Vins, which has an addressable market of over $10 billion today, cold chain, and automation solutions. The company's large and growing total addressable market continues to be driven by trends towards e-commerce, the rise in environmental and sustainability concerns globally, and the need for automated solutions. The company is based in Concord Township, Ohio. It has about 84 million shares, which closed at $5.21 yesterday for a $436 million equity market cap, $530 million of net debt for about a $770 million total enterprise value. I'm pleased to introduce Bill Drew, Ranpak SVP and CFO, who will be giving a presentation with an overview of the company before we move into Q&A. Thanks so much for being here.
Thanks, everybody, for joining us today. As Hannah mentioned, we're Ranpak Holdings Corp. We're a company that's been around for more than 50 years. Started off in the protective packaging business. The way that you can think about us is a pure-play provider of environmentally friendly product protection solutions and best-in-class end-of-line automation solutions. We have 140,000 machines across the globe in the field that we place at end users for them to use our paper exclusively through those machines to make protective packaging solutions. You can think of void-fill, cushioning, wrapping solutions that are all created by putting paper through our blue converters. We maintain ownership of those machines, and our customers use our paper exclusively with those converters. We participate in the $10 billion-plus protective packaging market.
That's a market that's growing low to mid-single digits, and we think paper is poised to take share from its resin-based competition in bubble wrap, foam-in-place, as well as air pillows. We did about $370 million in sales last year, which grew about 10%. Volumes were up 12%. We have had six quarters in a row of volume growth in what we would characterize as a pretty challenging environment. You can see from our volume trends that the plastic-to-paper shift is taking hold, particularly in North America, and we're a key beneficiary of that. We did about $84 million in adjusted EBITDA last year. EBITDA grew about 14%, and we expect to continue to grow EBITDA nicely and get the operating leverage on the G&A investments we've made over the past few years.
The protective packaging business is an asset-light model, a razor-blade model with the recurring revenue of the paper sales going through the converters, which generates really nice high-margin recurring revenue business. I'll talk a little bit about automation solutions. That's a newer business for us that's growing really well and we think has a real step-change potential in the growth outlook for Ranpak. That is a sale of capital goods where we're actually selling equipment to the end user for them to optimize their end-of-line automation processes. This is just a snapshot of who is Ranpak. Our mission is to deliver a better world. We think we can help our customers do that in a variety of ways by making their processes more efficient while also making their environmental footprint more favorable.
You can see on the left, right, the protective packaging business was established in 1972. That's a business we've been doing for 50 years plus with a lot of success and a great track record. Those key solutions are there on the bottom left. Cushioning, void-fill, wrapping, and then newer items such as cold chain and mailers are areas that we've introduced more recently that provide environmentally friendly solutions to compete against traditional resin-based offerings. On the right, you can see our end-of-line automation snapshot. That's a newer business for us that does box customization, automated dunnage insertion, robotic pad insertion, and is using machine vision and AI to optimize our end user processes. Sustainability is core at everything that we do. Our sustainability proposition is critical in each one of these business areas.
For protective packaging, again, we're replacing single-use plastic or low recycling rate plastic with paper, which has a significantly higher recycling rate. Our automation solutions have a variety of benefits for our customers, but sustainability is definitely one. It optimizes the amount of dunnage that they use. It lowers the dimensions and weight of the boxes being shipped, which in turn also will allow customers to ship more goods on a given pallet, more goods in a truck, lowering emissions. It also reduces some of their labor costs as well. Mailers and cold chain, again, we've introduced environmentally friendly paper-based, in the case of mailers, competition to a lot of the traditional resin or poly-based offerings. Cold chain is a small new business for us that we've been building out.
