Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ranpak Holdings Corporation Third Quarter 2022 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Thank you, and good morning, everyone. Before we begin, I'd like to remind you that we will discuss forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K and our other filings filed with the SEC. Some of the statements in 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 press release has been included in a Form 8-K that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non-GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the table and slide presentation accompanying today's earnings release. Lastly, we'll be filing our 10-Q with the SEC for the period ending September 30, 2022. The 10-Q 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 third quarter results and provide commentary on the operating landscape and 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, Sarah, and good morning, everyone. I appreciate you all joining us this morning. As expected, the third quarter was a challenging one at Ranpak as the headwinds we discussed on our Q2 call impacted results and macro weakness intensified throughout the globe. The global consumer remains under pressure due to inflationary headwinds related to fuel, food, and energy impacting personal budgets and reducing disposable income. Adding to the challenges, spending patterns remain firmly in favor of experiences and travel rather than in e-commerce as many consumers pull forward their goods purchases during the pandemic. More recently, the impact of rapidly rising rates on household net worth and rising housing costs is having an impact on confidence and reducing willingness to spend on discretionary items. Overall, we expect e-commerce and the consumer to remain under some pressure in the near term. But as we exit the year and head into 2023, we will begin to lap the short-term pattern shift from the purchase of goods to experiences and expect e-commerce to ultimately return to growth. Due to the shift from brick-and-mortar with the timing and trajectory of a recovery impacted by the near-term macro headwinds. While the environment certainly remains challenging, we have been developing new products that are ideally suited for the e-commerce environment, which we believe can improve the velocity of our bounce back and get us back on a trajectory for growth we have been working towards. In July, we communicated that we expected the energy crisis in Europe to worsen and its impact on the economy to become more pronounced. The ramifications of skyrocketing energy prices are flowing through the economy at this time, and we expect headwinds to persist until alternative energy supplies can be found, and the continent has a viable path forward without Russian natural gas. While governments have been slower to take action in securing new sources of energy than we would all like, many companies in the region are taking the matter into their own hands and switching their key energy inputs from natural gas to oil and coal, which is helping to reduce demand and meet storage targets ahead of the winter. Pricing for natural gas has remained extremely volatile, moving meaningfully one way or the other based on the headline of the day. The ultimate impact this environment has on business and the consumer is difficult to forecast. So we are staying in close touch with our vendors and customers to share information and plan accordingly. We feel very confident in our paper sourcing as we have reallocated our buy and taken steps to reduce risk. Our status as a reliable sized buyer of paper has helped us secure access to the tons we need. For some regional color, North American results were disappointing as lackluster e-commerce activity persisted throughout the quarter, impacting Void-fill and Wrapping, while cushioning was down modestly due to slower activity. New business activity continues to be solid, though, and at levels in line with Q2, which is encouraging. The biggest areas of demand continue to be in our cushioning solutions, which we are working hard on fulfilling the converter demand. In Europe and APAC, performance varies throughout the region and country by country. Fortunately, I believe the substantial portion of the destocking activity that has impacted us throughout the year has largely been worked through, although some pockets still persist in the Nordic region and Australia. The biggest detractors in the quarter were in Germany, Poland, and Australia, with Germany and Poland largely driven by the macro environment and Australia impacted by lower e-commerce activity combined with destocking. Bright spots in the reporting unit can be found in Japan, which was up nicely year-over-year and continues to be a source of new business wins as well as Austria, Switzerland, and Spain, which outperformed. The macro backdrop is difficult, but certain areas that have been headwinds for us all year are starting to show some signs of improvement, driven by improved availability and lower commodity costs. Freight rates for ocean containers have dramatically improved as have tracking spot rates and availability in North America. We believe the momentum for paper pricing relief in North America continues to build as additional capacity is coming online and the lower demand for corrugated products improves availability. Pricing of a number of commodities, including OCC, pulp, and lumber, has meaningfully improved and inflationary metrics such as service and manufacturing PMI prices, car prices, and rents have begun to roll over. Many of these should help drive improved input costs for our business going into next year. While we would welcome external factors such as these improving, we have been focused on helping ourselves through expense reduction, greater efficiencies, and new product development to drive demand. Our G&A expense reduction effort I discussed last call is being executed and starting to flow through. Over the past number of months, we have implemented plans to reduce headcount by approximately 10% across the globe and reduced discretionary spend where possible. Some of these benefits are yet to be realized due to local notification requirements, but we should see the bulk of the savings on a run rate basis by year-end. On the efficiency front, we are getting better with the new systems every day and believe it will be an important tool to support our ability to extract manufacturing efficiencies as we grow our business. Our new facilities in the Netherlands and Malaysia, which opened in 2023, should also enable us to operate in a more efficient and lower-cost manner. The Netherlands facility combines three facilities into one, and Malaysia provides us with the lower-cost, local platform to service the APAC region. What I'm most excited about though is the work we have been doing on the new product side; we have meaningful introductions coming in the near term on the Void-fill, Wrapping, cold chain, and automation front. We believe the introduction of these new products will help us drive demand, gain market share and get back on the path to growth. Now I'll turn it to Bill for an overview of the financial results.

