Good day, everyone. And welcome to the Graphic Packaging First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. And we’ll open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mark Connelly, Senior Vice President, Investor Strategy and Development. Sir, the floor is yours.

Good morning and welcome to Graphic Packaging Holding Company's first quarter 2025 earnings call. We have with us today, Mike Doss, President and Chief Executive Officer; and Steve Scherger, Executive Vice President and Chief Financial Officer. On this call, we'll be referencing our first quarter 2025 earnings presentation, which is available through this webcast and on the Investors section of our website at www.graphicpkg.com. Today's press release and presentations include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and in our filings with the SEC. Now, let me turn the call over to Mike.

Thank you, Mark. Good morning, everyone, and thank you for joining our call today. Graphic Packaging is a global leader in sustainable consumer packaging. In the first quarter, our business faced considerable pressure, and stretched consumers pulled back further. Promotional activity by our customers did not drive meaningful volume improvement, and we experienced significant input cost inflation. While these challenges won't be resolved overnight, neither are they long-term in nature. We have taken actions to offset higher costs and continue to generate innovation sales growth that is helping us grow faster than the end markets we serve. Despite near-term challenges, we remain well-positioned to generate substantial cash flow in the quarters and years ahead. In the first quarter, Graphic Packaging sales were $2.1 billion, adjusted EBITDA was $365 million, and margins were 17.2%, and adjusted EPS was $0.51. Those results were significantly below our expectations, driven mainly by weaker volumes in the Americas business and broad-based input cost inflation. Turning to slide 3, our Waco recycled paperboard investment is on track for startup. Hiring is effectively complete, and I have been extremely pleased with the quality of the team we've been able to assemble. Training is well underway, and as you may remember, the Waco machine is nearly identical to our K2 machine in Kalamazoo, so we have experienced operators training our new team members on essentially the same equipment they will be running a few months from now. After ensuring an appropriate level of paperboard inventory for the transition, we announced that our Middletown, Ohio recycled paperboard manufacturing facility will close on June 1st. Middletown was built in 1909 and has served our company well. We announced our intention to close Middletown some time ago so the transition was not a surprise to the affected employees. We are working with the team there to provide outplacement assistance and other services. I want to personally thank the Middletown team for their dedication and commitment to excellence. With a period of major investment and competitive advantage coming to a close, we expect to generate substantial excess cash over the next several years. Yesterday, our board approved a new $1.5 billion share repurchase authorization. As we transition from our Vision 2025 to Vision 2030, our capital allocation priorities shift primarily to reinvestment and to returning capital to stock and debt holders. This new repurchase authorization reflects the board's commitment to our Vision 2030 priorities and their confidence in the strength of Graphic Packaging's team and business model. Volumes across consumer staples remain uneven and below our expectations. A stretched consumer has seen no significant relief from price inflation and consumer confidence has declined significantly in the U.S. and in the other markets we serve. Our volumes in the Americas, which were down about 1%, were disappointing, yet still broadly outperformed the CPG and QSR markets we serve. In our international business, where volumes turned positive in the second quarter of 2024, we continue to see growth, but we also see signs that consumers in international markets are beginning to pull back in their response to higher prices and greater economic uncertainty. The combination of slightly positive overall volumes and modest price pressure left our reported revenue essentially flat, excluding the effect of the May 1, 2024 Augusta divestiture. The modest price pressure mostly reflects the impact of third-party price recognition made in the middle of 2024 and some mixed shifts. On April 15, we announced a $40 price increase on all of our recycled and unbleached paperboard grades effective May 15. We have a very good record of offsetting labor benefits and other costs through efficiency and net performance gains, and we did that again in the quarter. But when we experience meaningful input cost inflation, like we did in the first quarter, we will pass those costs through to our customers. Turning to the five major markets we serve; food and health and beauty saw some modest improvement versus last quarter. Foodservice and household products were relatively flat, and beverage was down against a strong comparison last year, despite higher promotional activity and soft drinks. With food prices still high, we have seen the consumer search for value expand. Shoppers across most income brackets are now making different choices in response to relatively high food and household product prices, and that appears to be particularly benefiting our mass retail, superstore, and discount grocer customers. I am sure you've read the same reports that we have of consumers shopping in more stores buying fewer items in each one as they seek out the best value. Where consumers shop doesn't have a big impact on us, but our customers are seeing real volume declines in total goods purchased, and that certainly does affect us directly. We continue to broadly outperform North American CPG and QSR markets, largely as a result of our innovation sales growth, which came in at $44 million for the quarter. That growth came across a wide range of product categories, with several new contributions in strength packaging, coffee, snacks, and cleaning products. Meanwhile, our paperboard canister continues to expand into new products and new markets, and we see a good tailwind in Europe in beverage multi-pack demand, thanks to regulatory requirements that are phasing in over the next few years. I am often asked if consumers are pulling away from innovation and sustainability initiatives to save money in this uncertain environment. In the first quarter, we did see a few customers slow down their roll-outs, but most launches remained on schedule. We tend to have about six to nine months of visibility in terms of new product development, and I feel very good about reaching our innovation sales growth target of at least 2% in 2025. Turning to slide 4, the breadth and depth of our consumer staples packaging portfolio is the foundation of our strength. We are in every aisle of the supermarket, our major packaging supplier to the quick service restaurants, and expect to grow our presence substantially over