Ranpak Holdings Corp. (PACK) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our consolidated financial statements and related notes set forth in Part II, Item 8, as well as the discussion included in Part I, Item 1A, “Risk Factors,” of this Report. For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022. All amounts and percentages are approximate due to rounding.

Overview

We are a leading provider of environmentally sustainable, systems-based, product protection solutions and end-of-line automation solutions for e-commerce and industrial supply chains. We generate revenue by providing our PPS systems and paper consumables to customers, which include direct end-users and our network of exclusive paper packaging solution distributors, and by providing end-of-line automation systems that solve challenges, including optimization, customization, and efficiency.

Highlights from fiscal year 2023 compared with fiscal 2022 included:

•
Net loss for 2023 decreased $14.3 million to $27.1 million from a net loss of $41.4 million in 2022.

•
EBITDA for 2023 increased $29.7 million to $62.6 million from $32.9 million in 2022.

•
AEBITDA for 2023 increased $9.7 million to $76.5 million from $66.8 million in 2022.

Key Performance Indicators and Other Factors Affecting Performance

We use the following key performance indicators and other factors to analyze our business performance, determine financial forecasts, and help develop long-term strategic plans:

PPS Systems Base. We closely track the number of PPS systems installed with end-users as it is a leading indicator of underlying business trends and near-term and ongoing net revenue expectations. Our installed base of PPS systems also drives our capital expenditure budgets. The following table presents our installed base of PPS systems as of December 31, 2023 and 2022:

Paper Costs. Paper is a key component of our cost of goods sold and paper costs can fluctuate significantly between periods. We purchase both 100% virgin and 100% recycled paper, as well as blends, from various suppliers for conversion into the paper consumables we sell. The cost of paper supplies is our largest input cost, and we historically have negotiated supply and pricing arrangements with most of our paper suppliers annually, with a view towards mitigating fluctuations in paper cost. Nevertheless, as paper is a commodity, its price on the open market, and in turn the prices we negotiate with suppliers at a given point in time, can fluctuate significantly, and is affected by several factors outside of our control, including inflationary pressures, supply and demand

29

and the cost of other commodities that are used in the manufacture of paper, including wood, energy, and chemicals. The market for our solutions is competitive and it may be difficult to pass on increases in paper prices to our customers immediately, or at all, which has in the past, and could in the future, adversely affect our operating results. Although we look to pass increased market costs on to our customers to mitigate the impact of these costs, we are unable to predict our ability to pass these costs on to our customers and how much of these increases we will be able to pass on to our customers. As such, we expect some continued pressure on our gross margin in the medium term relative to our historical margin profile.

Effects of Currency Fluctuations. As a result of the geographic diversity of our operations, we are exposed to the effects of currency translation, which has affected the comparability of our results of operations between the periods presented in this Report and may affect the comparability of our results of operations in future periods. Currency transaction exposure results when we generate net revenue in one currency at one time and incur expenses in another currency at another time, or when we realize gain or loss on intercompany transfers. While we seek to limit currency transaction exposure by matching the currencies in which we incur sales and expenses, we may not always be able to do so.

In addition, we are subject to currency translation exposure because the operations of our subsidiaries are measured in their functional currency which is the currency of the primary economic environment in which the subsidiary operates. Any currency balances that are denominated in currencies other than the functional currency of the subsidiary are re-measured into the functional currency, with the resulting gain or loss recorded in the foreign currency (gains) losses line-item in our Consolidated Statements of Operations. In turn, subsidiary income statement balances that are denominated in currencies other than USD are translated into USD, our reporting currency, in consolidation using the average exchange rate in effect during each fiscal month during the period, with any related gain or loss recorded as foreign currency translation adjustments in other comprehensive income (loss). The assets and liabilities of subsidiaries that use functional currencies other than the USD are translated into USD in consolidation using period end exchange rates, with the effects of foreign currency translation adjustments included in accumulated other comprehensive income (loss).

