Hello, and welcome to the Ranpak Holdings Fourth Quarter and full-year 2021 Earnings Call. My name is Emily, and I will be coordinating the call today. During the presentation, you will have the opportunity to ask a question. I will now hand the call over to our host, Sara Horvath, General Counsel. Please go ahead.

Thank you. And good morning, everyone. Before we begin, I would like to remind you that we will discuss forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements due to various factors, including those discussed in our press release and the risk factors identified in our Form 10-K and other filings submitted to the SEC. Some statements and responses to your questions in this conference call may include forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. Ranpak assumes no obligation and does not intend to update any such forward-looking statements. You should not place undue reliance on these forward-looking statements, all of which speak to the company only as of today. The earnings release we issued this morning and the presentation for today's call are posted on the Investor Relations section of our website. A copy of the release has been included in a Form 8-K that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non-GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the table and slides presentation accompanying today's earnings release. Lastly, we'll be filing our 10-K with the SEC for the period ending December 31st, 2021. The 10-K will be available through the SEC or on the Investor Relations section of our website. With me today, I have Omar Asali, our Chairman and CEO, and Bill Drew, our CFO. Omar will summarize our fourth quarter results, provide an update on our growth strategies, and issue our outlook for 2022. Bill will provide additional detail on the financial results before we open up the call for questions. With that, I'll turn the call over to Omar.

Thank you, Sara. And good morning, everyone. I hope everybody is staying safe and healthy. Ranpak had a strong fourth quarter and robust results for the calendar year 2021. I'm extremely pleased with our overall results and the execution of our team members, who delivered strong growth in our topline and meaningfully grew our profitability against a tough Q4 2020 comparison. We've accomplished a tremendous amount this year, not only in the financial results, but also in advancing key initiatives for our company. We had a number of significant projects going on in 2021. In prior calls, we mentioned our digital transformation and investments in technology. The most impactful component of which was upgrading to our new ERP platform, SAP. This project stretched across the entire organization and took one year for us to implement. We went live with the new system in January of this year and I'm genuinely impressed with the hard work and dedication I witnessed from our global team to accomplish this gargantuan task. It took tremendous effort and dedication from all involved, working late nights, weekends, and holidays to accomplish. As we get up the learning curve associated with an ERP system as sophisticated as this one, we expect that the benefits for the organization will be tremendous in terms of better processes, access to data, and visibility into the business. It also significantly improves our ability to scale the business globally and onboard acquired companies as we pursue a more robust M&A strategy going forward. IT infrastructure does not always get the limelight, but given the critical role it can play in the successful growth of an organization, improving this area has been a priority of mine. I'm pleased to report Ranpak now has world-class ERP, CRM, Financial Planning, Human Resources, and Data Analytics Software and Information Systems. It's been a tremendous undertaking to get all of these systems implemented and talking to each other. Most of this activity has taken place in the past