (iii) projected operating expense (iv) the weighted average cost of capital (“WACC”), (v) and the residual growth rate for each reporting unit.
Cash Flows The following table sets forth our summary cash flow information for the periods indicated: Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 1.1 $ 54.3 Net cash used in investing activities (37.9 ) (69.8 ) Net cash provided by (used in) financing activities (4.5 ) 72.0 Effect of Exchange Rate Changes on Cash 0.2 (1.1 ) Net Increase (Decrease) in Cash and Cash Equivalents (41.1 ) 55.4 Cash and Cash Equivalents, beginning of period 103.9 48.5 Cash and Cash Equivalents, end of period $ 62.8 $ 103.9 Cash Flows Provided by Operating Activities Net cash provided by operating activities was $1.1 million in 2022.
No mandatory prepayments were required as of December 31, 2023, and the Company was in compliance with all debt covenants. 36 Cash Flows The following table sets forth our summary cash flow information for the periods indicated: Year Ended December 31, 2023 2022 Net cash provided by operating activities $ 52.6 $ 1.1 Net cash used in investing activities (52.4 ) (37.9 ) Net cash used in financing activities (1.8 ) (4.5 ) Effect of exchange rate changes on cash and cash equivalents 0.8 0.2 Net decrease in cash and cash equivalents (0.8 ) (41.1 ) Cash and Cash Equivalents, beginning of period 62.8 103.9 Cash and Cash Equivalents, end of period $ 62.0 $ 62.8 Cash Flows Provided by Operating Activities Net cash provided by operating activities was $52.6 million in 2023.
Comparison of 2022 to 2021 Year Ended December 31, 2022 % Net revenue 2021 % Net revenue Net revenue $ 326.5 ― $ 383.9 ― Cost of goods sold 226.9 69.5 235.0 61.2 Gross profit 99.6 30.5 148.9 38.8 Selling, general and administrative expenses 105.5 32.3 98.3 25.6 Depreciation and amortization expense 32.1 9.8 35.0 9.1 Other operating expense, net 4.5 1.4 3.4 0.9 Income (loss) from operations (42.5 ) (13.0 ) 12.2 3.2 Interest expense 20.7 6.3 22.4 5.8 Foreign currency gain (2.2 ) (0.7 ) (5.3 ) (1.4 ) Other non-operating income, net (4.3 ) (1.3 ) - - Loss before income tax benefit (56.7 ) (17.4 ) (4.9 ) (1.3 ) Income tax benefit (15.3 ) (4.7 ) (2.1 ) (0.5 ) Net loss $ (41.4 ) (12.7 ) $ (2.8 ) (0.7 ) Non-GAAP EBITDA $ 32.9 $ 91.1 AEBITDA (Constant Currency) $ 66.8 $ 117.8 Net Revenue The following table and the discussion that follows compares our net revenue by geographic region and by product line for 2022 and 2021 on a GAAP basis and on a non-GAAP constant currency basis as described above and in the discussion below.
We reconcile this data to our GAAP data for the same period under “ Presentation and Reconciliation of GAAP to Non-GAAP Measures ” for 2023 and 2022. 30 Comparison of 2023 to 2022 Year Ended December 31, 2023 2022 $ Change % Change Net revenue $ 336.3 $ 326.5 $ 9.8 3.0 Cost of goods sold 213.0 226.9 (13.9 ) (6.1 ) Gross profit 123.3 99.6 23.7 23.8 Selling, general and administrative expenses 91.8 105.5 (13.7 ) (13.0 ) Depreciation and amortization expense 33.8 32.1 1.7 5.3 Other operating expense, net 5.2 4.5 0.7 15.6 Loss from operations (7.5 ) (42.5 ) 35.0 (82.4 ) Interest expense 24.3 20.7 3.6 17.4 Foreign currency gain (0.3 ) (2.2 ) 1.9 (86.4 ) Other non-operating income, net (0.2 ) (4.3 ) 4.1 (95.3 ) Loss before income tax benefit (31.3 ) (56.7 ) 25.4 (44.8 ) Income tax benefit (4.2 ) (15.3 ) 11.1 (72.5 ) Net loss $ (27.1 ) $ (41.4 ) $ 14.3 (34.5 ) Non-GAAP EBITDA $ 62.6 $ 32.9 $ 29.7 90.3 AEBITDA (Constant Currency) $ 76.5 $ 66.8 $ 9.7 14.5 Net Revenue The following table and the discussion that follows compares our net revenue by geographic region and by product line for 2023 and 2022 on a GAAP basis and on a non-GAAP constant currency basis as described above and in the discussion below.
