PresentationMichael DossPresident, CEO & Director Thank you, Phil, and good morning, everybody. It's nice to be here. I appreciate the invitation to come to the industrial conference. And first we're first up on presenting this morning on the packaging side, which is great. We appreciate that and your interest in Graphic Packaging. I'm going to start by basically through the safe harbor statements, making the case for why Graphic. And that's really what I want to do over the next 20, 25 minutes in my prepar ...

Graphic Packaging Company (GPK) 2025 Conference September 03, 2025 08:50 AM ET Company ParticipantsMichael Doss - CEO, President & DirectorPhilip Ng - Managing DirectorConference Call ParticipantsNone - AnalystMichael DossThank you, Phil. Good morning, everybody. It's nice to be here. Appreciate the invitation to come to the Industrial Conference. We're first up on presenting this morning on the packaging side, which is great. We appreciate that and your interest in Graphic Packaging Holding Company. I'm go ...

Core Viewpoint - Graphic Packaging Holding Company is a leader in sustainable consumer packaging and is committed to reducing the environmental footprint of its products [2]. Group 1: Company Overview - Graphic Packaging Holding Company is headquartered in Atlanta, Georgia, and specializes in designing and producing consumer packaging primarily from renewable or recycled materials [2]. - The company operates a global network of design and manufacturing facilities that serve well-known brands in various sectors, including food, beverage, foodservice, household, and other consumer products [2]. Group 2: Upcoming Events - Michael P. Doss, President and CEO of Graphic Packaging, will present at the Jefferies Industrials Conference on September 3rd at 8:50 am ET [1]. - The presentation will be available live and can be accessed later via a webcast on the Graphic Packaging website [1].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number: 001-33988 Graphic Packaging Holding Company (Exact name of registrant as specified in its charter) ...

Financial Data and Key Metrics Changes - In Q2 2025, Graphic Packaging reported sales of $2.2 billion, adjusted EBITDA of $336 million, and an adjusted EBITDA margin of 15.3% [6][25][26] - Adjusted EPS for the quarter was $0.42, with overall volume up approximately 1% [25][26] - Packaging prices were approximately 1% lower, reflecting third-party price recognition from 2024 [25] Business Line Data and Key Metrics Changes - Volumes in The Americas were modestly better than expected, driven by increased beverage promotions and targeted promotional activity in food and foodservice [6][12] - Innovation sales growth reached $61 million in Q2, on track to meet the 2% of sales growth target for the year [13] - Food results remained uneven, with snacks under pressure while pasta, sauces, and prepared foods saw gains [15] Market Data and Key Metrics Changes - International results remained positive, but growth slowed modestly, indicating stretched consumer conditions [12] - Private label and store brands gained traction in select food categories, with trademarking activity accelerating [13] - Beverage season in 2025 started strong, with carbonated soft drinks showing good growth due to higher promotional activity [16][17] Company Strategy and Development Direction - The last major investment in the Vision 2025 program is nearing completion, with expectations to generate excess cash starting in 2026 [6][8] - The company is focusing on recycled paperboard, which has a lower environmental footprint and cost advantages over bleached paperboard [9][10] - Graphic Packaging aims to grow its presence in household products and health and beauty sectors, leveraging recycled paperboard [14] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers are stretched, impacting spending habits, with a focus on volume growth and market share protection expected in the coming quarters [5][11] - The company anticipates improved adjusted EBITDA margins in the second half of 2025 due to inventory management and reduced maintenance [30] - There is caution among CPG and QSR customers regarding near-term volume outlooks, reflecting broader economic uncertainties [30][56] Other Important Information - Capital expenditures for 2025 are estimated at $850 million, with a decline to 5% of sales in 2026 [8][31] - The company has repurchased 1.6% of its outstanding shares in Q2 at an average price of $22.26 per share [28] - The Waco investment is expected to provide significant economic and quality advantages, with an anticipated EBITDA contribution of $80 million in 2026 [52][63] Q&A Session Summary Question: Clarification on capital spending increase and its impact on free cash flow - Management explained that the increase in capital expenditures for 2025 will not change free cash flow expectations due to offsetting factors like reduced working capital and lower cash taxes [34][35] Question: Inquiry about higher permitting and labor costs for Waco - Management indicated that labor costs, particularly for electricians, have been higher than expected due to market conditions, and some project elements required rework, contributing to cost overruns [38][40] Question: Discussion on margin expectations for the second half of the year - Management provided confidence in achieving improved margins due to reduced planned maintenance and inventory management efforts [46][48] Question: Inquiry about competitive dynamics in the packaging market - Management noted that there is a need for price discipline in the current competitive environment, with ongoing changes in customer strategies to stimulate growth [103]