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-Q, which provides further information on Ranpak's operating results. Machine placement in the quarter increased 7.3% year-over-year to approximately 138,500 machines globally. Solid placement performance but at a lower rate than earlier in the year due to slower market conditions. Cushioning Systems grew 1.4% in the quarter, while Void-fill installed systems increased 8.1% and Wrapping increased 14.6% year-over-year. Overall, net revenue for the company in the third quarter was down 12% year-over-year on a constant currency basis, driven by lower volumes due to slower end market demand, offset somewhat by positive price contribution. North American net revenue decreased 10.5% year-over-year, largely driven by lower Void-fill and Wrapping sales as e-commerce activity was lower compared to the prior period. In Europe and APAC, net revenue on a constant currency basis in the third quarter was down 13% year-over-year, driven by lower volumes and partially offset by higher price in the region. Overall, general economic weakness in the region and the allocation of disposable income to travel and experiences rather than e-commerce, weighed on results as all categories were down in the quarter. Sentiment in the region remains extremely poor as consumers and businesses are tightening their belts in anticipation of a painful winter due to the energy crisis. Automation sales increased a little under 10% this quarter on a constant currency basis and represented approximately 5% of sales as we continue to make inroads with our automated solutions that enable customers to accelerate the packaging output, reduce operating costs and improve the sustainability profile of their operations. Our COGS in the quarter remained under pressure compared to a year ago due to inflationary headwinds largely related to paper pricing. The COGS headwinds, combined with the lower sales resulted in a gross profit decline on a constant currency basis of 29%, implying a margin of 31.6% on a constant currency basis compared to 39.1% in the prior year. Excluding depreciation, gross margins on a constant currency basis declined year-over-year from 49.2% to 42.2% during the third quarter. The margin headwinds were driven primarily by increased material costs, which represented roughly 5.3 points of pressure. Increased automation negatively impacted margins by 120 basis points as well as increased depreciation, which contributed 50 basis points of pressure in the quarter, while freight as well as labor and overhead provided some relief. On a positive note, in Europe and APAC, gross profit per unit improved versus the prior year for the first time in 2022 as paper prices in the region stabilized and pricing actions helped to close the gap. Material cost headwind on margins in the region improved from approximately 8.7 points of pressure in the second quarter to 4.9 points in the most recent period. More work to do on this front, but it's a step in the right direction. Constant currency adjusted EBITDA for the quarter declined 41.8% year-over-year to $16.6 million, implying a 19.7% margin on a constant currency basis. The decline was driven by lower gross profit, coupled with G&A that was higher than a year ago but down sequentially as our cost-saving initiatives are flowing through. We are, of course, continuing to evaluate for areas of efficiencies and cost savings. But overall, we are a more lean and efficient company than we were earlier this year. Within G&A, again, I think it's helpful to point out a year-over-year comparison directly has $2.4 million in cloud computing implementation costs that includes $700,000 of amortization as well as Hypercare outside health as well as the LTIP performance share amortization of roughly $4 million per quarter, which was based on the roughly $25 share price at