year, while the team has also been focused on executing and growing the business. I could not be more excited about our new systems and processes, as well as the efficiencies we will hopefully extract due to our additional insights. My hat is off to the global team that really drove these processes. Overall, the theme for us the past couple of years has remained the same: stay focused on executing in the short term, while investing in the business for the long term. Capital allocation decisions are critical to the long-term success of any company and creating shareholder value. Our mindset is always focused on maximizing value for the long term, but we are also cognizant of maintaining strong performance along the way. It's a balancing act as we weigh the sequencing and depth of investments due to the impact on near-term results, while making sure we are being aggressive enough to pursue the opportunities that provide maximum upside for shareholders in the next five years. This year, we have been very prudent in our strategic decision-making the past two years. As we will discuss later in the call, our guidance for 2022 shows that this year, we plan to continue to take a more aggressive approach to investing in the business to support our growth objectives. We finished the year with solid momentum in the business and with the acquisition of Recycold, a manufacturer of sustainable gel packs. These drink-safe and plant-based gel packs are a great addition to our cold chain offerings. We're excited to plug Recycold into the Ranpak network to help expand the business and bring these solutions to the United States. Now, a few words on the quarter. I'm pleased to report consolidated net sales on a constant currency basis increased 21% driven by broad-based growth in all product lines, bringing full-year sales up 26% on a constant currency basis. Europe and APAC experienced exceptional demand in the quarter, exiting the year with good momentum. Net revenue on a constant currency basis was up 24% driven by strong growth across all product lines. Our North America business also delivered excellent top-line results at 18% for the quarter, marking the third quarter in a row of double-digit growth. Overall, I'm really pleased with the activity levels we see in the region and believe that in 2022, North America is on a real path to sustainable growth. Adjusted EBITDA of $35.7 million was up 8.2% in constant currency terms year-over-year, resulting in a very strong margin of 32.6%. Our growth in adjusted EBITDA was due to higher sales compared to a year ago, offset somewhat by increased input costs and investment in personnel. For the year, constant currency adjusted EBITDA was up 26% to $117.8 million, in line with our revenue growth. Overall, really excellent performance to finish the year in the face of a challenging supply chain environment and inflationary headwinds. I'm very proud of what we have accomplished in 2021, and I'm even more excited about 2022 and beyond. We continue to navigate well and believe we are well-positioned for further success. The additional investments in the business are beginning to pay off, and we look forward to an even greater impact going forward. The backdrop for 2022 is a positive one for Ranpak as Ranpak's three key structural tailwinds remain in place. E-commerce activity remains robust as the share gain from brick-and-mortar appears structural. Sustainability continues to gain momentum globally, and increased wages and labor shortages drive the need for further automation and efficiencies. We'll take you through our guidance for 2022 after Bill's remarks. But to summarize, we're focused on achieving double-digit growth again this year and will further invest in the business to position ourselves to maximize the opportunity over the long term. With that, let me turn the call over to Bill, who will give you further details related to the quarter and full-year 2021.

