Good morning, everyone, and thank you for joining Packaging Corporation of America's First Quarter 2024 Earnings Results Conference Call. Your host today will be Mark Kowlzan, Chairman, Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question-and-answer session. And please also note today's event is being recorded. At this time, I'd like to turn the floor over to Mr. Kowlzan. Please proceed when you are ready.

Thank you, Jamie. Good morning, everyone, and thank you for participating in Packaging Corporation of America's first quarter 2024 earnings release conference call. Again, I'm Mark Kowlzan, Chairman and CEO of Packaging Corporation of America. And with me on the call today is Tom Hassfurther, Executive Vice President who runs the Packaging business, and Bob Mundy, our Chief Financial Officer. I'll begin the call with an overview of our first quarter results, and then I'll be turning it over to Tom and Bob, who will provide further details. And then I'll wrap things up, and we'd be glad to take questions. Yesterday, we reported first quarter net income of $147 million or $1.63 per share. Excluding special items, first quarter 2024 net income was $155 million or $1.72 per share compared to the first quarter of 2023's net income of $198 million or $2.20 per share. Our first quarter net sales were $2 billion in 2024 and 2023. Total company EBITDA for the first quarter, excluding special items, was $333 million in 2024 and $405 million in 2023. First quarter net income included special items expenses of $0.09 per share, primarily for certain costs at our Jackson, Alabama mill for the paper to containerboard conversion-related activities. Details of special items for both the first quarter of 2024 and 2023 were included in the schedules that accompanied our earnings press release. Excluding the special items, the $0.48 per share decrease in first quarter 2024 earnings compared to the first quarter of 2023 was driven primarily by lower prices and mix in the Packaging segment for $1.33, and the Paper segment $0.08, higher scheduled mill outage expense $0.10, higher depreciation $0.03, higher expenses related to corrugated plant capital projects of $0.02 and other expenses $0.04. These items were partially offset by higher volumes in the Packaging segment for $0.71, and Paper segment $0.06. We also had lower operating and converting costs of $0.15 driven by very good process efficiencies and control over other usages of fiber, chemicals, energy, materials, and labor. Although energy prices were lower versus last year's first quarter, they were more than offset by higher recycled fiber prices. In addition, we had lower freight and logistics expenses for $0.04, lower interest expense $0.07, and lower tax rate $0.09. The results were $0.18 above the first quarter guidance of $1.54 per share, primarily due to the strong volume in both the Packaging and Paper segments, along with the continued emphasis on cost management and process efficiencies across our manufacturing and converting facilities. This drove operating and converting costs lower even with the persistent inflation we continue to experience across most of the cost structure. Executing the conversion outage at our Jackson, Alabama mill better than planned resulted in lower scheduled mill maintenance outages, expenses, and freight and logistics expenses were less than guidance as well. Looking at the Packaging business, EBITDA, excluding special items in the first quarter of 2024 was $326 million with sales of $1.8 billion, resulting in a margin of 18.1% versus last year's EBITDA of $392 million or sales of $1.8 billion or 21.7% margin. Throughout the quarter, containerboard and corrugated products demand exceeded our expectations. In addition to outstanding operational performance at our box plants and containerboard mills, we were able to service the high demand from excellent execution of the conversion outage at our Jackson mill. This enabled us to restart both machines earlier than anticipated, and we completed our work prior to the quarter-end rather than in the month of April, which had been the original plan. Despite these efforts, with the higher demand, we ended the quarter with a record-low weeks of inventory supply for this time of year. With just our Filer, Michigan mill having a scheduled maintenance outage in the second quarter, we do expect to build our inventories back to targeted levels by the end of this quarter. I'll now turn it over to Tom, who will provide further details on containerboard sales and the corrugated business in general.