time across household products and health and beauty. We can't change the macro environment, but our ability to move with the consumer is a key source of top line consistency over time. Turning to slide 5, let's look at sales by market. Overall, first quarter sales were basically flat year-over-year. Food represents approximately 38% of our packaging sales, and we saw some overall improvement, but results by product category remained very uneven. Promotional activity was not materially different from the fourth quarter and appears to have again driven more brand and mix change than overall category volume growth. Cereal volumes improved modestly with gains by branded products, more than offsetting weaker private label results, mostly as a result of promotional activity. Dry pasta and dry prepared foods like mac and cheese showed incremental strength, while some frozen prepared food categories lost ground. Frozen complete meals, for example, continue to lag as consumers balance cost against convenience. Bars, as a snack and meal replacement, continue to gain, supported by trends including higher protein diets, GLP-1, returning to the office, convenience and portion control. Coffee and tea again showed solid gains, thanks in part to our own product innovation, but also from a shift in coffee consumption to home and office and away from coffee shops. Tariffs could have a material impact on European coffee producers, given the higher proportion of European coffee that is exported to the U.S. Beverage, which represents about 25% of our overall packaging sales, saw its first decline after two years of strong performance. While beer consumption trends continue to slow, we did see some positive impact from promotion and soft drinks in the quarter, as well as gains by alternative beverages, including energy and nutritional drinks. In that alternative category, we saw notable gains by private label producers, continuing on the trend that we have seen in soft drinks. Foodservice represents 21% of our packaging sales. Year-over-year results were relatively unchanged, with basically flat performance in the Americas and a pickup in our smaller international business. While we saw higher promotional activity by quick service restaurants, traffic remained relatively flat, even as a shift towards value menus and limited time offerings became more pronounced. We saw growth in foodservice demand from supermarkets and U.S. convenience stores, where investments in freshly prepared foods and bakery items have shown some success, taking volume from the QSR channel. Muscle products represent approximately 12% of our packaging sales and saw uneven results, with modest weakness in the Americas offset by pockets of significant improvement internationally. Laundry detergent pods, where our child-resistant paperboard solution is replacing plastic and plastic film from major European brands, continues to be a solid growth opportunity for us. Pet food remains strong, while tissue weakness continued. And finally, health and beauty, a small but promising part of our overall packaging sales, saw mixed results internationally but better results in the Americas. In international, we saw incremental weakness in everyday skin care and other wellness products as consumers tightened their belts, but we saw a modest gain in the Americas. Healthcare was about flat in both markets. If you'll turn with me to slide 6, we present typical seasonal patterns on the left and our actual and expected experience on the right. While normal quarterly seasonality was evident in most categories, food was modestly weaker than normal. As we noted in our February earnings call, January started out slow in large part due to unusually cold weather that led to fewer trips to the grocery store. As the quarter progressed, our customers continued to see relatively weak volumes without the normal February dip and the March rebound. And as you've read elsewhere, the search for value is not just focused on lower income brackets. Consumers across the income spectrum and increasingly across our international business are searching for better value, and many are cutting back for the can. Meanwhile, as I noted earlier, promotional activity by our CPG and QSR customers has not translated into meaningful volume improvement or higher foot traffic. Private label and mass retail continue to gain in that environment. Cost inflation, which looked relatively benign early in the quarter, picked up considerably across most our inputs other than fiber. As we look to the second quarter, input cost inflation remains significant, and at the consumer level, some categories, particularly food, are experiencing renewed retail-level price increases. When we spoke last quarter, we said we weren't banking on a consumer recovery. As we look to the 2025 outlook, a 2% volume decline is now our base case. That is a very challenging backdrop for our CPG and QSR customers, and we continue to work with them to deliver the best packaging solutions for their strategies. Another trend I'm often asked about is private label and if growing private label has implications for innovation growth and for our margins. The reality is that private label has been a significant part of our innovation sales growth, particularly with some of our highest value innovations like Oreo and Paper Seal. Retailers want their own brands to stand out on the shelf and are just as committed to plaster production as most CPGs. Our experience has been that our margin with private label customers is not materially different from our branded customer margins. Slide 7 highlights our five packaging innovation platforms and notes the scale of the opportunity we see in each one. My confidence in the size and scope of the opportunity in each of these areas continues to rise. Each new commercial success, Paper Seal for prepared food, for example, not only adds to our sales but also adds to our insights and our confidence and our ability to expand in new markets, and we are doing just that. Turning to slide 8, EnviroClip Beam is our proprietary solution for PET bottle multipacks. Developed in the United States, it is now rolling out with our first customer in the UK, a rapidly growing independent beverage producer. EnviroClip Beam is an outstanding low-impact alternative to plastic ring carriers and shrink wrap that offer exceptional product stability, superior marketing value and is plastic and glue-free, making it fully recyclable. Turning to slide 9, our vision for Graphic Packaging is clear. After a half decade of transformational investment capabilities, innovation and competitive advantage, our focus turns to innovation and execution. We have built our company culture around safety, engagement and delivering for our customers. Our commitment to improving the environmental footprint of consumer packaging is at the center of our mission. Pulling those three things together, innovation, culture and commitment to sustainability is how we generate best-in-class results for customers and for all our stakeholders. Now let me turn it over to Steve for a review of the company's financials and operations.