The table below presents our significant enforceable and legally binding obligations and future commitments as of December 31, 2022. 39 Payments due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Contractual Obligations First Lien Term Facility (1) $ 395.4 $ 1.5 $ 3.0 $ 390.9 $ - Operating leases (2) 18.2 3.7 6.6 2.9 5.0 Finance leases (2) 37.7 2.6 4.3 3.7 27.1 Capital commitments (3) 10.5 10.5 - - - Other non-current liabilities reflected on the registrant's balance sheet under GAAP (4) 0.8 0.2 0.4 - 0.2 Total $ 462.6 $ 18.5 $ 14.3 $ 397.5 $ 32.3 (1) Consists of cash obligations under the First Lien Term Facility, which are described in more detail in Note 11, "Long-Term Debt" in the notes to our Consolidated Financial Statements.
The table below presents our significant enforceable and legally binding obligations and future commitments as of December 31, 2023. 37 Payments due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Contractual Obligations First Lien Term Facility (1) $ 402.8 $ 1.6 $ 401.2 $ - $ - Operating leases (2) 45.7 6.2 10.5 6.2 22.8 Finance leases (2) 2.1 1.0 1.0 0.1 - Total $ 450.6 $ 8.8 $ 412.7 $ 6.3 $ 22.8 (1) Consists of cash obligations under the First Lien Term Facility, which are described in more detail in Note 11 — Long-Term Debt in the notes to our Consolidated Financial Statements.
Revenue for paper consumables is recognized based on shipping terms, which is the point in time the customer obtains control of the promised goods. Machine lease revenue is recognized on a straight-line basis over the terms of the PPS systems agreements with customers, which have durations of less than one year.
Machine lease revenue is recognized on a straight-line basis over the terms of the PPS systems agreements with customers, which have durations of less than one year.
These adjustments impact the amount of net revenue recognized by us in the period of adjustment. Charges for rebates and other allowances were approximately 10.0% and 7.4% of revenue in 2022 and 2021, respectively.
These adjustments impact the amount of net revenue recognized by us in the period of adjustment. Charges for rebates and other allowances were approximately 12.0%, 10.0% and 7.4% of revenue in 2023, 2022, and 2021, respectively. Refer to Note 8 — Contracts with Customers , of the Notes to consolidated financial statements for further discussion of revenue.
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.
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. Contractual Obligations and Other Commitments We lease production and administrative facilities as well as automobiles, machinery and equipment.
Share Repurchase Program On July 26, 2022, members of the Company’s Board of Directors (“Director(s)”) authorized a general share repurchase program of our Class A common stock of up to $50.0 million, with a 36-month expiration.
Net cash used in financing activities was $4.5 million in 2022 and reflects debt repayments, and tax payments for withholdings on stock compensation. Share Repurchase Program On July 26, 2022, members of the Company’s Board of Directors (“Director(s)”) authorized a general share repurchase program of our Class A common stock of up to $50.0 million, with a 36-month expiration.
The decrease in net revenue is quantified by a decrease in the volume of our paper consumable products of approximately 24.1 percentage points (“pp”), partially offset by a 14.4 pp increase in the price or mix of our paper consumable products and a 0.8 pp increase in the sales of automated box sizing equipment.
The increase in net revenue is quantified by an increase in the volume of our paper consumable products of approximately 1.9% and a 1.3% increase in the sales of automated box sizing equipment, partially offset by a 1.7% decrease in the price or mix of our paper consumable products. Net revenue was also positively impacted by currency tailwinds.