Thanks, Mark. As Mark mentioned, Packaging segment volume for the quarter exceeded our guidance estimates. Corrugated product shipments per workday were up 11% and total shipments with one less shipping day were up 9.2% compared to last year's first quarter. Compared to the pre-COVID period of the first quarter of 2019, shipments were up over 10.4% on a per day basis. Outside sales volume of containerboard was 40,000 tons above last year's first quarter and 15,000 tons below the fourth quarter of 2023. Our order backlog remained incredibly strong throughout the quarter, and although demand continues to be challenged by constant inflation, higher interest rates, and other factors, we expect to continue this positive momentum as we enter the second quarter. Domestic containerboard and corrugated products prices and mix together moved slightly higher from the fourth quarter of 2023 levels by $0.01 per share, which was less than we anticipated due to our total announced increase not being recognized in the published benchmark prices. Versus the first quarter of 2023, prices and mix were down $1.19 per share. Export containerboard prices and mix were down $0.01 per share compared to the fourth quarter of 2023 and down $0.14 per share compared to the first quarter of 2023. I'd like to point out that the capital spending and optimization strategy within our box plant system that we have been continuously focused on over the last few years is providing incredible benefits. This has allowed us to focus on the mix of customers we want to profitably grow our revenues with by providing them the product and service needs they desire and allows them to grow. Based on our current demand outlook for this year, this strategy has us on pace to set a new record for box shipments per plant. I'll now turn it back to Mark.

Thanks, Tom. Looking at the Paper segment, EBITDA excluding special items in the first quarter was $41 million with sales of $164 million or 25% margin compared to the first quarter of 2023's EBITDA of $41 million and sales of $151 million or 27% margin. Sales volume, which exceeded our guidance estimates, was 14% above the fourth quarter of 2023 and 16% above the first quarter of 2023. Demand was very good both from our existing customers, as well as incremental volume from some new customers that we acquired towards the end of 2023. Orders remain strong as we enter the second quarter, although volume will be impacted by the scheduled maintenance outage at our International Falls, Minnesota mill in June. An improved sales mix moved paper prices slightly above the fourth quarter of 2023, although prices and mix were down about 6% from last year's first quarter. This past February, we announced a $100 price increase across all of our paper grades and we began implementing these increases on April 1. I'll now turn it over to Bob.

Thanks, Mark. Cash provided by operations during the quarter totaled $260 million and free cash flow was a first quarter record of $184 million. The primary payments of cash during the quarter included capital expenditures of $77 million and dividend payments of $112 million. Excluding the invested cash proceeds from the bond transaction we mentioned on last quarter's call, our quarter-end cash balance, including marketable securities was approximately $900 million with liquidity of $1.2 billion. Due to the excellent execution of the conversion outage at the Jackson mill that Mark spoke of and moving the International Falls mill outage from the third quarter into the second quarter, we are revising the scheduled mill outage guidance we provided on last quarter's call. The revised total company estimated cost impact for the year is now $0.89 per share versus $0.96 per share previously. The actual impact in the first quarter was $0.24 per share, and the revised estimated impact by quarter for the remainder of the year is now $0.18 per share in the second quarter, $0.14 in the third, and $0.33 per share in the fourth quarter. I'll now turn it back over to Mark.

Thanks, Bob. Looking ahead, as we move from the first into the second quarter in our Packaging segment, we expect continued strong demand and higher corrugated products and containerboard shipments. Prices and mix will move higher due to our announced price increases and increases in published domestic index prices as well as higher export prices. Orders in our Paper segment are expected to remain strong; however, volumes will be lower due to the scheduled maintenance outage at the International Falls Minnesota mill during the quarter. Although we're implementing our recently announced paper price increases, the average prices and mix are expected to be slightly lower due to the published decrease in index prices earlier this year and how that impacts contract triggers with certain customers. Operating and converting costs should be slightly lower, primarily due to the sequential improvement in seasonal weather and wage and benefit timing expenses that we incurred in the first quarter, and scheduled maintenance outage expenses will be lower. Rail rate increases at six of our mills during the first and second quarters will result in higher freight and logistics expenses and depreciation expense will be higher. Finally, our tax rate will be sequentially higher due to the tax-related benefit of share-based compensation that vests in the first quarter. Considering these items, we expect the second quarter earnings of $2.07 per share. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constitute the forward-looking statements. The statements were based on current estimates, expectations, and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in the Annual Report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. And with that, Jamie, I'd like to open up the call for questions, please.

Our first question today comes from George Staphos from Bank of America Securities. Please go ahead with your question.

Hi, everyone. Good morning. Hope you're doing well. Thanks for the details. I guess the first question, maybe the standard one for all of us, can you talk to what the early trends are in terms of bookings and billings so far in 2Q? And then I had a couple of follow-ons.

Bookings remain very strong, as I indicated earlier in the call, and they are up 8% so far. We expect a strong second quarter and the rest of the year as well.

Thanks for that, Tom. Can you discuss your vertical integration in the first quarter and the fourth quarter? If you prefer not to share specific figures, could you explain the relative trend instead? Additionally, can you describe the business mix in terms of third-party exports in the first quarter compared to what you saw in the fourth quarter?

