Ranpak Holdings Corp. Price & Performance (PACK)

A copy of the release has been included in a Form eight ks that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast. On the company website. For financial information that is presented on a non GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the table and slide presentation accompanying today's earnings release. Lastly, we'll be filing our 10 ks with the SEC for the period ending this thirty one, twenty twenty four. The 10 ks will be available through the SEC or on the Relations section of our website. With me today, I have Omar Asaly, our Chairman and CEO and Bill Drew, our CFO. Omar will summarize our fourth quarter results and issue our outlook for 2025. Bill will provide additional detail on the financial results where we open up the call for questions. With that, I'll turn the call over to Omar.

Thank you, Sarah, and good morning, everyone. Thank you for joining us today. We finished 2024 on a really positive note. As we built on the large enterprise account momentum from the third quarter and delivered our best quarter of the year and second best quarterly revenue in the history Ranpak. We experienced an outstanding e commerce led holiday season in North America which drove double digit volume growth across the organization in the fourth quarter and pushed us to double digit volume growth for the year as well. I'm pleased with the way our team has executed this year and the way we have delivered on our key goals going into 2024. At this time last year, I shared a number key developments we expected to occur in 2024 that 2024 would be an inflection year related to our business. We said enterprise accounts, which we have been referring to as strategic accounts, would ramp up beginning in Q2. Driving double digit volume growth for the year in a challenging environment. We said automation was going to have an inflection [indiscernible] It did. We grew automation revenue by more than 40% and we expect it to grow another 50% in 2025.

We said CapEx would step down meaningfully as our major investment cycle is behind us. It did. It declined by 40% and we got back to the mode of generating cash. We delevered by half a turn and refinanced our term loan. We plan to pay down a portion of our term loan in 2025. We opened up our Malaysia facility to start serving the APAC market, reducing our production and logistics costs to serve the region. We are in ramp up phase there and excited about what this platform can break. We set our solution set and execution differentiated us in the marketplace We just got validation of what we have built by the largest e commerce company in the world choosing to economically align themselves with us. I will speak more about that later on in the call. Lastly, hit the midpoint of our top line guide and the higher end of our adjusted EBITDA guide. Our goal is to do what we say we're going to do and that is the state of mind of our team at Rampak Ranpak. Overall, I believe we have delivered in 2024 sets the foundation for a really exciting 2025. And next chapter in Rampac's evolution.

With the noise of COVID and our major investment cycle behind us, I and the team are laser focused on execution and growth. We have a best in class platform in areas with major You couldn't draw it up on a piece of paper much better. Now it comes down to execution. We have to deliver. As we get into our quarterly results in more detail, wanted to provide an update on our constant currency presentation. In our release, you saw our statement that we're moving away from the fixed rate constant of $1.15 per euro, which we have done since the company went public in 2019. While we believe this may judging the performance of Rampac over a longer period of time easier for investors, by removing the noise of currency fluctuations related to more than 50% of our sales from our results We're adjusting the way we report our results and discuss our performance to be more consistent with how others report FX impact. As such, the adjusted EBITDA and constant currency changes we discussed and report today are at the reported rate of 108 rather than 115. We will do our best to bridge the gap in our new reporting to our previous guide, which was at 115 In the release, we provided a table showing our guidance going into 2024 would have been at the 108 average rate for the year as well as what our fourth quarter results would have been at the 115 fixed rate, so folks have an apples to apples comparison.

Moving on to our results. We experienced our sixth quarter in a row of volume growth and second quarter in a row of double digit volume growth. Consolidated net revenue increased 17% on a constant currency basis driven by 12% volume growth as e commerce activity drove outsized growth in North America and automation had its largest revenue quarter ever. 10% volume growth for the year drove 2024 full year net revenue up 10% on a constant currency basis. With strong acceleration throughout the year as enterprise accounts ramped in North and automation gained momentum. This put us just above the midpoint of our 2024 guide [indiscernible] North America business was the engine that drove top line performance with sales up 36% and volumes up nearly 40%. Full year net revenue were up 19% in North America driven by VoIP fill and automation. On a positive note, the breadth in North America in the fourth quarter improved as end users in our distribution channel saw increased demand as well. Which we are hopeful will continue. Top line improved in Europe and APAC, but they did not experience the same holiday season strength we saw in The U. S. Resulting in an increase of 1% The environment in Europe, particularly post U. S. Election, remains challenged with the larger industrial economies remaining a drag on performance activity muted somewhat due to uncertainty about tariffs.