If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. In determining our reporting units, we consider economic characteristics, nature of services and products, and relative size of components within our operating segments.
If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
See also “ Presentation and Reconciliation of GAAP to Non-GAAP Measures ” for further details: Year Ended December 31, 2022 % Net revenue 2021 % Net revenue North America $ 134.7 41.3 $ 146.9 38.3 Europe/Asia 191.8 58.7 237.0 61.7 Net revenue $ 326.5 100.0 $ 383.9 100.0 Cushioning machines $ 140.3 43.0 $ 162.6 42.4 Void-Fill machines 130.6 40.0 154.5 40.2 Wrapping machines 40.5 12.4 52.0 13.5 Other 15.1 4.6 14.8 3.9 Net revenue $ 326.5 100.0 $ 383.9 100.0 33 Non-GAAP Constant Currency Year Ended December 31, 2022 % Net revenue 2021 % Net revenue $ Change % Change North America $ 134.7 39.1 $ 146.9 38.9 $ (12.2 ) (8.3 ) Europe/Asia 209.4 60.9 230.6 61.1 (21.2 ) (9.2 ) Net revenue $ 344.1 100.0 $ 377.5 100.0 $ (33.4 ) (8.8 ) Cushioning machines $ 149.2 43.4 $ 159.2 42.2 $ (10.0 ) (6.3 ) Void-Fill machines 136.6 39.7 152.2 40.3 (15.6 ) (10.2 ) Wrapping machines 41.8 12.1 51.4 13.6 (9.6 ) (18.7 ) Other 16.5 4.8 14.7 3.9 1.8 12.2 Net revenue $ 344.1 100.0 $ 377.5 100.0 $ (33.4 ) (8.8 ) Net revenue for 2022 was $326.5 million compared to net revenue of $383.9 million in 2021, a decrease of $57.4 million or 15.0%.
See also “ Presentation and Reconciliation of GAAP to Non-GAAP Measures ” for further details: Year Ended December 31, 2023 2022 $ Change % Change North America $ 137.3 $ 134.7 $ 2.6 1.9 Europe/Asia 199.0 191.8 7.2 3.8 Net revenue $ 336.3 $ 326.5 $ 9.8 3.0 Cushioning machines $ 145.8 $ 140.3 $ 5.5 3.9 Void-Fill machines 133.9 130.6 3.3 2.5 Wrapping machines 36.0 40.5 (4.5 ) (11.1 ) Other 20.6 15.1 5.5 36.4 Net revenue $ 336.3 $ 326.5 $ 9.8 3.0 Non-GAAP Constant Currency Year Ended December 31, 2023 2022 $ Change % Change North America $ 137.3 $ 134.7 $ 2.6 1.9 Europe/Asia 211.7 209.4 2.3 1.1 Net revenue $ 349.0 $ 344.1 $ 4.9 1.4 Cushioning machines $ 152.0 $ 149.2 $ 2.8 1.9 Void-Fill machines 138.3 136.6 1.7 1.2 Wrapping machines 37.1 41.8 (4.7 ) (11.2 ) Other 21.6 16.5 5.1 30.9 Net revenue $ 349.0 $ 344.1 $ 4.9 1.4 Net revenue for 2023 was $336.3 million compared to net revenue of $326.5 million in 2022, an increase of $9.8 million or 3.0%.
Interest payments on the First Lien Term Facility are calculated quarterly using variable interest rates based on market indices and, as a result, are not readily determinable for this analysis. (2) Includes estimated lease obligations for our new facilities in Shelton, Connecticut and Eygelshoven, The Netherlands.
Interest payments on the First Lien Term Facility are calculated quarterly using variable interest rates based on market indices and, as a result, are not readily determinable for this analysis. (2) See further discussion in Note 17 — Leases in the Notes to our Consolidated Financial Statements.
Higher costs due to inflation and the conflict in Ukraine during 2022 were partially offset by price increases, which mitigated the impact on our operating results.
In 2022, inflationary pressures increased the costs of paper as well as shipping and logistics, among other costs, and the conflict in Ukraine caused certain headwinds including increased energy costs. Higher costs due to inflation and the conflict in Ukraine were partially offset by price increases, which mitigated the impact on our operating results.