We hedge some of our exposure to foreign currency translation with a cross-currency swap. Refer to Note 12 — Derivative Instruments to the consolidated financial statements included elsewhere in this Report for additional information. Significant currency fluctuations could impact the comparability of our results between periods, while such fluctuations coupled with material mismatches in net revenue and expenses could also adversely impact our cash flows. See “Qualitative and Quantitative Disclosures About Market Risk.”

Inflationary Pressures and Other Costs. We have continued to experience inflationary pressures in 2023, which have adversely impacted some of our end-users, particularly e-commerce customers, that are particularly sensitive to reductions in business and consumer spending by their respective customers, and which in turn have impacted our net revenue. In 2022, inflationary pressures increased the costs of paper as well as shipping and logistics, among other costs, and the conflict in Ukraine caused certain headwinds including increased energy costs. Higher costs due to inflation and the conflict in Ukraine were partially offset by price increases, which mitigated the impact on our operating results. Our ability to predict or further offset inflationary cost increases in the future or during economic downturns or recessions may be limited or impacted by heightened competition for net revenue, an unwillingness by our customers to accept price increases or pressure to reduce selling prices if end-users reduce their volume of purchases. Inflationary pressures and associated increases in interest rates and borrowing costs may also impact the ability of some of our end-users or suppliers to obtain funds for operations and capital expenditures, which could negatively impact our ability to obtain necessary supplies as well as the sales of materials and equipment to affected end-users. This could also result in reduced or delayed collections of outstanding accounts receivable from end-users, which could impact our cash flows. As a result, to the extent inflationary pressures continue, we expect additional pressure on our net revenue and gross margin. We will continue to evaluate the impact of inflationary pressures on our profitability and cash flows.

Results of Operations

The following tables set forth our results of operations for 2023 and 2022, presented in millions of dollars.

In addition, in our discussion below, we include certain other unaudited, non-GAAP constant currency data for 2023 and 2022. This data is based on our historical financial statements included elsewhere in this Report, adjusted (where applicable) to reflect a constant currency presentation between periods for the convenience of readers. We reconcile this data to our GAAP data for the same period under “Presentation and Reconciliation of GAAP to Non-GAAP Measures” for 2023 and 2022.

30

Comparison of 2023 to 2022

Net Revenue

The following table and the discussion that follows compares our net revenue by geographic region and by product line for 2023 and 2022 on a GAAP basis and on a non-GAAP constant currency basis as described above and in the discussion below. See also “Presentation and Reconciliation of GAAP to Non-GAAP Measures” for further details:

Net revenue for 2023 was $336.3 million compared to net revenue of $326.5 million in 2022, an increase of $9.8 million or 3.0%. Net revenue was positively impacted by increases in cushioning, void-fill, and other revenue, partially offset by decreases in wrapping. Revenue continued to improve year over year on a consolidated basis driven by increased placement of packaging systems with end users, partially offset by the current consumer spend preferring experience over discretionary goods and the impact of inflationary and interest rate pressures on consumer and corporate spend. Cushioning increased $5.5 million, or 3.9%, to $145.8 million from $140.3

31

million. Void-fill increased $3.3 million, or 2.5%, to $133.9 million from $130.6 million. Wrapping decreased $4.5 million, or 11.1%, to $36.0 million from $40.5 million. Other sales, which includes automated box sizing equipment and non-paper revenue from packaging systems installed in the field, such as systems accessories, increased $5.5 million, or 36.4%, to $20.6 million from $15.1 million, for 2023 compared to 2022.