Thank you, Mike. Turning to slide 10. As Mike has noted, the first quarter was a challenging one with volumes below expectations and inflation pressure across a range of inputs. Sales for the first quarter of 2025 were $2.1 billion. If we exclude the impact of the Augusta divestiture and the impact of foreign exchange in the quarter, packaging sales were basically flat year-over-year. Packaging price was approximately 1% lower, and volume was approximately 1% higher. Price largely reflected the impact of a third-party price recognition in the middle of 2024, which will roll off after next quarter and some minor mixed effects. Behind the 1% volume growth, our Americas business with its higher integrated margins was actually down approximately 1%, while our smaller, non-integrated international business was up approximately 3%. Adjusted EBITDA was $365 million, well below our original expectations, primarily as a result of the weaker than expected volumes and higher than expected inflation. When we spoke on last quarter's earnings call, we described cost inflation as relatively benign. We weren't surprised by the higher costs which came with the cold weather in January. Input costs rise and production efficiency drops with cold weather, and this year's weather was particularly harsh. But as the weather improved, it became clear that the upward pressure on input costs was not going away. The increases that we saw in January in energy, chemicals, logistics, and transportation, and other categories, remained elevated throughout the quarter and have continued into the second quarter. Responding to that input cost inflation, on April 15th, we announced a $40 per ton price increase for recycled and unbleached paperboard. We expect those price increases to help bring margins back to more normal levels over the coming quarters. During the first quarter, the impact of price, volume, and mix together amounted to a $34 million headwind. That performance of $33 million largely offset labor, benefits, and other inflation of approximately $25 million but was not enough to offset input cost inflation of $21 million. The absence of Augusta in 2025 reduced reported adjusted EBITDA by approximately $25 million. We ended the quarter with net leverage of 3.5x. Cash outlays for taxes and spending were notably higher in the first quarter than we expect them to be in future quarters. Slide 11 highlights the challenging consumer taxing environment on the left and the strength of our business model and execution on the right. While lower than expected volume and input cost inflation pushed margins lower in the quarter, our price actions are expected to improve margins as the year progresses. The second quarter will be a heavy planned maintenance quarter, as it was in both of the past two years, and as such, we expect second quarter margins to again fall modestly below first quarter margins. Turning to the outlook on slide 12, we have adjusted guidance to reflect a higher level of uncertainty around volumes and a broad-based increase in input cost inflation. We lowered and widened the range of expected volume outcomes to a 4% volume decline at the low end, to flat volumes at the high end. Previous guidance had assumed that market volumes would be relatively flat, then layered on 2% innovation sales growth to arrive at a range of plus 1% to plus 3%. But it is clear that our CPG and QSR customers are in many cases experiencing volume declines in the low to mid-single digits, with little help from promotional activity. Meanwhile, consumer confidence has dropped in both the Americas and in our international markets, which may lead to even more consumer retrenchment. The continued weak consumer response to promotional activity leaves us increasingly cautious about potential volumes in 2025. Our adjusted EBITDA and EPS guidance reflect the impact of those lower and wider volume assumptions, as well as an expectation that input cost inflation will continue in coming quarters. We have taken a number of actions to ensure that our own resources are appropriately scaled and deployed. And as mentioned earlier, we are in the market with price increase announcements. We continue to expect capital spending to fall in the $700 million range. And as Mike noted, we expect to generate innovation sales growth of at least 2% of sales. Slide 13 summarizes the company's Vision 2030-based financial model and capital allocation priorities, which are unchanged. With Waco nearing completion, our priorities turn to a more normal level of reinvestment for growth and productivity, which is included in our 5% of sales CapEx target and returning capital to stockholders. In February, we announced a 10% increase in the quarterly dividend. Graphic Packaging believes that a growing dividend is appropriate capital allocation given the relative consistency and strength of our business model and our future cash flow expectations. We expect to generate substantial cash in excess of our needs for years to come. And as Mike mentioned earlier, our Board of Directors has approved a new $1.5 billion share repurchase authorization that takes our total available authorization to more than $1.8 billion. Graphic Packaging has a strong history of opportunistic share repurchase activity, and we will compare every use of cash against the alternative of repurchasing our own stock. The new authorization includes the ability to enter into a 10b5-1 plan to give the company a higher level of flexibility over the coming months and years. While we continue to expect to be investment-grade by 2030, given our declining capital spending needs and limited near-term debt maturities, we are comfortable with our current debt levels. We are targeting net leverage for year-end 2025 below 3.5x, inclusive of any share repurchase activity or other capital deployment initiatives we may undertake. Slide 14 describes some of the milestones on the path to our Vision 2030 goals. 2024 was peak CapEx at $1.2 billion. In 2025, capital spending is expected to be in the range of $700 million. And in 2026 and each subsequent year, we will hold capital spending to approximately 5% of sales, which includes sustaining capital needs, greenhouse gas reduction projects, and growth capital. In each of 2026 and 2027, we expect the Waco project to deliver incremental EBITDA of approximately $80 million. Despite trade and market growth uncertainty, 2025 marks the beginning of a multi-year free cash flow expansion cycle at Graphic Packaging. We intend to deploy that incremental cash to generate outstanding returns for stockholders while further strengthening Graphic Packaging's position as the world's leading producer of sustainable consumer packaging. On slide 16, you will find supplemental information that may be useful for modeling purposes. That concludes our prepared remarks. Before I turn the call back to the operator, I want to let everyone know that we will be adhering to the one question, one follow-up guideline in order to allow as many of you to participate on the call as possible. Operator, let's begin the Q&A.