Cushioning there remains pressured while e commerce and automation drove top line expansion. On a constant currency basis, adjusted EBITDA increased 8% for the quarter, and 14% for the year, resulting in us achieving the higher end of our guide coming into the year which was for growth of 5% to 16%, on a constant currency basis. While you always want good performance to be more broad based overall, it was a strong quarter. A positive finish to the year that sets us up very well for 2025. Generally speaking, we entered '25 in a better operating environment in North America than we experienced in 2024. In Europe, things are less robust from a macro standpoint, but we are gaining traction through some of our enhancements to the sales organization and cross selling with our automation equipment to larger accounts. We expect a meaningful growth in automation again in 2025 as we look to make Edent in our goal to get to $100,000,000 plus for automation. In Europe, recent announcements coming out of Germany and whatever it takes plan on defense and fiscal spending is encouraging. The input cost environment varies somewhat by geography. Starting late last year, pricing in The U. S. Has moved up a few points given the greater demand in the marketplace for kraft paper.

The North American paper market became increasingly tight in the fourth quarter as the plastic to paper transition and strong holiday season drove longer lead times with the mills. The strength of the demand in North America market surpassed our expectations as well as I believe the mills leading to some short term inefficiencies in areas like freight and logistics that have extended into Q1. Temporarily impacting our margins in the short term. As we get deeper into 2025, we expect to be able to improve our margin in North America as the market adjusts to the greater demand environment. We have enacted internal initiatives to improve improve margins as we expect to achieve the full benefit of our optimization efforts, and utilize longer lead times to enhance our planning, [indiscernible] In Europe, the energy markets have been more volatile lately as winter was colder resulting in a greater draw on reserves. Current pricing on Dutch Natgas is around €42 per megawatt which although meaningfully lower than the peak of 300 has moved up from the mid-20s area from a year ago. So far, this has not impacted paper pricing meaningfully as pricing for the first two quarters are in line but if it persists could put some upward pressure on pricing in the back half of twenty twenty five.

Overall though, in EMEA and APAC, we believe we are well positioned to maintain our attractive margin profile we clawed back post COVID. We'll take you through our guidance for 2025 after Bill's remarks, but to summarize, we're focused on accelerating top line growth this year, double digit adjusted EBITDA growth and working and further delever. We started the year with some good momentum in January announcing a transformational transaction agreement with our largest customer, We are excited to deepen our relationship with the largest buyer of packaging and automation solutions globally and believe this transaction aligns our interest for further growth and expansion. In January, we also announced an exclusive commercial partnership with Rabo. Leader in computer and machine vision technology, to bring AI to the pack station and provide actionable insights to improve efficiency and reduce waste for our customers. This partnership is an excellent complement to Rampac's growing suite of technology and AI powered packaging solutions. Through our investments over the last couple of years, Ramback can now provide customers with cutting edge vision data, hardware and robotics solutions to improve warehouse operations. Our vision offerings include RAVO and R2 Robotics, which has internally developed the Decision Tower applying a unique combination of two d and three d AI supported computer vision technology for a variety of tasks including quality assurance, [indiscernible] and precision void filling.

In data, we have pre COVID our proprietary data and cartonization software. This solution uses historical site order data to simulate machine utilization and box fill rates to help customers identify the optimal combination of body sizes and our machines given their shipping profile. Our hardware and robotic solutions include internal autofill and Padded to reduce touches and labor, minimize waste, and offer attractive ROIs to our customers. We also have a strategic partnership with Pickle Robot the market leader in using generative AI and machine learning autonomously unload trucks [indiscernible] We believe our innovation in this area created real differentiation for us. And that is the feedback we are getting from our customers. We believe we are the future of end of line packaging automation. With that, here's Bill with more info on the quarter. Thank you, Omar. The deck, see a summary of some of our key performance indicators. We'll also be filing our 10 ks, which provides further information on Ramtek's operating results. Overall, net revenue for the company in the fourth quarter increased 17% year over year on a constant currency basis driven by exceptional volume growth in North America, and increased automation sales. Bringing full year net revenue up 10% on a constant currency basis.