Financial Data and Key Metrics Changes - In Q2 2025, Graphic Packaging reported sales of $2.2 billion, adjusted EBITDA of $336 million, and an adjusted EBITDA margin of 15.3% [5][25] - Adjusted EPS for the quarter was $0.42, with overall volume up approximately 1% [25][30] - Packaging prices were approximately 1% lower, reflecting third-party price recognition from 2024 [25] Business Line Data and Key Metrics Changes - Volumes in The Americas were modestly better than expected, driven by increased beverage promotions and targeted promotional activity in food and foodservice [5][11] - Innovation sales growth reached $61 million in Q2, on track to meet the 2% of sales growth target for the full year [12][13] - Food results remained uneven, with snacks under pressure while pasta, sauces, and prepared foods saw gains [14] Market Data and Key Metrics Changes - International results remained positive but growth slowed, confirming that consumers in those markets are also stretched [11] - Private label and store brands continue to gain traction in select food categories, indicating a shift in consumer preferences [12] - Beverage season in 2025 started strong, with good growth in carbonated soft drinks and moderation in beer decline [15][18] Company Strategy and Development Direction - The last major investment in the Vision 2025 program is nearing completion, with expectations to generate cash substantially in excess of needs starting in 2026 [5][6] - The company is focused on sustainability, with recycled paperboard being a key area of growth due to its lower environmental footprint [7][9] - Graphic Packaging aims to grow its presence in household products and health and beauty sectors, leveraging recycled paperboard as a more appealing alternative [13] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers are stretched, impacting spending habits, with more money spent on groceries but fewer items purchased [10] - The company expects second-half adjusted EBITDA margins to improve significantly due to inventory management and less scheduled maintenance [30] - There is caution among CPG and QSR customers regarding near-term volume outlooks, reflecting broader economic uncertainties [30][56] Other Important Information - Capital expenditures for 2025 are estimated at $850 million, with a decline to 5% of sales in 2026 [6][31] - The company has repurchased 1.6% of its outstanding shares during Q2 at an average price of $22.26 per share [28] - The Waco investment is expected to provide significant economic and quality advantages, with anticipated EBITDA contributions of $80 million in 2026 [30][54] Q&A Session Summary Question: Impact of increased capital spending on free cash flow in 2026 - Management clarified that the increase in capital expenditures for 2025 will not change free cash flow expectations for that year, with 2026 cash flow updated to reflect current EBITDA expectations [35][36] Question: Drivers of higher permitting and labor costs for Waco - Management explained that higher labor costs, particularly for electricians, and evolving project requirements contributed to increased costs, but they remain optimistic about the project's returns [39][41] Question: Confidence in achieving second-half margin targets - Management outlined that reduced planned maintenance and inventory management would contribute to improved margins in the second half of the year [47][48] Question: Competitive dynamics in the packaging market - Management noted that the oversupply in the solid bleached market has created a competitive environment, but they have been able to outperform their customers [105]

Financial Performance - Net sales decreased by 1% year-over-year, from $2.237 billion to $2.204 billion[31] - Adjusted EBITDA decreased from $402 million to $336 million, a decrease of $66 million[31] - Adjusted EBITDA margin decreased by 270 basis points to 15.3%[31] - Adjusted EPS decreased by $0.18, from $0.60 to $0.42[31] - The company repurchased approximately 5.0 million shares at an average price of $22.26 per share, resulting in a 1.6% reduction in shares outstanding[34] Strategic Updates and Innovation - Waco, Texas recycled paperboard investment is on track for Q4 2025 startup[7] - Innovation Sales Growth reached $61 million in the quarter[7] - Volume increased by 1% year-over-year, while price decreased by 1% year-over-year[7] Guidance - Net Sales guidance revised to $8.4 billion to $8.6 billion[36] - Adjusted EBITDA guidance revised to $1.45 billion to $1.55 billion[36] - Capital Spending guidance revised to approximately $850 million[36]