Your first question is coming from Ghansham Panjabi from Baird.

Hey, guys. Good morning. So, I guess first off, just on the volume component, I mean, clearly, Mike and Steve, I mean, volumes were at a low point to begin with, right? So, you had the COVID surge, you had the destock, you had consumer affordability issues, and maybe we're sort of at the tail portion of that, still feeling the lags of previous price increases, et cetera. But you also have this dynamic of GLP-1 and the impact on packaged food, especially center of the store. So, are you able to see any trends within your own data that would confirm that it's really an affordability issue versus anything else at this point?

Yes, thanks for the question. I guess if you kind of go back and look at the second half of last year, Ghansham, and you look at how we were operating the business, and we talked to all of you at our second quarter call, and what our customers were telling us is that they were going to grow their volumes roughly 3%. And so, we geared up, and they wanted us to gear up for that. That's exactly what we did. And as you saw, we finished the year, the second half of the year, we were slightly up, I think, about a half of 1%, so essentially flat. That was the basis for the plan that we put forward. You heard Steve talk in his prepared comments that our assumption going into this year was kind of flat volume, to your point, coming off some challenging years in ‘23 and ‘24, and that our innovation would be plus two. And so, we kind of built our business on that. And kind of quickly into the quarter, we saw that really wasn't happening. We talked at a couple of investor conferences about our volumes being flat. And of course, what you have seen in the last two, three weeks, including today, with McDonald's announcement, are the vast majority of our customers have been pointing those volumes down roughly 3% to 4% against relatively easy comp. Now, to your question around kind of what is driving all that, we actually believe affordability is a key part of that. If you think about GLP-1, and you mentioned this, that's a little bit of an opportunity and a challenge for our customers. In some cases, the additional protein creates opportunities, need for protein, I should say, creates additional opportunities for reformulation, which several of our customers have done. On the other side, it impacts some of their snack sales. I would say the MAHA piece of this is also pretty significant for our customers, particularly those who could potentially be impacted by these SNAP programs not being able to be used in other government-assisted programs for certain soft drinks or salty snacks and those types of things. So that's a challenge. And the reformulation piece with some of the requirements coming from the FDA around removing certain dyes, they'll reformulate. They're really good at reformulating, our customers are, but it takes some time. And ultimately, as you know, those reformulations are usually more expensive. And so then that creates additional pressure on a consumer that already came into the year, pretty stretched. And now if you lay on these trade and tariff backdrop here, they're nervous. And so where they used to go to the store and maybe buy 15 things, now they're going to the store and buying 13 things. And ultimately, as we've talked about, we're not immune from our customers' buying shortfalls. So even at the 2% down in our guide here, we're actually outperforming what we're currently seeing. And we felt it was important that we actually take a hard look at what our customers' numbers are telling us in their releases and operating the business along those lines. Of course, we're helping them reformulate, we're cheering for them with their promotions. But to this point, across a wide range of customers, we have not seen it translate into volume stability or certainly growth. And so as we look at the full year and how we want to operate the business, while we can't control our volumes, what we can control is our cash flow. And we want to run our business really to demand and making sure that we're running to the requirements that we see in front of us. That'll eliminate some of the inventory that correctly so some of the analysts pointed out that we built at the end of the last year as we were kind of preparing for the growth that didn't show up. So that's how we think about it. In the short term, that's got some negative implications for EBITDA, but it helps us make sure that we maximize our cash flow and really positions our business for rebound, which eventually will happen. I just can't tell you when.

Okay, that's really good perspective. Thank you for that. And then just quickly on, as it relates to guidance, maybe for Steve, what's the embedded assumption for when price costs will turn at least neutral to positive in 2025?

Yes, thanks, Ghan, it’s Steve. Our embedded assumption in the midpoint of $1.5 billion of EBITDA, just touching on that briefly, is embedded in that is the minus 2% volume assumption. And we've got about $80 million plus of inflation in the business. We are pursuing price actions on multiple fronts. We obviously have our cost models that will inflect with some pricing. We have our new index model, which will inflect positive on pricing. And then we've announced a third-party increase. It's our expectation that we'll flip to positive late this year and recover the inflation as we roll into 2026. So we'll see modest benefit of our pricing actions this year, and we would expect that our pricing initiatives, multiple of them, will recover the inflation that we're seeing as we roll out of 2025 and into 2026. So we have full intent, obviously, to recover the inflation that we're seeing. Just given some of the modest delays, it will take place more as we enter into 2026 relative to that recovery. We've got about $100 million of price actions that we're executing on right now across all of the options that we have for pursuing pricing.

Your next question is coming from Arun Viswanathan from RBC Capital Market.

Great. Thanks for taking my question. I hope you guys are well. I guess I'm just kind of curious, going back to the volume side. So this volume kind of decline has been going on for a little while. You guys have taken some downtime in the past. But I guess just curious if that's still kind of what you're contemplating, and then would you consider, do you think the market is kind of oversupplied? Or maybe you can just kind of go through the supply-demand balance in each of your three grades. I know SPS, you don't have much exposure to, but what's really, do you think there's any footprint actions that have to be undertaken by the industry, yourselves included? Thanks.