The increase in net revenue is quantified by an increase in the volume of our paper consumable products of approximately 1.9% and a 1.3% increase in the sales of automated box sizing equipment, partially offset by a 1.7% decrease in the price or mix of our paper consumable products. Net revenue was also positively impacted by currency tailwinds. Constant currency net revenue was $349.0 million for 2023, a $4.9 million, or 1.4%, increase from constant currency net revenue of $344.1 million for 2022. On a constant currency basis, cushioning increased $2.8 million, or 1.9%, to $152.0 million from $149.2 million. Void-fill increased $1.7 million, or 1.2%, to $138.3 million from $136.6 million. Wrapping decreased $4.7 million, or 11.2%, to $37.1 million from $41.8 million. Other sales increased $5.1 million, or 30.9%, to $21.6 million from $16.5 million, for 2023 compared to 2022.

Net revenue in North America for 2023 totaled $137.3 million compared to net revenue in North America of $134.7 million in 2022. The increase of $2.6 million, or 1.9%, was attributable to an increase in cushioning sales of $0.1 million, an increase in void-fill sales of $4.7 million, and an increase in other sales of $3.1 million, partially offset by a decrease in wrapping sales of $5.3 million.

Net revenue in Europe/Asia for 2023 totaled $199.0 million compared to net revenue in Europe/Asia of $191.8 million in 2022. The increase of $7.2 million, or 3.8%, was driven by favorable currency exchange rates of the Euro to the U.S. dollar, as well as increases in cushioning sales of $5.4 million, wrapping sales of $0.8 million, and other sales of $2.4 million, partially offset by a decrease of $1.4 million in void-fill sales. Constant currency net revenue in Europe/Asia was $211.7 million for 2023, a $2.3 million, or 1.1%, increase from constant currency net revenue of $209.4 million for 2022. On a constant currency basis, the increase was attributable to an increase of cushioning sales of $2.7 million, an increase in wrapping sales of $0.5 million, an increase in other sales of $2.1 million, partially offset by a decrease in void-fill sales of $3.0 million compared to 2022.

Cost of Goods Sold

Cost of goods sold for 2023 totaled $213.0 million, a decrease of $13.9 million, or 6.1%, compared to $226.9 million in 2022. The decrease was primarily due to lower raw material costs and favorable currency exchange rates, partially offset by an increase in volume and increased manufacturing input costs. Additionally, currency rate fluctuations accounted for approximately 1.3% of the percentage increase in 2023 over the prior year.

Operating expenses

Selling, General, and Administrative (“SG&A”) Expenses. SG&A expenses for 2023 were $91.8 million, a decrease of $13.7 million, or 13.0%, from $105.5 million in 2022. The change in SG&A was largely due to a decrease in stock compensation expense primarily associated with the 2021 LTIP PRSUs, whose downward adjustments resulted from evaluations on their performance criteria, partially offset by increased employee compensation from increases in headcount and increased professional service fees. This was partially offset by currency rate fluctuations that increased SG&A expenses by 1.0% over the prior year.

Depreciation and Amortization. Depreciation and amortization expenses for 2023 were $33.8 million, an increase of $1.7 million, or 5.3%, from $32.1 million in 2022, primarily due to an increase in leasehold improvements, which resulted in additional depreciation of $1.3 million over the prior year. Additionally, currency rate fluctuations accounted for approximately 0.9% of the percentage increase in 2023 over the prior year.

Other Operating Expense, Net. Other operating expense, net, for 2023 was $5.2 million, an increase of $0.7 million, or 15.6%, from $4.5 million in 2022. The increase in other operating expense was due to higher losses on the sale of property, plant and equipment of $0.5 million compared to the prior year and higher research and development costs of $0.2 million.

Interest Expense

Interest expense for 2023 was $24.3 million, an increase of $3.6 million, or 17.4%, from $20.7 million in 2022. The change was due to increases in interest rates associated with our First Lien Credit Facilities. Currency rate fluctuations accounted for approximately 1.0% of the increase in 2023 over the prior year. We incurred additional non-cash expense of $0.5 million from amortization of deferred financing costs associated with the amendment of our First Lien Credit Facilities compared to 2022. Additionally, our $50.0 million notional interest rate swap at 1.5% matured on June 1, 2023.