Thank you, Omar. In the deck, you'll see a summary of some of our key performance indicators. We'll also be filing our 10-K, which provides further information on Ranpak's operating results. Machine placement continued its steady and broad-based increase, up 13.5% year-over-year to over 133,000 machines globally. Installed systems increased 4.8%. Void Fill installed systems grew 14%. And wrapping continued its expansion path, growing really well at 29.7% year-over-year. Overall, net revenue for the company in the fourth quarter was up 21% year-over-year on a constant currency basis, driven by strong double-digit growth in all regions. For the quarter, combined revenue in our Europe and APAC reporting division increased 24% on a constant currency basis, bringing full-year 2021 combined revenue in those regions to 34% on a constant currency basis. Europe and APAC finished the year on a strong note, experiencing robust growth across all categories versus the prior year. North America posted another strong quarter of double-digit top-line growth, reporting net revenue of $45.8 million, which was up 18% versus the comparable period in 2020, bringing full-year results up 15%. For the quarter, all categories were up double-digit percentages exiting 2021 with solid momentum. Execution in North America continues to improve, and sustainability is growing in importance. We have bolstered the team with key talent across the board and provided additional resources to enhance growth and improve the way we serve customers. Reported gross margins of 35.6% for the quarter were lower versus 42.1% in the prior year, as we experienced incremental input and production costs that surpassed our year-to-date pricing actions, contributing more than 3.5 points of the decline. We're implementing targeted pricing actions in the first half of 2022 to claw back a significant portion of the increased input and production cost we absorbed in the last few months. Additionally, we took a one-time write-off of consumables related to our SAP conversion, which represented another roughly 1.8 points or $1.9 million of pressure. Important to clarify, the consumables write-off was purely a new accounting mechanism that we are adopting going forward that will expense these items directly versus carrying them in inventory and then expensing them. Also, it's helpful to keep in mind that from a profitability standpoint, the fourth quarter of 2020 was exceptionally strong as kraft paper pricing was extremely favorable, volumes were robust, and staffing levels at our company were significantly leaner as there were still gaps to fill for key initiatives. Now, let me elaborate on our input cost and margins. In response to the rising cost of kraft paper, freight, labor, and pallets, we have taken pricing actions at various points throughout the year in different parts of the globe. We have been strategic in our actions, triangulating between accelerating top-line growth, reserving margins, as well as being mindful of how and when pricing might get passed on in different geographies. Fortunately, the volume elasticities have been better than expected following our price increases in 2021 as many businesses are experiencing similar inflationary pressures. Given how dynamic the commodity markets have been, we did face a bit more pressure in Q4 than prior periods as our pricing actions lagged behind the movement in kraft paper and energy markets to finish the year. Already in 2022, we have announced additional pricing actions to recover some of the margin pressure we experienced in Q4. As always, we continue to analyze whether conditions warrant further increases in the future. To support growth initiatives, SG&A continued to build last year driven by increasing headcount from approximately 645 to finish the year at around 850. As Omar mentioned, we added talent in senior management, sales, operations, and finance personnel, as well as beginning to build out our internal automation effort, resulting in an increase of $2.9 million year-over-year for the quarter. Many of our team members have been dedicated to SAP over the past year, so we're looking forward to integrating them back in their roles and some of the efficiencies they may be able to bring as the year progresses. As expected and consistent with seasonality in years past, the fourth quarter was our largest net revenue from adjusted EBITDA standpoint. Although it was a challenging comparison and we had our largest input cost headwinds for the year, the team did a great job managing the P&L, achieving meaningful constant currency adjusted EBITDA growth of 8.2% on top of last year's exceptional results, and bringing full-year constant currency adjusted EBITDA up 25.7% versus 2020. Moving to the balance sheet and liquidity. We completed 2021 with a strong liquidity position including a cash balance of $104 million and no drawings on our revolving credit facility, bringing our net leverage ratio to 2.6 times on an LTM basis. We are pleased with the continued progress on our capital structure in 2021 as we paid down debt and reduced our interest expense; our cash balance and conservative leverage profile provide us with excellent flexibility to pursue growth initiatives and M&A. With that, I'll turn it back to Omar before we move on to questions.

