QUAD - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning ladies and gentlemen for standing by, and welcome to the Quad/Graphics Third Quarter 2017 Conference Call.

During today's call, all participants will be in a listen-only mode. [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 last night's earnings release. Alternatively, you can access the slide presentation on the Investors section of Quad/Graphics' Web site under the Events and Recent Presentations link in the left-hand navigation bar.

conference be the for presentation, today's call open will questions. Following event Please recorded. also Instructions] is note, [Operator today's being At this of time, call Relations. over I'd like to Kyle Quad/Graphics' turn Egan, Senior Manger Treasury Investor to and the conference please Kyle, ahead. go

Kyle Egan

results off Thank of of will and today presentation by Joel third outlined with in me strategic follow Safe on with Joel Chief to along call a slide more Chief news Officer; Financial Quadracci, would everyone. our forward-looking quarterly our I our webcast Honan, lead and are and President XXXX Officer. you, Dave detailed remind followed to and our and review statements today's Chairman, results, being provisions that Executive of in operator, highlights Company's morning Dave subject today's this Executive our transformation. With financial Slide call good is with Harbor our Vice financial discussion will as President like release everyone quarter X. Q&A. and ongoing are

results prepared Principles. with accordance are in Generally Accounting Accepted financial Our

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

site slide non-GAAP in will The A available included, the we call have section on future of presentation on Joel. to financial I will for these Web slide to measures. reference. today. presentation, GAAP Investors financial We remain Web replay measures call site reconciliations our the of will of the now be after conclude the Quad/Graphics hand shortly posted

Joel Quadracci

continued support new relationships. low-cost remain and results expectations the consistent Quad/Graphics' win to producer. will to and in quarter of I as we the aspects sustainably all our business help high-quality maintain morning in and that industry industry's report to path our to transformation generating we our Quad and great cash strengthen were On company's sustainable volume, status commitment pressures, good returns. profitable team by long-term free with economic ongoing XXXX core forward, and costs, Kyle, to inline you, ongoing impact flow disciplined existing pleased providing work X.X, minimize and reduce our our shareholder This how expand our everyone. reflect platform, our the Thank of third includes manage and fulfill our am

to continue flat and improving strengthen productivity enhancement on while the our cost remain EBITDA top focused ongoing To this EBITDA balance held and We reducing adjusted line industry expertise Despite to revenue. drive again XXXX. through on we improvements ongoing line staying pressures, our on remained sheet which sustainable we operational quarter margin, debt. demonstrated reductions, focused

our quarter result, and is ratio, a lowest point times, XXXX. last at than As lower since X.XX the at leverage debt

Quad accelerate their helps platform services, efficiently we to X.X content We build continue sales market our effectively. more and marketing creation and an brand-owners transformation of in integrated that services through fuel the continue marketplace. to the To products, transformation, momentum our

entered In number with publishers fact, and contracts of Quad/Graphics. have into a exclusive marketers

of for video mix, role production. with additional drive extended its and online. million Bluestem purchasing, $XXX Bluestem's for Orchard critical is retailer portfolio production over under to of and in and brands. traffic printing, For photography in distribution Brands effectiveness and brands XX expanded beginning its in Bluestem new and XXXX, the XX recently understands us plays catalogue of mail of several multi-channel us all Brands, relationship example, extends print services and particularly worth over including also contract. awards The uses marketing The contract its Gettington term paper the Brands digital its our the the Fingerhut

relationships, we of six become and of provider. our GQ, services a strategic such Nast's XX platform publishes print Conde us the Conde value begin additional validate all and titles partner. and with as to across and awarded titles underscore strength Nast magazine contract our which products and Vogue, other January iconic Appetite, as recently this and us, These contracts ability Nast, exclusive deliver renewed Recently awarded With Conde Bon Vanity XXXX. titles is example that Another Fair.