the time of the grant. The LTIP is strictly performance-based invested on achieving EBITDA between $130 million and $150 million in years 2023 through 2025. One housekeeping note on the non-GAAP reconciliation: based on feedback from a number of the research analysts, we adjusted the presentation of the non-GAAP reconciliation to provide the P&L without currency adjustments and to include one line item showing the constant currency adjustment to get to adjusted EBITDA. We previously provided each line item adjusted for constant currency, and some folks said they prefer to see it in this newer format. For reference and ease of comparability, we included the older format at the end of the earnings release as well. Hopefully, this new approach will be helpful. Capital expenditures for the quarter were $11.5 million. Converter spend was $6.3 million in the third quarter of 2022, down from $11 million in the third quarter of 2021 and approximately $8.5 million per quarter in Q1 and Q2 of this year. Other CapEx for the quarter was $5.2 million, driven largely by increased investment in technology and infrastructure and our ongoing real estate infrastructure projects. Moving briefly to the balance sheet and liquidity: cash and cash equivalents improved in the quarter to $61.3 million as of September 30. As communicated in the last quarter's call, we have been tightening up working capital management related to inventory and our CapEx spend on converters. We achieved adequate levels of safety stock in the majority of converters, and in some cases, are above targets, which we are evaluating given the weaker economic environment. This well-equipped inventory position will enable us to slow converter CapEx spend in the upcoming quarters, preserving cash. We will work down this position over time to lower safety stock levels, given the lower demand environment and we'll be discerning on new placements as to ensure we are optimizing utilization of the fleet. Our debt structure is comprised of a first lien term loan facility due in 2026, that is split into two tranches. One tranche of $250 million is denominated in USD and is L+375. We have two interest rate swaps in place on this tranche to manage the rate exposure. $200 million is swapped at 2.09% through June of 2024 and $50 million is swapped at 1.5% through June of 2023. We also have a euro tranche of approximately EUR 136 million outstanding in an effort to hedge the cash flows coming from Europe. This tranche is at Euribor+375 and is floating. We have zero drawn on our $45 million revolving line of credit, which expires in June of 2024. Our annual cost of interest at today's level and incorporating the swaps we have in place is just over $20 million. Our net leverage based on reported LTM adjusted EBITDA on a constant currency basis was 3.9x at the end of the quarter. From a covenant standpoint, our bank adjusted EBITDA leverage ratio was 3.4x. The primary covenants of note we have in our debt, our maximum first lien leverage ratio of 9.1x, which is a springing covenant, which only comes into play if we use more than 35% of our revolving facility and an excess cash flow calculation that we perform at the end of the calendar year and requires us to dedicate a percentage of excess cash flow generated in the annual period to debt pay down or our first-lien leverage ratio is above 4 turns. Based on our expectations for the remainder of the year and the deductions related to CapEx and working capital taken into calculation, we do not currently anticipate having to pay down any additional debt as a result of the test. To summarize, because I think it's important to make clear, we have more than $100 million in liquidity, no near-term maturities and substantial headroom underneath any leverage covenant. We believe we have plenty of runway to make it through this macro environment.

