Good day, and thank you for standing by. Welcome to the Q3 2025 Sealed Air Earnings Conference Call. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Mark Stone. Please go ahead.

Thank you, and good morning, everyone. This is Mark Stone, Sealed Air's Vice President, Investor Relations. With me today are Dustin Semach, our President and CEO; and Kristen Actis-Grande, whom I'm pleased to welcome as our new Chief Financial Officer. Before we begin our call, I would like to note that we have provided a slide presentation to supplement today's discussion. This presentation, along with our third quarter earnings release, is available to download from our Investor Relations page on our website at sealedair.com. I would like to remind everyone that during today's call, we make forward-looking statements, including our outlook or estimates for future periods. These statements are based solely on information that is currently available to us. Please review the information in the forward-looking statements section of our earnings release and slide presentation. These sections also apply to this call. Our future performance may differ due to a number of factors. Many of these factors are listed in our most recent filings with the SEC. Additionally, we will discuss financial measures that do not conform to U.S. GAAP. Information on these measures and their reconciliation to U.S. GAAP can be found in our earnings release or the appendix of our slide presentation. I will now turn the call over to Dustin and Kristen. Operator, please turn to Slide 3.

Thank you, Mark, and good morning, everyone. Thank you for joining Sealed Air's Third Quarter 2025 Earnings Call. Let me begin by welcoming Kristen Actis-Grande to Sealed Air. Kristen joined in late August and brings a proven track record of driving transformation, optimizing complex manufacturing and distribution networks, and instilling operational rigor. She's already hit the ground running, and I'm looking forward to partnering with her and the rest of the team to further accelerate our ongoing transformation. In a few minutes, Kristen will give color on our third quarter results and set expectations for how we anticipate closing the year. But first, I will provide an update on the progress both businesses are making to navigate the macro environment. The macroeconomic trends from the second quarter continued throughout the third quarter. These trends include softer global growth outlooks, muted industrial production, and a consumer that, while still resilient, has decreasing purchasing power, particularly in North America within the lower to middle-income households. These factors, combined with lower consumer sentiment, persistent inflation, and picking up unemployment numbers, are contributing to increasing uncertainty around the consumer, particularly in the U.S. Considering that backdrop, our team executed well in the quarter, continuing to focus on controlling the controllables by putting our customers first, executing with discipline, driving productivity, and reducing costs across the business. In this market environment, we are focused on leveraging our core competitive strengths to find new sources of growth across both businesses. We are accelerating productivity initiatives to offset potential further market weakness while our transformation continues to take hold across the business. I will share more on those opportunities for each business, starting with Protective. Our Protective turnaround remains on track. Our performance in the third quarter continues to demonstrate improving fundamentals despite market indicators, whether it's overall box shipments or industrial output pointing to a subdued demand environment and a cautious consumer. Sales sequentially improved with material volumes inflecting the growth for the first time since 2021. While we remain cautious on the consumer and the macro environment, we are expecting materials to continue to stabilize in the fourth quarter, offset by a weaker outlook for equipment driven by timing and continued market pressures. The North American business has stabilized further and is performing relatively in line with the market. In the early stages of the transformation, we focused on minimizing churn and rebuilding our overall go-to-market strategy. We increased the number of sellers and improved customer and distribution partner engagement. In parallel, we also focused on resetting our large account strategy and value proposition, which we knew would take time as this customer segment has a longer sales cycle. Our approach is beginning to yield results with the team recently landing multiple seven-figure competitive wins at national accounts. As the transformation in North America is taking hold, we are beginning to increase our efforts in EMEA and APAC. While those businesses were less impacted by volume pressure than North America, the same value unlock exists to upgrade talent, create more efficient go-to-market strategies, enhance distributor relationships, and invest in our field teams to accelerate growth. More to come as we progress on this. As we mentioned during our last call, with the go-to-market transformation well underway, we are shifting to other areas of the business to ensure they are fit for purpose, meaning streamlined and driving better business outcomes. As part of this, we have focused on improving the effectiveness of our R&D efforts, ensuring the organization is connected to our customers while taking a more balanced approach between internal and external solution development. While still early in this aspect of the transformation, this approach is already producing better solutions with stronger product market fit, increasing our speed