Our ability consistent. client to remained create value has

The deliver clients own do optimization and client best, by to with our free client what brand helping they focus and first are enthusiasts. way time save we operate simplify they workflow within value discovery how our Through their is on to process organizations connecting money. programs,

helping channels. deliver offline services, advertising more sell we their by across way value online data-driven The by marketing of and own second effectiveness marketing using client products, client improving and is spend

For provided channels. to retailer sales media including and social overall The engaged XXX placement, our web, mobile, ideation to and retailer through planning in-store, us sharing, integrated and creative acquire customers. new media coupons, increase print, Through with services. media, we all example, planning campaign paid came over specialty stores us We recently our engagement placement platform contests, a and marketing [ph] consumer such help the orchestrated it as and across campaign management, social and consumer-facing tactics quizzes, design. initially and

insights multi-channel We and campaign. attribution actual through also the delivered

campaign of the With help, achieved associated the number and converting complexities to able retailer engagement compared of increased to on retailer's X% the those transactions The multiple also result, our participants a retailer same the use to a the also nearly prior of agencies relationships. managing year's consumer was the As sales customers. increase all XX% eliminate with events. in of

it points, of for holiday all at offline. and up-and-coming to and In aim we additional fact, across named And we print including campaigns record, online touch the has engage retailer seamlessly implement too. point, Quad/Graphics have an some to to campaign, continues the both develop for in agency which will us promotion the retailer and

revenue across quarter's product services shared an in on XXXX, multiple our drive in are as solutions, and $XXX downstream business last print marketing will new fortifying incremental Our and lines call. million estimated we

Quad/Graphics everything they very in ongoing turn call inside to our of of of and am recognize Dave, also play and employees role centric transformation. company. Before I'm proud other for keep competitive. Quad's doing our and commitment important the over outside client our employees our employees' I help I and to to values, to each want I really proud thank by the live are both

September do Dave. their out apart. as homes money live their to the asking of proud abroad to employees how our And to in Following homes. in than City, global we am to call response we damage earthquake major Co-workers individuals now, more we raising turn to I'd repair and model. campaign can raise lines. I launched and help, rebuild the immediately employee our can reported over Together their began fund like XX Mexico we a continue to the

Dave Honan

cash our $XX first million The from years. an an morning property finally, objectives a Included million to Thanks, ended and insurance and year-to-date in X%, were multi-employer with by program, plan. X.X%, to Yes, pleased Net margin year-to-date and from that flow from The XX.X%. in guidance, increased down and pension offset was XX, from primarily down were X% September this to X.X%. our exchange and of the positively price execute and XXXX, million claim vacation XXXX, of million from Organic in benefit XXXX. nine volume working XXXX a and volume an the by months year-over-year the The million of from XXXX, in of accrual less report to We're impacts our $XXX in declines snapshot compares EBTDA our annual sales a of compared third September to reductions compared nine company nine financial XXXX, pension expected, our contributions from the to and delivery sales, September to recognized flow the was benefit XX.X% at to full-year XXXX we driven employee-related financial were X.X% one-time XXXX $XXX $X and the productivity to costs for which XX, working that exclude XXXX, for improvement three points $XXX quarter of pressures $XXX million would margin XX.X% reflected gains XX, cash for as range narrowed impacts, due declined restructuring, sale settlement ended million, reduced XXXX. $XX related represents sales $X XXXX, sales $XX foreign ongoing months sales lower quarter in payments EBITDA of down pricing results from third employee-related XX Slide XX, million were paper net improvements. three during by Adjusted reduction in decrease in guidance a industry declines benefits flat decrease Net and were by these as was of today's $XXX year-over-year, benefits the free our lower $X our $X to capital quarter EBITDA million X.X%. net and organic in pass-through the for million, X.X% generated XXXX, Pass-through basis $XX the of a and This liabilities and strategic billion, $X $XX declines within sales controllable are in million ended four liabilities a first X.X%. quarter XXXX. ongoing provides non-recurring $XX in remained exited billion, and adjusted and to driven September between original our the months with a of This impacted partially a everyone. as million. range good for free paper primarily sales of Adjusted results million which exchange net second impact decline cash XXXX. primarily XXXX, was X.X% on from million X.X%. XXXX EBITDA ended a adjusted and gain our our months and were to declined reduction guidance. sustainable organic Joel, million or compared lower were for X% while expectations million reductions capital for call. increase continue delivered for the cost months $XXX $X controllable were decreased inline XXXX, quarter foreign for

