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PE

Pactiv Evergreen Inc. (PTVE)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 total net revenues were $1.274B, down 14% year over year and down 8% sequentially; Adjusted EBITDA was $207M (+24% YoY; -9% QoQ), and Adjusted EPS was $0.33 versus $0.17 in Q4 2022 and $0.32 in Q3 2023 .
  • Management highlighted “solid financial performance” that “exceeded guidance,” with Adjusted EBITDA margin at 16.2%, the second consecutive quarter above 16% and the second highest quarterly margin since IPO .
  • Announced a footprint optimization plan targeting ~$35M run-rate savings by 2026; 2024 guidance: Adjusted EBITDA $850–$870M and Q1 2024 $160–$170M; dividend maintained at $0.10 per share for Q4 2023 .
  • Strategically focused on “value over volume,” deleveraging (total debt reduced by $550M in 2023), and operational excellence via PEPS; CFO guided to ~high-3s net leverage by YE 2024 .

What Went Well and What Went Wrong

What Went Well

  • Adjusted profitability outperformed: Adjusted EBITDA rose to $207M (+24% YoY) and Adjusted EPS to $0.33 (vs $0.17 prior year); management: “Delivered solid financial performance and exceeded guidance” .
  • Margin resilience despite seasonal headwinds: “Adjusted EBITDA margin surpassed 16%…coming in at 16.2%…second highest quarterly adjusted EBITDA margin since our IPO” .
  • Balance sheet progress and strategic clarity: “Reduced…total debt by $550 million” in 2023 and initiated footprint optimization with $35M run-rate savings targeted by 2026; CEO: “This was a pivotal year…The Company made significant progress…exceed[ing] its financial goals” .

What Went Wrong

  • Top-line pressure from restructuring and pricing: Revenue fell 14% YoY primarily due to Canton mill closure, lower volumes, contractual pass-through of lower material costs, and unfavorable mix; Food & Beverage Merchandising volumes lagged amid “value over volume” execution .
  • GAAP earnings impacted by charges: $38M restructuring and related charges in Q4 2023 reduced GAAP EPS to $0.12 (vs $0.15 prior year/prior quarter) .
  • Sequential softness: Adjusted EBITDA down 9% QoQ to $207M and Free Cash Flow negative due to timing of CapEx and interest payments; management cited seasonal volume declines and higher manufacturing costs .

Financial Results

MetricQ4 2022Q3 2023Q4 2023
Revenues ($USD Millions)$1,476 $1,379 $1,274
GAAP Diluted EPS – Continuing Ops ($USD)$0.15 $0.15 $0.12
Adjusted EPS ($USD)$0.17 $0.32 $0.33
Adjusted EBITDA ($USD Millions)$167 $227 $207
Adjusted EBITDA Margin (%)——16.2%
Gross Profit ($USD Millions)$225 $281 $253
Net Income – Continuing Ops ($USD Millions)$27 $28 $22

Segment detail:

Segment MetricQ4 2022Q3 2023Q4 2023
Foodservice Net Revenues ($MM)$633 $675 $626
Foodservice Segment Adjusted EBITDA ($MM)$85 $117 $112
Foodservice Segment Adj. EBITDA Margin (%)13% 17% 18%
Food & Beverage Merchandising Net Revenues ($MM)$872 $712 $653
Food & Beverage Merchandising Segment Adjusted EBITDA ($MM)$109 $130 $113
Food & Beverage Merchandising Segment Adj. EBITDA Margin (%)13% 18% 17%

Quarterly KPIs:

KPIQ4 2022Q3 2023Q4 2023
Net Cash Provided by Operating Activities ($MM)$173 $238 $81
Capital Expenditures ($MM)$55 $62 $107
Free Cash Flow ($MM)—$176 $(26)
Total Outstanding Debt (End of Period, $MM)$4,105 $3,611 $3,586
Net Debt (End of Period, $MM)—$3,378 $3,422

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($MM)FY 2023$825–$835 (raised in Q3) Actual: $840 Beat vs guidance
Adjusted EBITDA ($MM)Q1 2024N/A$160–$170 New
Adjusted EBITDA ($MM)FY 2024N/A$850–$870 New
CapEx ($MM)FY 2024N/A~$300; includes $15–$20 for footprint optimization New
Footprint Optimization Restructuring – Cash ($MM)2024–2025N/A$50–$65 New
Footprint Optimization Restructuring – Non‑cash ($MM)2024–2025N/A$20–$40 New
Beverage Merchandising Restructuring – Non‑cash ($MM)Total Plan$325–$330 $325–$330 (reiterated) Maintained
Beverage Merchandising Restructuring – Cash ($MM)Total Plan$150–$160 $150–$160 (reiterated; majority incurred in 2023) Maintained
Dividend ($/share)Q3 2023 → Q4 2023$0.10 $0.10 Maintained
Net Leverage Ratio TargetFY 2023 → FY 2024Low‑4s by YE 2023 (achieved 4.1x) High‑3s by YE 2024 New target