Foreign Currency (Gain) Loss Foreign currency gain for 2022 was $2.2 million, a change of $3.1 million, or 58.5%, from foreign currency loss of $5.3 million in 2021 due to the volatility in Euro exchange rates compared to USD.
Additionally, our $50.0 million notional interest rate swap at 1.5% matured on June 1, 2023. Foreign Currency (Gain) Loss 32 Foreign currency gain for 2023 was $0.3 million, a decrease of $1.9 million, or 86.4%, from a foreign currency gain of $2.2 million in 2022 due to the volatility in Euro exchange rates compared to USD.
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. Upon completion of the 2022 Interim Tests, we concluded that each area was not impaired.
The test for goodwill used unobservable inputs that required significant judgment and were performed using a combination of the Discounted Cash Flow Method and the Guideline Public Company Method in order to determine fair value. Upon completion of the annual impairment assessment, we concluded that each area was not impaired.
For example, we generally expense sales commissions when incurred because the contract term is less than one year. These costs are recorded within sales and marketing expenses. Goodwill and Identifiable Intangible Assets, net .
We recognize incremental costs to obtain a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less. For example, we generally expense sales commissions when incurred because the contract term is less than one year. These costs are recorded within sales and marketing expenses. Goodwill .
Net revenue was negatively impacted by currency headwinds, as well as decreases in cushioning, void-fill, and wrapping, slightly offset by an increase in other sales.
Net revenue was positively impacted by increases in cushioning, void-fill, and other revenue, partially offset by decreases in wrapping.
In addition, inflationary pressures have adversely impacted some of our end-users, such as automotive companies; distributors; electronic manufacturers; machinery manufacturers; home goods manufacturers; e-commerce and mail order fulfillment firms; and other end-users that are particularly sensitive to reductions in business and consumer spending by their respective customers, and which in turn have impacted our net revenue.
See “ Qualitative and Quantitative Disclosures About Market Risk. ” Inflationary Pressures and Other Costs. We have continued to experience inflationary pressures in 2023, which have adversely impacted some of our end-users, particularly e-commerce customers, that are particularly sensitive to reductions in business and consumer spending by their respective customers, and which in turn have impacted our net revenue.
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 our senior secured credit facilities will provide us with sufficient resources to cover our current requirements.
We believe that our cash and cash equivalents of $62.0 million as of December 31, 2023, together with borrowing capacity under the revolving portion of our senior secured credit facilities, will provide us with sufficient resources to cover our current requirements.
Other net revenue includes automated box sizing equipment and non-paper revenue from packaging systems installed in the field, such as systems accessories.
Other sales, which includes automated box sizing equipment and non-paper revenue from packaging systems installed in the field, such as systems accessories, increased $5.5 million, or 36.4%, to $20.6 million from $15.1 million, for 2023 compared to 2022.
Cash Flows Provided by (Used in) Financing Activities Net cash used in financing activities was $4.5 million in 2022 and reflects debt repayments, payments on finance lease liabilities, and tax payments for withholdings on stock compensation.
Cash Flows Used in Financing Activities Net cash used in financing activities was $1.8 million in 2023 and reflects payments on finance lease liabilities, legal fees paid related to a modification of our debt facilities, debt repayments, and tax payments for withholdings on stock compensation, partially offset by proceeds from equipment financing, net of repayments.
At December 31, 2022, we did not have amounts outstanding under our $45.0 million revolving credit facility, and we had no borrowings under such facility through March 31, 2023.
At December 31, 2023, we did not have amounts outstanding under our $45.0 million revolving credit facility, and we had no borrowings under such facility through March 14, 2024. Debt Profile The material terms of our debt are summarized in Note 11 — Long-Term Debt to the consolidated financial statements included elsewhere in this Report.
Revenue for Automation equipment sales is recognized based on an input method of cost and effort incurred. We sell our products to end-users primarily through an established distributor network and direct sales to select end-users.