For the quarter in the Europe and APAC reporting division, combined revenue increased 1% on a constant currency basis, driven by better automation sales, bringing full year net revenue up 3% on a constant currency basis. North America had its highest net revenue quarter ever driven by 39% volume growth and increased contributions from automation. Net revenue for the quarter was up 36% which brought the full year net revenue in the region to growth of 19%. Momentum in North America is excellent as our execution with enterprise accounts continues deliver results and positions us well for further volume growth in 2025. Gross profit increased 21% in the quarter as reported gross margin of 39.4% for the quarter improved 170 basis points versus the prior year.

Improved margins were driven largely by lower COGS depreciation and improved as input costs remain favorable. Excluding depreciation, gross profit increased 5.3% year over year to the mix impact of lower margin enterprise account revenue in North America. We believe we can improve the margin profile of this book of business in 2025 we get more efficient with our operations. SG and A excluding RSU expense was up 1.5% versus prior year at $26,200,000 Controlling our spend and leveraging our G and A investments remains a top priority. We saw some of the savings initiatives we implemented in Q3 begin to flow in the fourth quarter and we expect to keep our spend tight as we We've invested a tremendous amount in personnel and additional products over the past few years as it relates to automation. We are at a point now where we expect to leverage those investments and better absorb our fixed overhead. At roughly $30,000,000 in sales, automation remained a meaningful drag on our profitability, being a negative $7,000,000 contribution to adjusted EBITDA for the year. We are expecting substantial growth in 2025 in automation, which would put us a little under breakeven by year end, is a key milestone for us to hit.

As that business scales further, gets to $60,000,000 to $100,000,000 in top line, we expect that business contribute to high teens to 20% adjusted EBITDA margin. With minimal CapEx needs.

This would meaningfully improve the overall capital intensity of our financial profile drive our adjusted EBITDA margins on a consolidated basis back to the mid to high 20% area overall, which is our goal. A result of the improved sales volumes and improved gross profit in the fourth quarter, adjusted EBITDA improved 8% in the quarter on a constant currency basis implying a 24.1% adjusted EBITDA margin. This brings the full year's results to up 14% on a constant currency basis and a 22.7% adjusted EBITDA margin for the year. Which is a 90 bps improvement over the prior year. Moving to the balance sheet and liquidity. We completed 2024 with a strong liquidity position and refinanced credit facility. We had a cash balance of $76,100,000 and no drawings on our revolving credit facility. Bringing our reported net leverage to four turns on an LTM basis. Our recent peak leverage was 5.7 times in the June quarter of twenty twenty three, and we have been steadily delevering since. The goal of growing adjusted EBITDA and getting back to generating cash. Our next target is to get to between 2.5 to three turns of leverage we believe we can achieve in the next eighteen to twenty four months.

Our steady progress and improving performance enabled us us to refinance our term loan in December with a new syndicated seven year Term Loan B facility. Our new facility is all USD, so we continue to utilize cross currency swaps to hedge our capital structure. These swaps replace our USD exposure with euro exposure. Reducing our currency risk as it relates to debt service, also enable us to save on interest expense by swapping our SOFR exposure with Eurobore, saving us roughly 130 bps on the hedged portion annually. One thing to point out as it relates to currency, is that outside of our cap structure, which we hedged through cross currency swaps, our exposure is largely translation as our revenue and production costs in the regions we operate are largely matched in local currency, particularly in The U. S. And Europe. Our CapEx for the year was 33,100,000.0 reduction of 40% from 2023. We finished our Malaysia plant in August and have begun ramping our production there. This marks the end of our multiyear investment cycle. As we've been saying, we now have a fully invested world class digital and physical infrastructure Related to CapEx, I want to speak briefly on tariffs.