We have biodegradable gel packs that we provide to our customers who are looking for a more environmentally friendly option for shipping gel packs to keep things like meal kits cold during transit. This is a snapshot of our global footprint. Although we're a small company in terms of size, we cover a lot of ground. We do business in more than 50 countries across the globe, and you can see those green dots represent areas where we conduct business. The blue dots on this slide represent our manufacturing locations. You can see in North America, we have a number of locations which we use to serve the U.S. market as well as Canada and Mexico. In Europe, we have two different locations, one in the Netherlands, one in the Czech Republic, which we use to primarily serve the European market.
Most recently, we've opened up a facility in Malaysia to start serving the Asia-Pacific market. That facility is very exciting for us as historically we had served the Asia-Pacific market primarily through production in Europe, which, as you can imagine, includes a lot of transit and lead time as well as logistics cost. This is a visual of our solutions for global commerce. Void-fill on the top left, you can see how this works in action. The paper-based solutions take the place oftentimes of air pillows and are used to keep goods safe during transit, keep them from moving around, they fill the void. Cushioning, you can see here, it's more of like a coil heavier duty type pad, which oftentimes is used to ship heavier items like engine parts, valves that you would find in the industrial sector.
Wrapping on the bottom left oftentimes is competing against bubble wrap. This is a paper-based offering that is oftentimes used to ship items that have a consumer component, right? You can think of like home goods, beauty, things like that where there's an unboxing experience where something like our Geami offering is a lot more favorable than a customer opening up bubble wrap. On the bottom, you can see automation and cold chain snapshots as well. I'll talk a lot more about automation going forward. Ranpak sits at the cross-section of multiple what we would call mega trends. One is e-commerce, another is sustainability, and the third is automation. I think everybody would agree that e-commerce continues to gain share from brick and mortar, continues to grow, and has a positive outlook.
Ranpak provides its void-fill, wrapping, and cushioning solutions to a number of e-commerce customers, and it's our largest end market, which we expect to continue to grow. For direct e-commerce sales, right, again, about 37% of our sales are to those folks that we would consider direct e-commerce players, the Amazons of the world, former Jet.com, Walmarts, et cetera. Sustainability, we think, continues to gain share. You're seeing it finally in North America after what we had expected would occur, right, as consumers push to move away from things like plastic and foam. In Europe, you've had a number of tailwinds for the past couple of decades in the movement away from plastic. In Asia-Pacific, certain countries, Korea, Japan, Australia really are embracing sustainability as well.
Automation solutions, I think a lot of folks, particularly with everything going on over the past few years with inflationary costs, the availability of labor, folks are looking to take costs out of their P&L. Our automation solutions enable them to do that by lowering labor costs, lowering dunnage costs, as well as lowering freight and logistics as well. Again, we compete in the $10 billion-plus global protective packaging market, a market we expect to kind of grow in the low to mid-single digits on its own. You can see paper at about 16% is the smallest part of that market. We expect paper to take share from things like foam, bubble, and air pillows in the upcoming years. Foam, from a cost standpoint, is meaningfully more expensive than paper.
We do expect paper to be able to, particularly our cushioning products, be able to go and really take some share from foam-in-place. Bubble wrap, we compete extremely well from a cost perspective. We think that consumer sentiment will continue to shift towards paper away from bubble wrap. Air pillows historically had been the most challenging from a cost perspective for us to compete against just on a dunnage versus dunnage basis, given air pillows are very thin film filled with air. More recently, with things like EPR laws being introduced in places like California and we call it 10 or so other states, there is really, I think, some good momentum for paper versus air pillows, and the cost differential is narrowing. I like this slide because I think it gives you a good sense of the balance of the business, right?
You can see on the top left the geographic diversity by region. Europe is our largest market at just under 50%. North America, a little bit smaller than that, but growing rapidly with the plastic-to-paper shift driven by e-commerce players. Asia-Pacific is a small market for us now, but we think has meaningful opportunity to grow, especially as we have the new Malaysia production facility, which meaningfully lowers our cost, making us much more competitive in that region. On the top right, you can see the category breakdown of the sales. You can see void-fill and cushioning are the two workhorses within PPS. Wrapping, a smaller part of the business, but we think is poised for really nice growth. Automation, small currently, but really nice growth in 2024. We expect really nice growth in 2025.
