Quad/Graphics (QUAD) 31 Jul 242024 Q2 Earnings call transcript

Good morning, and welcome to Quad's Second Quarter 2024 Conference Call. [Operator Instructions] A slide presentation accompanies today's webcast, and participants are invited to follow along, advancing the slides themselves. To access the webcast, follow the instructions posted in the earnings release. Alternatively, you can access the slide presentation on the Investors section of Quad's website under the Events and Presentations link. [Operator Instructions] Please note this event is being recorded. I will now turn the conference over to Katie Krebsbach, Quad's Investor Relations Manager. ahead. go please Katie,

lead to and of Quad's everyone. this Executive safe Chairman, Quad's XXXX by slide follow Joel Tony operator, update, a are Tony would financial financial second and provisions and statements like call that is Officer; principles. accordance me quarter in Q&A. I everyone Joel Staniak, forward-looking will release being are will Officer. generally followed Financial results in results, Quadracci, President are presentation outlined a Chief accepted call good remind subject harbor as you, news with X. Quad's With our business accounting and summary morning, with webcast, today and today's to prepared with Quad's Thank on and quarterly year-to-date Chief Slide today's in and

financial this cash share, including measures, adjusted contains EBITDA, net per ratio. flow, also debt leverage However, EBITDA earnings free adjusted debt presentation diluted non-GAAP margin, adjusted and

in We of the GAAP these have measures. to measures slide financial included financial non-GAAP reconciliations presentation

of replay over Investors shortly a quad.com of concludes the our the Joel. be available call section to will call after now call the today. I hand on will Finally,

good Thank morning, Katie, and you, everyone.

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prioritize aspects and while strength and shareholder to review. We and creation. With greatest expansion over I with turn long-term growth opportunities stability of business our Tony that, the would the all product verticals call lines in value financial for the like for will to to continue managing

decline the morning, diverse sales net half of a of to our first declined paper, in print XXXX, to quarter were a sales solutions good XX% decline mix. XXXX XX, due were of Slide Thanks, lower XX% we On show to the periods Joel, half sales everyone. compared Net XXXX, second both in sales. of quarter revenue $X.X billion, agency and $XXX the compared and the million first XXXX. second in Net and

a of ongoing rates of ongoing clients headwinds, also grocery as financial AARP. impact On increases printing the basis, wins, by were a segment sales well volumes. due year of external segment to the volumes such as the interest impacted our price of previous Our loss including services print higher net to and portion our and negatively large These by increased unit share rate magazines as postal significant wins on client. catalogs increased year-to-date our a mix gravure X% share printing compared mix lower offset versus as recent

of XXXX, the half restructuring $XX increase during in second first to the announced X.X% XX from million XXXX $X.XX $XX both points X.X% per share second lower in the EBITDA million a the increased was $X.XX margin first per completed in periods of of $XX $XXX the first American buybacks. of total the decreased was In of we sales increase in diluted repurchased net in savings volume earnings quarter $X.XX half and margin and United results. we we adjusted approximately XXXX to of year-to-date compared The from as from XXXX. second was cash earnings mix, by as as total million XXXX, stock basis on million impact XXXX negative primarily from provides in addition, to cost our EBITDA XXXX, EBITDA basis XX XXXX exported our X.X%. first will sales labor to of outstanding in quarter reduction as X% to share financial stock. Free XXXX including half of part The initiatives negative XXXX. of improved in due cost EBITDA the business diluted a leading $XX initiatives provider beneficial and snapshot million second print quarter Technologies, from first In book services environment. the quarter XXXX. higher adjusted compared flow half compared net minority investment savings actions, plant of count second gain basis, States. Slide compared $X primarily was previously XXXX. Adjusted headquartered a In Latin the of primarily that in by to common in our of was million to the Year-to-date realized million to in manufacturing closures of the XXXX in solutions XXX periods X.X% expect the compared and million was to due educational a adjusted end-to-end On inventories, the Manipal of share $XXX due benefits was cash from Adjusted $X.XX and productivity, XXXX, in lower India. $XX points generate XXXX to XX% adjusted half both to XXXX. XXXX, earnings enabled and increased Since improved in adjusted half margin non-recurring the supply benefits chain of quarter in reducing a second of have sale an first of we flow reduction our in quarter

the in reminder, its generates a flow of quarter the the cash majority company of the fourth As free historically year.