to market and helping to accelerate the build-out of our substrate-agnostic portfolio. Recent proof points include the newly launched AUTOBAG brand 850HB Hybrid Bagging Machine, which processes poly and curbside recyclable paper bags with high-speed precision and print on bag capability. Our fully fiber Jiffy and padded mailer and our upcoming ProPad Mini, a new innovative tabletop paper system. We are excited about our pipeline, and I will keep you updated. Finally, I would like to highlight one other area of focus as part of our fit-for-purpose strategy, network optimization, where we are evaluating our footprint for opportunities to improve our cost positions and better serve our customers. Historically, we incrementally rationalized the footprint, but our current planning efforts are taking a holistic approach, working backwards from our end markets, analyzing each of our products and then driving improved unit economics through a combination of facility, asset, and logistics optimization. The transformation of this scale, progress is generally expected to be nonlinear. With that said, I am pleased to see the improvements we are making week after week, demonstrating incremental progress towards our goals. Now turning to Food. The segment's performance was resilient this quarter despite continued market headwinds. The overall market dynamics discussed in the second quarter accelerated throughout the third quarter and into the fourth, where in North America, the consumer continued to rotate into value grocery as their purchasing power wanes. The rest of the world continued to perform well. This dynamic in our retail end markets results in trade-downs to private label, different pack formats, and away from higher-priced fresh counter items into prepackaged solutions. These are all trends our portfolio serves that change the mix of products. As an example, during the third quarter, we saw consumers here in the U.S. continue to move from the fresh sliced deli counter, a shrink-back application, into pre-sliced deli meats. While we are capturing a portion of the trade down, it's a roll stock type application with a lower margin profile. Within foodservice markets, the U.S. was flat as many quick-service restaurants and fast-casual operators are leaning into value offerings and new products or promotions to help spur traffic. The rest of our international foodservice markets continue to be resilient. Despite the U.S. market headwind, our focus on service quality and driving growth in dairy within Liquibox resulted in the fluids and liquids portfolio growing volume above expectations. Retail and foodservice continue to represent key growth areas for the food business, given higher growth rates and overall opportunity to take share. As we expand further into those end markets, we will smooth out the volatility that comes from our exposure to supply-side dynamics within industrial food processing end markets. On the supply side, U.S. beef harvest rates were lower than anticipated in the quarter, down approximately 10.5% compared to the prior year, following a mid-single-digit decline in the second quarter. During the third quarter, the number of days that cattle spent on feedlots remained above historical averages. The steeper-than-anticipated decline in beef production is pressuring our industrial exposed volumes. The U.S. cattle rebuilding is expected to persist into 2026, be relatively flattish in 2027, and return to growth in 2028. We now expect this year's beef slaughter to be worse than 2024 by mid-single digits. Outside of the U.S., beef production remained strong in Australia, while other regions saw tempered rates. We are more intentionally making a rotation into retail and foodservice end markets by applying the transformation playbook we developed in Protective to our food business. Like Protective, we are initially focused on our North American business due to its size and current market pressure. We are in the process of rewiring the organization to connect our end markets in retail and foodservice throughout our commercial, R&D, and supply chain teams. This alignment will support a mix of go-to-market changes, new innovations, and network asset optimization. We will continue to upgrade talent to ensure we are building a team that's growth-oriented, externally focused, highly accountable, and operating with urgency and pace. This is where I have been focusing my energy and effort, and we have made progress over the past couple of months. We are planning to make all the necessary foundational changes by the end of this year so we can hit the ground running in 2026. When you pull everything together, we continue to focus on controlling the controllables by extending the protective transformation across other geographies and down into R&D and supply chain, as well as executing a growth transformation within our food business that will leverage an existing playbook, allowing us to move more quickly, starting in North America. In parallel, we are advancing our productivity initiatives across the areas previously discussed, as well as procurement and continued back-office improvements to further streamline our cost structure and position us well for stronger profitable growth when market conditions improve. As we progress in the fourth quarter, we will have more visibility around where the consumer is headed, the resulting impact on next year's demand environment, and more clarity on the timing of the benefits from our transformation initiatives. The combination of these factors will shape our outlook for 2026. I'm now going to turn it over to Kristen to give an update on our business performance and our updated outlook for 2025. Kristen, over to you.

