Key Contradictions Emerge in Q3 2025 Earnings Call on Automation Growth, Regional Markets, and Cost Management

Date of Call: October 30, 2025

Financials Results

• Revenue: Net revenue increased 4.4% year-over-year on a constant currency basis (would have increased 5.3% excluding $0.8M non-cash warrant impact)
• Gross Margin: 34.5%, compared to 31.3% in Q2; warrants reduced gross margin by ~0.5 points

Guidance:

• Second-half revenue expected at the low end of $216M–$230M
• Automation revenue for 2025 expected $40M–$45M (net of warrant expense)
• Second-half adjusted EBITDA guide $44.5M–$54.5M; company expects to achieve the lower end
• Year-end cash expected $65M–$70M
• 2026 free cash flow targeted ~$15M–$20M with CapEx of ~ $35M
• Target to delever to 2.5x; long-term target $800M revenue in 5 years with automation ~15% and >25% EBITDA margin

Business Commentary:

• Strategic Partnerships and Revenue Growth:
• Ranpak Holdings signed a strategic partnership with Walmart, potentially worth $700 million over the next ten years, and announced a multiyear agreement with Medline, covering up to 14 distribution centers.
• These agreements can lead to over $1 billion in revenue from Amazon and Walmart alone over the next 8 to 10 years.

• The partnerships are expected to drive significant growth in both automation and protective packaging solutions.

• Automation Revenue and Market Traction:

• Automation revenue increased 56% on a constant currency basis in Q3 2025, on track to achieve $40 million to $45 million in full-year revenue.
• North America's automation revenue grew by 140% year-over-year, with significant contributions from large e-commerce accounts and the Walmart partnership.

• The growth is attributed to the adoption of Ranpak's automated solutions, which offer a clear differentiator in the market.

• Regional Revenue Trends:

• North America's sales grew by 10.9%, driven by strong enterprise accounts and automation revenue, despite a challenging environment in Europe and Asia Pacific.
• In Europe and Asia Pacific, combined revenue decreased by 0.6%, with volumes down 2.5% year-over-year, impacted by a more challenging operating environment and destocking activity.

• The differing trends are due to varying economic conditions and execution challenges in different regions.

• Margin Enhancement and Financial Performance:

• Gross margins improved to 34.5%, up from 31.3% in Q2, driven by margin enhancement initiatives and cost efficiencies.
• The company reported a net leverage ratio of 4.4x, with a strong liquidity position and a cash balance of $49.9 million.
• These improvements are the result of tight control on spending and internal process optimizations, despite external economic uncertainties.

Sentiment Analysis:

Overall Tone: Positive

• Management called the Walmart agreement "a transformational deal" and "an extremely exciting transaction," highlighted automation growth (automation +56% constant currency; expecting $40M–$45M in 2025) and cited margin improvement (gross margin up to 34.5% from 31.3% in Q2) and explicit long-term targets ($800M revenue, >25% EBITDA).

Q&A:

• Question from Greg Palm (Craig-Hallum Capital Group LLC): Omar, going back to the guide, it sounds like no change in automation or North America, but weaker Europe and APAC — is that right?
  Response: Yes — automation and North America unchanged; Europe and APAC weaker, so expect to be at the low end of the guidance range.

• Question from Greg Palm (Craig-Hallum Capital Group LLC): How much of the pricing and cost-reduction benefit did you see in Q3 and how much is left for Q4?
  Response: Q3 benefited from North America pricing; substantial additional margin upside remains from cost initiatives (procurement, logistics, footprint optimization) that will continue in coming months.

• Question from Greg Palm (Craig-Hallum Capital Group LLC): On the Walmart ramp (roughly $700M over 10 years), how should we think about the timeline and annual contribution?
  Response: Ramp has started (modest Q3, more in Q4) with major equipment deployments expected in 2026 and beyond; management expects the ramp could occur faster than a 10-year span and that Walmart may become one of the company's largest customers.

• Question from Greg Palm (Craig-Hallum Capital Group LLC): Confirming long-term targets: $800M revenue in 5 years and automation ~15% — any EBITDA margin target?
  Response: Yes — target is $800M organically in five years with automation ~15% of revenue and a longer-term objective of north of 25% EBITDA margin.

• Question from Ghansham Panjabi (Robert W. Baird & Co. Incorporated): What is a reasonable baseline for volumes in 4Q and how will that split between major regions?
  Response: Expect Q4 volumes roughly consistent with Q3: continued enterprise-driven strength in North America (plus improving distribution), while EMEA and APAC are expected to be modestly down year-over-year (APAC destocking).

• Question from Ghansham Panjabi (Robert W. Baird & Co. Incorporated): How should we think about automation going into next year given its lumpy nature and current momentum?
  Response: Think annual deployments/backlog rather than quarter-to-quarter; management expects 50%+ near-term growth in automation and to hit $40M–$45M in 2025.