free However, anticipated cash payments their narrow reflected of and million offset were lower tax annual primarily will in in are by XXXX, multi-employer the but $XXX interest our lower flow not million. in to cash $XXX guidance pension flow be impact increased free payments and income guidance,

margins of million, $XXX is approximately we million of conversion represents at the quarter XXXX reminder, the of midpoint our This the expected summary believe our to of Full-year cash represents that On net of a narrowed year in free flow which midpoint over guidance expected Free of adjusted cash narrowed guidance midpoint rate. XXXX initial are the cash industry-leading flow flow expected which cash to to cash majority of in the free financial $XXX for is our be guidance the free We business. in our five, Full-year given of $X.X sales of range be to flow original XXXX due to seasonality an from generate any amount free dollar EBITDA conversion we've of $XXX in range. the the higher included $X.XX to adjusted range slide within our to flow fourth EBITDA range. cash adjusted have our XXXX in a narrowed As adjusted be is EBITDA earned, of dollar generated than every our flow million our range. EBITDA. to initial free every guidance. of of million, XXXX is guidance. we case $XXX billion, the

As guidance tax offset plans of structure primarily income of be payments. lower for September we pension includes interest by our lower comments, capital other debt a expect remains as pension XXXX. multi-employer contribution mentioned my unchanged. in six Slide to previously XX, All higher and summary

Since finished sheet reduction. quarter We remain debt XX debt a reduced the X.XX public XXXX, we've the of in December our of the to our our level on which nearly by billion debt. approximately continue is And third balance times debt focused to reduction debt strengthening And for resulted our ratio Quad with at million, through we a $XXX $X.X of total improved further leverage company. the debt. under as of in quarter end just quarter. This lowest debt

our focus operating believe to We and times debt two-and-a-half reduction long-term and policy is within over as two range the our appropriate primary target. leverage uses the cash, pension continue on that of of consistent the

range this investment a compelling As timing reminder, the opportunities. may outside operate of we depending on strategic

we $XXX have blended $XXX million which shareholders. XXXX. Our debt commitment September and value of we at to our Available an January dividends, which XX% our a is seven was structure of XX% fixed, floating, XX, no our way capital in is and with liquidity interest key return advantageous revolver rate until million under significant X.X%. our to maturities shows Slide

of XXXX worth share repurchased the part of December paid third program yielding million in we next share of our XXXX. at back quarterly repurchase $XXX annual November on cash dividend of of quarterly be guidance. shareholders average per $X.XX only of but our payable price authorized $X as to during quarter will free per is at the million of midpoint Our of record share Quad flow existing as dividend a $X.XX X, We've approximately our shares an of dividend, $XX.XX XX, XXXX represents consistently of per X%, our Also, over XX% share XXXX. and

availability share program. remaining of under We the have $XX repurchase million

represents and prudent and reduce trading outlook our in of in returns. shareholder leverage. carefully during increase cash the we company, cash are to continue dip balanced the third of with repurchase the use given repurchases share are attractive of down a value, We shareholder use the to share debt price and quarter opportunity to stated We and our increasing stock's pay to believe opportunistic the an future committed our long-term confidence

and seasonally further who'll focused XXXX turn on of balance continue the year the by cash on questions. busiest year, pressures to and priorities. to I'd free back to our we're Equally we'll We transformation while and quarterly enhancements our other finishing line continue an through continuing focus call and EBITDA Quad to work industry's producer now, through low-cost ongoing financial business sheet dividend We'll reinforce your are debt driving strong return in And guidance. flow to our strong generation. shareholders on our to healthy delivering the the midst of important, as top of taking time to offsetting the accelerate our on already impacts facilitate in reduction high-quality among Quad strengthening our like invest operator capital X.X the the and

Operator

[Operator Ladies question. ahead And session. Macquarie. Instructions] James question from our and Clement gentlemen, with we'll go begin first your question-and-answer comes from the Please today

James Clement

Yes, hear gentlemen. good me? you morning, Can

Joel Quadracci

Yes, you? How Good James. we are morning, hear.