Because of these factors, Ranpak recognizes machine revenue over time on a contract-by-contract basis using an input method, based on the percentage of costs and effort incurred to complete the construction of the machine. We sell our products to end-users primarily through an established distributor network and direct sales to select end-users.
Cost of Goods Sold Cost of goods sold for 2022 totaled $226.9 million, a decrease of $8.1 million, or 3.4%, compared to $235.0 million in 2021. The change was primarily due to lower volumes, currency headwinds, as well as $1.2 million lower depreciation expense partially offset by increased paper costs.
Cost of Goods Sold Cost of goods sold for 2023 totaled $213.0 million, a decrease of $13.9 million, or 6.1%, compared to $226.9 million in 2022. The decrease was primarily due to lower raw material costs and favorable currency exchange rates, partially offset by an increase in volume and increased manufacturing input costs.
The decrease of $45.2 million, or 19.1%, was driven by currency headwinds as well as decreases in cushioning, void-fill, and wrapping sales, partially offset by an increase in other sales. Constant currency net revenue in Europe/Asia was $209.4 million for 2022, a $21.2 million, or 9.2%, decrease from constant currency net revenue of $230.6 million for 2021.
The increase of $2.6 million, or 1.9%, was attributable to an increase in cushioning sales of $0.1 million, an increase in void-fill sales of $4.7 million, and an increase in other sales of $3.1 million, partially offset by a decrease in wrapping sales of $5.3 million.
Other Non-Operating Expense (Income), Net Other non-operating income, net for 2022 was $4.3 million and primarily represents the unrealized gain on our investment in Pickle. Other non-operating income, net was not material for 2021. Income Tax Benefit Income tax benefit for 2022 was $15.3 million, or an effective tax rate of 27.3%.
Other Non-Operating Expense (Income), Net Other non-operating income, net was $0.2 million in 2023 and $4.3 million in 2022, a decrease of $4.1 million year over year. In 2022 the other non-operating income was primarily related to the unrealized gain on our investment in Pickle.
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 $62.8 million in cash and cash equivalents as of December 31, 2022 and $103.9 million as of December 31, 2021.
Further, volatility in the equity and credit markets from macroeconomic factors could make obtaining new equity or debt financing more difficult or expensive.
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 continued pressure on our gross margin in the medium term relative to our historical margin profile. Inflationary Pressures and Other Costs.
As such, we expect some continued pressure on our gross margin in the medium term relative to our historical margin profile. Effects of Currency Fluctuations.
Income tax benefit was $2.1 million in 2021, or an effective tax rate of 42.7%.
Income Taxes Income tax benefit for 2023 was $4.2 million, or an effective tax rate of 13.4%. Income tax benefit was $15.3 million in 2022, or an effective tax rate of 27.3%.
Accordingly, you should not put undue reliance on these statements. Overview We are a leading provider of environmentally sustainable, systems-based, product protection solutions and end-of-line automation solutions for e-commerce and industrial supply chains. Since our inception in 1972, we have delivered high quality protective packaging solutions, while maintaining our commitment to environmental sustainability.
Overview We are a leading provider of environmentally sustainable, systems-based, product protection solutions and end-of-line automation solutions for e-commerce and industrial supply chains.
Additionally, currency rate fluctuations accounted for approximately 3.1% of the decrease in 2022 over the prior year. Other Operating Expense, Net Other operating expense, net, for 2022 was $4.5 million, an increase of $1.1 million, or 32.4%, from $3.4 million in 2021.
Additionally, currency rate fluctuations accounted for approximately 1.3% of the percentage increase in 2023 over the prior year. Operating expenses Selling, General, and Administrative (“SG&A”) Expenses. SG&A expenses for 2023 were $91.8 million, a decrease of $13.7 million, or 13.0%, from $105.5 million in 2022.
The fluctuation in the effective tax rate between periods was primarily attributable to a jurisdictional mix of income, benefits derived from stock-based compensation, return to provision adjustments, 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.
The fluctuation in the effective tax rate between periods, and the difference between the effective tax rate and the U.S. federal statutory rate, was primarily attributable to stock-based compensation adjustments.
