Mike King: Yeah. I think if you look at Foodservice specifically, there’s a lot of things that look promising. So, we are mixed specifically looking at both year-over-year and sequentially. You know, we’re starting to see that things are moderating. From a normal seasonality, things feel like we’re getting back to pre-2019 seasonality. If you look into Q4 as we kind of noted previously. And so you know, when do we get to that inflection point? I think it comes down to when does the consumer start to start to change their behaviors just a little more. And high menu pricing, we’re watching that close, I think looking at that foot traffic metric that we continue to use to measure our Foodservice assessing gains and losses, but all those things, I think, are starting to moderate.
You know, there’s a quarter. Is it two quarters away? It would be guessing to say, but, I can tell you Q3 feels better. Q4 seasonality will tell us a lot more. I’m assuming that Greg’s merch, I think that we’re largely seeing, that the fresh trend, people get their calories, both in the center and perimeter of the stores is very real. That trend, I hate to call it a buy down because all calories are expensive right now, but it is people are spending less discretionary. So baked goods and some of the more, less healthy alternatives aren’t as priority people are focused on. Consumers are more focused on obviously, the core proteins and basics. And that would lead us to believe that until we start to see more discretionary spending hit the big dial and some of the more discretionary food items but we’re not there yet on food and beverage merch either.
So I think we’re probably, we’re waiting to see, but things are looking positive for us.
Anthony Pettinari: Oh, okay. That that’s super helpful. I’ll turn it over.
Operator: Standby for our next question. The next question comes from Adam Samuelson of Goldman Sachs. Adam, go ahead with your question.
Adam Samuelson: Thank you. Good morning, everyone. So maybe continuing on the line of questioning on the value over volume. Wondering if there’s any distinction or color you could provide by product category that where maybe that is you’re seeing a particular emphasis or you’re emphasizing kind of a portion of the portfolio in a grant to a greater extent than others. And conversely, is there any distinction or anything notable that to lean there by substrate. Are you seeing kind of a shift more of your volumes in some of the higher more sustainable solutions, or vice versa or conversely the opposite that has margin implications.
Mike King: Yeah. I would say it’s there’s not any one segment customer probably take that value over volumes, prevalent in versus others for us. It’s really more of an overall view that we’re taking, as it relates to, working with our partners, our customer partners to drive volume growth and making sure that, you know, where we, where we can kind of extract the kind of value we see and that we provide as a, not just a packaging producer, but as a supply chain partner. You know, that’s where we’re, that’s where we’re seeing it. It’s not just a product or a category base. We are seeing, you know, to your question, when you think about our sustainable offerings, we are seeing that as our customers continue to evolve their strategies.
We are winning in those spaces. I would say it’s a driver of value for us, and it’s focused for us. So I don’t want to under value that comment. So there is an ability to take advantage of better margins and a better product growth profile there and we’re doing that. But separate from our volume, our value over volume strategy.
Adam Samuelson: Okay. No. That’s helpful. And then maybe one for Jon, just as we think about cash flow and de-leveraging into 2024. Can we think about working capital next year continuing to be an incremental source of cash? Or do you think the working capital levels are now kind of where they then the terms where they will settle out your cash flow will more closely track kind of the EBITDA trends.
Jon Baksht: Yes. So, it’s a great question. So, we and — thanks for asking that. From a free cash flow standpoint going into next year, while we’re not providing guidance per se, clearly by targeting to get into the threes on that leverage by next year, would certainly imply that we’re going to be generating some free cash flow into next year which we intend to do. As you look at the components that drove a lot of that free cash flow this year, if you look at just on an LTM basis, our inventory reduction was $241 million or $183 million this year-to-date. Certainly, we don’t we don’t anticipate that, repeating into next year. There were some inventory dynamics as we built up that incremental inventory last year. To help really drive service levels, during that environment.
We’ve gotten more efficient with that inventory this year as evidenced by that inventory — our ability to really work down our inventory, working more closely with our customers. Frankly, I think we’re even moving into next quarter, I think we’re getting to the point where we’re getting to probably more normalized, inventory levels and our ability to uphold that level of fringe incremental free cash flow, is not going to be the driver going into next year or even into next quarter. What I would say is that the EBITDA trajectory, we’re on the margin trajectory, that we’re on margin growth that we’ve shown, I think those are going to be really some of the key drivers going into next year and really extract lighting some cash from the business.
Adam Samuelson: Appreciate that, that color. I’ll pass it on.
Jon Baksht: Thank you.
Operator: Thanks. I’m showing no further questions at this time. I would now like to turn the call back over to Mike King for closing remarks.
Mike King: As we close today, Pactiv Evergreen is a strong differentiated and socially responsible business. We are an industry leader in Foodservice and Food and Beverage Merchandising, and we are confident that our markets are largely recession resilient. We are focused on generating sustainable returns and our experienced leadership team has demonstrated our willingness to transform the portfolio to put us in the best in class position to deliver in our commitments. We offer a broad array of products and substrates, and we have longstanding strategic partnerships with our customer base. Many of which are blue chip companies. We are constantly working to innovate and develop the highest quality sustainable products. We set a goal of having 100% of our net revenues in 2030 come from products made for recyclable or renewable materials.
We continue to deliver strong adjusted EBITDA and free cash flow generation which we are carefully managing to drive de-leveraging and further growth through disciplined capital allocation process. We look forward to updating you again next quarter. Thank you for your time.
Operator: This concludes today’s presentation. You may now disconnect.