James Clement

disrupted. even seem about struggling, line Joel, both? Retailers last of X.X, this you performance guys function customers a for maybe little to publishing industry a Okay, better the be doing quite looking great. over top quarter, than bit bit this the of couple Hi. well. intersection at line Quad/Graphics business is or Is trend you're or back kinds a being and years. is or being concerns of But overstated, those perhaps of winning the because Quad via of little

Joel Quadracci

at this experienced that. you're our There's you'll fast is Well, light your earlier I think our talked X.X lot really say, that help people because, right wasn't to publishing ago. in at see started continue lots are continue I've towards that the I've going to where switch it's something are offset strategy and people we'll have years new really happened for disruption just look, are disruption in yesterday, People but disruption that take to We've been of models But about closing this. they at or working. a in continued retail; on. going X.X how watch while. time we about that clients I assumption of migrating reinvesting a But a stores, some the on And talked several a stores, And in things hold. surprised time can reacting is again, closely apparent as we most. look happened than to you what's as happen,

conversations And revenue that XXXX, $XXX and have incremental yes, with for the had just early X.X clients million in in we're referenced existing innings. the we so

other fact, we direct And to short, mails. created I momentum, direct to also October story in mail. mail, digital these plan we've just not long we've personalized about our opportunities. that mean, starting product of press but up lot talked about second X.X So a started for large in continue or in has having talking format it's lines whether but I created, decline, just packaging that create are direct conversations we're

it's from feel strategy the what areas. would. So a lot it's is hoped think working out But and it I coming good about we way that the of playing that we is

James Clement

And then, great. question. next Okay,

The all packaging, market the the although of You here function kind just this the is a quarters point? stayed of of that last couple acquisition of price it keeping of acquisition in at for out thing. years, there of couple deal of Is that last evaluation of market? couple out anything market packaging

Joel Quadracci

are of it, mean out executed of I on we say are haven't No, out it just not is we we to anything.

and always to got make it's sense. attention. are But paying a looking We lot we're of always

the do with to X.X, between had You story there how know because that in to that. of really we Right of a lot we based. lot the We sort opportunities. do is know go balancing of We X.X pay sort is consolidating talent or acquisitions. philosophical things those now to the attention scaling buy conversations do bid the do a you in it of you

James Clement

Right.

Joel Quadracci

I there be is so, careful of to lot about agency disruption a in got world. And the

displaced business, to is to packaging rather do are those you on in to And so we roles. X.X packaging, is leaving no model about are legacy And spending And we've better where a that that conversations unique. time fill you we're $XXX someone a way. think starting when that do created we because packaging else's of a which they million but take model fail that problem close buy lot the finding see or talent you finding is talent the having is

of that the by record packaging agency of were that yet. brands scripted big -- that part the of the call, I conversations And and don't with retailer so, we're them way along very are we lines in print for in the having referenced some what with more

So switched QUAD you'll lines we -- product talking because we going that Chapters opportunities I sector so to got in sheet in. we're enhancement on it's if seeing those again from of every X.X, the are about And X.X, balance all that's play that here. X.X a out have. recall, really And an to we've great

have we're us the dry is but strategy not to. trying powder lot to, created because allowing working a We of because

here so lot is to were happening things. of what's paying a And attention we

of terms we've But about right And We in are out comes build very capital. our of uses of all figure in what trying we'll amounts be buy way versus to no areas. huge created matter the that. optionality disciplined

James Clement

you and time, for thank Okay, very your much job, good job. good

Joel Quadracci

you, Operator, next All right, thank Jamie. question?