Thank you, Bill. Over the past year, we made a strategic decision to invest further in accelerating share gains to hopefully emerge with more momentum as market disruptions lessen. In 2022, we plan on maintaining this approach and accelerate our investment in some areas to maximize opportunities in 2023 and beyond. This year, on a constant currency basis, we are anticipating revenues of $425 million to $445 million, reflecting top-line growth in the area of 13% to 18% and adjusted EBITDA growth of 9% to 12%, implying a range of $128 million to $132 million. Our expected outsized top-line growth for the year reflects our expectations of continued volume growth as we expand our business, as well as 2021 pricing actions and planned increases for 2022. Our growth in adjusted EBITDA of 9% to 12% reflects investments in key areas such as automation, as well as our expectation that some of the input cost inflation pressures we experienced in Q4 will persist in the first quarter and then will be offset through additional pricing action. In earlier calls, we shared our plans for meaningful investments in capacity related to automation. This involves our new European headquarters, which will consolidate our PPS and automation operations in the Netherlands, as well as the new automation and R&D facility being built in Shelton, Connecticut. Both of these facilities are new builds, and we anticipate them opening hopefully in Q4, 2022. From a capacity standpoint, these investments will increase our ability to produce automation equipment by 3 to 4 times what it is today. For 2022, we're targeting more than $20 million in sales, which is more than 50% above last year, which maxes out the capacity of our current facility. This implies the ability for automation to contribute $60 million to $80 million in top-line as we ramp up activity at our new facility and gain some efficiencies in our processing. To position ourselves to hit the ground running when we open our facilities, we are ramping up our hiring in 2022 in areas such as engineering, sales, assembly, installation, and service to achieve greater scale in 2023 as quickly as possible. 2022 is a pivotal year for Ranpak. We're investing in the infrastructure that will enable us to continue to grow organically, and should we decide to do so, scale up through M&A over the next number of years. These investments take the form of renovation of our headquarters in Concord, and three new facilities—one new automation center in Connecticut, our new headquarters and automation center in The Netherlands, and lastly, a new production facility in China. The second leg of our investments involves our IT infrastructure, including SAP, CRM, and other business apps, as well as a number of operational projects to enhance our capabilities. All in, these projects, which I consider to be non-recurring, will be roughly $35 million to $40 million in 2022, bringing total CapEx closer to $75 million for the year, including our converter spend. These one-time investments in real estate and technology will enable us to target significant growth in future years and capitalize on the strong end-user demand we continue to see in our business. Overall, I'm very excited about the business for 2022 and beyond. With MPPS, Europe continues to execute well and benefit from a strong sustainability tailwind. The further push to replace plastic and foam that initially began in Northern Europe continues to spread throughout the rest of the continent. In North America, many of the enhancements we have made over the past couple of years in sales, engineering, and digitalization are taking hold, resulting in improved performance, as well as a passionate workforce and a reinvigorated network of distributors and end-users. Encouragingly, sustainability is showing signs of increasing in importance in the decision-making process in North America, as companies feel pressure from boardrooms, employees, and shareholders to reduce their plastic output. In Asia-Pacific, the team continues to expand and further penetrate the region. We are thrilled to be opening a production facility in China in the second half of ’22, which will reduce our lead times as well as our freight and logistics costs. Removing the additional cost burden from serving this region out of Europe will enable us to be significantly more competitive and help us drive growth. On automation, I mentioned earlier our goal for this year to surpass $20 million in sales, which is the max capacity of our facilities. We expect that much of this growth will be within Europe, where the majority of our existing automation infrastructure is, but we have ramped up hiring plans in North America, focused on automation as well, and are pushing to expand rapidly in this market as quickly as possible. We are celebrating Ranpak's 50th anniversary this year. Our BTS business has been the consistent high-margin growth engine for Ranpak over our first five decades. With our focus on R&D and innovation, as well as sustainability tailwinds, I believe EPS will continue to be a critical growth driver and robust cash generator for Ranpak going forward. For Ranpak, the structural demand I see unfolding for automated solutions provides what I believe is the biggest opportunity to step change growth over the next decade. Although in the near-term it impacts profitability, we believe allocating the capital and resources to this area, including the build-out of service, assembly, and installation organizations will provide us the best opportunity to more rapidly execute on our plan to expand our automation platform when our facilities open. And now, just a moment to share with you something that we are seeing on the sustainability front. Globally, we continue to seek to tackle the plastic waste crisis. Later this year, world officials will meet at a United Nations Environment Assembly Conference, also known as UNEA 5.2, to start negotiations on aligning UN member states on legally binding policies to address plastic pollution. This includes initiatives that are both upstream and downstream with goals of reducing the use of virgin plastic and speeding up the transition to a circular global economy. More than 70 signatories, including many of the world's biggest brands, have joined this effort to come up with systemic solutions to stop plastic leakage into nature. Initiatives such as this one, as well as the continued rollout of EPR laws in Europe and now in the United States, including in California, could do wonders for the environment and for demand for paper-based protective packaging solutions. We at Ranpak are very excited about being part of the solution and doing our part to deliver a better world. This is a special journey that we're on. In closing, I will reiterate that we are proud of what we did in 2021 and are excited about our plans for 2022. Thank you all again. At this point, we'd like to open the line for questions.