Bob?

The integration in the first quarter was around 90%, almost 93%. It was slightly below that in the fourth quarter.

Thanks, Bob.

Okay. I guess the last one, please go ahead.

Yeah, Tom, do you want to comment about mix and...

Right. Are you asking about the mix of exports or what exactly are you asking, George?

I was inquiring about the export tonnage in the first quarter compared to the fourth quarter, specifically in terms of percentage and any qualitative or quantitative data you could share for both quarters. Additionally, while we commend you on the shipment volume, the EBITDA margin was below our expectations. I'm trying to understand the reason behind this margin loss compared to our projections—whether it was due to a product mix or another factor in that quarter. Thank you, and I’ll hand it over.

Let me see if I can tie this together here real quick for you, George.

Thank you.

The export numbers in the first quarter compared to the fourth quarter were slightly down. The fourth quarter is typically a peak time for exports. Overall, it was relatively flat. Regarding the EBITDA margins, one factor that could be overlooked is that the $20 decline from last year impacted the beginning of this year due to contract triggers. We anticipated a $70 price publication, but only $40 was released, and it was delayed. As a result, the expected price increase didn't happen as quickly or to the same extent due to the index. Additionally, I want to highlight that inflation remains persistent. While there is some perception that inflation rates have slowed since the peak during COVID, they are still rising. At the same time, the index has shown prices moving in the opposite direction until the recent $40 increase. I believe this explains the gap in the margins.

George, there's a lot of elements within the cost structure that people lose sight of. I mean, if you keep in mind, I mean things just like general services that a paper mill or box plant relies on, all these associated costs to run the business are up dramatically over the last few years, and they're not easing up. Bob, do you want to comment on this? Again, I think people are truly, truly missing that.

As we move from the first to the second quarter, prices for recycled fiber and wood may see an uptick. While gas prices have decreased, electrical rates remain high. Additionally, the costs of chemicals like lime, adhesives in box plants, resins, alums, and starch are all rising. It's important to note that our direct costs represent only about 40% of our overall costs; the remaining 60% includes maintenance services, repairs, materials, operating supplies, property taxes, rent, warehouse costs, and insurance leases. Inflation is persistent, and suppliers are facing similar inflationary pressures in their businesses, which they pass on to us. I believe a lot of these factors tend to be overlooked.

I appreciate all the color, guys. I'll turn it over. Thank you very much.

Thank you. Next question, please.

Our next question comes from Michael Roxland from Truist. Please go ahead with your question.

Thank you, Mark, Tom, and Bob for taking my questions. This is Nicco Piccini on for Mike. I guess just realizing that demand has improved across the board, are there any particular sectors or end-markets where you saw more notable improvement, and then anything lagging?

I can tell you, the demand improved across the board, believe it or not. When we look at the various segments, whether it's e-com, ag, food, even in the heavier manufacturing area, we had significant improvement across the board.

Got it. Thank you. And then just following up, since roughly 2019, you spent quite a deal of time and money recapitalizing your box plants. Can you comment on maybe if there's anything left to do there realizing there's always some level of work to be done?

We've got this momentum going right now that we started good five or six years ago. And quite frankly, as we've done on the mill side now, the opportunity to continue to capitalize on the box plant opportunity will continue indefinitely for us. That's part of our growth strategy. That's how we'll continue to provide value for our customer base. And so again, Tom, again just...

I would like to emphasize that our capital plants and box plants are designed with our customers in mind. The customers we are aligned with are experiencing growth, which is a significant advantage for us. We will keep investing in support of these customers.

I think I mentioned in the January call that over the last five years since 2019, we've installed 69 new converting machines and replaced or completely upgraded 25 of our corrugators. We have built four new plants: Marshfield, Richland, Landisville, and Salt Lake City specialty. We just started operations at the Salt Lake City plant last month, making it our newest facility. As Tom mentioned, all of this is aimed at growing with our customers and meeting their needs. We have the capability to do this and will continue to leverage our strengths.

Understood. Thank you very much for the commentary.

Next question, please.

Our next question comes from Mark Weintraub from Seaport Research Partners. Please go ahead with your question.

Thank you. First, are you now done with the Jackson project conversion? Is that now fully set?

