10-Q: Ranpak Reports Q3 Loss Amid Revenue Growth, Control Issues

Ranpak Holdings Corp. reported an increased net loss for the third quarter and nine months ended September 30, 2025, despite overall revenue growth driven by automation and void-fill solutions, while also disclosing ineffective internal controls.

Summary

• Net revenue increased by 8.0% to $99.6 million for the three months ended September 30, 2025, and by 7.3% to $283.1 million for the nine months ended September 30, 2025, compared to the prior year periods.
• Net loss widened to $10.4 million for the third quarter of 2025 (from $8.1 million in 2024) and to $28.8 million for the nine months (from $10.7 million in 2024).
• Gross profit remained flat at $34.4 million for the third quarter of 2025 but decreased by 4.3% to $94.2 million for the nine months.
• Adjusted EBITDA (AEBITDA) increased by 8.1% to $21.4 million for the third quarter of 2025 but decreased by 5.8% to $55.2 million for the nine months.
• Automation net revenue saw significant growth, up 63.0% in the third quarter and 33.9% for the nine months.
• Issued non-voting common stock warrants to Amazon and Walmart, vesting based on aggregate payments for goods and services.
• Invested an additional $2.5 million in Pickle Robot Co., resulting in a $5.8 million unrealized gain.
• Disclosure controls and procedures were deemed not effective due to material weaknesses in internal control over financial reporting, with remediation efforts ongoing.

Sentiment

Score: 4

Explanation: While revenue growth, particularly in automation, and strategic customer warrants are positive, the significant increase in net loss, decline in gross profit and EBITDA for the nine-month period, and the ineffectiveness of internal controls indicate substantial operational and financial challenges. The decrease in operating cash flow and cash reserves further adds to the negative sentiment, outweighing the positives.

Positives

• Net revenue increased by 8.0% to $99.6 million in the third quarter of 2025 and 7.3% to $283.1 million for the nine months ended September 30, 2025.
• Automation net revenue grew significantly by 63.0% to $11.9 million in the third quarter of 2025 and 33.9% to $25.3 million for the nine months.
• Void-fill product line revenue increased by 4.8% in the third quarter of 2025 and 11.2% for the nine months.
• Entered into strategic warrant agreements with major customers Amazon and Walmart, potentially securing future business and long-term revenue streams.
• Realized a $5.8 million unrealized gain on the strategic investment in Pickle Robot Co.
• The One Big Beautiful Bill Act (OBBBA) is expected to reduce cash taxes due to additional deductions related to 100% bonus depreciation, 100% expensing for domestic research and development costs, and an increase in the interest expense deduction.
• Maintained compliance with all financial covenants under the 2024 Credit Agreement.
• Net availability of $44.1 million under the Revolving Facility as of September 30, 2025.

Negatives

• Net loss increased by 28.4% to $10.4 million in the third quarter of 2025 and by 169.2% to $28.8 million for the nine months ended September 30, 2025.
• Gross profit remained flat at $34.4 million in the third quarter of 2025 and decreased by 4.3% to $94.2 million for the nine months.
• Loss from operations increased by 35.7% to $5.7 million in the third quarter of 2025 and by 64.8% to $23.4 million for the nine months.
• EBITDA decreased by 5.6% to $11.9 million in the third quarter of 2025 and by 35.1% to $37.2 million for the nine months.
• AEBITDA decreased by 5.8% to $55.2 million for the nine months ended September 30, 2025, compared to $58.6 million in the prior year.
• Net cash provided by operating activities significantly decreased to $3.6 million for the nine months ended September 30, 2025, from $34.9 million in the prior year, partly due to non-recurring patent litigation settlement proceeds and a gain on sale of patents in 2024.
• Cash and cash equivalents decreased to $49.9 million as of September 30, 2025, from $76.1 million at December 31, 2024.
• Cost of sales increased by 12.8% in the third quarter of 2025 and 14.1% for the nine months, primarily due to increased production costs and foreign currency fluctuations.
• North America segment EBITDA decreased by 63.9% to $3.0 million in the third quarter of 2025 and 36.2% to $11.1 million for the nine months.
• Europe/Asia segment EBITDA decreased by 34.6% to $26.1 million for the nine months, primarily due to a decrease in non-operating income from a non-recurring patent litigation settlement in 2024.
• Disclosure controls and procedures were deemed not effective due to material weaknesses in internal control over financial reporting, indicating a significant governance issue.
• One customer represented 12.4% of total net revenue in the third quarter of 2025 and 26.1% of accounts receivable, indicating customer concentration risk.

Risks

• Inability to secure a sufficient supply of paper to meet production requirements.
• Impact of rising prices on production inputs, including labor, energy, and freight, on results of operations.
• Impact of the price of kraft paper on results of operations.
• Reliance on third-party suppliers.
• Geopolitical conflicts, government shutdowns, and other social and political unrest or potential tariffs on the import of goods.
• High degree of competition and continued consolidation in the markets in which the company operates.
• Consumer sensitivity to increases in the prices of products, changes in consumer preferences with respect to paper products generally, or customer inventory rebalancing.
• Economic, competitive, and market conditions generally, including macroeconomic uncertainty, the impact of inflation, and variability in energy, freight, labor, and other input costs.
• Loss of certain customers.
• Failure to develop new products that meet sales or margin expectations, or the failure of those products to achieve market acceptance.
• Ability to achieve environmental, social, and governance (ESG) goals and maintain the sustainable nature of the product portfolio and fulfill obligations under evolving ESG standards.
• Ability to fulfill obligations under new disclosure regimes relating to ESG matters, such as the European Sustainability Disclosure Standards recently adopted by the European Union (EU) under the EU's Corporate Sustainability Reporting Directive (CSRD).
• Future operating results fluctuating, failing to match performance or to meet expectations.
• Ability to fulfill public company obligations.
• Ability to profitably collaborate with strategic partners and enter new markets.
• Material weaknesses in internal control over financial reporting, which are reasonably likely to adversely affect the company's ability to record, process, summarize, and report financial information.