Core Viewpoint - Graphic Packaging reported quarterly earnings of $0.42 per share, exceeding the Zacks Consensus Estimate of $0.40 per share, but down from $0.60 per share a year ago, indicating a +5.00% earnings surprise [1] - The company posted revenues of $2.2 billion for the quarter, surpassing the Zacks Consensus Estimate by 1.17%, but down from $2.24 billion year-over-year [2] Financial Performance - Over the last four quarters, Graphic Packaging has only surpassed consensus EPS estimates once [2] - The company has experienced a decline of approximately 14.8% in share price since the beginning of the year, contrasting with the S&P 500's gain of 8.6% [3] Future Outlook - The earnings outlook for Graphic Packaging is uncertain, with current consensus EPS estimates at $0.57 for the coming quarter and $1.97 for the current fiscal year, with revenues expected to be $2.15 billion and $8.5 billion respectively [7] - The Zacks Rank for Graphic Packaging is currently 5 (Strong Sell), indicating expectations of underperformance in the near future [6] Industry Context - The Containers - Paper and Packaging industry is currently ranked in the top 38% of over 250 Zacks industries, suggesting that companies in the top 50% tend to outperform those in the bottom 50% by more than 2 to 1 [8] - Another company in the same industry, Karat Packing, is expected to report quarterly earnings of $0.61 per share, reflecting a year-over-year increase of +24.5% [9]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Graphic Packaging reported a Q2 2025 net income decline to $104 million and adjusted EPS of $0.42, despite volume growth, with the Waco investment nearing completion to enhance future shareholder returns Q2 2025 vs Q2 2024 Performance Summary (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $104 million | $190 million | | Diluted EPS | $0.34 | $0.62 | | Adjusted Net Income | $128 million | $183 million | | Adjusted Diluted EPS | $0.42 | $0.60 | - CEO Michael Doss stated that promotional activities drove modestly **better-than-expected volumes**, and the company is working closely with customers who may increase their focus on volume growth and market share protection[3](index=3&type=chunk) - The company's Waco, Texas recycled paperboard investment is nearing completion, which is expected to **sharply decrease capital spending in 2026**. This will enable **substantial cash returns** to stockholders through dividends and share repurchases, with a long-term goal of achieving an investment-grade rating[4](index=4&type=chunk) - Key operational highlights for the quarter include: - Waco, Texas recycled paperboard investment is on track for a **Q4 2025 startup** - Packaging volumes **increased by 1%** - Innovation Sales Growth reached **$61 million** - The company repurchased **$111 million** of its shares, reducing outstanding shares by **1.6%**[8](index=8&type=chunk) [Operating Results](index=1&type=section&id=Operating%20Results) Q2 2025 Net Sales decreased 1% to $2,204 million due to divestiture, while Adjusted EBITDA fell 16.4% to $336 million, impacted by lower prices and cost inflation - Net Sales decreased by **$33 million (1%)** year-over-year, driven by a **$40 million** negative impact from a facility divestiture, partially offset by a **$20 million** favorable foreign exchange impact[5](index=5&type=chunk) Q2 Adjusted EBITDA Performance Drivers (YoY Change, in millions) | Driver | Impact (in millions) | | :--- | :--- | | Price | $(23) | | Labor & Benefits Inflation | $(26) | | Input Cost Inflation | $(10) | | Divestiture & Open Market Sales | $(5) | | Net Performance (Inventory Reduction) | $(13) | | Foreign Exchange | $11 | Q2 EBITDA and Margin Comparison (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | EBITDA | $323 million | $458 million | | Adjusted EBITDA | $336 million | $402 million | | Adjusted EBITDA Margin | 15.3% | 18.0% | [Financial Position and Capital Allocation](index=1&type=section&id=Financial%20Position%20and%20Capital%20Allocation) Total debt increased to $5,859 million by Q2 2025, raising the Net Leverage Ratio to 3.7x, while $177 million was returned to stockholders through dividends and share repurchases Debt and Leverage Profile (in millions) | Metric | Q2 2025 | Q4 2024 | | :--- | :--- | :--- | | Total Debt | $5,859 million | $5,209 million | | Net Debt | $5,739 million | $5,052 million | | Net Leverage Ratio | 3.7x | 3.0x | - Capital expenditures in Q2 2025 were **$228 million**, a decrease from **$249 million** in Q2 2024[8](index=8&type=chunk) - In the first six months of 2025, the company returned **~$177 million** to stockholders, including **$111 million** in share repurchases in Q2 (**5.0 million shares**) and **$66 million** in dividends paid across Q1 and Q2[8](index=8&type=chunk)[9](index=9&type=chunk) [2025 Annual Guidance and Commentary](index=2&type=section&id=2025%20Annual%20Guidance%20and%20Commentary) Full-year 2025 guidance was updated, projecting Net Sales between $8.4 billion and $8.6 billion, Adjusted EBITDA from $1.45 billion to $1.55 billion, and Adjusted EPS from $1.90 to $2.20, with increased capital spending for Waco not impacting free cash flow Full-Year 2025 Guidance (in billions, except EPS) | Metric | Guidance Range | | :--- | :--- | | Net Sales | $8.4 billion - $8.6 billion | | Adjusted EBITDA | $1.45 billion - $1.55 billion | | Adjusted EPS | $1.90 - $2.20 | - The guidance update reflects actual first-half performance and a modest increase in second-half revenue expectations, though market uncertainty remains high[10](index=10&type=chunk) - Full-year 2025 capital spending is now expected to be approximately **$850 million**, an increase due to higher final costs at the Waco facility, with the 2025 free cash flow forecast remaining **unchanged** due to offsetting factors[11](index=11&type=chunk) [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements reveal a year-over-year decline in Net Sales and Net Income, growth in total assets and liabilities, and lower net cash from operating activities for H1 2025 [Consolidated Statements of Operations](index=3&type=section&id=Consolidated%20Statements%20of%20Operations) For H1 2025, Net Sales decreased to $4,324 million from $4,496 million, with Net Income falling to $231 million, or $0.76 per diluted share Six Months Ended June 30, Performance (in millions, except EPS) | Metric (in millions, except EPS) | 2025 | 2024 | | :--- | :--- | :--- | | Net Sales | $4,324 | $4,496 | | Income from Operations | $414 | $602 | | Net Income | $231 | $355 | | Net Income Per Share – Diluted | $0.76 | $1.15 | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Total Assets increased to $11,795 million, and Total Liabilities grew to $8,576 million, driven by property, plant, equipment, and debt Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,968 | $2,784 | | Property, Plant and Equipment, Net | $5,598 | $5,258 | | Total Assets | $11,795 | $11,144 | | Total Current Liabilities | $2,072 | $1,903 | | Long-Term Debt | $5,392 | $5,145 | | Total Equity | $3,219 | $3,013 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 saw Net Cash Provided by Operating Activities at $93 million, Net Cash Used in Investing Activities at $505 million, and Net Cash Provided by Financing Activities at $362 million Cash Flow Summary - Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $93 | $164 | | Net Cash (Used in) Provided by Investing Activities | $(505) | $175 | | Net Cash Provided by (Used in) Financing Activities | $362 | $(368) | | Net Decrease in Cash and Cash Equivalents | $(37) | $(37) | [Reconciliation of Non-GAAP Financial Measures](index=6&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP to non-GAAP measures, showing Q2 2025 Adjusted EBITDA of $336 million, Adjusted Net Income of $128 million, and a Net Leverage Ratio of 3.7x Q2 2025 Reconciliation of Net Income to Adjusted EBITDA (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $104 | $190 | | Income Tax Expense | $35 | $74 | | Interest Expense, Net | $53 | $60 | | Depreciation and Amortization | $131 | $134 | | **EBITDA** | **$323** | **$458** | | Special Items, Net | $13 | $(56) | | **Adjusted EBITDA** | **$336** | **$402** | Q2 2025 Reconciliation of Net Income to Adjusted Net Income (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $104 | $190 | | Special Items, Net | $13 | $(56) | | Amortization of Purchased Intangibles | $15 | $15 | | Other Adjustments & Tax Impact | $(4) | $34 | | **Adjusted Net Income** | **$128** | **$183** | Net Leverage Ratio Calculation as of June 30, 2025 (in millions) | Metric | Amount | | :--- | :--- | | Net Debt | $5,739 | | LTM Adjusted EBITDA | $1,538 | | **Net Leverage Ratio** | **3.7x** |