Yes, everything that we had scoped out four years ago is complete, and that project has turned out, as you can imagine, we're more pleased than we thought we were going to be at this time. The original phase of work that we just completed was originally a 58-day schedule. We completed that two weeks ahead of time, started up the day before Easter, and have been running extremely well ever since. And as I've talked over the last year, I expected that machine to be producing over 2,000 tons a day, and we've been doing that for the last week or two. And so, getting that mill stretched out now, and getting everybody used to running at these high production rates, but the good news is we need every ton that we can produce. And this is all high-performance grade lightweight linerboard coming off that machine. And so it's doing everything that we expected it to do and more.

Congrats on that. With Jackson now operational, I believe you produced slightly under 1.2 million tons in the second quarter. Could you share your potential full production capacity on an annualized basis, assuming the demand is there?

If you include the seven mill system, it would be a little bit over 5 million tons. If you round off 5 million tons, 5.2 million or so.

Okay.

Depending on the grade mix that you're running as far as lightweight basis weight, 5 million, 5.2 million is a good number going forward on a run rate basis.

Excellent. And then lastly, just want to come back to the up 8% on at least in April, et cetera. If I look at where your first-quarter daily shipments were relative to your second-quarter '23 daily shipments, they were up about 8% as well. And I realize we're talking about different time periods when you're referencing April specifically. But so the question is, I mean, are you still seeing momentum of demand getting stronger in the current environment? Or is it more that you had this uptick, you gained business and it's sort of stable at those higher levels?

Mark, it's still going up. Although the rate is slower, we are still experiencing growth. The second quarter tends to be more unpredictable compared to the third and fourth quarters, which are easier to forecast. Seasonality is a bit uncertain in the second quarter. Nonetheless, we are observing positive momentum, and we anticipate continued growth in the third and fourth quarters of the year.

Okay. And then one last quick one. I noticed your capital spending was fairly low, around $72 million, in the first quarter. What are your full-year expectations for CapEx? I had anticipated a larger expenditure this year. Also, now that Jackson is complete, what are the plans for the new funding?

Yes, Mark, that was a timing issue regarding how invoicing is handled for the projects. We indicated that it's in the higher $400 million range, and we will provide updates in July. We always keep the option open to pursue new opportunities as they arise. Currently, we are in the high $400 million area, and we'll provide updates if there are any changes in July.

Thank you. I'll get back in queue.

And our next question comes from Gabe Hajde from Wells Fargo. Please go ahead with your question.

Mark, Bob, Tom, good morning.

Good morning.

Thank you for the detailed information. I wanted to revisit the pricing issue, which can be a bit complex at times. Reflecting on the Q4 call, Mark mentioned trying to separate from RISI indices as much as possible. Now, we're observing a sequential basis where we saw the $40 per ton posted in February, while we anticipated $70. This seems like a setback compared to previous expectations, especially given the price-cost squeeze that we misestimated in the first quarter. I'm interested to know if this is proving more difficult than anticipated. This situation feels like uncharted territory for analyzing this industry. Additionally, without inquiring about future price increases, based on your recent descriptions and historical practices of implementing price hikes, would it be correct to say that the January 1 price increase is now considered, and that you would need to propose something new going forward if you felt it was warranted? Thank you.

Gabe, this is Tom. That's a great question, especially regarding the separation from RISI. As I mentioned in our last call, this task is complex and will take some time. However, we are continuing to move forward, driven by our customers' frustrations with current reports and market conditions. From PCA's perspective, if you analyze the numbers, the liner prices dropped $110 from their peak, and medium dropped even more. We would need a substantial recovery to return to those levels. Additionally, inflation continues to be a factor. Customers have expressed that they would have preferred stability at the peak prices rather than experiencing these fluctuations. Over time, we could have managed this situation more smoothly. These are the discussions we have with our customers, who are open to exploring alternatives and different methods. However, many of these contracts are long-term, with various trigger points and negotiation timelines. Currently, we're operating under these circumstances. When we announced the price increase, it was specifically for containerboard and was not related to boxes, which is a separate matter between us and our customers. This distinction was not conveyed properly, which adds to our frustration. Regarding future pricing, we don't typically discuss that or indicate our future actions, but you can likely infer our position given the current inflationary pressures. It's important to note that not all price increases are due to supply and demand; they can also stem from rising costs. We are working hard to minimize these costs, but in many cases, that is not possible. I hope this gives you a clearer picture of our current situation.

No, crystal clear. Thank you, Tom. Maybe just, I don't know, Bob, if you can quantify, I think kind of standard repricing for rail occurs in and around April 1. You called it out, I think roughly two-thirds or so of your parent rolls gets shipped around rail and then the majority of converted product is mostly trucked. So just maybe can you frame up maybe what the increases were or what portion of your transport spend is rail specifically?