Thank you, Dustin, and thank you to the Sealed Air team for the warm welcome and support over my first two months. This is an exciting time to join given where we are in our transformation journey. The transformation opportunity, along with the strength of the underlying brands in food and protective, are a large part of what drew me here. I look forward to partnering with Dustin and the team to accelerate our efforts. Now let's turn to Slide 4 to review Sealed Air's third quarter performance. Despite persisting market headwinds, our teams executed above expectations, delivering sales of $1.35 billion, up 0.5% as reported or down 1% on a constant currency basis. Adjusted EBITDA in the quarter was $287 million, up 4% as reported or 3% on a constant currency basis. Adjusted earnings per share was $0.87, up 10% as reported or 9% on a constant currency basis, driven by higher adjusted EBITDA and lower interest expense. Our adjusted tax rate was 23.9%, which was relatively flat compared to the prior year. Our weighted average diluted shares outstanding in the third quarter was 148 million. Moving to Slide 5. During the third quarter, volumes were down less than 1% with Food and Protective performing above expectations. Food volume was relatively flat in the quarter as the decline in our shrink bag business was offset by growth in our foodservice portfolio, which outperformed the market across all regions with volume up 4% year-over-year. Protective volume was down less than 2% in the quarter as our industrial portfolio showed modest growth year-over-year and the fulfillment portfolio continued to improve, led by strength in auto bag solutions and specialty foam. We reached another key milestone in our transformation in the third quarter as protective materials grew for the first time since 2021, 1% year-over-year. This was offset by lower equipment volumes. Price was essentially flat in the third quarter on relatively stable resin markets and a tariff landscape that didn't change meaningfully within the quarter. Although these are two areas we continue to watch heading into 2026. Foods pricing was 20 basis points better than the prior year, while Protective declined 1%. Third quarter adjusted EBITDA of $287 million increased $11 million or 4% with a margin of 21.3%, up 80 basis points year-over-year. The strong adjusted EBITDA performance was primarily driven by lower operating costs, including favorable productivity savings and cost control actions, partially offset by slightly lower volumes and negative net price realization, which was mostly driven by inflation on labor and nondirect material costs. Moving to segment performance on Slide 6. In the third quarter, food net sales of $910 million were consistent with last year on a constant currency basis, with both volume and pricing relatively flat. We are seeing continued consumer softness in North America, resulting in trade downs and trade-outs. On the supply side, beef production declined at a faster pace than was previously anticipated. Though market headwinds were partially offset by positive volume in our fluids and liquids portfolio. From a regional perspective, volumes were up in all regions outside of the U.S. with low to mid-single-digit growth in EMEA, Latin America, and APAC. Food adjusted EBITDA of $215 million increased $9 million or 3% in constant currency compared with the prior year. Adjusted EBITDA margin was 23.6%, a year-over-year improvement of 70 basis points. The increase in adjusted EBITDA on a constant currency basis was primarily driven by productivity and cost-out savings, partially offset by negative net price realization. Protective sales were $442 million in the third quarter, down $12 million or 3% on a constant currency basis. Volumes were down less than 2%, demonstrating once again continued improvement sequentially as the disciplined execution of our go-to-market strategy continues to yield iterative progress. Protective adjusted EBITDA of $78 million in the third quarter increased approximately $3 million or 3% as reported and 1.5% in constant currency compared with the prior year. This represents our first year-over-year adjusted EBITDA growth in this segment since the first quarter of 2024. Adjusted EBITDA margin in Protective was 17.7%, up 80 basis points year-over-year. The improvement was driven by productivity gains, which were partially offset by negative net price realization and lower volume. Turning to Slide 7. Through the first nine months of the year, free cash flow was a source of $201 million compared to a source of $323 million for the same time period a year ago. We generated $120 million in free cash flow during the third quarter, up 4% from the same quarter last year. At the end of the quarter, our total liquidity position was $1.3 billion, including $282 million in cash and the remaining amount in committed availability under our revolver. Last week, we closed on the refinancing of our five-year revolving credit facility, and as a part of the facility, incorporated a new delayed draw term loan. The committed delayed draw structure will act as a backstop to refinance our 1.573% senior secured notes maturing in October of 2026, which allows us to continue to take advantage of the low coupon of the existing notes until maturity. Our net leverage ratio was 3.5x, and we remain on track to reaching a net debt to adjusted EBITDA leverage ratio of approximately 3x by the end of 2026. Shifting gears to the update of our full-year outlook on Slide 8. We see market pressures accelerating in the fourth quarter, resulting in volumes lower than anticipated, particularly in North America Food, along with further competitive pricing pressure in both businesses. These dynamics will be partially offset by further tailwinds from a weakening U.S. dollar. In addition to the macro factors discussed earlier, we are monitoring the near-term implications of the U.S. government shutdown, specifically as it relates to funding the Supplemental Nutrition Assistance Program, or SNAP. We don't yet know the impact the delay in funding the program will have on our U.S. business, but anticipate it to be transitory. In the short term, the shutdown may continue to exacerbate the trade downs we are seeing as lower-income households would stretch their dollars even further. At this time, we continue to target the $5.3 billion midpoint of our tightened full-year sales range. We are raising the adjusted EBITDA expected range to $1.12 billion to $1.14 billion, up $5 million from the prior midpoint, implying $274 million in the fourth quarter. Our Q4 adjusted EBITDA outlook reflects continued operating discipline and ramping productivity initiatives that will be partially offset by lower volume and unfavorable net price realization. Given the strong year-to-date performance on adjusted EPS, we now expect the full year to be between $3.25 and $3.35 per share. This assumes full year shares outstanding of approximately 147 million and an updated full-year tax rate of 26%. Finally, we are reaffirming our full year free cash flow to be approximately $400 million. As a reminder, we seasonally ramp down inventories in the fourth quarter, which drives stronger cash generation toward the end of the year. We have lowered our full-year capital expenditure projection to $175 million, reflecting increased rigor around capital deployment and refocused priorities guided by our transformation efforts. As we progress through the remainder of the year, we will better understand where the consumer is headed, particularly in the U.S., and its impact on next year's demand environment. We will also gain greater clarity on the timing of our transformation and productivity initiatives and how the combination of these factors will shape our outlook for 2026, which we look forward to sharing with you in February. And with that, Dustin and I welcome your questions. Operator, we would like to begin the Q&A session.