The environment around this is obviously uncertain, but I wanted to share that from a paper sourcing perspective, we see minimal impact as we source locally in our production areas. From a converter standpoint, we continue to work on ways to limit and mitigate potential impact In our CapEx plans for the year, the impact of the current tariffs of China been in 2024. One area I wanted to provide some additional color on as well was the accounting impact of the Amazon Maher mentioned As you see us report in 2025, there will be some noise related to the revenue associated with Amazon as the value of the warrants are recognized. For folks who aren't familiar with these types of transactions, will need to reduce a portion of our revenue from Amazon the value of the warrants over the life of the deal. That means each period, there will be a non cash decrease to our reported revenue figures which will flow down through the income statement to gross profit, adjusted EBITDA and net income. You will see the impact of this clearly in the statement of cash flows where it gets added back in as well as in the footnotes where we'll break out the value for the period.

We wanted to flag this as the reported GAAP figures and adjusted EBITDA be impacted by the value of the warrants. When evaluating our performance, we recommend looking at our income statement figures on a pro form a basis, adding those revenue offsets in to get a true sense of the cash flow performance. While the reporting optics are a bit confusing at first, we believe this deal sets a great alignment meaningful incremental growth and cash flow for Rampac with the upcoming years. With that, I'll turn it to Omar.

Thank you, Bill. The past couple of years and 2024 in particular have laid the foundation for the next chapter of Rampac Ranpak. We are executing and following our plan. Some of our key accomplishments include we rearchitected the IT system and now have world class technology driving our decision making and providing insights. We won enterprise accounts with more to come. And have economically aligned ourselves with the largest e commerce player in the world. We concluded our investment cycle and got back to cash generation mode. For our next chapter, our goal is to deliver the following: automation at scale, that means 100,000,000 plus in sales in the next few years. We have incentivized our largest customer to provide us with hundreds of millions of incremental spend and deepened our relationship with them. Three, we are focused on getting leverage to 2.5 to three times. Our goal is for our cash structure to not be a topic of discussion. Four, Enterprise account wins and the lower leverage profile enable us to go further on offense, and scale the business. [indiscernible] as we get closer to our target leverage profile, we will have a lot more options on the menu related to capital allocation.

Our share price does not reflect the platform we have built the momentum of this business. I look forward to being able to go on offense especially when our shares are under pressure. Regarding guidance for the year, on a constant currency basis, we are forecasting net revenue growth in the area of 5% to 11% and adjusted EBITDA growth of 5% to 16%. Calculated by translating 2025 forecasted metrics and an exchange rate of €1 to 108 which represents the average exchange rate of 2024.

Which results in a range of $387 to $4.00 $9,000,000 in net revenue and $88,000,000 to $97,000,000 for adjusted EBITDA.

This guidance reflects the expectation of a reported non cash net revenue and adjusted EBITDA reduction of between $3,000,000 to $5,000,000 in 2025 related to the recognition of foreign expense against Amazon revenue. So even though there may be a bit of noise this year as we absorb the impact of the first year of our new economic arrangement with our largest customer, Overall, we feel great about the strategic and economic nature of this deal. For reference, our prior method of reporting constant currency at one five exchange rate would have been $400,000,000 to $425,000,000 in top line $92,000,000 to 101 of adjusted EBITDA.

From a more general standpoint, our are of a normalizing operating environment in e commerce as the consumer and labor market in North America remained resilient. We saw improving trends from the fourth quarter continue into start of the year in this area, is encouraging. Industrial activity is expected to remain lackluster globally until businesses get more confidence in the operating environment and adjust to the new norms post election. We expect to achieve mid to high single digit volume growth in PPS building on the momentum of 2024 and recognizing that we lap a tough comparison in the second half. Industrial automation remains a mega theme in an environment where labor costs and other rising inputs pressure margins. Our solutions deliver real savings and efficiencies minimize cost and waste, We are forecasting automation revenue to be up more than 50% in 2025. Our forecasted growth in adjusted EBITDA of 5% to 16% reflects the contributions from the expected top line increase improving margin profile, We expect that capital expenditures will be between $36,000,000 to $38,000,000 as our major investment cycle is complete enabling us to focus on cash generation and deleveraging and taking into account current loans on tariffs, which obviously are dynamic.