I think in total spend, Gabe, it's like 65% or so is rail, I believe.

Okay. And one last one, very subjective, but given the fact that your two largest competitors right now are pursuing transatlantic combinations, do you see any opportunity, Mark, either organically or potentially if there's a required divestiture to pick up business along the way? Again, appreciating it. I know it's a sensitive topic. Thank you.

I don’t have any comments on that. It's a sensitive matter that I won't discuss. However, as you can imagine, we take advantage of opportunities as they arise.

Thank you.

Next question, please.

Our next question comes from Anthony Pettinari from Citi. Please go ahead with your question.

Hi, good morning.

Good morning.

On the last call, you talked about expectations for I think $0.35 sequential headwind in 1Q on seasonal costs that I think were mostly labor and benefits related, and maybe being able to get 60% of that coming back in 2Q. If I got that right, I'm just wondering how given where you shook out in 1Q and the 2Q guidance, how that kind of played out versus expectations?

Yeah, Anthony, I think we performed a bit better than expected regarding the impact in the first quarter. For our second quarter guidance, as you mentioned, I indicated that around 60% of those seasonal or one-time items related to wages are included in our guidance for this quarter.

Got it. Got it. And then just following up on Gabe's earlier question on pricing mechanisms, a lot of packagers have contracts where they get kind of an automatic pass-through on their primary raw material, whether that's aluminum or polyethylene. I'm just wondering, kind of conceptually, big picture, would it be possible to structure contracts where fiber is just passed through automatically, whether that's OCC or virgin fiber, or is there something about craft line or test line or boxes where maybe there's too many SKUs or there's too many customers or it just makes that kind of automatic pass-through more difficult?

I think it's a...

Yeah, Tom, go ahead...

Anthony, I think it's a fair question, but far more complicated than I think you have in a lot of other materials. And I'd also like to add that in containerboard, not every sheet is the same. And you have a lot of variance between everything between 100% virgin and 100% recycled and a lot of technology in between there on performance liners, et cetera. So there's just a whole myriad of things that go into the process that would have to be taken into account. And it's not as simple as just taking that raw fiber or something like that as your single material.

I would like to highlight that, unlike a decade ago when things were relatively stable regarding inflation, we are currently experiencing a resurgence of inflation similar to that of previous decades. As a result, we are seeing a significant overall increase in input costs. It would be overly complicated to connect this situation to any specific mechanism. Additionally, it's important to remember that around 25 years ago, transportation costs were a minimal factor in the movement of containerboard and paper products across the country. Today, transportation has become a major component of our costs, significantly impacting our overall expenses.

Got it. Got it. I'm just wondering in kind of previous periods of very strong inflation or maybe going back to the '70s or was the paper industry using things like surcharges? I'm just trying to think about other kind of pricing mechanisms that have been used historically. Obviously, not talking about any kind of future actions. But Bob listed out that you know those categories that are all seeing inflation. I'm just wondering as you look at the history of the industry, were there sort of other ways that producers were able to pass those along?

Anthony, this is Tom again. We're exploring all the potentials in detail with our customers, and I think we'll just see how this unfolds over time. We're also learning on our side as we gather information from all our suppliers. This is part of the inflation and cost challenges we are facing. We're considering everything, and this will be addressed directly with our customers.

Yeah, suffice it to say, we'll be far better off going forward.

Understand. I appreciate it, and appreciate it's a difficult question to answer in this kind of format. But appreciate the color. Thank you.

Thank you. Next question, please.

Our next question comes from Philip Ng from Jefferies LLC. Please go ahead with your question.

Hey, guys. Your box shipments were obviously really strong during the quarter. It seems like you're outpacing the market handily. Tom, you kind of talked about some of the investments you've made on the box side in market, I think you talked about momentum kind of building there. Has that been like a big area of differentiation that's kind of helped you take share a little faster and grow a little faster than your peers? Anything you want to call out in terms of these investments you've made that makes PCA even more competitive than years past?

I believe it's been a significant advantage for us, and we wouldn't have pursued it if it weren't. I’ve said before that we don’t just build something and hope it will attract customers. We focus on what our customers require and invest accordingly. That’s our strategy. Additionally, we are enhancing the efficiency of our system, aligning ourselves appropriately in the right markets, and connecting with the right customers, which I consider a major benefit. Furthermore, we are consistently improving our product quality, allowing us to respond promptly to demands and operate as an integrated system. This has a considerable impact on our business, and our customers certainly recognize this, which is reflected in the growth we are experiencing.