Thank you, Bill. Overall, as I think about where we are now versus a few months ago, I would say the two biggest changes are, first, the war has escalated to another level with the blowing up of the North Stream pipeline and destruction of the bridge connecting Crimea to Russia. And second, the Fed has been much more aggressive in its efforts to combat inflation. The rate increases and hawkish rhetoric resulted in significant increases in the cost of capital, leading to massive wealth destruction in the capital markets and higher funding costs for businesses and consumers. The dollar has reached 20-year highs, causing issues for global trade and potentially leading to more financial instability across the globe. This is happening at a time when most indicators I can see in our business suggest inflation is rolling over and the economy in the U.S. is meaningfully weaker. Freight and logistics costs are substantially lower. The job market is not nearly as hot as it was a year ago, and our key input costs have stabilized and appear to be heading lower. Overall, I would say the North American market deteriorated more than I was expecting going through the second half of the year. Activity levels over the past couple of months have been softer across the board, but particularly related to e-commerce, as I think consumers are stretched. Paper pricing in the region has stabilized and begun to roll over, in my view, as overall demand for paper and corrugated is lower and substantial kraft paper supply is coming online at the end of this year and into next year. We're working with various mills on testing their capabilities and are pleased with the quality of the product coming to market. As a result of the environment and increased industry supply, we expect paper pricing to become a tailwind going into next year, which we believe should enable us to claw back some of the margin we let go temporarily as pricing reached levels that we did not believe were sustainable given the backdrop. We're extremely focused on being aggressive to drive volumes and claw back our margin. We believe we are well-positioned to do so given new business activity levels, new products we're introducing and efficiencies to be gained through our digital transformation as well as paper pricing relief. Europe is roughly in line to slightly worse than where I thought we would be at the end of July with the economic backdrop deteriorating further as natural gas spiked again to extreme levels as flows were completely shut off by Russia and the Nord Stream pipeline was attacked. Fortunately, storage level targets have been hit ahead of schedule as industry activity has been lower and LNG shipments have really ramped up. Pricing is still elevated but is less than half the extreme levels experienced in August. Activity levels, while not robust, remain resilient in my opinion, given everything going on in the region and the destocking we have endured. I've spent a lot of time in the region recently, and I'm in close contact with the team on the ground to keep an eye on how the energy crisis and war are impacting our suppliers, customers, and the overall economy. Business at most end-users is down meaningfully and all are very focused on cost and minimizing spend in the current environment. We feel good about our stable of paper suppliers in the region and our ability to continue to access the product we need. Our Russian supply has been completely reallocated to other vendors in the region, and we have put in a great deal of effort to adjust our paper buys to minimize the risk of supplier disruption for this year and into 2023. We have reduced our exposure to German mills and allocated more resources to those mills we feel are best positioned to weather a choppy environment this winter. A substantial amount of virgin paper is sourced for mills that are self-sufficient from an energy standpoint, and we have spread out our recycled paper purchases across vendors in different countries with a focus on those vendors and countries best suited to endure the energy crisis. Paper pricing in the region has been flat recently, albeit at high levels. We have seen some recycled paper suppliers start to offer lower prices, though as some of the inputs such as waste paper have come down recently. Not dramatic moves, but a good sign. We're also aware of some virgin vendors sitting on a couple of months of inventory due to a slower economy. This has not flowed through to pricing at the moment, and I'm sure the mills will do their best through maintenance and shutdowns to preserve price, but I find this to be a good data point. The overall environment is a testing one, but we believe we are well-positioned to endure the economic weakness and continue investing in the areas that will drive growth and maximize value over the longer term, such as automation and cold chain. I think it would be a mistake to pause our investments here, particularly automation, as I believe that is the biggest opportunity at Ranpak over the next 5 to 10 years. We updated our guidance last quarter to reflect our expectations of the new reality. We still believe we can achieve the lower end of our adjusted EBITDA range. However, due to some additional pressure in Europe and the considerably weaker U.S. market compared to a few months ago, we expect our top-line results to be slightly below the lower end of what we provided. The rapidly changing environment and the distribution model, which limits our visibility somewhat to end-user activity, has made forecasting more difficult than usual. Obviously, we are not happy with the results, but I assure you, we are laser-focused on getting ourselves back on the path to achieving the results we know Ranpak is capable of. While the near-term macro environment is a challenge, I'm optimistic about our path forward. Our input costs are moving in our favor in North America and have stabilized in Europe. We are near the end of the destocking that has plagued us all year in Europe and APAC. We have taken steps to reduce G&A while still investing in the business. We have done a complete digital transformation of the business and are now 10 months into our largest technology upgrades, which will start to show some benefits through efficiencies related to procurement, production, and planning. We have made key investments in new products that will begin to contribute in 2023. Overall, we've endured a myriad of headwinds this year, including our new systems going live in Q1. These will largely have been absorbed as we exit 2022, and many will be neutral to positive for us next year, while our comparisons become much more favorable. We just celebrated the 50th anniversary of Ranpak's founding in October. This business has a fantastic history with a long track record of growth, profitability, and cash generation. We remain very confident in our outlook. Now let's open the call up for some questions.