In 2024, that business grew a little bit north of 40%. We expect to grow about 50% in 2025, driven by a lot of the tailwinds that I mentioned, right? Folks looking to take costs out of their P&L, reduce touches in the warehouse, and make their business more efficient. On the bottom right is just a breakdown of the end market diversity. Again, 37% for e-commerce. After that, it is highly diversified with various end markets that we serve, all the way from the industrial sector to things like home goods and furnishings. We cover a lot of ground with our solutions. We do serve 30,000-plus end users. That means that we are in a lot of warehouses from various sizes, from the mom-and-pops of the world all the way to the Amazons. We serve everybody in between quite well.
That is where we feel like we set ourselves apart. Enabling us to serve those 30,000 end users are our go-to-market and distribution channels, which you can see on the bottom left. Almost 80% of our sales are through distribution. That enables us to serve those large number of end users in an economic way. To maintain our high-margin profile, we rely on our distribution partners to help us serve some of those smaller customers. For the larger customers who are willing to take the truckload quantities and make the economics worthwhile for us, we do serve about 21% of our revenue through that channel as well. This slide gives you a view of some of the solutions, right, in action, just a closer look, right? The void-fill, what some of the machines and equipment look like, as well as how it looks inside the box.
You can see various converters on the right. We have our Trident solution all the way on the far right. That spits out paper at about 96 inches per second, so extremely fast, enabling very quick throughput for our customers who are shipping a lot of product at their facilities in a given day. On the bottom, you can see our cushioning solutions. The left converter is our Guardian, which is a nice small footprint to be used in more industrial-type settings, used to ship heavier items that require a lot more protection. This competes against things like foam-in-place. On the top here is wrapping. These are solutions oftentimes being used to ship goods to consumers. We have a number of different wrapping solutions that companies can use to protect their goods.
We've introduced this newer Giami version in the middle here, smaller footprint that can work really well for our customers with smaller pack stations. On the bottom, you can see cold chain. This is a newer area of investment for us, but we've got a number of different environmentally friendly solutions in terms of liners that can last up to 48 hours, additional liners that can last 72 hours for things like meal kits. There's a snapshot of our biodegradable gel packs that use less than half of the amount of plastic that a traditional gel pack would use in the covering. This slide just gives you a better sense of how all that cold chain, all the cold chain products come together, right, and can be used when shipping things like food to customers.
You can see the way that the liners can be used on the outside with the gel packs to keep items cool, as well as other wrapping solutions that are on the top there to help from a protection standpoint. Again, environmental focus is key to what we do, but that's not how we win. We love the environmental impact that we have on our customers' business, but we really compete on total cost of ownership, cost savings, the speed, the throughput of our solutions as we're going against things like air pillows, foam, and bubble, as well as the breakage and protection that our solutions offer to keep customers' goods intact when being shipped. There are a number of tailwinds, right, that have helped the sustainability shift and the push towards things like paper in the U.S.
EPR laws have been in place and passed in places like California, as well as a number of other states over the past few years. That's helping to drive adoption of paper in the U.S. That's all at the state level, not at the federal level. In Europe, those EPR laws have been in place for a number of years and really helped to drive a lot of growth there, which Ranpak was a nice beneficiary of. More recently in Europe, you've got additional regulation coming in that increases the requirement for companies to reduce the amount of void being shipped in boxes. Companies shipping product have to ship boxes that have no more than 50% void in their box, which will be a nice benefit for our automation business, which adjusts the height of the box to fit the contents.
This is a deeper look at some of our automation solutions. We have invested a lot in automation over the past few years. This is where we feel the world is going. We feel that automation solutions are a really nice complement to our protective packaging solutions. Again, we are serving 30,000 end users with our protective packaging solutions, many of them in high-volume e-commerce-type settings, which really lends itself well to deepening those relationships by introducing things like automation. Over the past few years, we have developed what we believe is the best-in-class solution set for end-of-line automation. We have on the top the Geami, which is robotic pad insertion. A robot can stick the pads that are required for protection into a box, all taking touches out of the process. On the top right, you have got our Cut'it! , right?