• Question from Ghansham Panjabi (Robert W. Baird & Co. Incorporated): How will geographic weighting change over the next ~3 years between North America and overseas (Europe/APAC)?
  Response: North America expected to grow faster in the near term; Europe should stabilize and recover more slowly; Asia-Pacific viewed as significant longer-term opportunity but currently earlier in ramp.

• Question from Ghansham Panjabi (Robert W. Baird & Co. Incorporated): Any updates on cash flow versus prior guidance and how to think about CapEx for 2026?
  Response: Year-end cash expected $65M–$70M (revised down due to Europe/APAC); company expects to generate ~$15M–$20M free cash flow next year with CapEx around $35M.

Contradiction Point 1

Automation Growth Expectations

It involves differing expectations for automation growth, which is a key driver for future revenue and operational efficiency.

How should we assess automation growth for next year, given its volatility? - Ghansham Panjabi(Robert W. Baird & Co. Incorporated)

2025Q3: Automation is driven by equipment sales and installations, not by consumables. We expect 50% plus growth annually, supported by enterprise agreements like Medline. - Omar Asali(CEO)

Will automation continue to be a drag in the second half? - Daniel James Eggerichs(Craig-Hallum)

2025Q2: We expect a slight drag in Q3, but automation will be about breakeven in Q4, marking a significant step towards positive financial contribution. - William Drew(CFO)

Contradiction Point 2

Regional Market Performance and Growth Dynamics

It showcases differing perspectives on regional market performance and growth dynamics, which are crucial for strategic planning and investment decisions.

How will North America and Europe's weighting shift over the next few years based on current growth trends? - Ghansham Panjabi(Robert W. Baird & Co. Incorporated)

2025Q3: North America will grow at a faster pace than Europe in the next few years. North America will become more important, but Europe will still be a significant contributor. - Omar Asali(CEO)

What were the key factors affecting EMEA and APAC performance in March? What is the outlook confidence for these regions moving forward? - Danny Eggerichs(Craig-Hallum)

2025Q1: In Southern Europe, the market feels stronger, while Northern Europe and Central Europe experienced softness. The Nordic region weakened, and Germany had some hesitancy. - Omar Asali(CEO)

Contradiction Point 3

Cost Management and Gross Margin Improvement

It highlights differing expectations on the timeline and impact of cost management initiatives on gross margins, which are critical for operational efficiency and profitability.

How much of the anticipated pricing and cost cuts were realized in Q3, and how much remains for Q4? - Greg Palm(Craig-Hallum)

2025Q3: We have more room for improvement on cost initiatives, including logistics, freight, and physical footprint optimization. We are expecting more progress and a continued drive to improve gross margin. - Omar Asali(CEO)

How will cost management initiatives impact margins in Q2 and beyond? - Danny Eggerichs(Craig-Hallum)

2025Q1: Improvements expected in Q2 and more significantly in Q3 and Q4 as cost-saving initiatives take effect. - William Drew(CFO)

Contradiction Point 4

Automation Growth and Global Market Consistency

It involves differing perspectives on the consistency and growth expectations of automation across global markets, which directly impacts revenue projections and investor confidence.

Can you clarify the implications of the new guidance compared to the previous update, specifically automation, North America's performance, and slower results in Europe and APAC? - Greg Palm(Craig-Hallum)

2025Q3: We continue to feel excellent about automation globally. In North America, we see robust volumes. Europe and Asia Pacific are inconsistent. - Omar Asali(CEO)

Do we expect the Q1 automation delays to Q2 to all be completed in Q2 now, or is there a risk of further delays due to macroeconomic conditions? - Danny Eggerichs(Craig-Hallum)

2025Q1: Strong customer interest continues. Large accounts prioritize automation projects despite tariff discussions. Some smaller companies impacted by tariffs are deferring projects, but this is not a significant segment. - Omar Asali(CEO)

Contradiction Point 5

Revenue and Automation Contribution

It involves differing expectations for revenue growth and automation contribution, which are critical for understanding the company's financial outlook and strategic focus.

What are your long-term targets for revenue and automation contribution, and EBITDA margin? - Greg Palm(Craig-Hallum)

2025Q3: Our organic plan is to double the top line to $800 million in the next five years, with automation contributing 15%. - Omar Asali(CEO)

How will the mid-to-high single-digit volume growth in 2025 break down between paper and automation, and what is the forecasted growth for e-commerce vs. industrial markets? - Ghansham Panjabi(Robert W. Baird & Co. Incorporated)

2024Q4: We expect mid to high-single digit PPS volume growth with automation contributing 3 to 5 points. - Omar Asali(CEO)