Future Outlook

The company expects continued pressure on gross margin in the medium term relative to its historical margin profile, primarily due to inflationary pressures and the potential inability to fully pass on cost increases to customers. Seasonality is expected to persist, with the highest net revenue typically recorded in the fourth fiscal quarter and the slowest sales in the first fiscal quarter of each fiscal year. Remediation of certain material weaknesses in internal control over financial reporting is expected by the end of calendar year 2025, though changes to timing and delays may be experienced. The One Big Beautiful Bill Act (OBBBA) is anticipated to reduce cash taxes due to additional deductions related to bonus depreciation, R&D expensing, and increased interest expense deduction.

Management Comments

• We believe that our $49.9 million in cash and cash equivalents as of September 30, 2025 and cash flows from operations, 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.
• 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 are focused on cost out and efficiencies to minimize the impact to our customers, and believe in the ongoing value proposition of our equipment.
• Management believes the Company is in compliance, in all material respects, with environmental laws and regulations and maintains insurance coverage to mitigate exposure to environmental liabilities.
• Management does not believe any environmental matters will have a material adverse effect on the Company’s future consolidated results of operations, financial position or cash flows.
• Management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of our operations and our cash flows for the periods presented in this Quarterly Report, in conformity with U.S. generally accepted accounting principles.

Industry Context

Ranpak operates in the e-commerce and industrial supply chain sectors, providing environmentally sustainable protective packaging and automation solutions. The company's performance is influenced by broader macroeconomic factors such as inflation, energy prices, and consumer spending, particularly in the e-commerce sector which exhibits strong seasonality. The strategic warrants issued to Amazon and Walmart highlight the increasing importance of large e-commerce players and the company's efforts to secure long-term partnerships in a competitive market. The investment in Pickle Robot Co. indicates a move towards advanced automation and AI in logistics, aligning with industry trends for efficiency and technological integration. The challenges with rising input costs and the inability to fully pass them on reflect broader inflationary pressures impacting manufacturing and logistics industries.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• No amounts are required to be reflected in these unaudited interim condensed consolidated financial statements related to contingencies for the three and nine months ended September 30, 2025.
• Management believes that any future accruals with respect to currently known litigation matters, claims, and administrative proceedings would not have a material effect on the financial condition, liquidity, or cash flows of the Company.

Related Party Transactions

• The Company has a shared services agreement with One Madison Group LLC (the Sponsor), an entity controlled by the chief executive officer, for certain services. Total fees under this agreement are not significant.

Stakeholder Impact

• Shareholders: Increased net loss and declining profitability metrics (gross profit, EBITDA, AEBITDA) for the nine-month period could negatively impact shareholder value. The share repurchase program, if executed, could provide some support. Warrants issued to Amazon and Walmart could dilute future equity but secure long-term customer relationships.
• Customers: Strategic warrant agreements with Amazon and Walmart indicate strengthened relationships with key customers. Continued inflationary pressures and potential price increases could impact other customers.
• Employees: Stock-based compensation expense is a component of overall compensation. Restructuring and severance costs are mentioned as adjustments to AEBITDA, indicating potential workforce changes.
• Suppliers: Reliance on third-party suppliers and the inability to secure sufficient paper supply pose risks. Inflationary pressures could impact supplier relationships and costs.
• Creditors: The company is in compliance with all debt covenants, which is positive for creditors. However, declining operating cash flows and increased net loss could be a concern for future debt servicing capacity.

Next Steps

• Continue remediation plan to address material weaknesses in internal control over financial reporting, with an expectation to remediate certain weaknesses by the end of calendar year 2025.
• Evaluate the impact of future adoption of ASU 2024-03 (Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures), ASU 2025-05 (Financial Instruments Credit Losses), and ASU 2025-06 (Intangibles Goodwill and Other Internal-Use Software) on consolidated financial statements.
• Continue to evaluate inventory requirements and adjust according to volume forecasts.
• Continue to evaluate the impact of inflationary pressures on profitability and cash flows.
• Take steps to minimize the potential impact of tariffs by evaluating alternative parts and global suppliers and refurbishing existing machines.
• The share repurchase program is authorized but no repurchases have been executed to date.

Key Dates

Recommendation

The significant increase in net loss, coupled with declining gross profit and EBITDA for the nine-month period, indicates a deteriorating financial performance. The substantial drop in operating cash flow and cash reserves raises concerns about liquidity and future operational funding. Furthermore, the disclosure of ineffective internal controls over financial reporting is a major red flag, signaling potential risks to financial integrity and investor confidence. While revenue growth in automation and strategic customer warrants offer some long-term potential, the immediate financial and governance issues outweigh these positives, suggesting a 'sell' recommendation for a seasoned investor.

Keywords

Ranpak Holdings, PACK, SEC Filing, 10-Q, Protective Packaging, E-commerce Solutions, Automation, Paper Packaging, Financial Results, Net Loss, Revenue Growth, EBITDA, Warrants, Amazon, Walmart, Strategic Investments, Internal Controls, Risk Factors, Sustainability, Supply Chain