The traditional EVO Cut'it! , as well as the multi-lid. We have also introduced a new print option for customers that are looking to put their branding on their boxes. What those machines do is they adjust the height of the box to fit the contents. They optimize the amount of void. You are not shipping large boxes with small items. You are taking labor out of the process, typically one or two heads out of the process, optimizing the dunnage, optimizing the freight. Attractive payback for any customer that is really shipping at least 3,000-4,000 boxes a day. In the bottom in the middle, you can see our AutoFill. That is what I would call the other workhorse of automation. That is focused on automated dunnage insertion.
Customers, particularly in very high-volume environments, can use the AutoFill to optimize the amount of dunnage that goes into a box. You can look at the picture there where a box would come down the conveyor, go underneath our tower. Our tower would read the size of the void in the box, communicate to our converter. The converter spits out the optimal amount of dunnage. You're never overfilling, you're never underfilling, because both are expensive for companies. The box gets automatically sealed, the label gets put on, and off it goes. You're taking a number of touches out of the process for our high-volume customers. This Decision Tower is something newer that we've recently introduced that we think really is a differentiator in the market. This provides our customers with a lot of insight into their business.
It also optimizes the uptime for our machines. You can place this Decision Tower ahead of our automation units, particularly our AutoFill or our Cut'it! . This will help to maximize the uptime. It will divert boxes that are not packed properly. If there is an issue with something sticking out of the box, it will divert it down to a different conveyor, right? You are never going to be having boxes go into our production equipment that would cause jams or downtime. The Decision Tower also will use machine vision and AI to see what is in the box. Does it need a hazardous label ID? Is the label in the right spot? It can offer quality assurance. It can take pictures of the contents that are in the box. The customer can use those pictures to verify that contents were actually shipped to customers.
A number of different applications and high-quality data that our customers can use to maximize their profitability in their business. Increasingly in places like Europe, where you have to be able to measure the amount of void and prove that to regulators, this will enable them to do that as well. Why do customers choose Ranpak? For a number of reasons, but I think these are the key ones, right? We place the machines at no cost to the end user for our protective packaging business. They're not coming out of pocket. They get access to our machines at no upfront cost. In exchange, they'll use our high-margin paper consumables that go through those machines. The speed and the throughput of those machines we feel is best in class. Maximizing uptime, which for high-volume customers is critical.
The efficiency of our machines, the breakage rates, all really help to improve the profitability of our customers' operations. Again, they're not coming out of pocket to do so. Sustainability, right, is kind of the icing on the cake for a lot of those customers. They get to have quantified impacts that they're doing to improve their environmental footprint. They can put those in their ESG reports. If it's in Europe, they can include all that in their CSRD filings. Lastly, automation as the key differentiator, right? The protective packaging business is a competitive market. We have excellent competitors in that space. Where we feel we really differentiate ourselves is in our automation offering. We feel we have best-in-class 1D box customization combined with the dunnage insertion, the robotic pad insertion, and the Decision Tower that we think really sets ourselves apart.
Lastly, I would just point out we went through some major infrastructure investments over the past few years. If you were looking at our financial statements from 2022, 2023, you could see elevated CapEx levels in those years. What we did in that time period was really invest in our digital infrastructure and our physical infrastructure. We did extensive upgrades to our IT, where we put in things like SAP. We put in a new HRIS. We put in a new CRM, a whole new data analytics platform. We had access to real-time data that was high quality, enabling us to run the business better and also eventually take cost out with access to that data. That is all behind us.