We will now begin with the first question from George Staphos from Bank of America Securities.

I guess my question is really around food. Dustin, you talked about maybe beef production in North America picking up, I guess, by 2028. And I don't want to put words in your mouth. But can you give us a bit more detail in terms of the sources that you're using in terms of navigating this bottom in terms of cattle on feed and beef production, recognizing it's not the only thing that drives your food business. And the question behind the question is, we've seen some commentary from industry sources that suggest maybe '26 is really the plateau and we should start seeing an uptick in cattle on feed '26 or '27. Kind of what informs your view and what should we be mindful of? Related point, and this may be just a punt to '26 and we understand, given the productivity initiatives that you have underway in food, do you expect that at least directionally, EBITDA should be up next year for Food as you put all of the pluses and minuses together, and obviously, we'll get more detail next quarter.

George, I appreciate your comments and question. To discuss the U.S. beef cycle, we began this year on a strong note in the first quarter of 2025. Throughout the year, the cattle cycle has intensified. While we observe supply dynamics, it's also important to consider demand, as there's a lack of consumer interest in purchasing high-end beef. This is leading to noticeable changes, with increased retention and a sharper decline, particularly in the third quarter. We're now projecting similar trends for the fourth quarter. It's crucial to recognize that the current situation reflects both consumer behavior and supply factors. Based on recent forecasts and changes in Q3, our expectations for 2025 suggest a decline in the 5% range, keeping in mind a strong first quarter. We are anticipating a similar trend, around 5% to 6%, as we move into 2026. The steepening observed in Q3 is expected to continue into Q4, followed by a leveling off in Q1 and Q2 of next year, with '27 showing little change based on current trends, and a return to positive growth in '28. This is why we are focusing on transitioning towards retail and foodservice, as these sectors provide a balance, which was evident in our Q3 results related to the strength of our foodservice portfolio. And then going back to your question on '26. Right now, as Kristen and I both commented in the script, it's really a combination of those factors that we're looking through because a lot will determine how '26 shapes up based on where the consumer is at in the overall U.S. economy. And as we mentioned, right now, uncertainty is increasing. We've seen some of those macroeconomic trends weaken in the third quarter and intimating right now going into the fourth. And so we don't want to kind of comment right now on exactly where we land because it's that combination of where the market is at, which I would say is the biggest area of uncertainty in combination of what we're doing on the transformation side as it relates to food specifically, what benefits are we going to get from our initiatives in retail as well as foodservice and then the combination of productivity. But those are all the variables that we're managing right now, and we'll give you a more fulsome update in February when we come back.

We'll now take our next question. This is from Ghansham Panjabi from Baird.

Welcome also. I guess just following up on George's question on the Food segment. If we could just kind of switch to the EMEA segment, a portion of that segment. Can you just touch on the operating environment there? Is it any different than the U.S. baseline? And then I think you cited share gains in the region. Give us a bit more color as to what drove that, which specific businesses, et cetera, that would be helpful.

Thank you, Ghansham. Regarding our EMEA region and the food business, it has been the strongest performer within the overall Food segment. The operating environment remains very robust, and the share gains that began in late 2024 continued through 2025, with the business performing well in terms of margin expansion and additional share gains. This trend is apparent across our entire portfolio. In the EMEA region, there is less shrink bag penetration compared to industrial markets, and there is a greater emphasis on retail due to the dynamics in Europe compared to our other regions. It is less cycle-driven than in places like Australia, Latin America, and the U.S. This trend is ongoing. However, we are seeing some caution entering the market related to the broader global growth outlook. As we approach the end of 2025, we expect the European region to finish strongly. This outlook is supported by our activities in Liquibox, our rollstock applications, particularly a product called DM5, and shrink bags, reflecting broad-based strength across that portfolio and region.

And the next question is from Phil Ng from Jefferies.

Congrats on another strong quarter in a tough environment. I guess, Dustin, well, first of all, welcome, Kristen, really looking forward to working with you going forward. I guess a quick question out of the gate. I guess your implied fourth quarter guide implies seasonal counter seasonality, certainly, you called out some headwinds on food in particular. So I guess, number one, have you seen the correction in demand already, whether it's the consumer protective in terms of your order patterns weakening in the fourth quarter? And then you called out some price degradation as well. Have you seen that kind of soften already going into the fourth quarter, whether it's food or Protective?

Yes. I'll start by jumping in and just give you some perspective broadly on Q4, and then I'll let Dustin add some specificity around Protective and a couple of the other points you raised. So let me start by just framing the big picture Q4 and really what we are carrying in from Q3. We mentioned in the prepared remarks that the team is really executing well against the challenging backdrop, and there's a lot of focus here internally from the teams on making sure we're controlling what we're able to control. So if you think about the progress that we're making both on the growth initiatives, the transformation initiatives, all the things that contributed to the Q3 performance, we absolutely expect all of that to continue. But what you're really hearing from us quite broadly is concerns around a softer macro environment sequentially moving into the fourth quarter. And we touched on like industrial production index, various points around consumer sentiment and uncertainty. And all of that broadly speaking, again, total enterprise on the top line is bringing us down in volume relative to the prior guide, about 2.5 points. And a couple of areas I'd point out where that's concentrated is in NAM food and that's specifically in industrial processing. As you mentioned, there's a little bit of negative price coming in, in the fourth quarter, and that really has to do just with the challenging volume metric environment that we're seeing. But I will point out it's being offset by currency. So it really doesn't net out to being a very volume-driven story. But the teams are going to continue to do all the things they did in Q3 to deliver against that. And Dustin, maybe you want to put a finer point on some of the questions on Protective.