Operator

Our comes with Dan Jacome from question. Company. next Sidoti ahead Please your question from & go

Dan Jacome

Good morning. How is everybody?

Joel Quadracci

are you? How Good.

Dave Honan

Dan. morning, Good

Dan Jacome

Thank well. you. Doing

couple my contract to please. bidding on out the on years? competitive, going curious prior know one there? with contract this what like any am -- for the by about think more X was on talked just you X going competitive some Just here; that I can the you're flesh is was typically just if can then within questions elaborate I about these chance And What different one process you question. assuming how I was if details not it, or that Bluestem are contract. any doing sorts you of little probably color you which And positive, first to That was for but a looks of first renewal, a us to be it, versus bit you

Dave Honan

created imaging a video industry contract them. which lot But the them. taken all, every We from has early lot of is Fingerhut and been too And of many We many is you work. first Well, has do has on. with the conversation the we process big over of years. of the X.X know do relationship Bluestem is bid this a old sort lot for of been aspect over photography been a in We of buying paper had competitive.

acquired standpoint. And so, at the a than was think this I look them when you that volume is they competitor importance of bigger from a

biggest brand catalogers there. out is of the one Orchard So

the I have. think is real that are what so, we note part And bigger than thing is to the here winning big we

that. focused over the well on worth services but And have some $XXX as And the also print legacy the other doing to opportunity it's creates expand still payer for term so contract. been that over to QUAD have million we of is combined of We earn as the Bluestem. heavily the buying

time We it bid proven with we partner. parent we're great have to that I think But again, company on competitively. the that have over

we on color win that's are But, so, a And it. give with it's profitable the win. I think for great can yes, mean it. a and I most it's I probably And pleased us

but from up the are best effort on spent so of, the -- that not to to right have platforms investing standpoint competitive, profitable. we and capacity yes, much we going going with tie is So we're yes, time platforms, not on everything and sizing stuff isn't valuable

very do we value than heavy greater add lower to a discipline maintain making And prices. the pressure sure the is so, that

lot share And so, we wins market days. I pretty balance of good a hit a think we've in having these are

Dan Jacome

had. Okay, it out for in I placement not be are Twitter, a prepared just And you will that Is customer asking they magazine but that to marketing that elaborate Nast feel like trying in a people Instagram? that printed you And figure okay, bit Any this, Condé something me on remark a more add little good. or is word buzz a can like seem silly if a a put more for what is media helps. like to the in there very going help are like savvy? then,

Joel Quadracci

Yes.

[ph]. are acquisition placement a came the traditional They of an I good as So split and a planning have which Staben originally Vertis, her who planning couple doing some up and placement. that, and whole media Stephanie in runs insert. part friend team of of of I media them in my retail [ph] visited just areas; Saratova actually is

marketer decide use the geography you retail inserts, to bang what very which newspapers, a analytics do to buck. lot tell get So those where they for when trying you the most in is a efficiently put should of to be they

let's just It's the inserts. go oh, in not places. let's just it's place And actually place as well, simple right as them these so,

through so, record. print through not this executing ended that, relationship we up but And as entered agency

also XX+ in their turned I flat revenue because program, last several which on -- was think number of for to two of our increase And goals. past now, agencies went to And to transactions. down declining a flat had years. they same they from the that one sales of we sales X%

So it's power the had -- to to that the me about done change disrupt X.X had ourselves how the I make time we've so sales that is company. force if functions. if several and have I product And feels we offering. had in to different to work, to when change one their we it of how are executing even one the like line as executives run company, each of that so really function, integration

time discussions. previous bigger these sort have while X.X guys This of Vertis I this without which X.X-ish, still print has was resulted sale of completely sold have couldn't understand And doing that call an we we to do And so, didn't we to any been the have the wonderful To of example that all as any something acquisition X.X the in rest these for to us me entered areas the we and with entry any giving to to be in using the point are whole. you examples can the point is as one what customer, to the while of conversation I of those for print. a have is have natural total allows QUAD of even very am different entry sort day, a well. print

many printing of but it's to be doing very know record actually just but great goal, what so dealing has high the quality the as they a yet. printer an for retail -- who And stores quality marketer a that's only with not disruption agency

share again happen I to And about in is of plan we our so, the do. of anything it's lot your I through. X.X just print it reason shed execution marketing And all comes enhancement a way tool tools from we of is have example when think that to

doing so efficiently of can all for channels and across have And they conversation do an opportunity who more their that's whatever about product with QUAD. than we more today selling markets it anybody

of where us. the line has people And so that's kind blurred really how we're changed of really which refer to sort