And your first question comes from Ghansham Panjabi from Baird.

I guess first question on the machine placement, which is obviously very strong at 7% plus in the third quarter. How are you sort of managing the placement cadence with the world that we have today while also ensuring that you have acceptable return thresholds, just given the way you place the machines at no cost to customers?

Sure. And as you may recall, Gansham, the cost to the end user is nothing, but our distribution partners do pay us a monthly fee for the machines. The way we've been thinking about it is—it's, frankly, new business opportunities despite the weak environment has been pretty decent. Our trial activity is high throughout the year and kept improving as the year progressed. Our wins have been real. What has been different is the ramp-up period with some of these new customers is a bit longer than what we've seen historically. In some cases, the trial period is a bit longer. So what's going on is we are placing more and more machines that I would say the revenue is a little bit delayed. And in a year where these new opportunities, new revenue is delayed a little bit, and your existing accounts are consuming less paper and less volume, that double hit has really impacted revenue per machine quite a bit. We are very, very focused on some of the wins that we've had and that the ramp-up period will play as we expected. I suspect that in the following months, you're going to see meaningful improvement in that metric as some of these wins ramp up to get to, let's call it, normalized volumes. And we're not expecting crazy volumes given the world that we're in, but more normalized volumes, which I think will help showcase how displacement has been appropriate.

Yes, that's helpful. For my second question, I wanted to ask about your reflections on this year. A lot has happened, including the SAP implementation, and there were significant unfavorable price costs along with the macro environment. Looking ahead to 2023, do you think price costs might turn positive, and will we return to focusing on the macro environment? How are you currently approaching the outlook for 2023?

Sure. Well, at this point, in terms of the SAP implementation, I expect that to deliver quite a bit of benefit for us. It already started in the last couple of months, and it will continue, and this is important because it's driving efficiencies, productivity measures, better measurement and faster measurement of KPIs, et cetera. So I think that implementation as we speak and going forward, is going to be a tailwind. In terms of price volume as well as cost dynamics, I think the initial benefit we're going to see is going to be on the cost side. It is evident in the U.S., given the increase in capacity is somewhere along 8% or so of increase in annual production volume on the kraft side that I think that supply/demand will help us get better pricing. In terms of Europe, what we're seeing so far is the stability to modest declines. The reason these declines in pricing for us are not more material, it's frankly related to the energy market. Nat gas has just been very volatile. So today, it's much better than where it was a few months ago, but it's going to depend on what kind of winter we have and who knows whether prices spike from here or they stay where they are or go down. And given that lack of visibility, I think mills have sort of been disciplined speaking to the existing pricing formula. So depending on nat gas, we may see some relief, but the weakness in Europe in volume in terms of corrugated and kraft players, that's going to also help us. So overall, as I look at '23, I think there is a real case to be made that on the COGS side, and our biggest input there is paper that we're going to see some relief, maybe meaningful relief in America, and let's call it, modest relief in Europe. On the volume side, well, the first thing is given the top of the year we've had this year, as we lap, we're going to have easier comparisons. We really have invested quite a bit this year in new products, and these new products, many of them are coming to market later this year and early in 2023, and that should impact our volume as well. In terms of our pricing to our customers, I suspect we're going to hold these prices until we get more clarity. I would not be surprised if we get a lot of relief in terms of our COGS and our paper supply. If we pass some of that to our customers as well, given the inflationary spikes the last couple of years. So if you put this whole picture together, we feel 2023 is going to be materially better than 2022, which has been a tough year for us.