Yes, absolutely. Regarding the question on food, I want to highlight that in Protective, we are observing order entry patterns that reflect the ongoing dynamics, especially in industrial volumes related to food processing. This is the area where we noted downward pressure in Q3, which was somewhat mitigated by certain offsets. However, in Q4, the situation is worsening, and we are experiencing increased pressure, which is evident in our order entry. While the full impact has yet to unfold, we will proceed with caution through the fourth quarter, but we are already seeing these effects.

Next question is from Matt Roberts of Raymond James.

Dustin, you spent a lot of time talking about that commercial playbook. So maybe more specifically, what could you borrow from the Protective playbook you've already executed on? Or maybe what needs to be done in terms of either customers' R&D spend or KPIs you measure within the sales force? And how does the shift to food impact capital allocation in coming years? And to the point you just talked about as well, despite those headwinds, 3Q still came in good as did the margin, I think an unfavorable mix of margin from those end markets, and you discussed the price headwinds, but how are you able to preserve margin in food in 3Q? And could you expect to hold margins year-over-year in 4Q despite those incremental beef headwinds?

Thank you for your question, Matt. I appreciate the detailed inquiry. First, I want to comment on our overall commercial strategy. In Protective, we shifted from a reactive to a proactive sales approach. We invested in the field, simplified our go-to-market structure, revised incentives, and concentrated on strategies within each segment. For instance, in Protective, this meant streamlining how we engage with our distribution partners and enhancing overall engagement. This strategy is supported by sales performance management, where we monitor key indicators such as weekly calls and visits, customer satisfaction, and pipeline management. These same principles can be applied to our food business, which traditionally has been more connected to industrial volumes, necessitating a different sales approach compared to retail and food service. Therefore, we are customizing our go-to-market model, focusing on our end markets and aligning our strategy with R&D and supply chain efforts, starting with our primary market, North America, where food comprises about 50% of our overall business. It's crucial to ensure that R&D and supply chain connections are strong, particularly as we explore other segments. Regarding our margin profile, we are pleased with our performance this quarter. While we acknowledged potential demand weaknesses earlier in the year, we focused on what we can control and adopted a proactive approach. Our management team has dedicated significant effort to improving productivity across the company, which has helped mitigate some pricing pressures as we enter the fourth quarter. Now, I’ll hand it over to Kristen to address your question about capital allocation.

Yes. Thanks, Dustin. I appreciate it. So broadly speaking, what we're really trying to focus on with our capital expenditures is how we're choosing to invest in things that are accretive to ROIC, which has really been a focus of ours since the Liquibox acquisition. And if you think about deployment of CapEx, really, whether it's to food or it's Protective, it really links back to the transformation priorities. And those priorities are absolutely going to inform what investments we're making and the timing of those investments. And I do think that there's a lot of interesting things ahead of us with respect to food transformation specifically that we can do to continue to drive profitable growth in the business. Specifically what those are or how much we're going to spend on them, we'll come back to you in February with more color on the '26 guide, and we'll elaborate a bit more on the CapEx side as well.

Next question is from Edlain Rodriguez from Mizuho.

Welcome, Kristen. In terms of Protective, Dustin, again, you've seen an inflection in material volume in there. Like what drove that? And do you believe that's sustainable going forward? And do you still expect to see the overall volume inflection in that segment as we go into 2026?

Great question. I'll start by saying we're very pleased with our performance in the third quarter. It marks a significant milestone in our Protective transformation as we saw a substantial increase in material volumes. This improvement was driven by positive developments in our industrial portfolio, which we discussed in the second quarter. Notable standouts include Instapak and AUTOBAG, along with additional growth in areas such as Korrvu, our suspension films, and inflatables. More parts of our portfolio experienced growth this time than in the past, and we continued to see enhancements in fulfillment. The successes we've had with national accounts are primarily in the fulfillment area, and as those sales come in, we expect them to benefit us into 2026. So, to summarize, we had a very strong Q3 that excites us about our ongoing journey, which has been evolving since 2021. We previously mentioned that we anticipate further stabilization in material volumes in the fourth quarter. Looking ahead to 2026, we will be considering the same factors we discussed earlier, particularly regarding overall U.S. economic conditions, which will significantly influence market performance, whether upward or downward. Therefore, we are approaching this cautiously. Our Q4 results will shape our perspective on 2026. However, I am confident in our strategy and how our transformation in Protective is progressing. I'm excited about our future, and I will provide more updates as we gain a better understanding of market dynamics and the timing of our transformation initiatives along with the achievements we've made this year.

Next question is from Jeff Zekauskas from JPMorgan.

I was hoping that you would talk about your SG&A costs in that they came down about $10 million sequentially on higher sales. And so I was wondering if there was anything unusual about your SG&A number this quarter? Or is it sustainable? I take it most of your restructuring has to do with your food business in that the food operating profit kind of matches the change in SG&A. Is that true? And for next year, is there another $50 million or $60 million in charges? Or are we done?