Foreign Currency (Gain) Loss

32

Foreign currency gain for 2023 was $0.3 million, a decrease of $1.9 million, or 86.4%, from a foreign currency gain of $2.2 million in 2022 due to the volatility in Euro exchange rates compared to USD.

Other Non-Operating Expense (Income), Net

Other non-operating income, net was $0.2 million in 2023 and $4.3 million in 2022, a decrease of $4.1 million year over year. In 2022 the other non-operating income was primarily related to the unrealized gain on our investment in Pickle.

Income Taxes

Income tax benefit for 2023 was $4.2 million, or an effective tax rate of 13.4%. Income tax benefit was $15.3 million in 2022, or an effective tax rate of 27.3%. The fluctuation in the effective tax rate between periods, and the difference between the effective tax rate and the U.S. federal statutory rate, was primarily attributable to stock-based compensation adjustments.

Comparison of 2022 to 2021

Discussions of 2021 items and comparisons between 2022 and 2021 that are not included in this Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for 2022.

Presentation and Reconciliation of GAAP to Non-GAAP Measures

Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have, however, also presented below Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and adjusted EBITDA (“AEBITDA”), which are non-GAAP financial measures. We have included EBITDA and AEBITDA because they are key measures used by our management and board of directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating EBITDA and AEBITDA can provide a useful measure for period-to-period comparisons of our primary business operations. Adjusting AEBITDA for comparability for constant currency also assists in this comparison as it allows a better insight into the performance of our businesses that operate in currencies other than our reporting currency. Before consolidation, our Europe/Asia financial data is derived in Euros. To calculate the adjustment that we apply to present AEBITDA on a constant currency basis, we multiply this Euro-derived data by 1.15 to reflect an exchange rate of 1 Euro to 1.15 USD, which we believe is a reasonable exchange rate to use to give a stable depiction of the business without currency fluctuations between periods, to calculate Europe/Asia data in constant currency USD. An exchange rate of 1.15 approximates the average exchange rate of the Euro to USD over the past five years. We also present non-GAAP constant currency net revenue and derive it in the same manner. We believe that EBITDA and AEBITDA provide useful information to investors and others in understanding and evaluating the Company’s operating results in the same manner as our management and board of directors.

However, EBITDA and AEBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, EBITDA and AEBITDA should not be viewed as substitutes for, or superior to, net income (loss) prepared in accordance with GAAP as a measure of profitability or liquidity. Some of these limitations are:

•
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA and AEBITDA do not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•
EBITDA and AEBITDA do not reflect changes in, or cash requirements for, our working capital needs;

•
AEBITDA does not consider the potentially dilutive impact of stock-based compensation;

•
EBITDA and AEBITDA do not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to us;

•
AEBITDA does not take into account any restructuring and integration costs;

•
AEBITDA is presented on a constant currency basis and gives effect to the impact of currency fluctuations;

•
while EBITDA for all periods herein has been reported without giving effect to constant currency adjustments, we have previously presented EBTIDA on a constant currency basis, which reduces its usefulness as a comparative measure to certain of our historical results that are not presented in this report; and

33

•
other companies, including companies in our industry, may calculate EBITDA and AEBITDA differently, which reduces their usefulness as comparative measures.

EBITDA. EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: benefit from (provision for) income taxes; interest expense; and depreciation and amortization.

AEBITDA. AEBITDA is a non-GAAP financial measure that we present on a constant currency basis and calculate as net income (loss), adjusted to exclude: benefit from (provision for) income taxes; interest expense; depreciation and amortization; stock-based compensation expense; and, in certain periods, certain other income and expense items; as further adjusted to reflect the performance of the business on a constant currency basis.

