Pactiv(PTVE) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Highlights Pactiv Evergreen reported solid Q1 2024 operating performance, improving net income despite decreased revenues Q1 2024 Key Financial Metrics | Metric | Q1 2024 | vs. Q1 2023 | vs. Q4 2023 | | :--- | :--- | :--- | :--- | | Net Revenues | $1,252 million | Down 13% ($1,431 million) | Down 2% ($1,274 million) | | Net Income (Loss) | $10 million | Up from ($133 million) | Down from $22 million | | Adjusted EBITDA | $168 million | Down from $189 million | Down from $207 million | | Diluted EPS | $0.04 | Up from ($0.76) | Down from $0.12 | | Adjusted EPS | $0.14 | Up from $0.13 | Down from $0.33 | Management Commentary Management highlighted strategic focus on innovation, operational excellence, and financial flexibility - CEO Michael King stated the company is navigating a challenging environment by focusing on innovation, operational excellence, and customer service to drive volume growth[2] - CFO Jon Baksht announced an amendment to the company's credit agreement on May 1, 2024, increasing the revolving credit facility capacity from $250 million to $1,100 million and extending the maturity to May 1, 2029[2] Strategic Initiatives Update Updates on 'Footprint Optimization' and 'Beverage Merchandising Restructuring' plans, targeting cost savings and facility optimization - Footprint Optimization: A strategic initiative announced Feb 29, 2024, expected to incur $40-45 million in capex, $50-65 million in cash charges, and $20-40 million in non-cash charges. In Q1 2024, the company incurred $8 million in cash and $2 million in non-cash charges[3] - Beverage Merchandising Restructuring: A plan from March 6, 2023, involving the closure of the Canton, NC mill and Olmsted Falls, OH facility. Total expected charges are ~$160 million cash and ~$330 million non-cash. In Q1 2024, the company incurred $8 million in cash and $3 million in non-cash charges[4] Financial Performance Analysis This section analyzes Q1 2024 financial performance against prior periods, detailing key drivers of revenue and profitability First Quarter 2024 vs. First Quarter 2023 Results (YoY) Year-over-year, net revenues decreased, but net income improved significantly despite Adjusted EBITDA decline - Net revenues decreased mainly due to the Canton, NC mill closure, lower pricing from passing through material costs, and lower sales volume amid market softening[8] - Net income improved significantly due to a $106 million increase in gross profit (largely from accelerated depreciation in the prior year) and a $56 million decrease in restructuring charges[9] - Adjusted EBITDA decreased due to lower sales volume, lower pricing (net of material costs), and higher employee-related costs, which were partially offset by lower manufacturing and transportation costs[10] First Quarter 2024 vs. Fourth Quarter 2023 Results (QoQ) Quarter-over-quarter, net revenues decreased, impacting net income and Adjusted EBITDA due to higher costs - Net revenues decreased mostly due to lower sales volume from seasonal trends in the Foodservice segment[15] - Net income decreased due to a $32 million drop in gross profit, which was partially offset by a $21 million decrease in restructuring charges[16] - Adjusted EBITDA and Adjusted EPS decreased mainly due to higher manufacturing and material costs and lower sales volume[17] Segment Results This section details performance of Foodservice and Food and Beverage Merchandising segments, analyzing revenue and EBITDA changes Foodservice Segment Foodservice segment revenues decreased YoY and QoQ due to lower pricing and seasonal volume, impacting EBITDA Foodservice Performance (YoY) | Metric (in millions) | Q1 2024 | Q1 2023 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $597 | $614 | ($17) | (3)% | | Segment Adjusted EBITDA | $90 | $106 | ($16) | (15)% | Foodservice Performance (QoQ) | Metric (in millions) | Q1 2024 | Q4 2023 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $597 | $626 | ($29) | (5)% | | Segment Adjusted EBITDA | $90 | $112 | ($22) | (20)% | Food and Beverage Merchandising Segment Food and Beverage Merchandising segment revenues decreased YoY due to mill closure, impacting QoQ Adjusted EBITDA Food and Beverage Merchandising Performance (YoY) | Metric (in millions) | Q1 2024 | Q1 2023 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $660 | $850 | ($190) | (22)% | | Segment Adjusted EBITDA | $100 | $101 | ($1) | (1)% | Food and Beverage Merchandising Performance (QoQ) | Metric (in millions) | Q1 2024 | Q4 2023 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $660 | $653 | $7 | 1% | | Segment Adjusted EBITDA | $100 | $113 | ($13) | (12)% | Balance Sheet and Cash Flow Highlights The company strengthened its balance sheet by reducing debt, with negative Q1 2024 Free Cash Flow and a dividend - The company reduced its total outstanding debt by $551 million since December 31, 2022[23] - The Board declared a Q1 2024 dividend of $0.10 per share, payable on June 14, 2024[23] Q1 2024 Balance Sheet & Cash Flow Metrics | Metric (in millions) | As of March 31, 2024 | | :--- | :--- | | Total outstanding debt | $3,585 | | Net Debt | $3,514 | | Net cash flow used in operating activities | ($33) | | Free Cash Flow | ($74) | Outlook Pactiv Evergreen reiterated full-year 2024 guidance, confident in achieving targets through strategic initiatives - The company reiterates its full-year 2024 Adjusted EBITDA guidance range of $850 million to $870 million[25] - The company also reiterates its guidance for full-year 2024 Free Cash Flow[25] Financial Statements This section presents unaudited condensed consolidated financial statements, providing a GAAP-based view of performance - Presents the Condensed Consolidated Statements of Income (Loss) for Q1 2024, Q4 2023, and Q1 2023[40][41] - Presents the Condensed Consolidated Balance Sheets as of March 31, 2024, December 31, 2023, and March 31, 2023[42][43] - Presents the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and the preceding four quarters[44][45] Non-GAAP Reconciliations This section reconciles non-GAAP financial measures to GAAP counterparts, including Adjusted EBITDA and EPS - Provides definitions for non-GAAP financial measures used by the company, including Adjusted EBITDA, Adjusted EPS, Free Cash Flow, and Net Debt[31][32][33][34] - Includes a detailed table reconciling Net Income (Loss) to Adjusted EBITDA and Diluted EPS to Adjusted EPS, showing specific adjustments for items like restructuring charges, depreciation, and amortization[50] - Shows the reconciliation of reportable segment Adjusted EBITDA to the consolidated Adjusted EBITDA[48][49]