Okay. Just to clarify for Bill, the currency adjustment you mentioned for EBITDA was approximately $1.9 million for the third quarter, correct?

Yes, Ghansham, that's correct. And so just for reference in the release and in the presentation. We've got the new format, which we'll break it out and give you the exact impact on the EBITDA. And then we also, at the end, provided the product on that as well, just so you can have some accountability.

Okay. Great. See you in the conference next week. Thank you.

Your next question comes from the line of Greg Palm from Craig-Hallum Capital.

I guess I just wanted to first follow up on that previous dialogue. I mean is there any way you can just sort of quantify what the headwind, the price volume, or the price headwind has been this year? I think, Omar, maybe you just said that you expect 2023 to be materially better than 2022. I'm guessing you meant on sort of a margin EBITDA basis. But just any way to quantify what that headwind has been this year, all else equal, if everything maybe starts to normalize in 2023?

Sure. I'll start, and then I'll turn it over to Bill to give you maybe more precise numbers. But I think the headwind in the past, call it, 10 months or so, and you're right, I was referring to gross margin and EBITDA in terms of my outlook for 2023 is probably somewhere between 600 to 800 basis points that hit our margin, mostly, frankly, going to paper mills. Many of them that report publicly, I think you'll see they're up 500 to 800 basis points this past year in terms of gross margin. So given the energy situation, given earlier on in the year, supply/demand dynamic when demand was still decent and supply was a bit more limited, you effectively have that much of gross margin leave our complex and go into the mills and the suppliers. But again, I'll have Bill maybe give you more precise numbers.

Sure. Yes, Greg, Omar was actually right in line. So it was year-to-date, the hit to gross margin has been about 720 basis points based on just material cost alone. We've gotten a little bit of help on the labor and overhead. But between the materials cost being 720 basis points, automation, about 1 point and then depreciation to over another point to get to an indiscernible year-to-date. If you look at where we're working in the quarter though, the headwinds, as we mentioned in the earlier remarks, was less onerous as we're beginning to lap some of these increases, which really started to ramp up in Q3 and Q4 of last year. So in the quarter, it was about 500 basis points of a headwind. So the rate of change is improving there.

Understood. Okay. That's helpful. And do you expect that you can recoup most or all of that in 2023? I know super uncertain environment still. And I guess just talking specifically about Europe, if we assume that gas prices don't spike up again, is there any reason why you wouldn't see a greater relief in kraft paper prices over there just given the dramatic change just in the last month or two of prices over there in gas?

So on the second question, Greg, if it stays at these levels or improves a little bit, we will get meaningful relief you're spot on in terms of pricing, and that will help our margin profile quite a bit. The reason we are not sort of counting on that is, frankly, we are in no position to say what type of winter Europe is going to have or where natural gas is going to end up. Every time we got relief the last few months, it was followed by a spike. So we're more just taking a wait and see approach. But if we assume prices stay here, if we assume winter is reasonable, then yes, you can assume we will get much better relief than what we're talking about. Now as far as recouping all of sort of the margin erosion that we experienced this year, I would say I'm more comfortable saying, I believe based on what I know right now, we will recover most of it. I'm not sitting here counting on recovering all of it. I do think we will deliver a much stronger margin profile in 2023, and that the majority of what you saw us give up this year, we will be able to recover.

Got it. I mean is it as easy as just trying to figure out the implied EBITDA margin for this year and adding 400 to 500 basis points next year? Is that sort of what the math implies?