Our first question today comes from Ghansham Panjabi from Baird. Your line is open.

Thank you. Good morning, everybody.

Morning.

Can you provide some insights on the paper consumable volumes of 5.5% in the fourth quarter, which is an increase of almost 17% from the third quarter? Was there a pre-buy in anticipation of price increases? Additionally, what are your expectations for paper consumable volumes in the current quarter, and how much volume are you factoring into your top-line growth guidance for 2022?

So, in terms of what we saw in the last quarter, we've had a number of closes, Ghansham, that helped drive quite a bit of growth. So, there were a number of organic growth factors that drove part of that volume. Given the SAP and the ERP announcement, we believe with some of our partners, there was a little bit of buying just to ensure that whatever supply they received in January of this year was seamless. What we've seen since then, and since implementing the new system, is a pickup back again to just normal rates of volume and growth. Frankly, we continue to see strong trends in terms of volume and in terms of end-user demand. Bill, I don't know if you want to add some color to that.

Yeah, and Ghansham, the other thing I'd point out just on the volume side is that the fourth quarter of last year was an extremely frenetic environment from an e-commerce perspective. So, I think you have a pretty dramatic increase last year, making for a challenging comparison on the volume side, year-over-year.

Got it. And for '22, what are you baking in for volumes?

We're looking at roughly 50-50 in terms of price and volume contribution on the top-line there.

Okay. Perfect. And then for my second question, Omar, maybe for you on automation and a lot of companies, including those in our coverage, they’re talking about ramping up their investments there. Can you just share specifically about how Ranpak is differentiating itself, from a competitive standpoint, specifically in automation? What capabilities are you bringing to the table for your customers?

Sure. So, we're very focused on what we call all end-of-line activity for automation. That is anything from putting the item in the box, erecting the box, customizing the size of the box to labeling, and frankly, with some of our partnerships all the way to loading the truck. We have solutions that can do all of that in an automated fashion, Ghansham, or some solutions that are semi-automated that reduce the amount of labor required. The biggest challenge we have is in the equipment we make, which includes box customization, pad insertion, robotics, and automated void-fill. We have been hitting capacity in our existing physical footprint, and we've been saying for a while that we want to invest in real estate to expand that capacity because frankly the demand we're seeing from our existing customers as well as prospects surpasses our capacity quite a bit. So, we are working hard on expanding that in Europe as well as building our facility here in the U.S. I wish there was a way to do that even at a faster rate, given the robust demand that we need. Once we do that, this will enable us to basically increase our production by three to four times. For just that equipment, there's a number of other solutions we have, where we work with external parties on sub-assembly and assembly that we're also increasing capacity there. What that would put us in a position to achieve is, we believe, being a leader in end-of-line solutions that our customers want. That's really the focus and the investments that we're making in a fully robust organization from installation, project delivery, all the way through to services and parts so that we can meet the demands of our customers.

Thank you so much, Omar.

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

Yes. Thank you. Good morning, everyone.

Good morning, Adam.

First, I wanted to follow up on Ghansham's question regarding the revenue guidance and perhaps approach it from a different angle. The installed base at the end of the fourth quarter was approximately 13.5%. You experienced a 12-point increase in the price of your paper consumables. You're considering additional pricing actions going forward. Pricing should have some relatively easy comparisons, particularly in the first half of the year. The constant currency revenue guidance of 13% to 18% might be influenced by the automation aspect you mentioned, which could account for about one to one-and-a-half points of revenue growth. I'm trying to understand why the implied volumes per machine in the installed base are decreasing. Are the new placements significantly less productive in terms of throughput compared to some of your legacy machines? Are you noticing reduced throughput with existing customers? Because if not, I'm having difficulty comprehending how we can reach the 13% to 18% constant currency revenue guidance.

Sure. We watch our revenue per machine very closely. It's an important metric for us. One of the things that get lost when you do things at the overall company level is what type of converters and equipment you are investing in and growing. I'll give you an example. We see a lot of opportunity in wrapping. We see a lot of opportunity in ship from store. Some of that equipment is smaller, just by definition, and has less revenue per machine compared to some of the larger industrial equipment. So, we're taking part of that as part of our capitalization. I think your numbers are generally correct where you were talking about a point-and-a-half of automation. The rest of the growth, roughly speaking, this is not exact, we think it's a mix between price and volume. One of the things I want to highlight on price is that we've instituted some price increases. We will be doing some more. I would say, given the inflationary environment we're seeing and given the noise out there with what could be transitory, what isn't transitory, we are asking for price increases. We're not pushing on that lever as much as we can to continue to see where the world settles. So, we're being a little bit patient, and you saw that in our numbers in Q4, and that's part of why we're giving the guidance that we're giving. Could there be some room for further price increases? Yes, potentially, but I think we're taking the position of let's see what happens in the inflationary environment and within the supply chains before we start doing that across our different markets.