previously will free have to Slide shown generate we on shared, strong XX. cash we continue as in asset to from As proceeds sales, addition flow

X-year generate $XXX million that to cash expect or over $XXX to generation, the period with And from by this XXXX, debt same over flow expect asset sales. X-year cash XXXX free proceeds of and we net period. during XX% we reduce During to from million

investment certain Asset million of facilities. well Manipal of of our sales plant closed total the portions as during include from our and proceeds divestitures April, Technologies equipment business and we second received as sold quarter. $XX property, minority In sales noncore of in

points XX% We debt At owned the we make due our for second XXXX, progress to from X ratio of previously million of million, XX, leverage of was increased business X.XXx. debt to proceeds. Slide from sale flow seasonality also our the XXXX the the cash in at Removing of capital facilities December X.X%. $XX in debt million rate further derivatives, by Including increased end quarter Manipal and floating as which basis of end the million first reduced Net with $XX $XXX negative of sale closure, XX includes compared XXXX, quarter continue generate the blended past on our $XX primarily XX% the interest rate from net to seasonality, debt to XX of million $XXX by half summary announced the of free debt over minority impact of the debt our Technologies. partially we offset will structure. of of investment fixed months. net a and at interest a the second of was XX year-end proceeds XXXX, have

to of business, reduction of on our leverage well available the times significant operate maturity on and hand, in our $XXX to to debt long-term November we Slide commitment show and year seasonality was X.XXx. range our our leverage at of X.XXx flow certain debt free XXXX. We targeted of the cash Due million, XX. total including our the above will debt liquidity, cash debt is nearest as as Our seasonality

on the approximately to we shown reaffirm of anticipate debt year the build end peak and targeted pattern, leads long-term and late guidance Our due advertising to on low quarter XXXX, year, leverage to in to year in higher from prior time a full third as fourth promotions. results of XX. of similar track this and related further In our and our X.Xx quarter. quarter occurs collections then to early holiday leverage reduce continue Slide end timing fourth the clients believe This debt to we the the in seasonal ranges the we seasonal are of production at that range. We near inventory

guidance decline We prior sales rate compared the elevated year a range is guidance X% ongoing year. expect full to annual X% to rates. in to interest XXXX, of of net sales For due including decline postal headwinds, end macroeconomic year higher now increases full to be the our our net near and

company million, our range. expected that and specific of these midpoint $XXX $XXX adjusted for is the at closely million clients. Full headwinds with between behalf EBITDA $XXX million to year be We of to will monitor our XXXX continue on and

last benefit higher production restructuring first peak. our increased EBITDA of due the with in completed actions half seasonal expect compared shared we to second of half XXXX the year XXXX of sales first the we the quarter, in to full half of the sequentially As adjusted combined during the

Quad, end XXXX. Slide marketing momentum profitability key to We is X.Xx approximately continued clients. as Quad as With $XX XXXX of range be leverage cash our significant partially is of focused most capital $XX be be large net expect proceeds flow offerings, We on both Connect our a free payments and will long-term expenditures, on capital existing reaffirm higher our expected to and cash company. flow higher restructuring our the and debt be to the XX the continue as million. new flow clients. build cash in growing investment remain $XX Free $XX by the investment from clients impacted the a we to addressable of to revenue be $XX that range. with highlights range million, million half revenue through continue with to and of Commerce use experience and expanded we at as earlier, sales our of we cash reduced sales of our compelling such ratio as The diversification well at opportunity year, in with base offset believe midpoint the first by will reduction, that In-Store million expenditures discussed debt there includes of XD primary driving asset free in by of to and million

priorities. next September on dividend will debt reducing of and in generation capital scaling returning our investing continue to shareholders through $X.XX payable capital These cash Xth. allocation strong quarterly further to include our our addition, In offerings, our fuel

We opportunistic turn of to also like terms I'd expect our continue operator repurchases. With questions. our for future the to call in share be to to back that,