Thanks, Arun. So I'd answer the question this way. As I mentioned in my comment, my answer to Ghansham, we are going to run our business to requirements and demands. So that will necessitate from time to time us taking some rolling market-related downtime through our system. And that's reflected in this guide that we've given you. And ultimately, that's the impact of going from a plus two to a minus two at the midpoint. That's 4%. And that's the paperboard that we're pulling out of there. There's a fair amount of absorption, as you know, that ultimately we generate on that. It'll help us maximize our cash flow in the short term. We believe that's the right way to operate the business. It also makes sure that inventories stay very tight. And along those lines, it really does a nice setup for our Waco project here, which I'll comment on. I'm sure there'll be a question on that later on. In regards to kind of the supply-demand balance by the grades, look, you probably saw that two of our competitors this morning announced closures of coated recycled paperboard mills, which at a capacity level is well over 200,000 tons. That would represent in the North American market, certainly in the U.S., somewhere between 7% and 9% of reduction. And if you look at the actions that we've already announced from Middletown and East Angus as we get Waco up and running and the capacity that comes down the line with Waco, it essentially ties out and there's really no net ton add to the coated recycled paperboard side of the market. So that's really in a good spot. And our confidence level, and Steve said in his prepared comments, the $80 million in 2026 and the $80 million in 2027, I've got a high degree of confidence in that. And I think those actions really further cement support that as you kind of look out over the next two years. CUK is a great grade. I know sometimes we see in the trade journals that the beverage season didn't show up last year. That was news to us because we had a pretty normal beverage season last year. And this one's off to a decent start too. One of the can suppliers has gone earlier. They talked about expecting to have a decent summer beverage season. The area we see the biggest uneven behavior right now or volume is really our food business. And it's one of our biggest businesses. And it's just been that way now for the better part of a year and a half. And like I said, our customers are working on this. They're busy. We've got a lot of different things they're trying to do. But ultimately, it has to start to show up on the bottom line in the form of orders. And to this point, it hasn't. So we can't earn on what we don't have. But if you look at the SPS side of it, and you answered the question, we're doing well there because our Texarkana mill is essentially 100% integrated. As you know, a combination of our cup paperboard as well as our coated solid bleach sulfate paperboard that we use internally within our own operations. There is additional capacity coming online on the SPS side of the business. A producer is bringing out a new machine here in the second quarter. I get asked a lot, what does that all mean? And as I kind of told you guys, the analysts, that you're going to have to ask someone that's really much more in the open market sales than I am, because we just aren't in that market. But clearly, there needs to be capacity that comes out. But Graphic Packaging, along with you, will be watching on the sidelines there because we're essentially 100% integrated. So as we kind of look at the great in what we're making, we feel like we're really set up well. As we wind through year ‘25, ramp Waco in the fall, and head into 2026, focused on delivering our $80 million of EBITDA improvements. So hopefully, that helps answer your question.

Great, thanks. And just to clarify, so the $1.4 billion to $1.6 billion of EBITDA guidance for this year, would you consider that kind of $1.4 billion level worst case scenario? And I guess if volumes do say go to, is the midpoint kind of assumed kind of flattish volumes and $1.4 billion is down to, or how should we think about that? Thanks.

Yes, Arun, it’s Steve, specifically, the $1.4 billion low end of the case would be an extremely unusual case. We bracketed it because we didn't want to take off the table. But it would actually be a 4% volume decline and upwards of $150 million of inflation. So that would be a truly unique environment not seen before, where we have both a combination of inflation and significant volume erosion, kind of a deep recessionary inflation type scenario. The midpoint assumes the minus 2% volume, which is, and then roughly $80 million or so of inflation, which we will recover. It just will get recovered in 2026 and beyond. The $1.6 billion assumes roughly flat volume and a more modest level of inflation, something in the $50 million range. So everything is bracketed around volume and inflation assumptions. With inflation planning to be recovered, it will occur late this year and into next year. But that's the bracket. It's basically flat to minus 4% volume and a bracket around inflation, $50 million to $150 million, with kind of the midpoint being more into the $80 million range, slightly below the average of the two.

Your next question is coming from Matt Roberts from Raymond James.

Mike, Steve, Mark. Good morning. Steve, you gave some color on the inflation, but I was wondering if you could dig into those buckets a little bit further. I mean, if I think about it, it seems like OCC is flat, fuel is down, natural gas has certainly been volatile. But is a portion of that hedged to protect there or any cost benefit pull forward you're expecting from either Middletown or net performance offsets? I was just trying to think about the bucket contribution and any offsets you may have, excluding that price impact that benefits 2026 or so.

Yes, Mark. It’s Steve, thank you. As we mentioned on our prepared remarks, the inflation was a little bit across the board for us. So the $20 million was in really four or five categories. Energy was up, chemicals were up modestly, the external paper that we acquire was up, logistics was up modestly, and then some of our other inputs. So you kind of had five categories all up modestly, $4 million or $5 million. And then, as you mentioned, wood OCC was modestly favorable. So it wasn't fiber, and that's important. So it wasn't wood cost, it wasn't OCC, but it was across the rest of the other major categories. We've assumed that will continue on at the midpoint of our guide, $20 million roughly becomes $80 million. To your point, there will be variability there. We do have some hedges in place as well for things like nat gas, but we have assumed that the $20 million that we saw in the quarter would continue on for the year across a basket of commodities, really not focused around wood or OCC.