Dan Jacome

questions. And there just that. quo to a maybe I can from some yet, more then time. tax is -- -- we different when rate about there XXXX and is co-mailing with just level any XXXX Maybe been different there versus know commentary you've a doing then tax are would Okay, any in modeling, high all? you your quite that any there line that think appreciate at you you about would what I GAAP little Is a help out. two update the rate for Maybe Is started had -- running be not for just year? expectations have but be to your reason you. that. talk -- status Thank

Joel Quadracci

of I'll tax. start Dave with the role exciting role of co-mailing and can take the on

plants. gives discount it's economically And office. post out QUAD a a office. QUAD, It's when most again discounts at to the -- comes to out co-mailing very over of as look driven because office our of post So the comes potential post that the lot the is volume bypass of you X% volume clients given

the industry become that. at printing so good And has

to out that. cent will wring on every We continue last

got the to really him just of get process the to future It's easy even week to house post to the week got and all office I all post will as of and urge of increases. speaker floor, going some it's for coming up everyone. mailing and they bipartisan the on where just community the for challenge Washington though the think kind for go, the for I be been to around the fix four It's the noise point awhile. the does we win try is support which is It's just get of because unions before bill last this post timeframe through everyone office. of office the has out against him support. the making support to here rate that can't now calls got are a spoke where we I or

from obviously is Wisconsin. he so And

and here lot are of We the post have that office throughout impacted employees a the country. by

impact And can to so year what the of place But in to cost. offset and only through that post ability we efficiency doing the office, our terms try we that's continued every increase a are the that. we

Dan Jacome

Okay.

Joel Quadracci

that, over it with to some I'll thoughts? so And turn exciting Dave for tax

Dave Honan

That's Thanks, effective XX%. change between real and Joel. outlook for long the term in XX No something rate. the

any that Now that's happen pre on legislation could reform. tax obviously

Dan Jacome

printer and just that, that from to leader of Appreciate Okay, is Joel, okay, people only office. were a you on entity just enough. assumption? on commercial are fair you about not I the safe -- follow-up that saying speaking am post a assuming actually that what the kind is

Joel Quadracci

I you of industry lots No, associations. think a have

competitors, we try got where as can do You've one and voice. we speak but

And in all competitors -- deal perfect this. with is an so, but future segments the general solution agreement client in that big there the and agreement a not room that's the on we'll be different industry time, fact with that's the like

Dan Jacome

a it meant I absolutely. Yes, way. positive in

have make back the support would more other behind people… sense You your it in people the industry, with that

Joel Quadracci

It's a in a Donnelley mailer. I mailer. is LSC big RR everyone's best interest. is big mean

office of there. There general. big a mailer. a is are Survival of people means lot a out to post in other lot We the commerce

how to of it's users the even print printing it's just conduct industry, rural but the and industry. they very commerce. the It's communities just So, important not not

So a of lot voices there on this. is

Dan Jacome

a Okay, great. lot. Thanks

Joel Quadracci

Operator? questions, other Any

Operator

time, this showing additional at Sir, no I am questions.

Joel Quadracci

all February. Thank rest will be yearend week. of Okay. With for the back we at time the and to in you Enjoy you. the you we thank that, your

Operator

now has conference We the attending you today's gentlemen, concluded. and for thank Ladies presentation.

lines. now disconnect may your You

Quad/Graphics (QUAD) 1 Nov 172017 Q3 Earnings call transcript