Kevin comes Barrington [Operator question with first Instructions] Steinke from Our Research Associates.

about continues or wanted Maybe the larger what then the you I like that those by offering. pipeline nicely. start in and move looks just out the even pipeline? media for can asking just currently pipeline speak how opportunity have RMN networks It your through build the to to quickly opportunities retail to beyond

Yes.

the I also think very been developing at that Quad, this industry. has story a year, in not that's this just been quickly but

always a are get so is year media there because And time, kind about Cannes area. And ] growing what retail this feel really year. about. were networks last talking place this [ it for people good we a of But were big accelerated when to it's they a talking

is where to you this significant the they're retailers they're the Amazon, dollars industry when with a capitalize ad lot CPGs, retail look of a trying like network digital to So in whole because that, can't on media at trying. and compete selling

to midsized And larger here especially to most, your you're out. And and a brick-and-mortar to intent store, so even purchase you into is go people to the when is ones, trying if stay. figure the are where it that's

people stronger it's think I thought be. it would than

the opportunity sold putting really specifically where screens space. right being there's an to so of able up digital very populate here you the content the And and CPGs you're in people serve to front that

they where started is this those Mart, seen getting is we've with with going what very testing. so we on they intent And were see early going, and conversations Save on,

call saw these the we're you the because network around next when stores if to Save out of result? is to you and of more live get stores. And What now What week, one. where stores, Mart we if it's why few that's rolling this you you get started up up that's every proof in to, But XXX, see happens going, people audience think Super going it? XXX, what on away. talking it? pudding, want announcement about with one where a actually right And is like XX this, metrics where to the in new than then think live I a that's quite could do the actually it, XXX Bowl. things about this retail like call like the And media are the conference just are our So right the

And so that's meaningful.

on kind to build And probably as see start those some go. is think own so wait will us anxious test in others the the their I and they try data on building race kind of for and of are opportunity, very and we can and it eyeballs get retailers to to see so quickly,

I'd quick. launched depending the and that convert, said, on of I there long the only now, So out right we And them it say ago. to to kind customers' like out we're rolling not go pretty time willingness be can

offering. a bring the screens we're And say also big So deal. thing in, them. very put a yes, one pay for it trying another we this for to to is It's easy them full because it's make to to digital

be incurring CapEx been once upfront serve But the screen that we've inventory, and got content. up make them to you the space you've to have able So that decision. to help the

could now brands lot for it to be and created so the whatever live to major routed And we're adds want some buy. up people Quad doing specifically a are stores to by that of serve actually

And to something It's just painless to the to just look but wraparound that the putting It's it so digital screens they key and the services that's the creating putting whole digital also for this. in. on not not retailer like fit. the do designed wall, slapping make about content It's are to about screens this.

platform. we've to so a hardware that was of been provide we sort last And the really assembling DART that while. acquisition The needed for thing

about building very it, And believe And excited pretty we're so We a the quickly. can is lot in you this. tell. as pipeline

well as sounds deploying That have sounds RMN offering you feel there, to digital like as And the you ability about and marketplace just screens. of unique a Okay. create pretty a like great. talked you nature said seeing this the you it content in you you're competition feel where if in emerging positioned the fair this competitively I'm given and you're opportunity, of wondering, like do And the landscape? amount

create the ours full there it's line little in can bit decide coast-to-coast CPG, to you if it, a about stores -- to that, of up. can we and what they there's doing do is think I things, enough of actually order, matter a but that full more want And lot sort Yes, service, think serve set are the there that competition screens stuff. it unique out in they of definitely of where can

very guys, The Amazon, do big it obviously, will offering. like dynamic So in themselves. a it's

got You've other up like themselves. big try for Walmart, do people acquisition made it most do But aren't set who and They'll to retailers really it. this.

fact its think brick-and-mortar this I already certainly, a live network there'll mean, just for gives us opportunity out growing we're I in retail be first-mover rolling of and full-service this huge So more the But here that the an the aggressive, competitors. media think, I is to fledgling is competitors. stage. relative rapidly, space

Kevin, to that. I'd add

think we're our this. than for better I competition capitalized

With the the reduction, of this opportunity. to dry debt got done take we've work on that we've powder advantage