That's helpful. Thank you, Steve. Steve, if I may stick with you, but switch gears a little bit. In the remarks yesterday there was on the rate repurchase program, like you noted there was optionality in how you approach that. The review said even in the coming months, so as you look at the CapEx timing, target leverage of 3.5 by year end, and weigh that versus where the stock sits currently. Are there any leverage limits or spend buckets that you need to get through before you really start executing on that shareholder return agenda? Thanks for taking the questions.

Yes, Mark, I'll start. Mike can add some commentary here. I think with everything that we've provided you, it's a bit intentional. We've taken our leverage acceptable yearend target from three prior to kind of just sub 3.5x. That gives us some opportunity for share repurchase optionality as we roll through the rest of this year. Given that we have no debt coming due, we're in a good spot on our borrowing; we don't necessarily see the need for that to be taken down in the short to medium term. And so it does open up the window for opportunistic share repurchases, particularly given our confidence in the future cash flows and given what we see as we were just talking about Vision 2030 and Waco coming to life and the significant cash flow generation. So we are providing ourselves with the optionality around share repurchases here in the short term. And then obviously what we've just really committed to is a multi-year vast majority of our cash flows being applied to share repurchases and modest growing dividend for the next several years.

Maybe Matt, the only thing I'd add to that is that every investor conference I've gone to in the last two years, I've been asked, okay, what's the next Waco? And my answer has been, there isn't one. We have everything we need to run the company that we want to deliver on our Vision 2030. It's about execution and innovation. Obviously, we need our customers' volumes to cooperate and get back to at least a flat level here. And I believe they will, even though we're dealing with the dislocation right now. But if there was ever any question around what our intention is, it should be clear. We're focused on delivering and turning that cash flow back to our investors and debt holders. Hard stop.

Your next question is coming from Mark Weintraub from Seaport Research.

Thanks very much. So just wanted to follow up on the change in the guidance at the midpoint. It's about $210 million. You mentioned $80 million from inflation. And I think that's going from zero to 80. So I think that $80 million is a change. Just wanted to confirm that. And then that would leave $130 million. And you've talked about 2% volume declines. So I recognize there's presumably mill downtime related to that. But is that what's driving the rest of that? That $130 million? It seems like a pretty big number. Or are there other variables that we should be thinking about at the midpoint for your change of guidance?

Yes, Mark. It’s Steve here. You're fundamentally right. As Mike mentioned, we're going to run to demand this year. We'll be matching supply and demand. We will be taking inventory out of the business. So the inflation assumption from zero to 80 is correct. That's $80 million of the roughly $200 million call down at the midpoint. There's a 400 basis point call down at the midpoint on volume. Plus 2 going to minus 2. That's a solid $350 million top line call down. 30% margins we've talked historically at just kind of a simple math gets you at above $100 million. And then the aggressively matching supply and demand for the remainder of the year, as Mike mentioned, kind of picks up the rest. So it's all about volume and inflation. Inflation we will recover. The volume aggressively matching supply and demand for the year. It's really all about volume, Mark.

Your next question is coming from Lewis Merrick from BNP Paribas.

Morning, Mike. Morning, Steve. Thank you for taking my questions. Just on the revised guidance, the upper and the lower end of the range now implies EBITDA margin of 17% to 19% down from the prior 19% to 21% ambition. How should we think about the sort of midterm sustainable margin in the more longer term? Based on your comments, I think this is not a structural change in your thoughts, but maybe you could perhaps elaborate or lay out the building blocks to get back to that 19% to 21% range. Thank you.

Yes, Louis, it's Steve. I'll start again, and Mike can add on. But you touched on it actually extremely well. If you look at the midpoint of our guide, it's 18%. About 100 basis points of that is the temporary realities of inflation coming into the business that we would plan to recover, which would return margins back towards that 19% range. Then as we've articulated our confidence in the value of Waco coming to life, that $160 million of EBITDA over a couple of years is really the path back towards those 19%, 20% margins that we have experienced over the last couple of years. So it's really why our commitment to Vision 2030, our commitment to the cash flows remains intact. We've got to get through this inflation environment and recover that with price. But Waco, very de-risked as Mike talked about a couple of moments ago, given the supply-demand dynamic. And so that combination of price realization and then, of course, returns on ongoing investments in Waco is really the path back towards the kind of margins that you just articulated.

Thanks. And I've just got one more. Just on pricing, I believe last quarter you spoke about a stable or neutral pricing environment. With today's announcement, are you now guiding to a net positive price contribution in 2025?

No, we didn't. I think what's inherent in the guidance, Lewis, we knew we would be modestly negative on pricing here this year when we provided our original guide. That really hasn't changed. I think what Ghansham was asking earlier is when you start to see some inflection, we would expect to see some inflection late this year and then recovery as we roll into 2026. So we will have some modest negative pricing here in 2025. And we had expected that. There's been no real change in that expectation.

Lewis, the combination of all those pricing mechanisms that Steve outlined here, as you're aware, have about a six-month offset between when we actually get the inflation and we ultimately go recover it. So it'll have a minimal impact on 2025, but it's the setup for 2026 that we're focused on.

Your next question is coming from Mike Roxland from Truist Securities.