Cushioning decreased $22.3 million, or 13.7%, to $140.3 million from $162.6 million; void-fill decreased $23.9 million, or 15.5%, to $130.6 million from $154.5 million; wrapping decreased $11.5 million, or 22.1%, to $40.5 million from $52.0 million; and other sales increased $0.3 million, or 2.0%, to $15.1 million from $14.8 million, for 2022 compared to 2021.
Void-fill increased $3.3 million, or 2.5%, to $133.9 million from $130.6 million. Wrapping decreased $4.5 million, or 11.1%, to $36.0 million from $40.5 million.
(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.
(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 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.
The Revolving Facility matures on June 3, 2024. The Revolving Facility includes borrowing capacity available for letters of credit of up to $5 million. Any issuance of letters of credit will reduce the amount available under the Revolving Facility.
The First Lien Term Facility matures in 2026 and the Revolving Facility matures in 2025. As of December 31, 2023, no amounts were outstanding under the Revolving Facility. The Revolving Facility includes borrowing capacity available for standby letters of credit of up to $5.0 million. Any issuance of letters of credit reduces the amount available under the revolving facility.
Constant currency net revenue was $344.1 million for 2022, a $33.4 million, or 8.8%, decrease from constant currency net revenue of $377.5 million for 2021. Net revenue in North America for 2022 totaled $134.7 million compared to net revenue in North America of $146.9 million in 2021.
Wrapping decreased $4.7 million, or 11.2%, to $37.1 million from $41.8 million. Other sales increased $5.1 million, or 30.9%, to $21.6 million from $16.5 million, for 2023 compared to 2022. Net revenue in North America for 2023 totaled $137.3 million compared to net revenue in North America of $134.7 million in 2022.
The decrease of $12.2 million, or 8.3%, was attributable to a decrease in cushioning, void-fill, wrapping, and other sales. Net revenue in Europe/Asia for 2022 totaled $191.8 million compared to net revenue in Europe/Asia of $237.0 million in 2021.
On a constant currency basis, the increase was attributable to an increase of cushioning sales of $2.7 million, an increase in wrapping sales of $0.5 million, an increase in other sales of $2.1 million, partially offset by a decrease in void-fill sales of $3.0 million compared to 2022.
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 2.9% decrease due to currency rate fluctuations in 2022 over the prior year. Interest Expense Interest expense for 2022 was $20.7 million, a decrease of $1.7 million, or 7.6%, from $22.4 million in 2021.
The increase in other operating expense was due to higher losses on the sale of property, plant and equipment of $0.5 million compared to the prior year and higher research and development costs of $0.2 million. Interest Expense Interest expense for 2023 was $24.3 million, an increase of $3.6 million, or 17.4%, from $20.7 million in 2022.
Our credit facilities are secured by substantially all of our assets. The First Lien Term Facility accrues interest at a rate of LIBOR plus 3.75% (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%. The First Lien Term Facility matures on June 3, 2026.
The applicable margin is 3.75% with respect to eurocurrency borrowings or SOFR borrowings, as applicable, and 2.75% with respect to base rate borrowings, 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 and SOFR borrowings, as applicable, and 3.00% with respect to base rate borrowings.
We assess, use estimates, and make judgments regarding a variety of factors that may impact the fair value of the goodwill reporting unit or the intangible asset being tested. Such estimates and judgments include business plans, anticipated future cash flows, economic projections, and other market data.
Application of the goodwill impairment test requires judgment, including the identification of reporting units (North America and Europe/Asia), assignment of goodwill to reporting units, and determination of the fair value of reporting units. We assess, use estimates, and make judgments regarding a variety of factors that may impact the fair value of the goodwill reporting unit being tested.
We assemble our PPS systems and provide the 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 generate revenue by providing our PPS systems and paper consumables to customers, which include direct end-users and our network of exclusive paper packaging solution distributors, and by providing end-of-line automation systems that solve challenges, including optimization, customization, and efficiency.
Cash provided by operating activities was $54.3 million in 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 Pickle.