In addition, we include certain other unaudited, non-GAAP constant currency data for 2023 and 2022. This data is based on our historical financial statements included elsewhere in this Report, adjusted (where applicable) to reflect a constant currency presentation between periods for the convenience of readers. We reconcile this data to our GAAP data for the same period under “Presentation and Reconciliation of GAAP to Non-GAAP Measures” for 2023 and 2022. As noted above, we believe that in order to better understand the performance of the Company, providing non-GAAP financial measures to users of our financial information is helpful. We believe presentation of these non-GAAP measures is useful because they are many of the key measures that allow management to evaluate more effectively our operating performance and compare the results of our operations from period to period and against peers without regard to financing methods or capital structure. Management does not consider these non-GAAP measures in isolation or as an alternative to similar financial measures determined in accordance with GAAP. The computations of EBITDA and AEBITDA may not be comparable to other similarly titled measures of other companies. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, measures of financial performance as determined in accordance with GAAP or as indicators of operating performance.

34

The following tables and related notes reconcile certain non-GAAP measures, including the non-GAAP constant currency measures, to GAAP information presented in this Report for 2023 and 2022:

(see subsequent footnotes)

(1)
Reconciliations of EBITDA and AEBITDA for each period presented are to net (loss) income, the nearest GAAP equivalent.

(2)
Adjustments are related to non-cash unusual or infrequent costs such as: effects of non-cash foreign currency remeasurement or adjustment; impairment of returned machines; costs associated with the evaluation of acquisitions; costs associated with executive severance; costs associated with restructuring actions such as plant rationalization or realignment, reorganization, and reductions in force; costs associated with the implementation of the global ERP system; and other items deemed by management to be unusual, infrequent, or non-recurring.

(3)
Represents amortization of capitalized costs related to the implementation of the global ERP system, which are included in SG&A.

Liquidity and Capital Resources

We evaluate liquidity in terms of cash flows from operations and other sources and the sufficiency of such cash flows to fund our operating, investing and financing activities. We believe that our cash and cash equivalents of $62.0 million as of December 31, 2023, together with borrowing capacity under the revolving portion of our senior secured credit facilities, will provide us with sufficient resources to cover our current requirements.

Our main liquidity needs relate to capital expenditures and expenses for the production and maintenance of PPS systems placed at end-user facilities, working capital, including the purchase of paper raw materials, and payments of principal and interest on our outstanding debt. We expect our capital expenditures to increase as we continue to grow our business, expand our manufacturing footprint, and upgrade our existing systems and facilities. We continue to evaluate our inventory requirements and adjust according to our volume forecasts. Our future capital requirements and the adequacy of available funds will depend on many factors, and if we are unable to obtain needed additional funds, we may have to reduce our operating costs or incur additional debt, which could impair our

35

growth prospects and/or otherwise negatively impact our business. Further, volatility in the equity and credit markets from macroeconomic factors could make obtaining new equity or debt financing more difficult or expensive.

Including finance lease liabilities and excluding deferred financing costs, we had $407.4 million in debt, $2.5 million of which was classified as short-term, as of December 31, 2023, compared to $396.9 million in debt, $2.4 million of which was classified as short-term, as of December 31, 2022. At December 31, 2023, we did not have amounts outstanding under our $45.0 million revolving credit facility, and we had no borrowings under such facility through March 14, 2024.

Debt Profile

The material terms of our debt are summarized in Note 11 — Long-Term Debt to the consolidated financial statements included elsewhere in this Report. The First Lien Term Facility matures in 2026 and the Revolving Facility matures in 2025. As of December 31, 2023, no amounts were outstanding under the Revolving Facility. The Revolving Facility includes borrowing capacity available for standby letters of credit of up to $5.0 million. Any issuance of letters of credit reduces the amount available under the revolving facility.