Core Insights - Graphic Packaging Holding Company reported a net income of $104 million, or $0.34 per diluted share, for the second quarter of 2025, a decrease from $190 million, or $0.62 per diluted share, in the same quarter of 2024 [2][25] - Adjusted net income for Q2 2025 was $128 million, or $0.42 per diluted share, compared to $183 million, or $0.60 per diluted share in Q2 2024 [2][26] - The company experienced a 1% decrease in net sales, totaling $2,204 million in Q2 2025, down from $2,237 million in Q2 2024 [5][17] Financial Performance - EBITDA for Q2 2025 decreased by 29% to $323 million, with adjusted EBITDA at $336 million compared to $402 million in Q2 2024 [6][26] - The adjusted EBITDA margin was 15.3% in Q2 2025, down from 18.0% in Q2 2024 [6][26] - Total debt increased to $5,859 million in Q2 2025 from $5,209 million in Q4 2024, resulting in a net leverage ratio of 3.7x compared to 3.0x in Q4 2024 [7][27] Capital Expenditures and Shareholder Returns - Capital expenditures in Q2 2025 were $228 million, a decrease from $249 million in the same quarter last year [8] - The company returned approximately $177 million to shareholders in the first half of 2025 through dividends and share repurchases, including $111 million in share repurchases during Q2 [9][14] - Full-year 2025 capital spending is expected to be around $850 million, reflecting higher costs at the Waco, Texas facility [11] Guidance and Market Outlook - The company expects full-year 2025 net sales between $8.4 billion and $8.6 billion, adjusted EBITDA between $1.45 billion and $1.55 billion, and adjusted EPS between $1.90 and $2.20 [10] - Market uncertainty remains higher than normal, impacting volume and revenue expectations [10]