We expect to generate roughly $20,000,000 in cash in 2025 at today's currency levels, which provide us with the ability to pay down roughly $50,000,000 of debt. To help lower our interest burden and gross leverage profile. Generally speaking, outside of the specific an automation performance that we are keenly aware of, we believe this guidance is somewhat conservative and reflects a continued somewhat challenging near term backdrop in Europe. Expanding our presence in Asia Pacific was a key accomplishment in 2024 and sets us up well to grow in the region. As that factory ramps, lead times to get products to key markets such as Japan, [indiscernible] Australia, significantly reduced we have the opportunity to reduce our freight and logistics costs making us much more competitive in the region. [indiscernible] Local paper sourcing is further upside I'm excited about that as we have identified more local mills that could provide us with well priced paper relative to what we currently source in Europe. Thank you all again At this point, we'd like to open the line up for questions. Operator?

Our first question will come from Greg Palm from Craig Hallum. Please go ahead. Your line is open.

Yes, good morning. Thanks for taking the questions. And congrats on doing everything said you were going to do at the start of the year. Thank you, Greg. Good morning.

Let's start with Amazon, if we could and wanted to get a little bit more color on kind of how you viewed 25 in terms of the ramp up of the commercial agreement? And specifically, are you able to give us some color on maybe revenue ex expectations for this year relative to what you reported in 2024?

Yes, let me start and then I'll ask Bill to chime in. So we continue to ramp up nicely with Amazon. As you know, Greg, in our business, the second half of the year is always a lot more important. Then the first half given seasonality and holiday activity, etcetera. So right now, we're actually doing quite a bit more with them [indiscernible] We're also expanding our dialogue outside of The U. S. In Europe and in Asia Pacific with some of their and we're expanding dialogue across our different different offerings, not just in PPS, but in automation, in cold chain, etcetera. I'm expecting as the year goes on that we will continue to ramp up activity with them. So I'm honestly expecting a very busy year for us with them and we feel that we're pretty aligned given the strategic deal that we got [indiscernible] I'll let Bill maybe talk a little bit about scope. As you know, throughout the year, we may move more and more towards an asset light model. With them, where basically the cost of the paper and the paper buying is not [indiscernible] of the calculation around warrants and revenue So that's something we continue to work and there'll be a transitional period for that in the upcoming months and quarters.

But Bill, I don't know if you want to add anything about scale. Yes, sure. So I think from a volume perspective, right, we're expecting to continue to grow meaningfully with Amazon. We're expecting double digit volume growth there. In a number of different areas. We think that there's really good opportunity to continue to expand with them in North America as well as other parts of the world. So we're excited about deepening the relationship there. And as the relationship evolves, there's other areas within our product portfolio that we can expand into.

And when you talk about an evolving relationship with them specifically, should that translate into a higher installed base or is the thought that you're going to continue to sort of refurbish existing machines in the field Honestly, I think our hope and expectation is both. We continue to increase our footprint with them.

The dialogue to be quite frank Greg is around very, very sizable opportunities. We're not ready to sort of report any numbers per se, but the dialogue is expansive. It's around a lot of opportunities. It entails increasing EPS and both new as well as refurbished equipment, it entails more consumables frankly it entails even some new areas that we want to enter that we believe we can help them with. And we can help them hopefully over time we can build scale in some of these new opportunities. So I feel like the level of activity and dialogue is very robust. Let us see how the next few months go and when we have something more definitive to report, we will report back. I will say that we've been talking about enterprise accounts as you know for a number of quarters And as evidenced by frankly Q3 and Q4, we were surprised to the upside with the level of activity and volume that was needed to satisfy some of those accounts and that includes Amazon and other customers. And we're hoping and expecting that that trend will continue in 2025 And we think we can actually win more enterprise accounts in 2025.

So we're quite North America, we're quite encouraged with what we're seeing, Greg.

Okay, great. Lastly, you pointed out that you have a lot of European exposure today. That's I think recently been quite a big headwind. And you mentioned kind of the whatever it takes some of the proposed stimulus over there, I mean, it's obviously too early to know what will happen. But is it are you seeing do you think you could see green shoots? Are you getting any feedback? I'm just trying to get a sense of whether this ends up maybe potentially being a source of strength at some point. So Europe, as we all know, has been a challenge It's a very big piece of our footprint. It's a very important very important sorry business for us with very attractive margins. If you look at our guide and I'll just make a bit of comment around our guide, you will see our our guide for '25 is has a little bit of a broad range in it. And I would argue has a little bit of conservatism in it And that conservatism is largely driven by the macro picture and by Europe and uncertainty around Europe. So we reflected that in our numbers But frankly, what I'm seeing inside the business and what I'm seeing with some of our customers is a lot more bullish than our guide but we tempered it given your question about Europe.