It was a big lift, but we think enables us to have a world-class IT platform going forward that will help us maximize the value of the business. The other piece of the infrastructure upgrade that we did was related to our real estate and physical footprint. We built a new headquarters in the Netherlands that combined three facilities into one, making us more efficient and also expanding our capacity to build things like automation equipment. We also built the facility that you see on the right, which is in Shelton, Connecticut. That is our automation facility for the U.S. market. We now have a showroom and production capabilities to serve the U.S. market from the U.S., which increasingly will be coming in handy.
On the left, you can see the global headquarters just outside of Cleveland in Concord Township, Ohio, where we did an extensive renovation to things like the showroom so we could have customers in to display our best-in-class solutions, as well as upgrade the office complex so we could recruit high-quality talent to come in and join us to help grow Ranpak and deliver a better world.
[inaudible] some Q&A from here. A lot going on in the business and a lot of different dimensions here. I think I'll start with a few on the plastic to paper conversion and kind of the sustainability there, as that's kind of your largest business, but definitely want to spend some time on automation and cold chain and some of the newer areas you're investing in as well. Ranpak's benefited significantly from the conversion from plastic to paper-based solutions. At this point, can you discuss kind of the main barriers to entry you're encountering in convincing customers to make this transition? Are they coming to you? I guess at this point, what's holding anyone using plastic at this point from switching to paper?
How long do you think the trajectory will be until it's more fully paper-based?
Sure. I think we're seeing really good momentum on the plastic to paper shift, particularly in the U.S. Five, six years ago, we thought that would be happening. I think with COVID, it probably took a couple of years back as inflationary pressures, right? Everybody focused really on their P&L. That delayed things a little bit. I think when California announced their EPR law that they were putting in place, which was going to tax lower recycling rate dunnage, that got a lot of attention from particularly the larger players in e-commerce.
I think a number of those larger companies have been looking at changing their supply chains to reflect that incoming regulation, which goes into effect in the next couple of years, and are really moving forward now because of things like that, in addition to the total cost of ownership and the savings, as well as the consumer benefits. Where you get some of the pushback, it's less so, I would say, on some of the e-commerce folks. It's more, I would say, on the foam-in-place. You've got folks that have used foam for a very long time, feel very comfortable with it, feel like it's a customized solution. That's a longer sales cycle, right, and requires a lot more education, drop testing, working with package engineering to get folks comfortable there. There's also a lot of infrastructure built that folks have invested in.
That is one of the more challenging areas, but we think has good momentum. You're starting to see a lot of folks really take the paper-based cushioning solutions a lot more seriously. Within e-commerce, the pushback historically had been really more on the dunnage versus dunnage cost, right? You had some folks that would look at just the cost per sq ft of paper versus the air pillows. Paper had historically been about 15% more expensive. Some folks who were comfortable with the dunnage and the air pillows and did not want to increase any of their headline spend did not want to really do the work to go in and really figure out what the true total cost of ownership differential is. I think a lot more companies are investing the time to do that now.
That makes sense. I mean, considering your exposure to craft paper price fluctuations, how are you managing through some of those risks and maintaining your margins as that fluctuates?
Sure. We work with a lot of mills. We work with more than 20 different mills globally, have very good relationships with those mills. We're a big buyer of paper, one of the biggest buyers of paper out there. In good times and in bad, we've been a steady buyer. I think that helps us in our discussions with the mills. We do go and look where we can to lock in pricing for longer periods. Post-COVID, that has been a little bit more challenging. The longest that we're able to lock in at this point is more six months or so, depending on the mill. Some mills are quarterly. For us, we're really focused on the things that are in our control.
Getting efficiencies out of the business, making sure we can improve our gross margins with things that we're doing on the ground. We'll work closely with the mills to negotiate and use our buying power to make sure we're getting a good quality price. As pricing evolves in the marketplace, we'll have to pass that on to maintain our margin profile.