I appreciate your question, Jeff. We are very pleased with our progress in reducing our overall SG&A over the past couple of years. Since we launched the CTO2Grow program in 2023, we have consistently managed to lower that number. The third quarter reflects timing related to our initiatives, but there is nothing particularly unusual about it. In our upcoming Q3 disclosure, we will officially conclude the CTO2Grow program, although we will continue restructuring efforts into next year. Regarding the payments, we have indicated that there will be ongoing back-office restructuring. It's important to note that while we are focused on the Food and Protective segments, our overall SG&A, excluding sales and marketing, includes essential corporate functions like legal, finance, and HR that support both areas. As you continue to optimize the G&A structure through transformation, we’ve mentioned some of these initiatives previously, such as our office in Manila, which we established at the beginning of the year. Currently, we have over 300 employees there, making it our second-largest G&A facility. Many of these efforts are designed to enhance sustainability in two key areas: first, by streamlining our back-office operations, and second, by achieving improved business outcomes, particularly in IT. To provide some context, we’ve significantly modernized our IT infrastructure while simultaneously reducing our IT costs by a considerable margin. We are very satisfied with these results. I believe there are further opportunities ahead, and we will provide more details on the timing of restructuring payments when we reconvene in 2026.

Next question is from Anthony Pettinari from Citi.

I'm wondering if it's possible to give the maybe updated bridge items for the full year EBITDA guide in terms of net price, volumes, FX cost saves. And then apologies if I missed this, but you're reducing the CapEx for the full year, but your free cash flow estimate is unchanged. I don't know if you had any comment there in terms of the offsets.

Yes. Yes, I'm happy to take that. And maybe I'll just actually start with free cash flow, work back into the full year EBITDA bridge question. So we are guiding to a midpoint still of $400 million on free cash flow. To your point, we did bring the CapEx number down about $25 million. And then of course, we're bringing EBITDA up. So both of those would be tailwinds to the free cash flow number. One of the reasons that that's not flowing through and causing us to raise the midpoint is really around reductions in accounts payable, and that has to do with some of the mix of raw materials relative to what we were forecasting in the last guide. And just to put a finer point on the fourth quarter cash flow generation, too, just keep in mind that we're very Q4 weighted on cash generation, and that has to do with inventory management at year-end, which we do historically see, and we're laser-focused with the teams on how we're operationally creating that inventory reduction for the fourth quarter. So that's a little bit of color I'd give you on the guide around cash flow. And then going back to your first question, which was on the updated EBITDA bridge on a year-over-year basis, I think you had asked for that on a full year basis. Yes. So let me give you Q4 and then happy to go through full year, too. So four buckets I'll give you on the fourth quarter EBITDA year-over-year bridge. The first is volume, which we've talked quite a bit about, largely market-driven, again, concentrated in North America food and industrial processing. And then the second year-over-year change is continued negative net price realization, which is largely stable to what we've seen through the first three quarters of the year. And then productivity, we continue to generate high levels of productivity. The fourth quarter benefit there is a little bit under $30 million. And then the rest of the change is really two things. It's improved FX, and it is lower incentive compensation payments in Q4.

And then to step in and give you some color just on the full-year numbers, you're talking about approximately $20 million year-over-year in terms of benefit from an EBITDA perspective. That's true that's a negative $51 million or 50-ish relative to volume, negative $75 million on net price realization, which is a $10 million step-up that we alluded to earlier, which is concentrated in the fourth quarter. And then you see roughly $150 million, I would say, restructuring combined with cost control and cost containment. That's obviously a step-up, as we mentioned, to come in and offset some of that price impact in the fourth quarter and the rest of it being associated with other incentive comp payments.

Next question is from Anojja Shah from UBS.

I just wanted to go back to that comment that you made on network optimization and evaluating your footprint. Can we get a little more detail on that? And also, does that relate to both segments or just one?

It's a great question. Network optimization has been a continued focus over the past three years. We've previously mentioned areas where we consolidated sites and opened new ones, like our Lakeland facility in the Protective segment, which will benefit us in 2025. This comment applies to both segments moving forward, but the main point is that we are taking a comprehensive approach and evaluating our entire footprint. Historically, we have been opportunistic in rationalizing our portfolio. We're not ready to discuss specifics at this time, but as we advance our planning efforts, we will provide updates at the beginning of 2026 and throughout the year. This process involves more than just site consolidation; it includes logistics and freight optimization as well as asset optimization. Regarding capital deployment, we are being very intentional, especially with growth capital, and this applies to our sites too. While the script's comment primarily focused on Protective, it pertains to both areas, and we will offer more clarity in February.

Next question is from Chris Parkinson from Wolfe Research.

Dustin, now that things kind of are beginning to stabilize and inflect and you're clearly making substantial progress on the cost front, is now the right time to further assess the portfolio? I know there's been kind of this willingness to see kind of where you want to be ultimately in the future, especially on the food side of it. But as far as Protective is concerned, given the progress there, is there any reason to believe that now is the right time to further assess that? Or is it still really too early?

Yes, Chris, great to hear your voice. Thank you for the question. A couple of comments I would make to that is, as we mentioned before in the past, we're always looking for opportunities to maximize shareholder value. Right now, we're heads down in our transformation, really focused on making the impacts we need in each segment. What we focused on is really bringing both businesses back to long-term sustainable profitable growth. While we're really pleased with the progress we made in both segments, we still think there's a lot of opportunity right now to optimize and drive us to a place where we're achieving that long-term goal. And so that's where we're really focused right now. But with that said, we're always looking for opportunities to maximize shareholder value.