Borrowings under the Facilities, at our option, bear interest at either (1) an adjusted eurocurrency rate or, as of the effectiveness of Amendment No. 2, the SOFR rate, or (2) a base rate, in each case plus an applicable margin. The applicable margin is 3.75% with respect to eurocurrency borrowings or SOFR borrowings, as applicable, and 2.75% with respect to base rate borrowings, in each case assuming a first lien net leverage ratio of less than 5.00:1.00, subject to a leverage-based step-up to an applicable margin equal to 4.00% for eurocurrency borrowings and SOFR borrowings, as applicable, and 3.00% with respect to base rate borrowings. The interest rate for the First Lien Dollar Term Facility as of December 31, 2023 and 2022, was 9.44% and 7.88%, respectively. The interest rate for the First Lien Euro Term Facility as of December 31, 2023 and 2022 was 7.86% and 5.25%, respectively. Global interest rates have risen meaningfully in 2023 and we expect continued volatility in the interest expense related to these facilities.

The Facilities also provide us with the option to increase commitments under the Facilities in an aggregate amount not to exceed the sum of (i) the greater of $95.0 million and 100% of Consolidated Adjusted EBITDA (as defined in the Credit Agreement) for the four consecutive fiscal quarters most recently ended, plus (ii) the amounts of any voluntary prepayments of the First Lien Term Facility (and, in the case of the Revolving Facility, to the extent such voluntary prepayments are accompanied by permanent commitment reductions under the Revolving Facility) plus (iii) additional amounts subject to the relevant net leverage ratio tests and other conditions specified in the Credit Agreement.

The Credit Agreement contains customary events of default, representations and warranties, and affirmative and negative covenants. Such covenants, among other things, restricts our ability to (i) declare dividends or redeem or repurchase capital stock, including with respect to Class A common stock, (ii) prepay, redeem or purchase other debt, (iii) incur liens, (iv) make loans, guarantees, acquisitions and other investments, (v) incur additional indebtedness, (vi) engage in sale and leaseback transactions, (vii) amend or otherwise alter debt and other material agreements, (viii) engage in mergers, acquisitions and asset sales, (ix) engage in transactions with affiliates, and (x) enter into arrangements that would prohibit us from granting liens or restrict our ability to pay dividends, make loans or transfer assets among our subsidiaries.

The First Lien Term Facility also requires us to make mandatory prepayments of term loans upon the occurrence of certain events, including (i) the requirement to apply 50% of excess cash flow (as defined in the Credit Agreement), subject to step-downs to 25% if the first lien leverage ratio is less than or equal to 4.50:1.00 and greater than 4.00:1.00 and 0% if the first lien leverage ratio is less than or equal to 4.00:1:00 and additional deductions, to mandatorily prepay term loans under the Credit Agreement (ii) the receipt of certain insurance/condemnation proceeds or net proceeds from specified asset sales and sale-leasebacks, subject to step-downs based on our first lien leverage ratio; provided that in lieu of a prepayment, we may instead reinvest such proceeds in specified assets subject to certain conditions, and (iii) the incurrence or issuance of non-permitted debt, following which we must pay 100% of specified net proceeds received in connection therewith.

The Revolving Facility also requires us to maintain a maximum first lien net leverage ratio of 7.50:1:00 as of the four consecutive fiscal quarters most recently ended. This “springing” financial covenant is tested on the last day of each fiscal quarter, but only if on such date the sum of (i) the principal amount of outstanding revolving loans under the Revolving Facility, (ii) drawings on letters of credit under the Revolving Facility, and (iii) the face amount of non-cash collateralized letters of credit under the Revolving Facility in excess of $2.5 million exceeds an amount equal to 35% of the total revolving commitments under the Revolving Facility.

The Facilities are secured by substantially all of the assets of the Company. No mandatory prepayments were required as of December 31, 2023, and the Company was in compliance with all debt covenants.

36

Cash Flows

The following table sets forth our summary cash flow information for the periods indicated:

Cash Flows Provided by Operating Activities

Net cash provided by operating activities was $52.6 million in 2023. Cash provided by operating activities was $1.1 million in 2022. The increase in operating cash flows is primarily due to changes in working capital adjustments and decreased input costs.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $52.4 million in 2023 and reflects cash used for production of converter equipment and leasehold improvements for our new facilities in Connecticut and The Netherlands, net of $2.9 million in proceeds from the sale of our building and land located in Heerlen, The Netherlands. Cash used in investing activities was $37.9 million in 2022 and reflects cash used for production of converter equipment and the renovation of our global headquarters in Concord, Ohio, and an investment in Pickle, partially offset by cash received in termination of cross-currency swaps.