I think directionally, that's correct math. And the reason I get there is, obviously, we talked about paper and paper supply and costing. So that's the biggest factor for us, given how big paper is in our COGS. But things like freight, trucking, container costs, ballet costs—all these things are trending the right way, giving us some relief. And then we have been just very disciplined in this new world on our SG&A. So if you add it all up, I think directionally, you're right, Greg.

Okay. All right. I'll leave it there. Best of luck.

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

So I guess, I wanted to come back to the volume question a little bit. And you provided some context earlier, Omar, around some of the newer placements having lower productivity, lower throughput. But I guess, how are you— a, how are you evaluating the payback and ROI potential of those placements if they're taking less volume than maybe placements two or three years ago did? And then just more broadly, I mean, the volumes in total down 27% in the quarter with installed base that's up kind of the installed base that's been in place for longer than a year. Clearly, the paper per machine is down pretty considerably. Just do you think that's purely just destocking on the part of your distributors and customers, such that the end consumption is not down anywhere near that level? Or what do you think the—what confidence do you have that you're seeing a stabilization in paper throughput?

Sure. And Adam, I'll start and then also have Bill chime in. There's no doubt in the volume declines; a big chunk of it, not all of it, continues to be destocking, and we are trying our best to triangulate with our distribution partners where they are in that cycle. We believe in the majority of our geographies as we speak now, the bulk of that is behind us. There's still a couple of pockets where we think there may be some destocking, but take it took us a long time, almost 9, 10 months to get here, but destocking is largely behind us, and that's a big chunk of the 27 points. It's not the only piece; the other piece is frankly just weaker economic activity in e-commerce as well as in some industrial customers, in particular, in Europe. In e-commerce, in the Nordic region, in places like Poland and Germany, the declines have been quite severe. We have some facilities that were running 7 days a week, 24 hours that today run a few hours a day and 4, 5 days a week in places like Poland and Eastern Europe that are close to the war, and that has really impacted volume. And again, Bill can give you more specific math. So that's the volume picture. In terms of how it relates to machine placement and how we think about it, effectively, the payback now is a little bit prolonged by a few months. As some of these customers ramp up. So if you look at our placement in the last, I'm going to call it, 6 months, it's been decent. In many cases, we're putting converters either in new facilities for existing customers or new customers. And we know from them that it's going to take them a little bit of time to ramp up. Why? In some cases, Adam, they're working through inventory of other products they used to use that they still have. So they're destocking airbags or bubble on-demand or stuff like that before they switch. And we're putting our solution in there. And the reason we're putting it in there is when you win a mandate and customers are saying, 'Come place the equipment, I'm going to start incrementally switching. We will we are comfortable delaying our ramp-up by a few months in order to sort of win that account.' But if you look at the impact of that from a volume standpoint, it's delaying the ramp-up one; and then two, it's increasing our payback by a few months. The combination of that is hurting the revenue per machine. So if what I'm saying is correct, this thing is going to correct itself in the next few months, where some of these new accounts are going to ramp up and get to the levels that we think are appropriate given the number of shipments that they're doing, and that's how we decided to place the number of machines. So we think that's a temporary thing. We think the destocking is largely behind us with a few exceptions. So these two things should help us going forward. The one thing that is still unclear is given the macro backdrop, existing accounts where is the right normal level of volume for them? Are the last few months sort of exhibiting too much pressure, and we're going to normalize better volume with these accounts? Or is that the new normal, given the macro economy and where people want to spend that piece with existing accounts is the harder piece to forecast to predict. But we think the other two pieces are going to start helping us in the near future. Bill, I don't know if you want to add something?