Next question is from Mike Roxland from Truist Securities.

Congratulations on another strong quarter despite the challenges. Kristen, congratulations on the new role. I'm looking forward to working with you. Dustin, you mentioned a reset in the large account strategy for Protective and mentioned a few seven-figure wins. Did those mostly come from fulfillment? Can you confirm that? Also, what EBITDA impact are you expecting from those wins in 2026? Kristen, you've been in your position for about three months now. Given your expertise in driving transformations in complex manufacturing and distribution businesses, what do you think Sealed Air is doing well? Where do you see opportunities for further change at Sealed Air?

Mike, that’s a great question. We mentioned securing some significant seven-figure accounts, which are substantial deals for our Protective segment, as orders in this area tend to be smaller compared to food. It's mostly about fulfillment and involves national accounts and distribution networks. Our focus is on facilitating their distribution. The margin varies based on the specific products sold into each account. One key advantage we have as a market leader in the Protective segment is the extensive range and depth of our portfolio. This strong portfolio, combined with robust distribution relationships, has enabled us to seize these opportunities successfully. While we’re currently not quantifying the impact these victories will have in the coming year, we are still assessing the rollout of these new wins. Overall, the product mix is crucial, and it's different for each account since no two deals are the same.

Yes, thanks for the question. I just reached the 60-day mark last week. It has been a fantastic 60 days, and I am really enjoying it. It's a great business. We mentioned this in the prepared remarks, but the transformation opportunity was a significant factor in my decision to join. So far, I have observed that the transformation is one of the most thoroughly planned that I have encountered, considering our stage of maturity. It exceeds my initial expectations. The breadth and depth of the transformation are impressive, as is the specificity of the initiatives laid out in a data-driven and actionable manner. This gives me a lot of confidence in our ability to continue delivering on current initiatives and to follow through on our roadmap for the next one, two, or three years. So that's been really positive. I think where I can help and where we have opportunity to continue to mature the transformation opportunity is really in some of the management systems you've heard Dustin talk about. In the background that I come from, we refer to that more as the operating system. And we don't really have a very mature operating system here. If you think about how we sort of structure accountability through the business, how we coach our people, how we think about executing initiatives through leading indicators, really like holistic continuous improvement efforts. Those are all areas where I think we can make a lot of improvements. And we've put some things in motion already since I've been here, but that's a really big opportunity for us. And then broadly speaking, too, I think we're always looking to make sure that as we're going through this major change and this major transformation that we have the right talent in all parts of the organization to support that. It is a big change. We are evolving a lot of things in the company, including the culture, and that really requires us to make sure that we have the right leaders on board to drive that change over the next several years.

Next question is from Stefan Diaz from Morgan Stanley.

Welcome, Kristen. So foodservice volumes, I think you said in your prepared remarks were plus 4% this quarter, which is very nice to see, especially given the pressure consumer in the U.S. Can you just speak to some of the strength there and if you expect to continue to gain share in the quick service space and maybe some of the things that are driving that strength?

We are seeing increasing opportunities in foodservice, particularly due to our fluids and liquids portfolio, which has shown strong growth over time. We've introduced new products like FlexPrep and Zero Prep tailored for the quick service restaurant sector. Our partnership with Liquibox emphasizes the shift from rigid packaging to flexible options, creating opportunities in this area. This strategy mirrors our approach in the industrial sector, where we combine equipment, material science, and technical service to enhance throughput and maintain uptime for our customers. In foodservice, this means optimizing labor, which remains a challenge in the post-COVID landscape. Quick service restaurants are facing significant pressure, and our solutions help maximize product yield in areas such as sauces and condiments, which are newer for us. Additionally, we've shifted some focus within Liquibox to include dairy, where we've seen promising growth. Overall, we are optimistic about the prospects for growth in these areas following a strong performance in Q3, even though they represent a smaller segment of our overall business, estimated at around $0.5 billion.

And the next question is from Gabe Hajde from Wells Fargo.

Kristen, I'm looking forward to working with you. I have two unrelated questions. Dustin, I hate to bring this up again, but according to the filings, there are 102 facilities, with 15 that are co-located or serving both segments. You've made significant progress in separating the support and commercial strategies over the past 18 months. If you continue to separate those operations next year, would that allow you to explore other ways to enhance shareholder value beyond just improving financial and operational performance? My second question is unrelated, and I apologize for that. There's mention of $75 million in price-related non-direct material challenges in 2025. You all have implemented numerous changes to the commercial approach. Does this lead you to consider, as we're evaluating, a potential shift regarding these additional costs that seem to increase each year? Perhaps it's time to revisit pass-through mechanisms to account for these other expenses you incur.