Thank you, Mike, Steve, Mark, for taking my questions. Just one from me. Just looking at slide 14 in terms of the cash flow trajectory, I'm wondering if there's any change in that trajectory given that you're starting from a lower base now. So in terms of 2024, I believe it was negative cash flow given a high CapEx year. 2025, your EBITDA, as pointed out earlier, it was $200 million lower at the midpoint. So in terms of trying to hit that $2.5 billion of free cash flow for 2024 and 2027, can you help us understand how do you get there given the last few years have been a little more challenging than expected?

Yes, thanks, Mike, it’s Steve. You're correct in terms of that trajectory for us. We haven't moved off that trajectory of the business being capable of inflecting into that $800 million to $1 billion. You're correct. The leap-off point right here in 2025 would be at the lower end of that range. But the positive cash flow inflection for us is a bit undeniable given that CapEx will come down materially next year. The rest of the cash required to run the business, interest taxes, etc., is pretty well bracketed. And so our long-term confidence in those cash flows remains very high. The leap-off point coming out of 2025 into 2026, modestly below that. But as Mike was mentioning earlier, we're being very aggressive about cash flow generation this year. Inventory will be going down as the year plays itself out. So actual cash flow generation this year is going to be really at or above where we originally had expected it. It's just we're getting there with a little different EBITDA outcome given the challenges our customers are facing volumetrically. Mike?

No, I think you summarized it well, Steve. I mean, Michael, you know last year we did $1.2 billion of CapEx. This year, $700 million. And next year, we'll ramp to 5% or below. So those are hard numbers. I mentioned the Waco startup being de-risked. And I saw your note about the capacity that's been removed. I mean, you're absolutely right. From a net standpoint, when you look at the Waco ramp, the coated recycled paperboard market is in balance. And so our confidence that we'll deliver that $160 million on that project is incredibly high. And so you put the combination of those things together, focus on running to demand, expecting that our customers will do better in 2026. We need them to get back to at least a flat volumetric balance there or better. Look, they've been doing this for decades. And they've been through tough times before. And while this is a challenge for them, for the reasons I've articulated earlier in the call, my confidence level that they will figure it out is high. And so you put that all together, our confidence in our Vision 2030 and the cash flows that are going to be generated is extremely high. And that's really why the board of directors, along with management, made the decision to announce today the share buyback that we're putting in place. So hopefully that gives you a little bit more context.

That's great color. Thanks. And one quick follow-up. Just in terms of the incremental $80 million of Waco EBITDA, both in 2026 and 2027, can you just help us understand the volume assumptions underlying that EBITDA?

Well, it's a couple of things. As we've talked about, I think, in the past, close to $100 million of it is just fixed cost removal. Again, smaller, older facilities of our own that will be closed down. And then the balance of it was incremental tons that would flow through it. And again, I think today's announcement by several of our competitors about them removing capacity from the marketplace should, again, give a lot of confidence that remaining $60 million is solid. So that's how it works. And it's over a two-year period of time. We've already announced the Middletown closure. It will be down by the end of May, June 1st. And then our East Angus facility in Quebec will also be closed. We're taking a look at the timing just slightly. It might just change modestly depending on trade and tariffs there. We need to make sure that we take care of our customers, our Canadian customers. But ultimately, it will also go down. And that's a key part of the ramp of the EBITDA.

Your next question is coming from Gabe Hajde from Wells Fargo Securities.

Mike, Steve, Mark, good morning. Bear with me first. Thanks for taking the question. Bear with me for a second. If I were putting together a case study and thinking about the North American consumer board market, one could argue you had a competitor that maybe your largest that was undergoing a pretty big transition, change of ownership, etc. You had another one that was transitioning their strategy. You have a new entrant in North America, etc. Meanwhile, you guys were really kind of had offense on the field. You had low-cost assets, incumbent supplier position, etc. I'm curious, Mike, if we play that forward for the next couple of years, now these folks have got their feet under them. Are you seeing more RFPs come into the business, your customers may be coming back to you and kind of asking for better terms as they're facing their own inflationary headwinds? And somewhat related, you mentioned SNAP and MAHA. I don't think we've yet seen any impact of that directly. So I'm just curious if that's in your forward guide or if you've seen anything and we're just not aware of it.

Well, I'll take that one first. The answer, that's all relatively new stuff. So the answer is that's considered in the guide, but it isn't something we've seen yet, which is part of why you see our move to the minus two for the full year because there's a lot of headwinds out there in the near term, Gabe. So I'll start with that. In terms of the competitive landscape, look, I think in the last 24 hours, you see that the move that we're making in Waco, it's not just the cost structure we've got, it's the quality and the capability that we have on that paperboard manufacturing facility that we have in Waco and the one we have in Kalamazoo. They're tough to compete with and people are deciding where they want to put their CapEx and how they want to spend their money. The new entrant you're talking about, to be fair, they just bought somebody else's mill that was already there. So it's not like they may be new to this market, but it's not new capacity in here. We've been competing against that already. The one that is new is the SPS piece that I referenced earlier in my comments, and that'll come online in the second quarter of this year. That has had 450,000 tons, so that'll have to be dealt with. And I already kind of gave the answer there, so I won't repeat myself. But look, our customers, they're always trying to find value. They have to. These are very sophisticated global consumer goods companies and beverage companies. This is not new. We've dealt with that kind of competitive pressure for a long time. We do well in that environment. We've got a well-invested, low-cost, well-geographically covered footprint in North America and Europe that really help us take care of those customers. And again, now more than ever, they need to make sure that they've got regional supply chains that actually take care of them, particularly on this tariff and trade imbalances that are kind of going on right now and well documented and discussed. So I like how we're positioned, and I would actually argue we're still on offense and focused on taking care of our customers each and every day. So we don't mind that kind of competition. As a matter of fact, we embrace it.