Over the past five years, we have made substantial improvements in productivity and cost structures across all our converting facilities and full-line box plants. In many cases, we have quadrupled or at least doubled our productivity from our box plants. This enhancement has provided us with exceptional flexibility in our growth with customers and the ability to serve them efficiently. We are maintaining this momentum without needing to catch up, as our box plants and paper mills are in a strong position regarding cost structure and efficiency. We are ready to make new investments, as Tom mentioned, as we grow alongside our customers. This isn't a new initiative for us; we have been refining our processes for decades. The significant focus on our box plant system over the last five years, particularly after the organizational change in 2019, has allowed us to make substantial progress.

Super. That's helpful. And I guess a question on the pricing side of things. Since only $40 to the $70 linerboard increase got reflected in the index, just from a logistics standpoint, are you issuing rebates to your customers? And then I guess separately, the trade publication kind of reported maybe perhaps some of the independent box makers were a little reluctant to push price just given a more mixed demand backdrop for them. How did the box price increase progress? And do you kind of expect it to kind of proceed like normal?

The box price increase will be implemented as usual over a 90-day period. There will be a slight delay into the middle of the year due to some contracts having midyear triggers. However, most of the increase will take effect within the typical timeframe. I won’t go into the specifics of our dealings with individual customers, but we have implemented the $70 price increase on containerboard, as previously mentioned, and that has been in effect for a while now. This is essentially what we anticipate moving forward. Regarding independent sources commenting on supply-demand dynamics, it is frustrating because the open market is very limited at the moment. When I hear that 70% of surveyed respondents say one thing or another, it raises questions since that percentage is based on a very small sample size. Therefore, I previously noted the necessity to consider alternative mechanisms.

Okay. If I can sneak one more in, your two larger competitors in the US are obviously merging with European counterparts. Historically, the industry has had a mixed track record of being international. But Mark, Tom, team, I'm just curious, how do you kind of see that perhaps changing the competitive landscape and how you may compete and how you proceed with some of your customers going forward?

I don't see this as a significant change in the domestic marketplace. They are doing it for their own reasons. Tom, do you want to comment on that?

I don't have any comment at all, that relative to our competitors or what they're attempting to do or trying to do. We know what we need to do in our marketplace and that's what we go and focus on executing.

Just keep in mind for better part of 30 years, we concentrated in the lower 48 states and we've grown our business significantly over these last few decades here in the United States, and we'll continue to do so. And we've outgrown the rest of the industry by doing that and we'll continue to do that.

Okay. Appreciate the color. Thank you.

Next question.

And we do have an additional question from Ryan Fox from Bloomberg. Please go ahead with your question.

Good morning, gentlemen. In the fourth quarter of '23, we saw that you outperformed the broader industry by a very wide margin. Just curious if you felt like in the first quarter, we're going to see a similar performance.

Well, we just reported that in our second quarter. Tom pointed out that our trend continues into the second quarter. So, Bob, go ahead.

No, I mean, Tom, he's referring to the industry numbers. I think that will come out at the end of the week versus our performance.

Right. I think we'll outperform the industry, but I would think that the industry will be up as well.

And why do you think you've outperformed the industry by such a great margin in the last two quarters?

One reason is that we have been very focused on our existing customers. Our capital expenditures have been aimed at these customers. As I mentioned previously, after COVID, many of our large customers went through significant inventory destocking and were slow to recover, but they have now bounced back rapidly. This recovery has been beneficial for us since our comparison from a year ago was relatively easy. The numbers look promising, and the performance has improved consistently throughout last year, with the second, third, and fourth quarters showing continued growth. To maintain this momentum, we need to keep enhancing our efforts throughout the year, and we anticipate that happening. Additionally, we've seen substantial improvements from some key customers that had previously lagged after COVID.

Brilliant. Thank you so much.

Thank you. Any further questions?

And at this time, seeing no additional questions, I would like to turn the floor back over to you, Mr. Kowlzan, for any closing comments.

I'd like to thank everybody for joining us today and look forward to talking with you later at the end of July to give you the second quarter results and spend some time with you then. Have a good day. Take care. Thank you.

Ladies and gentlemen, that does complete today's conference call and presentation. We thank you for joining. You may now disconnect your lines.