Cash provided by operating activities was $1.1 million in 2022. The increase in operating cash flows is primarily due to changes in working capital adjustments and decreased input costs.
These estimates and judgments include, but are not limited to, projected revenues, operating margin, and discount rate. Because there are inherent uncertainties in these estimates and judgments, significant differences between these estimates and actual data may result in future impairment charges and could materially adversely affect our financial condition or results of operations.
Because there are inherent uncertainties in these estimates and judgments, significant differences between actual results of operations and other factors and the estimates used could result in significant differences and if we fail an impairment test, any non-cash impairment charge may have an adverse effect on our results of operations and financial condition.
While recent acquisitions have been relatively small, any significant future business acquisitions may impact the comparability of our results in future periods with those for prior periods. 31 Key Performance Indicators and Other Factors Affecting Performance We use the following key performance indicators and monitors 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 revenue expectations.
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 revenue expectations. Our installed base of PPS systems also drives our capital expenditure budgets.
We will continue to evaluate the nature and extent of the impact to our business, results of operations, financial condition, and cash flows. Results of Operations The following tables set forth our results of operations for 2022 and 2021, presented in millions of dollars.
Results of Operations The following tables set forth our results of operations for 2023 and 2022, presented in millions of dollars. In addition, in our discussion below, we include certain other unaudited, non-GAAP constant currency data for 2023 and 2022.
The increase was partially offset by decreases in expenses from proactive selective headcount reductions; the deferral of certain initiatives during the second half of 2022; a decrease in stock compensation expense primarily associated with the 2021 LTIP PRSUs (herein defined), whose downward adjustments resulted from evaluations on their performance criteria; and an approximate 5.0% decrease due to currency rate fluctuations over the prior year. 34 Depreciation and Amortization Depreciation and amortization expenses for 2022 were $32.1 million, a decrease of $2.9 million, or 8.3%, from $35.0 million in 2021, primarily due to a decrease in depreciation of computer software.
Depreciation and amortization expenses for 2023 were $33.8 million, an increase of $1.7 million, or 5.3%, from $32.1 million in 2022, primarily due to an increase in leasehold improvements, which resulted in additional depreciation of $1.3 million over the prior year. Additionally, currency rate fluctuations accounted for approximately 0.9% of the percentage increase in 2023 over the prior year.
Net Loss Net loss for 2022 increased $38.6 million to $41.4 million from a net loss of $2.8 million in 2021. The change was due to the reasons discussed above. EBITDA and AEBITDA EBITDA for 2022 was $32.9 million, a decrease of $58.2 million, or 63.9%, from $91.1 million in 2021.
Highlights from fiscal year 2023 compared with fiscal 2022 included: • Net loss for 2023 decreased $14.3 million to $27.1 million from a net loss of $41.4 million in 2022. • EBITDA for 2023 increased $29.7 million to $62.6 million from $32.9 million in 2022. • AEBITDA for 2023 increased $9.7 million to $76.5 million from $66.8 million in 2022.
Such covenants, among other things, will limit or restrict the ability of each of the borrowers, their restricted subsidiaries, and where applicable, Holdings, to: • incur additional indebtedness, issue disqualified stock and make guarantees; • incur liens on assets; • engage in mergers or consolidations or fundamental changes; • sell assets; • pay dividends and distributions or repurchase capital stock; • make investments, loans and advances, including acquisitions; • amend organizational documents; • enter into certain agreements that would restrict the ability to pay dividends; • repay certain junior indebtedness; • engage in transactions with affiliates; and • in the case of Holdings, engage in activities other than passively holding the equity interests in the borrowers and their subsidiaries.
Such covenants, among other things, restricts our ability to (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.
The change was due to a decrease in debt during 2022 compared to 2021. Additionally, currency rate fluctuations accounted for approximately 1.8% of the decrease in 2022 over the prior year.
The change was due to increases in interest rates associated with our First Lien Credit Facilities. Currency rate fluctuations accounted for approximately 1.0% of the increase in 2023 over the prior year. We incurred additional non-cash expense of $0.5 million from amortization of deferred financing costs associated with the amendment of our First Lien Credit Facilities compared to 2022.