I believe you've addressed the key points. The situation involves starting the year with 130,000 machines already deployed, and while new placements have increased, the challenge lies in the existing account base where volumes have significantly declined, especially among e-commerce users. This decline is evident in the Void-fill and Wrapping metrics, which are adversely affecting our growth this year. Current data suggests that the number of pallets per machine has fallen below 2019 levels, but we anticipate a rebound in the long run. The current environment, characterized by destocking and reduced consumption stemming from a prior demand surge in Void-fill and Wrapping, has been challenging for us. Nevertheless, we remain selective regarding new machine placements, ensuring that we receive sufficient returns on our capital investments. It’s crucial for us to have productive discussions with our distributors and end users to evaluate if there's a fundamental reason necessitating fewer machines than they currently possess. Last year's machine acquisitions may have been based on overly optimistic growth expectations from 2021. If that's the case, reclaiming some machines for redeployment elsewhere would be a more efficient capital strategy, and this is a significant focus for us at the moment.

Okay. That's all helpful color. If I could just ask a follow-up on the price/cost question. And really, just thinking historically, the company would procure the large majority of its kraft paper on an annual basis so you had good visibility to your paper cost for the following kind of 12 months. Do you think that you actually go back to that kind of procurement and pricing strategy into 2023? Or given kind of some of the macro uncertainty, especially in Europe that it might be difficult to secure volumes at a fixed price for 12 months?

So as we speak, Adam, we're negotiating our 2023 agreements. And in many cases, we will be pushing for annual. I will tell you, just knowing the way the world is working right now and how volatile energy is. I suspect we might succeed in maybe having, call it, a 6-month arrangement with some mills and that we revisit in 6 months depending on pricing, et cetera. I think expecting all mills to agree to annual agreements would be unrealistic. Some will. It depends on their energy stability and their energy situation and some, as you know, might be vertically integrated and so on. But I think in general, expect that in 2023, there will be maybe one reset or something along these lines. At least that's what we're attempting to do.

Got it. That's all really helpful color. I'll pass it on.

Your next question comes from the line of Stefanos Crist from CJS Securities.

Can you just talk about what you're seeing in the competitive environment versus other paper providers as well as plastic?

So from my seat, I am not seeing a switch from paper to plastic. Plastic has also gone up in pricing. You hear cases here and there. It's nothing out of the ordinary. I don't think we're seeing a reversal of the trend. And I know a lot of people love to talk about that, and are customers willing to pay for sustainability? That has not been a problem, certainly not one that is noteworthy. In terms of paper competition, paper competition is increasing. We've been in a good space and a good industry before this year, and competitors are trying to innovate and add to their solutions. That's something that we're fully aware of. And frankly, we're investing, we're innovating. We're adding a lot of new products, and we think we're ahead of the curve. In terms of our market share within the paper segment, Stef, it continues to be stable. We don't see us losing accounts. We don't see big attrition. We see volume declines at our existing accounts, but we're not seeing attrition where accounts are saying, 'I'm switching away.' And by the way, our wins are bigger than our attrition. But the problem is, as I said, our wins are now slow to sort of get to the level of volume that we would like to see. So the overall picture for us in terms of our market share feels somewhat stable. It's just we as a company are over-indexed, frankly, to e-commerce and to Europe, and these have not been good places to be in the majority of this year. And that's the stuff that I think has hurt our volume a little bit more.

That's great color. And just a follow-up. Can you just talk about the visibility you have for the holiday season? I know we're already a month into Q4, but do those deliveries for your customers, are they starting already? Or are you just having conversations? Just how should we think about that?

It's tough to predict the holiday season. I'll be honest with you because it's still relatively early. Yes, we have some visibility from the month of October, but November and December are really important months. This year, forecasting has been very, very difficult. We're optimistic about the peak season. But I would say given the world that we're in and how quickly things change, I'd rather just wait and see how the next few weeks evolve before we see sort of the real volume trends. So I think it's tough to give you a clear answer. I think it's too early in the peak season, Stef.

And there are no further questions at this time. Mr. Bill Drew, I'll turn the call back over to you for some final closing remarks.

Thank you, Rob, and thank you all for joining us today. We'll see you next quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.