Thank you for that, Mike. One last one. We talked about bridges for this year's EBITDA, but I didn't hear much in the way of startup costs associated with Waco. Is there a number associated with that? Is it in the 1.5? Thank you.

Yes, Gabe, it’s Steve. In the appendix of our materials, we've provided some startup cash costs. We've provided the range in the appendix, $65 million to $75 million. Most of that will be below the line, just kind of startup-related associated with that. It's also embedded, obviously, in our cash flow expectations for the year. So that's coming in about where we expected it to be. I think it's moved around a few million dollars. We just wanted to provide the clarity. But the 1.5 has within it our expected adjusted EBITDA midpoint for the year. So we have some cash startup costs, obviously, below the line. And the 1.5 is the operating go-forward expectations for this year.

Your next question is coming from George Staphos from Bank of America.

Thanks very much, everyone. Good morning. Thanks for the details. Mike, Steve, first question, just a point of clarification. So you talked about the optionality on cash flow and the fact that you like your balance sheet position. You've given yourself a little bit of additional headroom. That's my phrase, not yours, for the end of the year in terms of where leverage should be. And the fact that you have optionality now, but then on going repurchases. But I also thought I heard you say at one point that you want to see the volume picture improve for your customers. So I just want to make sure whatever options you have right now, you have them. If you'd like to buy stock back, you could do right now. You're not waiting on your customers' volumes to improve, or are you? How should I think about that? And I had a question on sort of volume in the rest of the year.

Yes, George, thank you for that point of clarification. No, we don't need to wait for customers to have volume inflection for us to be opportunistic in buying back shares. So if there was an implied correlation there, unintended. We obviously believe over time that our customers will address the issues around them and return to more normalized volumes. But no, we don't need to wait for that. Our cash flow generation capabilities this year are very good. Balance sheet's in a good place. And obviously we have the optionality to do so now.

Okay. Thanks for that, Steve. The second question I had, as we look out to the rest of the year, if I did the math right, I think you're looking at roughly about an 8% drop year-on-year in EBITDA over the remaining nine months. And I think the first quarter, when we adjusted for Augusta, was down over double digits, like 12%, 13%, somewhere in that range. Yet, even though the EBITDA year-on-year comparison is getting better, I mean, it's still worse than you would have liked, but it is getting better. The volume picture has seemingly gotten a bit worse in terms of your guidance change. The pricing effect that you talked about doesn't really happen until later in the year. It's really more of a ‘26 phenomenon. So what else might help you close the gap on performance over the rest of the nine months that's embedded in your guidance, even as volume has gotten a little worse? How would you have us think about that? Thanks, and good luck in the quarter.

Yes, thanks, George. The first half for us is more assertive relative to planned maintenance downtime. We have very large normal maintenance downtime at Texarkana in Q2. And obviously we were matching supply and demand pretty aggressively here in Q1, and we'll continue into Q2. The second half of the year does allow us to run a little more efficiently at a little higher rate, even with the volume assumptions that are here. So it's more of a maintenance cost issue, first half, second half, such that margins in the first half will be modestly below, kind of in that 17% range, and then we expect to inflect back into the 19% range in the second half of the year in the midpoint of our guide. So it's a little more maintenance-oriented as opposed to a difference in volume assumptions.

I think maybe the only thing I would add to that, George, is that usually what we see when we see a volumetric slowdown, we see our input costs go down. In this case, we actually saw them go up. And if you look back to 2008, inflation went from 3% down to like 0.5% by 2010. So if we do in the back half of this year see less inflation than the $80 million at the midpoint that we've targeted, that could be a positive too. But it's just, this one's a little different because just the dislocation of some of the trade flows is causing some distortion of some of the things that we buy. But maybe that settles down, it gets a little bit more normalized here in the months to come, and that could be a tailwind.

Thank you. We have reached the allotted time for Q&A. I will now hand the conference back to Mr. Doss for closing remarks. Please go ahead.

Thank you, operator. And thank you, everyone, for joining us on the call today. 2025 will be a challenging year for our CPG and QSR customers. High food prices and an uncertain economic environment cause consumers to pull back and embrace private label alternatives. New medical developments like GLP-1 and the new MAHA policy initiatives are both a risk and an opportunity. Yet if we stand back, we can put these near-term pressures into better perspective. Product reformulation is nothing new. Our customers are experts at that. Aligning and realigning products to deliver what consumers want and need and at a reasonable price point is a skill set that helped make our customers the global leaders they are. Finding the right formula for success doesn't happen overnight. At Graphic Packaging, we spent the last eight years building and expanding our innovation and execution capabilities, and we are exceptionally well-positioned to meet our customers' changing needs to support their growth strategies. We are positioned to generate cash well in excess of our needs and to use that cash to provide substantial value for our stockholders for years to come. I want to thank our 23,000 employees for their dedication and our stockholders for their confidence in Graphic Packaging. Thank you and have a good day.

Thank you, everyone. This concludes today's event. You may disconnect at this time. And have a wonderful day. Thank you for your participation.