Okay, that's helpful. I have a couple of quick model questions. What accounted for the $5.6 million adjustment to adjusted EBITDA in the period? This was a significant figure that wasn't defined or detailed in the press release. Secondly, what would your reported revenue and EBITDA for 2022 be at current exchange rates, and what would it look like in constant currency? Lastly, could you share your thoughts on free cash conversion? Looking at 2021, there's a notable gap between cash from operations and your adjusted EBITDA, so how should we approach that for 2022?

Sure. Adam, I'll start with EBITDA PA add-backs. So, the biggest chunk of that is related to SAP and the digital transformation. A big chunk of that is related to the consumables write-off that I mentioned in the prepared remarks. There's also some backfill cost and extra professional fees associated with that, which was about $3.5 to $4 million of that add-back. The other factors were largely driven by expenses related to the Recycold acquisitions, and some other legal fees. So, it's recognized as bigger than normal, but a lot of it was related to SAP. As far as the free cash flow conversion question, this year we did invest a lot more in our working capital. We've talked about that on a few of the calls where we were building up inventory of converters and paper to be ready to serve our customers, just given all the supply chain constraints that are going on in the world. I think that was a big driver of the disconnect between EBITDA and the cash from operations. We expect that to normalize going forward, right as we built up sufficient safety stock and expect to be selling out of stock now rather than building up inventory. But for '22, we do expect to generate meaningful cash even with these investments that we're talking about, with $75 million of Capex and the growth profile that we have in the cash generation from our PPS business.

And then on the EBITDA question, at current exchange rates, I'd have to get back to you on that. I don't have that handy in front of me, but we can follow up.

Yeah, thanks. Morning, everybody. I guess just wanted to dig in pricing just a bit more; just unclear. Do these newly announced price increases, can they completely offset the input cost inflation or will there be a continued lag or headwind in 2022 based on what you're seeing today?

Yes, Greg, this is Bill. I'll start with that. There has been a lot of movement in the commodity markets recently and continues. We are constantly analyzing those and making sure we're clawing back margin where we see fit. You saw some impact in the fourth quarter. We’ve already announced some pricing actions to take place. I think if you're just thinking about the cadence of it, we do expect some of that pressure to persist in Q1 and then improve going forward as the announced pricing actions are implemented. Given the transition to SAP, we were not able to implement those as quickly as we normally would. But we are expecting to claw back a meaningful number of margins, particularly as the year progresses.

The plan, Greg, is ultimately as the year goes on, you will see us implementing enough price increases to offset the inflationary environment that we're observing. One thing I want to highlight is that paper price increases have occurred in the marketplace, but there is inflation regarding labor costs and other areas. From a competitive landscape standpoint, we are getting into an area where our competitors that are more reliant on plastic and plastic substrates are facing more pricing pressure and requesting more price increases.

And that is helping us from a competitive standpoint. When we say it's dynamic, we're watching it, we’re trying to decide what to do—part of our capital is also to balance that with what we want to do from a market share standpoint, and what we want to do from a volume standpoint. Do we want to push a bit more on volume and hold back a little on price, because we have that choice or do we want to just implement price increases to offset everything we're seeing? That's part of the stuff we're reacting to in the marketplace, depending on what we're seeing there. But from a competitive standpoint, it's important to highlight. We’re noticing advantages. I’ll give you one example with foam in the industrial channel. The price increases there have been significantly higher than paper, and that's an area that we're focused on gaining more market share within the industrial channel.

Yeah, it makes sense. I'm guessing some of these price increases for the alternatives don't even take into account the recent move in energy and crude prices, right?

That's correct. So that's another added relative benefit, if you will, but this is why we're watching things, and we're making decisions based on new data and what we're observing out there and the market reaction from some of our customers and competitors.