Removed
All amounts and percentages are approximate due to rounding.
Added
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022. All amounts and percentages are approximate due to rounding.
Removed
Cautionary Notice Regarding Forward-Looking Statements All statements other than statements of historical fact included in this Report, including, without limitation, statements under “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.
Added
Key Performance Indicators and Other Factors Affecting Performance We use the following key performance indicators and other factors to analyze our business performance, determine financial forecasts, and help develop long-term strategic plans: PPS Systems Base.
Removed
When used in this Report, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward-looking statements.
Added
Although we look to pass 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.
Removed
Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign 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 reporting currency. See “Effect of Currency Fluctuations ” in Item 7 previously for more information about Ranpak’s foreign currency exchange rate exposure.
Biggest changeRefer to Note 11 — Long-Term Debt and Note 12 —Derivative Instruments to the Notes to consolidated financial statements included elsewhere in this Report for additional information on our indebtedness and interest rate swap agreements. 39 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 reporting currency.
A hypothetical 100 basis point increase or decrease in the applicable base interest rates under our credit facilities would have resulted in a $9.8 million impact on our cash interest expense for 2022. We use fixed interest rate swap agreements to manage this exposure.
A hypothetical 100 basis point increase or decrease in the applicable base interest rates under our credit facilities would have resulted in a $10.0 million impact on our cash interest expense for 2023. We use fixed interest rate swap agreements to manage this exposure.
A 10% increase or decrease in the value of the Euro to USD would have caused our reported net revenue for 2022 to increase or decrease by approximately $19.2 million.
A 10% increase or decrease in the value of the Euro to USD would have caused our reported net revenue for 2023 to increase or decrease by approximately $19.9 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.
Commodity Price Risk While our business is significantly impacted by price fluctuations related to the purchase, production and sale of paper products, we historically have negotiated prices with suppliers on an annual basis and negotiate prices with distributors reflecting competitive market terms, which mitigates the impact market price fluctuations in paper purchase or sale prices may have on our operating results.
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. Additionally, we hedge some of our exposure to foreign currency translation with a cross currency swap.
See “Effect of Currency Fluctuations ” in Item 7 previously for more information about Ranpak’s 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.
Refer to Note 12, “ Derivative Instruments” to the consolidated financial statements included elsewhere in this Report for additional information. For 2022, net revenue denominated in currencies other than USD amounted to $190.2 million or 58.3% of our net revenue for the period. Substantially all of this amount was denominated in Euro.
For 2023, net revenue denominated in currencies other than USD amounted to $199.0 million or 59.2% of our net revenue for the period. Substantially all of this amount was denominated in Euro.
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. 44
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.
Removed
In March 2020, we entered into the Second Amended January 2019 Swap (herein defined), 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.
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Additionally, we hedge some of our exposure to foreign currency translation with a cross currency swap. Refer to Note 12 — Derivative Instruments to the Notes to consolidated financial statements included elsewhere in this Report for additional information.
Removed
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.
Added
However, due to global inflation and other macroeconomic factors, as well as geopolitical unrest, in 2022 we were subject to significantly more commodity price volatility than we have historically experienced, and we may be exposed to this volatility in the future.
Removed
Refer to Note 11, “ Long-Term Debt” and Note 12, “ Derivative Instruments” to the consolidated financial statements included elsewhere in this Report for additional information on our indebtedness and interest rate swap agreements. 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.
Added
Where possible, we seek to pass increases in paper prices on to our customers, but we are unable to predict our ability to do so in the future. We expect some continued pressure on our gross margin in the medium term relative to our historical margin profile as a result of these factors. 40
Removed
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).
Removed
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.
Removed
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. 43 These reforms may also result in new methods of calculating LIBOR to be established, or alternative reference rates to be established.
Removed
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.
Removed
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.
Removed
We are evaluating the impacts of these changes, however, such impacts cannot yet be fully predicted and could have an adverse impact on our interest payment obligations under the Facilities and related interest rate swaps.

Other PACK 10-K year-over-year comparisons