The last couple of days, the announcements from Germany around stimulus around defense, around whatever it takes are very, very encouraging. We're hoping it's early days. We're hoping that will translate into economic activity, into more confidence at CEO level that type of activity can be very important for us. Europe, is a very important market. Germany in particular is a very important market for Ranpak. So I'm quite encouraged but it's early days. And then you'll see the reaction whether it's in the euro, last couple of days, whether it's in a number of basically announcements around hopefully a slightly better macro backdrop, All these things will be helpful. And then of course, there is the biggest question around geopolitics and around potential peace And if all that transpires, that's going to be a very significant tailwind for us. So it's not reflected in our numbers. We're watching things closely. We are talking to our team constantly on the ground. Let's see how the next few weeks again, these are very fresh announcements. Let's see the next few weeks what transpires on the ground, but these early signs are pretty positive, Greg.

Yes, that makes sense. All right. I'll leave it there. Thanks.

Thank you. Our next question comes from Ghansham Panjabi from Baird.

Please go ahead. Your line is open.

Yes. Thanks, operator. Good morning, everybody. Good morning, Ghosh. Omar, on the mid to high single digit volume growth expectation for 2025, how does that break down in terms of contribution from paper versus automation? And also what are you forecasting for e commerce versus industrial end markets? Because understand the Amazon sort of relationship expansion etcetera, but your comparisons will be tough for especially North American e commerce in the back half of next year. Or 2025? Sure. Let me start with just some commentary Ghansham and then I'll have maybe walk you through through a bit more precise numbers. We continue to see attractive sort of backdrop in e commerce. Amazon by far is the biggest But as I stated, we are winning other pretty sizable enterprise accounts that we think will ramp up in 2025 and that will drive part of the growth. So in addition to Amazon, we're expecting more and more activity and ramp up in volume with other sizable accounts. Amazon themselves, we believe there are a lot of opportunities that we can enter and frankly even other geographies where today we are not active. So it's tough Beyond the current business that we with them.

We think there's actually despite the tough comp that you refer, think there's quite a bit of growth opportunity there. On the industrial side, our forecast has been a little bit muted. Frankly more just given the macro backdrop and given what we're seeing out there in the market have not ascribed huge growth on the industrial channel, frankly, globally. And then the last piece in automation, the size of our business, we expect that in 2025, we will deliver north of 50% five-zero growth and that's part of our growth algorithm. So these are sort of the pieces that are coming together that we feel will drive the numbers that we outlined. But Bill, do you want to add any color?

Sure. Yes, Ghansham. Just for the building blocks, if you think about the volume, the automation, contribution, etcetera, the way that we were trying to break it down was for PPS volume growth to be in that mid to high single digits so at the low end and the high end of the range.

Automation contributing, call it three to five points right, at the low to high end. And then we've got two to three points really of kind of what we would call price mix headwind with point of that being the Amazon warrants. So that's how you get to kind of that 5% to 11% Okay, that's perfect. And then going back to 4Q, did EBITDA margins come in where you thought they would, 17% core sales growth versus the 8%? On EBITDA growth. [indiscernible] Just give us a little bit more color on that.

Sure. I'll be yes, just to be blunt about where we are. The growth we were winning business and that we're going to ramp up We tried to do the best forecasting we could. We tried to basically have our team and our physical footprint ready for meaningful growth and growth ended up being a bit bigger than we expected And frankly, that meant we were not as efficient as we wanted to be. Our top priority was instead of focusing on efficiency, Ganthem, was focusing on a good customer experience as we're onboarding and ramp some pressure on gross margin, it meant frankly a little bit of added resources, etcetera, in our G and A. To make sure we're fulfilling customers' expectations and hopefully surpassing that. I expect now that we have a better handle of that growth And I feel we have a better handle of the expectation from where we are here going forward. You will start seeing more and more efficiency from us and that will be reflected in the is driving growth and making sure our customers are happy. And we believe over time, as we normalize, you will see more of that growth flow into both gross margin and EBITDA margin.