Cash Flows Used in Financing Activities

Net cash used in financing activities was $1.8 million in 2023 and reflects payments on finance lease liabilities, legal fees paid related to a modification of our debt facilities, debt repayments, and tax payments for withholdings on stock compensation, partially offset by proceeds from equipment financing, net of repayments. Net cash used in financing activities was $4.5 million in 2022 and reflects debt repayments, and tax payments for withholdings on stock compensation.

Share Repurchase Program

On July 26, 2022, members of the Company’s Board of Directors (“Director(s)”) authorized a general share repurchase program of our Class A common stock of up to $50.0 million, with a 36-month expiration. These Class A common stock repurchases may occur in transactions that may include, without limitation, tender offers, open market purchases, accelerated share repurchases, negotiated block purchases, and transactions effected through plans under Rule 10b5-1 of the Securities Exchange Act of 1934. The timing and actual amount of shares repurchased will depend on a variety of different factors and may be modified, suspended or terminated at any time at the discretion of the Directors.

Contractual Obligations and Other Commitments

We lease production and administrative facilities as well as automobiles, machinery and equipment. We have various contractual obligations and commercial commitments that are recorded as liabilities in our condensed consolidated financial statements. Other items, such as purchase obligations and other executory contracts, are not recognized as liabilities, but are required to be disclosed.

The table below presents our significant enforceable and legally binding obligations and future commitments as of December 31, 2023.

37

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2023.

Critical Accounting Policies and Estimates

Our accounting principles and the methods of applying these principles are in accordance with U.S. GAAP, which often require the judgment of management in the selection and application of certain accounting principles and methods. We consider the following accounting policies to be critical to understanding our financial statements because the application of these policies requires significant judgment on the part of management, which could have a material impact on our financial statements. The following accounting policies include estimates that require management’s subjective or complex judgments about the effects of matters that are inherently uncertain. For information on our significant accounting policies, including the policies discussed below, see Note 2 — Basis of Presentation and Summary of Significant Accounting Policies to the audited consolidated financial statements included elsewhere in this Report.

Revenue Recognition. Revenue from contracts with customers is recognized under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) using a five-step model consisting of the following: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. Performance obligations are satisfied when we transfer control of a good or service to a customer, which can occur over time or at a point in time. The amount of revenue recognized is based on the consideration to which we expect to be entitled in exchange for those goods or services, including the expected value of variable consideration. The customer’s ability and intent to pay the transaction price is assessed in determining whether a contract exists with the customer. If collectability of substantially all of the consideration in a contract is not probable, consideration received is not recognized as revenue unless the consideration is nonrefundable and we no longer have an obligation to transfer additional goods or services to the customer or collectability becomes probable.

Our revenue associated with our PPS business contains (i) a non-lease component (the paper consumables) accounted for as revenue under ASC 606 and (ii) a lease component (our PPS systems) accounted for as machine lease revenue under ASC Topic 842, Leases (“ASC 842”). We allocate a percentage of PPS paper revenue to machine lease revenue using the residual approach to estimate the standalone selling price of our PPS systems to customers. The allocation is performed based on the number of PPS systems in the field. We do not sell or transfer ownership of our PPS systems to our customers. Our lease agreements with customer for PPS systems are for one year, or less, and renew annually. Revenue for paper consumables is recognized based on shipping terms, which is the point in time the customer obtains control of the promised goods. Machine lease revenue is recognized on a straight-line basis over the terms of the PPS systems agreements with customers, which have durations of less than one year.