So Gabe, I'll begin with your first question and then return to that point. This year, when considering overall net price realization, a significant part of the negative $75 million cost is due to labor inflation. To give you an idea, around $60 million of that negative impact is labor inflation, which has been easing compared to about three years ago when it was higher. Labor inflation is continuing to moderate, which is a positive sign. Additionally, we have a history of improving productivity each year that helps counterbalance inflation, independent of any restructuring efforts. This is our consistent approach every year. While we don't see any fundamental changes in this regard, it's likely that inflation in these areas will be lower moving forward than it has been historically, as it continues to moderate. It's difficult to predict the nondirect material side, especially concerning tariffs. The impact of tariffs, as everyone is aware, will start to appear on balance sheets following August 1, and these pricing dynamics will extend into 2026. We are still evaluating what this outlook will look like next year in conjunction with the overall resin markets. In terms of costs, I would categorize it that way. Regarding pricing, our business has a diverse mix. We've previously mentioned that in our food sector, a significant portion—about half—has been primarily based on formula pricing, mainly in North America. These formulas take into account various input measures beyond just raw materials when determining marketplace prices. Over the past five years, if you analyze net price realization across both businesses, they have shown strong pricing power regardless of inflationary costs, without even considering productivity. Looking ahead to pricing environments, as we entered 2025, we anticipated that overall polyethylene markets would become slightly inflationary, which would be a more favorable environment for flexible packaging manufacturers. As of now, commodity resins are at a low point. It's uncertain where they will trend into 2026, but that will be the key factor if we see any recalibration of pricing in the market segment. Going back to your original question around the overall segments, et cetera. Look, I mean, the reason we went down the road of putting the businesses back into Food and Protective, as we've talked about before, is they have very different end markets, very different routes to market in terms of whether it's distribution or direct sales, different products, applications, et cetera. And this was really to give each business the ability to drive towards a long-term strategy that's tailored to that specific business. And that's what we're focused on. As it relates to shared facilities, a lot of what you're talking about there specifically as it relates to shrink films and stretch overwrap films, those are the same asset base that produce both of those product categories. And that's really a legacy coming back from the days we acquired CRYOVAC back in 1998, where that asset base was acquired there. So our shrink films in the market, even though we sell them in the Protective segment because they're a protective application, they're originally a CRYOVAC technology and those assets actually produce both of those. And so right now, we're really focused on, as I mentioned beforehand, continuing to effectuate the strategies for each of those segments. And we're still, as Kristen said, while we've made a lot of progress over the past three years and keep in mind, we've been in this new structure for about a year now. We're really kind of wrapping. This is actually around the same time last year that we went back into Food and Protective. And we still think there's runway here to continue to really optimize each individual segment and their overall outlook, particularly as we head into 2026 and beyond.

And the last question today is from Arun Viswanathan from RBC.

Congrats on the strong results, and welcome, Kristen, looking forward to working with you as well. So I guess my question is just on the volume side and organic growth side. I guess I think you mentioned that your outlook now embeds maybe 2.5 points lower of volume growth in Q4. Is that just maybe relative to what you saw in the last month or so? When did you start to see that kind of weakness materialize? And do you expect that to kind of last through the first half of next year as well? And maybe you can just break that down how that looks in both segments.

Yes, I have a few comments. If you examine our fourth quarter guidance, it indicates a reduced forecast for volume, approximately 2.4 points lower. Overall, this results in a 4% decline in volume for the quarter, mainly in food and more specifically within North American food, while the rest of the world is performing relatively well. This shift from consumers to value grocery is decreasing volumes overall, compounded by the interaction between consumer trends and the beef cycle. The steepening of the beef cycle, as mentioned earlier, has surpassed our expectations. It is significantly influenced by overall consumer weakness and surrounding uncertainty. Considering the cycle, as we discussed previously, it is anticipated that the downturn will persist into the fourth quarter and likely continue through at least the first half of 2026. We are still assessing the extent of this situation, but it's expected to have a cascading effect. The outlook for the second half of 2026 remains uncertain and partly depends on the initiatives we control. In terms of the Protective segment, it's important to remember that it operates on a short cycle. Based on improvements in our understanding of competitive and market intelligence, we are currently better positioned than in the past, but we still have limited visibility and must analyze conditions one quarter at a time. Volumes can shift quickly depending on our customers' needs, impacting our overall volumes. We are currently looking at the fourth quarter with expectations of some seasonal strength, assessing how it compares to the previous year to help shape our outlook for 2026. I want to emphasize that we are experiencing increasing uncertainty regarding market dynamics and lower market demand, which stems from low levels of industrial production since the tariff announcements in March. Consumer weakness has been noted particularly among lower to middle-income households, a trend that has recently emerged. We approach the fourth quarter and 2026 with caution and expect to have more clarity as we move into February, allowing us to provide a more informed update on how 2026 will unfold based on the factors we previously mentioned.

And I will now turn the call back over to Dustin for closing. Thank you.

Thank you for joining us this morning. Kristen and I look forward to coming back in February to discuss how we finished the year and our expectations for 2026. More importantly, I want to reiterate that as a company, we are focused on maximizing shareholder value and are leaving no stone unturned. And a sincere thank you to all of our customers, our channel partners, and our employees who are at the center of what we do and are driving our transformation here at Sealed Air. Thank you.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.