That makes sense. Starting to move a little bit more towards the automation side, you recently deepened your relationship with the largest buyer of packaging and automation solutions globally. Can you talk a little bit more about the partnership with Amazon and the investment that they're making in Ranpak, a little bit about how you expect that to ramp, expectations for it moving forward, and just additional details there?
Sure. It was very exciting for us to announce this transaction in January. For anybody who's not familiar, we did announce an agreement with Amazon to expand our relationship and have more of an economic alignment where, in exchange for their purchase of goods from us, they would earn warrants along the way. We've done business with them for, call it, two decades, have a good relationship with them. We feel like over the past couple of years, as we've really invested in a number of these other solutions, like automation, like cold chain, and also executed well on the protective packaging side, we've differentiated ourselves versus our competition.
I think because of this, we've deepened the relationship with Amazon and came to an agreement where, in exchange for, call it, $400 million in sales over the next eight years, they could earn up to $18.7 million warrants if they spend that with us. We felt like it was a great opportunity for us to economically align ourselves with the largest buyer of protective packaging solutions and automation out there. We felt like it was a good vote of confidence to the outside world that folks could see that we had the confidence of a company like that that's very obviously discerning in who they partner with. We felt like it was a really good opportunity to have good organic growth, increase cash flow, and help us scale over the next number of years. We do expect that to ramp.
We think there's a lot more that we can do with them. Historically, the relationship has been mostly related to dunnage, particularly in the U.S. We think that there's the ability to expand with them in Europe, Asia-Pacific on the dunnage side, and then also automation. There's a number of different things that we could partner with them on.
Do you anticipate any other, I guess, strategic benefits, such as more integration into their logistics operations or helping influence your product roadmap at all, particularly around the automation and sustainable packaging side of things, or is it more capital-focused?
It will evolve. I think over time, we're happy to partner with folks and make sure that we're providing them with the solutions that they need. We also want to make sure it's scalable and not just a solution that would be focused on one or two people. If we feel like something that we're developing with them is going to be applicable for the broader market, then we're happy to do so. I think there's a lot of stuff that's already in our stable right now that is applicable to those large e-commerce players, particularly on the box customization and the dunnage insertion, that I think that we've really got a good starting point.
Great. Any questions from the audience for Ranpak? Yes, go ahead.
How many of your customers are on site at Amazon now?
We don't disclose the number right at a particular customer. They were a meaningful customer of ours last year. If you look in our 10-K, we did have a 10% customer.
Thank you.
Forgive me, I didn't read about the Amazon partnership, but you mentioned the warrants. Did they come up with that idea, or was it you? I know they did something similar with electric trucking company, Lion Electric, which unfortunately failed. How did the deal come to fruition, if you could provide any color?
Sure. This is something that they've done with a number of different companies. I want to say probably over 100 plus over the years, some public, some private. What we've seen is typically if they're going to allocate a good amount of spend that could potentially re-rate a company, they like to share in the upside. We were able to work with them to come up with a deal that we felt like was beneficial for both sides. We wanted to make sure the incremental revenue that we were getting in the transaction was worth the dilution and the expense related to the warrants. I think we structured that.
Great. Any other questions before we go ahead and wrap up? Yeah, one more right here.
This one may [inaudible]
Apologies for that. You talked about standing up the equipment. You talked about standing up the equipment and customers not having to pay for that, but you get the economics back with the paper. Can you maybe just explain that a little bit more?
Sure. Yeah. For the protective packaging business, which is the workhorse, that's the business we've been in for 50 years, the model there is razor razor blade. We will go and invest our dollars into those machines, the blue machines that you saw on the slides. Typically, those could be anywhere from a couple thousand dollars to $5,000, depending on the unit.
We will place that at a customer's site at no cost to them. The way that we make the money is we sell them the paper that goes through those machines. We will sell them rolls or bundles of paper that will go through those machines. The output of that is the pads that they would use to ship their goods.
Great. Thank you so much. I think that we're at time now, and we really appreciate it. I think this is your fourth or fifth year back, so we hope to see you again next year. Thanks so much.