Our Automation machines are highly customized to customer specific needs, and termination is only allowed in the case of breach of contract, and as such Ranpak is entitled to all consideration from the production of the machine. Ranpak cannot sell the machine to another customer due to the level of customization, and as such, there is not an alternative use for the product produced. Because of these factors, Ranpak recognizes machine revenue over time on a contract-by-contract basis using an input method, based on the percentage of costs and effort incurred to complete the construction of the machine.

We sell our products to end-users primarily through an established distributor network and direct sales to select end-users. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net revenue on the Consolidated Statements of Operations.

Charges for rebates and other allowances are recognized as a deduction from revenue on an accrual basis in the period in which the associated revenue is recorded. When we estimate our rebate accruals, we consider customer-specific contractual commitments

38

including stated rebate rates and history of actual rebates paid. Our rebate accruals are reviewed at each reporting period and adjusted to reflect data available at that time. We adjust the accruals to reflect any differences between estimated and actual amounts. These adjustments impact the amount of net revenue recognized by us in the period of adjustment. Charges for rebates and other allowances were approximately 12.0%, 10.0% and 7.4% of revenue in 2023, 2022, and 2021, respectively. Refer to Note 8 — Contracts with Customers, of the Notes to consolidated financial statements for further discussion of revenue.

We recognize incremental costs to obtain a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less. For example, we generally expense sales commissions when incurred because the contract term is less than one year. These costs are recorded within sales and marketing expenses.

Goodwill. Goodwill is not subject to amortization but is tested for impairment annually at a reporting unit level (October 1st) and between annual tests if events and circumstances indicate that the estimated fair value of a reporting unit may no longer exceed its carrying value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Application of the goodwill impairment test requires judgment, including the identification of reporting units (North America and Europe/Asia), assignment of goodwill to reporting units, and determination of the fair value of reporting units. We assess, use estimates, and make judgments regarding a variety of factors that may impact the fair value of the goodwill reporting unit being tested. These estimates and judgments include, but are not limited to, projected revenues, gross margin, operating expense, residual growth rate, and discount rate, which are dependent on business plans, anticipated future cash flows, economic projections, and other market data.

The test for goodwill used unobservable inputs that required significant judgment and were performed using a combination of the Discounted Cash Flow Method and the Guideline Public Company Method in order to determine fair value. Upon completion of the annual impairment assessment, we concluded that each area was not impaired. However, the test for one of our goodwill reporting units that encompasses our business in North America indicated that fair value of the reporting unit was close to approximating carrying value. The unobservable inputs that required significant judgment include estimates and assumptions affected by conditions specific to our businesses, economic conditions related to the industries in which we operate, and conditions in the global economy. Changes in these estimates and assumptions may result in an impairment charge for the North America reporting unit.

The assumptions that have the most significant effect on the fair values of our goodwill reporting units derived using the Discounted Cash Flow Method are (i) the expected revenue growth rate, (ii) gross margin, (iii) projected operating expense (iv) the weighted average cost of capital (“WACC”), (v) and the residual growth rate for each reporting unit. A hypothetical individual decrease in the expected long-term revenue growth rate by approximately 1.6%, a hypothetical decrease in the long-term gross profit assumption of approximately 2.4%, a hypothetical increase in the long-term operating expense assumption of 2.4%, or a decrease in the residual revenue growth rate of 1.2% would result in an impairment charge. Separately, a hypothetical increase in the WACC by approximately 0.7% would have resulted in an impairment charge in the North America reporting unit.

We believe that our estimates and assumptions used in our annual impairment assessment are reasonable but are subject to change from period to period. Because there are inherent uncertainties in these estimates and judgments, significant differences between actual results of operations and other factors and the estimates used could result in significant differences and if we fail an impairment test, any non-cash impairment charge may have an adverse effect on our results of operations and financial condition.

Recently Issued and Adopted Accounting Pronouncements

For recently issued and adopted accounting pronouncements, see Note 2 — Basis of Presentation and Summary of Significant Accounting Policies of the Notes to consolidated financial statements included elsewhere in this Report.