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023, Q3 2023)Current Period (Q4 2023)Trend
Value over VolumeEmphasized as portfolio strategy during inflation; segment recast to Food & Beverage Merchandising Continued; Foodservice ahead on execution; F&B Merchandising in midst of shift Ongoing execution
Beverage Restructuring & Canton ClosureCanton ceased operations in Q2; charges guided; debt reduction underway Charges continued ($38M in Q4); volumes/mix impacts persisted; guidance reiterated Nearing completion
PEPS Operational ExcellenceNoted continuous improvement; early innings 15 facilities achieved bronze; first silver recognized; broader rollout in 2024–2025 Scaling up
Footprint OptimizationNot previously quantifiedAnnounced; ~$35M run‑rate savings by 2026; ~10% facilities impacted; benefits weighted to 2025 New cost lever
Consumer & PromotionsInflation pressuring volumes; cautious macro Consumers stretched; expect H2 promotion to help volumes; Jan weather impact ($5–$10M) Soft near‑term; improving later
Pine Bluff Mill – Strategic AlternativesExploring alternatives Review continues; outage planned; manage pricing/mechanisms Ongoing
Deleveraging & FCFDebt paydowns, strong FCF despite restructuring Total debt -$550M in 2023; target high‑3s leverage by YE 2024; 2024 FCF ≥$200M Improving balance sheet

Management Commentary

  • CEO: “This was a pivotal year…The Company’s commitment to operational excellence and profitable growth helped offset the headwinds…allowing the Company to exceed its financial goals” .
  • CFO: “Adjusted EBITDA margin surpassed 16%…coming in at 16.2%…our second highest quarterly adjusted EBITDA margin since our IPO” .
  • CEO on footprint plan: “We intend to rationalize a portion of our physical footprint…approx. $35 million in annual run rate cost savings by 2026” .
  • CFO on 2024: “We expect to deliver between $160 and $170 million for the first quarter and between $850 and $870 million for the full year” .
  • CEO on strategy: “We remain focused on…value over volume…operational excellence and improving our balance sheet” .

Q&A Highlights

  • 2024 EBITDA bridge: Gains broad‑based; cost improvement initiatives ramping through the year; low single‑digit volume growth expected for both segments; Canton contributed partially in 2023 comparisons .
  • Seasonality and H1 softness: Q1 impacted by inflation/COLA lag and severe weather ($5–$10M EBITDA impact); ramp in H2 driven by promotions and backlog onboarding .
  • Footprint savings durability: Fixed costs removed; benefits begin late 2024, with ~$10–$15M run‑rate by YE 2025 .
  • 2024 cash flow bridge: Cash interest ~$220M (down from ~$249M), cash taxes ~$100M (up from $69M), restructuring cash $20–$35M; FCF ≥$200M .
  • Segment cadence: Foodservice volumes roughly flat to slightly up despite softer traffic; Food & Beverage Merchandising down in H1, inflecting in H2 .

Estimates Context

S&P Global consensus estimates were requested but unavailable via the tool for PTVE due to a missing CIQ mapping (attempted pull failed). As a result, explicit EPS and revenue consensus comparisons are not provided for Q2–Q4 2023. We anchored comparisons to company guidance and actuals disclosed in filings and the call .
Note: Wall Street consensus via S&P Global was unavailable.

Key Takeaways for Investors

  • Quality of earnings improving: Adjusted EBITDA and margins remained strong despite revenue pressure, supported by lower material and transportation costs and operational initiatives; Adjusted EPS rose to $0.33 .
  • Structural cost program adds another lever: Footprint optimization (~$35M run‑rate by 2026) should support margin expansion and reduce fixed costs; benefits skew to late 2024/2025 .
  • Near-term setup: Q1 softer (inflation/COLA lag, weather) but management expects H2 inflection on promotions and secured business onboarding; monitor H2 volumes and price/mix .
  • Balance sheet progress continues: $550M debt reduction in 2023; cash interest expected to decline to ~$220M in 2024; target leverage high‑3s by YE 2024 .
  • Segment dynamics: Foodservice leads on “value over volume”; F&B Merchandising still transitioning; watch for stabilization in consumer staples and promotional tailwinds .
  • Non‑GAAP reconciliation matters: GAAP EPS and net income were impacted by restructuring; Adjusted metrics strip out Beverage Merchandising Restructuring and other items; understand adjustments when modeling .
  • Dividend maintained: $0.10 quarterly payout sustained into Q4 2023; assess capital allocation as FCF remains solid even with restructuring and higher CapEx in 2024 .