Okay, perfect. And then Bill, in terms of the EBITDA bridge for 2588 to '97 in terms of how that translates free cash flow. Can you just give us the parameters associated with that?

Sure. So from a free cash flow perspective, Omar mentioned and I mentioned in the prepared remarks that generating cash and using that to pay down debt is a top priority for Rampec. So there's a tremendous amount of focus on cash generation within the company. Going into 2025. If you want to do kind of a walk from EBITDA to free cash, right, if you start kind of in that midpoint of the range there, 93%, $94,000,000 We're expecting about $36,000,000 $37,000,000 of CapEx Cash interest we expect to be about $34,000,000 on a net basis if rates stay where they are. We expect to have roughly $4,000,000 or so, dollars 5,000,000 of cash taxes and then a slight benefit in working cap to get you to right around that $20,000,000 in free cash.

Okay. Perfect. And then just finally, just so I understand it, because for us in terms of the warrant expense, etcetera. So the $3,000,000 to $5,000,000 in warrant expense you're embedding for 2025 on EBITDA, that assumes an embedded sales contribution from Amazon. Is that correct? That's correct. So we'd have to allocate a portion of our expected sales to that warrant expense.

And so just thinking out to '26, the sales contribution?

It will vary based on the sales contribution. So hopefully gross.

Okay. [indiscernible] Our next question comes from Troy Jensen from Cantor Fitzgerald. Please go ahead. Your line is open.

Hey, gentlemen. Congrats on all the great news here recently.

Thanks, Troy. Good morning. Good morning. So a quick clarity here, automation, I think you guys said was $30,000,000 in the quarter and you excuse me, dollars 30,000,000 in the year and expect it to grow greater than 50% in 2025?

That's exactly right. So our expectation is somewhere, let's call it, 45 plus for 2025 in top line for automation. Perfect. And then is there just one or two automation products driving this growth? Or is it more broad based? Is this related to some of these new products you launched?

In early January? Yes, that's There's a lot of activity in automation. There's a number of what I'm going to call, let's smaller opportunities of few pieces of equipment here and there. There are a couple of sizable accounts that we have been working with for a number of years. In many cases Troy we've installed things in last year and the year before and we expect to ramp up and provide more automation solutions to some of their other facilities. So it's a mix of some large repeated customers as well as some of the smaller orders here and there. There are probably globally close to three or four very large enterprises that are driving part of that growth. Not all of it, but a meaningful part of it. And frankly, that's the nature of the business. If you're not winning with large accounts in automation, for e commerce and for warehouses and fulfillment, then I don't think you're a real player in this space. The space is a little bit chunky. So that's driving part of the growth. The good news is in the majority of these cases, Troy, these are actually existing customers with our solutions installed where we think we can ramp up.

These are not completely new customers with new orders and new relationships.

Got you. Perfect.

Maybe a couple of questions for Bill here. Was there a 10% customer in Q4 or all of 2024?

There was. So starting in Q3, it got close and then Q4, there was 10% customer and then for the full year. There was It was. Okay, perfect. And then just last question, can you help us out with revenue seasonality in Q1?

I mean, kind of coming off a strong Q4 and what does it kind of typically seasonally do in the March quarter? Sure. So typically there's a step down from Q4 to Q1.

Right? And that's been high single digits historically and sometimes low double digit depending on how strong the holiday season. But the way that the seasonality of the business typically works is Q1 is typically the lowest in terms of revenue contribution. And it slowly builds throughout the year. So it gets a little bit bigger in Q2. Then really the second half is where you start to see it ramp up.

Where Q3 is the is the next largest and then Q4 obviously with the e commerce holiday season. By far being the largest quarter for us. Typically for this year when we're looking at it, we're going to be moving more probably toward the 47%, 53 type first half, second half.

Maybe a little bit more if you have a bigger bigger holiday season.

Got it. All right. Well, thanks gentlemen and good luck this year. [indiscernible] We have no further questions. I would like to turn the call back over to Bill Drew for closing remarks.

Thanks, Julianne, and thank you all for joining us today. We look forward to speaking again soon for Q1.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

And we're now in private. Have a great day everyone. You're welcome.

Thanks, Julian.