Yes, makes a lot of sense. And then I'm curious, what do you think the current demand profile of automation is today? So, you're maxed-out right now. I'm guessing demand is quite a bit higher than the $20 million that you said you'd be able to fulfill this year. I guess better said, how much revenue do you think you'll generate this year if you had more capacity?

I think if we have the capacity, we could have easily delivered double the machines from a demand standpoint, honestly. The limitation has been us, our capabilities, and our physical footprint. It has not been the end users. The demand is robust in Japan, in Korea, in Australia, in Europe, and North America. The demand for Automation Solutions is quite large, for us and for our competitors. The question is who is going to be ready and crack the code to provide the right solutions at the right price and time. That's the race that we're in.

Got it. So, we probably should expect just some growth next year as that capacity comes online, but pretty meaningful growth in automation.

That's why we highlighted in our commentary the capacity growth we’re targeting—3X to 4X. We are recruiting to get ready for that. As you can imagine, if all of our physical facilities are ready by the end of '22, there will be a little bit of a ramp-up period in early 2023. We're hoping we do enough planning, so that ramp-up period is short, and you should start seeing us hopefully operating at a much larger capacity, trying to meet the demand at those elevated levels.

Great. Best of luck going forward. Thanks.

Thank you.

Our next question comes from Stefanos Crist from CJS Securities. Please go ahead.

Omar and Bill, good morning.

Morning, Stef.

I want to address one of the previous questions you talked about, taking share from customers of plastic as oil prices are rising. Are you taking share from existing customers who use both paper and plastic or is that helping you gain new customers?

We are very focused on gaining share from customers that are utilizing plastic solutions today. That's a big focus for us, both in industrial and in void fill, as we target growth opportunities and help them switch from plastic to paper-based solutions. Obviously, with sustainability being a key part of it, we’re also trying to push on pricing where it makes sense, given the inflationary environment. Our key focus is on switching a lot of customers over time from plastics to paper.

That is similar to what we've seen in Europe. This is why we mentioned EPR regimes, the extended producer responsibility regimes, which have been implemented in the state of Maine, in Oregon, and there are discussions about it in New York and in California. If these regimes are implemented in a way that there are more taxes or fees associated with virgin plastic and less with paper solutions given their high recycling grade, that will continue to help us shift more customers from plastic to paper. That’s precisely what happened in the last several years in Europe with their EPR regime, and we think this could be replicated in North America in the upcoming years. So, Stef, to answer your question succinctly, there's a strong focus on switching customers from plastics to paper.

Great. Thank you. And then I just want to follow up on cold chain. Can you give us a sense of what percentage of revenue that is currently and the potential of that end market?

So right now, cold chain is below single digits. We see a lot of potential for this and we're excited to invest in Recycold and package that with some of our existing Ranpak solutions. We think it's a really nice combination and solution to offer to customers. The growth opportunities there are meaningful, and we're continuing to invest and add solutions to our profile, further enhancing our current offerings. The food and beverage passive cold chain market alone is roughly about a $5 billion market, growing at high single digits, 10% area. Then you can add some passive cold chain for pharma, but that's further out. We believe that there are significant opportunities to expand this business with our current offerings.

Perfect. Thanks so much.

Next, we have a question from Alexander Leach from Berenberg. Your line is open.

Morning, everyone. Thanks for taking my question. I know you were talking about pricing and costs, but given the volatility in pricing, can you discuss a little bit more about the conversations you've been having most recently? How are negotiations set for the grading prices for 2022, and how are you expecting much about the expectations of pricing for the year?

Yes. Listen, obviously, in the last few months many of our suppliers and mills have been very focused on the inflationary prices they are enduring, and that has been part of the conversations we're having with them, particularly on the energy side. In addition to all other labor issues, the energy side has seen quite a bit of pressure. We have secured the supply that we want for 2022, and we have negotiated the volumes that we want. Anyone we have negotiated with feels good about pricing going forward. As I said, with some price increases that we intend to do, we feel we will maintain our financial profile. In some cases, we have a number of suppliers where we've also agreed on indexing things based on indices, which we may revisit depending on what is happening. The reality is this reflects the volatility in the world, so if things ease up we see favorable pricing. If not, it will be a mechanism for our mills to secure respectable margins. If that happens and prices go up in six months with some of the vendors, we would be adjusting that in our own price increases with our customers. In general, we feel positive about securing supply for this year and negotiators on prices we are comfortable with.