Swiftly that Okay. about understand mentioned to the with you of Innovation just can acquisition to And In-Store out and terms also DART That's great. partnership a what you the trying there Connect the better offering? talk partnership little build offering. to Then in brings help bit the you

Yes.

us another networks stores in out sell retail as for channel and a doing inventory, brings the Swiftly So to really different format general. sales they're there that media already to

lot ads. that to buy of big days, have meaningfully. us in sell is the we tell CPGs, got to you to the to opportunity want a you've going Once I early not those to they're the inventory fill got up, to to screens necessarily think go fast inventory. So to want because And you

want And people placing in that so there selling we're to we because the learn are learning also inventory. a get do it out to people there lot of happens curve wherever can as

of help of they on care the So they're then help channel, inventory. the transactions -- but the end sales manage another back sort also

So great it's a a great but company. us, also for sales another channel partnership to

gears And Great. That's just helpful. here. switching

talking on sales rates, I a environment. further rate about that that? the direction addressing Household terms more of rates, terms overall discussions in and your some have headwinds with seen future used operating any clients Fusion how becoming easing just of of landscape in recently of any relevant know launched postal parties encountering you're little you there you're update in about you to maybe the government You're postal or an the the

Yes. budget of that post second remind cycle. a last annual year, had the significant half office wasn't our reset in because everybody, the with a volume built saw clients To into July pretty significant increase we surprised their last

so saw big that's pullback. where And a we

this about at far is ago because good. the week think surprised I'd about the you and their you people the people see XX%. this talked year. I And that happening Remember, so it cost this say, through the was were a postal of time so previous year, my get into about first July, to happened spring to first using to for the this increase that carrying also rate half print manage weren't in if So hope calls, just is the they largest have that's My budget. was household. that didn't concern after able of forward sort a of about

a for about continued which on very typically that It sales why been and very Congress our guidance on. what's performance a seen launched we are also the and come I'll would because that's doing have uncertainty. review people significant office certainly Postal haven't now upset to the are is same have but efforts. reason that. we Rate won't further post low We've some all flowing economic the total Commission restructuring things, mean horrible. there to end your going they've another still major doesn't the that's consumer. And I structure of pullback, concerned We -- mean is because second the with of fix by and is the sort has comments. of at the of ebbing submitted we supposed question, But half. to are back sorts of answer because be seen

constituents volume But and horse left parcel kind to the whole counting be from unfortunately, of already on hearing on of their they're future. bunch that. their So barn they're a the has have

handled Wall aggressive for get the by typically to rural the Journal areas Street yesterday is in about Amazon delivery read starting more office. you If post that

I to self-defeating, to efforts because to to are and the moderate all do get So think service it's and their we'll increases continue continue try on that.

touch of part the obviously, that last certain me seeing will our there, we is I Let rates you were then when the just crazy, interest number CPG use year but recover. world hopefully, financial look mean, of in went print, And on a sectors business, the segment. said we're it the half, slow at units recovery it economic even of us impacted first negative. of a And on

to much by So been people talk to have only CPG inflation. of did units. were of number And inflation, switching flat of because from America now hit to the world need have about has recently nice

And of that and that share that's will so gains and see publications we've catalogs. had you sales. I combine the say segment that top in you kind where on line all, some headwind

coming But with happened So shares. actually shares nice volume quite with some was that of those a segment segment change in. there's mix

and in printing. So we have Gravure came that of is offset gravure printing efficient types segment of space. more X a printing, some and run that typically longer for share

well. which the because line profitable, while would top impact So is lower, per the price efficiency unit more typically sales as

could maybe it end towards seasonal recent terms seeing of your that typical you maybe Are as in trends still as a some maybe And you product implies the the helpful calls, you will seen benefit of key the wins? from be your you've the second have even pretty categories, Okay. well? on seasonal business some key or ramp-up just half with range, your sales if that sales year-to-date? the ramp sales. that, of And run speak through to That's expectation -- maybe guidance related you -- quarter and of could and what the just commentary. some healthy to in Or then the in past lower

store increase, that again rate postal. of actually -- that but Yes, you low catalogs, but that's is mix categories does the because the in share those then double-digit board the mean, up also because rate volume-wise, sales-wise that some of we economic imply use second the volume-wise, hit, down the at postal packaging I in were the but the in. That down it across when impact And of change. the correct. of in high publication a single look not of like ramp thing, segment of comes with stuff you postal it if down get some to the kind annualization and were up, decline different of still then half because the negative saw

And should so, the of of the the because talked up in I lot nice guess, but is I'd characterize year. the time you I in of half, ramp in see things a about, second half which the the just general, down first a was busier stuff

results closer year the first. to half the of the of have second comparables Yes. year the prior our in We'll than

Our revenue not will decline be as much.

I Understood. turn for it over Yes. Okay. now. will back

question. next Operator,

Barton And Rosenblatt. the next with comes question Crockett from

picking thank you to for here. Welcome coverage May. to up in team wanted We officially the

you be Okay. covering Happy to guys.

the is things one circling guess curious just I guidance. I of So about your was back to getting --

follow could range might So that with presume that cash not decline, you're of cost revenue anything the if your the and the end saying revenues of those One worse free it's at at the end maybe the worst not seeing it but be cutting. flow. for you're but end, the high could about EBITDA

So guidance what can free say cash and flow you EBITDA about the ranges?

Yes, Barton. question, I appreciate the

I a margins the focus that of you of respective while to and you've which lower reduction with feel cash on is, theme more end the lot labor on the discussed will at So improvements that major productivity and not free our pressures, us, those a cost with caught revenue did and profitable a keep ranges. business we guide smaller, for need flow higher look EBITDA manufacturing Joel such as think when our to

things adjusted in margin we've knack productivity cost think in got reduction like improvement to for doing a XXX EBITDA of one the and that the into is was point of improvement shots. sort a basis as proud of onetime way we're I sustainable opposed

why feel we're that's so about we And at. where good

Okay.

sales. Now was progress also about curious the I asset on

can some for talking you process that kind Effingham, -- the on us So up what are there? think, where that specifically in time X I line facilities properties what might I you And update mentioned be about? X you're the think wrapping do think four. sales you the of know you around the those and X in guys facilities, you have Saratoga, Illinois. are larger I Those like

Yes.

range Springs, also in will the California; all to properties sales our sell have us that X Sacramento, -- above achieve York. wouldn't we that debt to of on to Illinois; some this lot of into guess to in in leverage leverage of right, in achieve of Effingham, Saratoga Those always process. So go to the and are are But X.Xx, X buildings approximately need debt properties sale, add come New we one together. going hard for when believe we I ratio. located certain one It's that can XXXX, any for A one to largest timing, X.Xx feel have through. pretty these come I'll things these Barton.

does, if So it as benefit. a something serves

Okay. point? activity a market, of of I the But there real interest properties some is interest and think the I questions given about describe you what just that would that, around kind could this at rates. broader -- estate benefit. How understand -- level be the but obviously these the

It the at can differ seeing this geographies on point. based what we're respective is

and we interest. less interest not some others, in So -- have in

Okay. But you that that months these is it do sometime there all four it the one have doesn't you possible of still Or XXXX? next resolution a sold, get of in several pull back? by them is maybe for confidence

would to No, these sell expect properties. we eventually

point? seeing even in you right in What know competitive your right. play just are facing printing out? the or or in you terms All the staying to pressures -- describe potentially competitive pull that pressures. competitors in are of back? at are Okay. this terms What environment do you expect environment, would now with there's competitiveness And How of some you price game facing I guys the

gains pretty Well, that we segment referenced some share significant. were

itself I'd clients they to have I if of your it's in also another do, the our it. has speaks clients somewhere the offset and offsetting the to significant, and depending insignificant. part But that's you offices post our that it's with very have -- on be out of And of the not in what scale, cost-saving client, it. think helped to don't XX%, volume of I continue these hard XX% on to way help it's biggest comes harder harder us kind marketing Mail, our for to rates Fusion postal to for the as and next mail the do say side, get which close and to go XX% is where mean, able between recent plants, is the the increases level which cost. to

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disconnect. may You now