Okay, great. You made some comments on M&A going forward in this year and next year. Could you just discuss a little about the pipeline that you're seeing for '22?

We continue to look at M&A right now, mostly driven by what we believe our customers want. We're continually looking for certain situations that can enhance our automation capabilities. We will look for products that expand our suite of offerings in PPS. The world is a little uncertain right now, so I wouldn't say we’re aggressively looking at anything. We are more always keeping our eyes and ears open for solutions that our customers want and we feel we can provide to them.

Or those solutions for them. That's really our approach, and it hasn't changed from prior years. The biggest difference is today, from a technology and platform standpoint, given all the digital investments we have highlighted, our company is a lot more robust to take on bigger M&A if that opportunity arises. But we all know M&A is dynamic and fluid, and it depends on valuations and many factors. We will be very, very disciplined. It's part of our capital allocation strategy, and when we think something makes sense, particularly for our customers, we will pursue it. But in the meantime, you have seen what we've done, whether it was the investment in Pickle and Creapaper or buying Recycold. These are all strategic decisions we are making to enhance offerings for our customers.

If I could just, several more in? How much of the benefit you're expecting from your digital transformation in margins? I’m assuming all the benefit will be reinvested back into the business as you scale. I'm trying to get an idea of how much leeway it’s going to give you in terms of being able to reinvest back into the business and maintaining the margin profile?

Yes. It depends on the different areas that we're in. There are real opportunities when you implement a system like this in procurement. The data we have on that is really attractive, where we may extract efficiencies meaningfully there, as well as a number of our other process flows. We think that going forward this will provide us with a nice opportunity to reinvest in the business to drive growth and maintain that 30% EBITDA margin profile that we like to target. As far as offering specific numbers on what that margin opportunity is, it's hard to say at this point because we just implemented the system, but we believe from the benchmarking data that there is real opportunity for savings here.

Great. Thanks, guys.

Next up, we have a follow-up question from Adam Samuelson from Goldman Sachs. Your line is open.

Yes. Thank you. I just wanted to follow up on the outlook for '22 on the base business. Is there any distinction you draw in terms of the price volume outlook across the different parts of your installed base—cushioning, Void Fill, and Wrapping—in terms of what areas you're more optimistic on growth versus maybe a little bit more guarded? The corollary, can you just disclose what your exposure—direct exposure—is in Russia and Ukraine?

Sure. On the outlook, if you think about our major PPS categories with cushioning, wrapping, and Void Fill, the outlook we have on each one of those categories is attractive. There are real opportunities to continue to grow that cushioning business, given what's going on in the foam and place market. We feel there are real opportunities for our paper solutions to expand there. We're optimistic about improving the growth rate within our cushioning solutions. E-commerce remains strong in the Void Fill space, and the share shift from brick-and-mortar is very real. We're continuing to see nice growth opportunities, particularly in North America, where we may be a little under-indexed. In wrapping, that product has great traction across the globe, and the growth profile there is consistent with what we've seen in the past. There are substantial opportunities to expand that business, particularly as the ship from store opportunities broaden.

In terms of customer exposure in Russia and Ukraine, it's minimal for us. Across the company, it's very small, in the order of a few basis points of our revenue, so that's not really an area of concern for us. We have some suppliers of paper out of Russia, and we're monitoring that closely. We feel pretty good about securing our supply, and if needed, given our negotiations, we can flex with others. We're watching that piece.

All right. That's really helpful. Thank you.

Thank you.

We have no further questions, so I will hand back to the management team for any concluding comments.

Thanks a lot, Emily. And thanks everybody for joining us today. We look forward to getting together in the first quarter.

Thank you, everyone, for joining us today. This concludes our call. Please now disconnect your lines.