QUAD - Earnings call transcript Q1 2018

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

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Quad/Graphics' First Quarter 2018 Conference Call.

During today's call, all participants will be in listen-only mode. [Operator Instructions] A slide presentation accompanies today's webcast and participants are invited to follow along, advancing the slides themselves. follow posted webcast, earnings last the release. access the in instructions night's To access on Presentations slide of you the Alternatively, can presentation left-hand bar. under Events the Quad/Graphics' the the & in Recent link navigation website section Investors

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

Kyle Egan

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

accounting are accordance results prepared Our financial with principles. generally in accepted

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

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

Joel Quadracci

robust we much and to our strong X.X, good transformation. to of leverage results a I at continue advance as our greater engaged create In X.X print significant and further am quarter generate necessary for value-creating value clients report have and To marketing more Quad focus our larger X.X state-of-the-art with line backed workforce fuel a to you, Kyle. and XXXX integrated technology morning, our Quad accelerating we of our on foundation Quad flow time cash disruption. the everyone. earnings expectations the part Thank to our that strategy. transformation, platform And by were in we to first pleased market strong our

print low-cost we ability Our “build, expand whose goal, bridged our delivery through strategic channels. the highly in place with businesses. In capitalizes advancing closely continuum, offers, marketing now expertise and resources the Together, appropriate or high-quality, the one accomplish clients’ in specializes partner, media, customer scale amplify functions, our our expertise a XXXX. as with the in digital our is multi-channel this approach in traditional Quad and complementary and multi-channel have to take partnered analytics marketing spend When integrated is March a interest. campaigns build professionals own Key the is since significant accelerate seeking the consistent fill consumers client-side Rise messages with print in in whom to and such disciplined Rise’s specific This controlling within. experience. in from producer a always, marketing online Quad’s way. expertise by channels we create data-driven company scale in core company offering. increased [Audio to In July we to we’ve with and we’re to helps us our and capabilities transformation. with remain to experience a hire at from position equity Gap] Interactive of execution. year, investment success optimizing our expertise Ivie Rise our of digital on offline SoHo Blue already with across relevant To we to capability companies across a X.X acquire” strategically partner quickly scale more a channels to gap this, and

Our SoHo, Associates, leading customized the with in integrated services, Ivie on-site offering marketplace. subject digital, that leader outsourcing, combined process provider. Together, with leader expertise media of platform marketing Quad, services unmatched marketing Rise provides & increased clients and and a business and integrated a Rise marketing production create stronger, matter our is our SoHo a complements team Ivie we marketing and is unmatched more Quad expanded Blue our recent The in investment for content Ivie acquisition execution process and in creative. Blue powerful skill optimization. is believe and a together in in workflow

value building and planning As independent our client media that existing strategy companies, agency stacking single online deploying to now we the to over an creative together planning media channels. understanding marketing print integrated well-integrated as Whether and not and in the media provide of expertise developing X.X, to we channels radio. Quad media level media across or and the a do capability build billion We and acquire from offline expertise roles generate centered traditional buying execution TV externally solutions entity. $X.X content same internally, we the a not our of partnership, integration has digital from concepting investment and only and increase in result various but traditional insights, on strategy data would includes is has channels. behalf fulfill well buying and across grown of efficiently our expanded In from our clients

transition solutions, clients multiple effectiveness. with our continue we a increased helping complexities vendor efficiencies process deliver provider marketing-spend a and As by value the improving of their who marketing also while working will reduce makes to agencies, products to from full scale we of

to continue will need. We client on our offering scale based

in industry stack way be headwinds generate will ensure services Quad we when time our We platform functional revenue of X.X to expand strategic to all businesses and our integrated continue. at a our across in marketing together products additional the

its the vertical. signed multi-year, morning newly direct a this hundreds example, multi-million in financial significant services with agreement a manages the dollar mid-size now acquisition per program The the Bank, US relevant to Quad inspire banks. of we For for all significant, announced XX individual US and is more than volume regional Under letter card to increase program highly engagement year, elements small for each win action. and credit data mail hyper-personalized recipient pieces with million Bank

best-in-class help and Our increase Bank effectiveness its the production reducing direct its campaigns while marketing costs. solutions also US marketing distribution of

the protection sends My in importantly, this achievement certification. in care This been certification go HITRUST Certified announce Another earlier this requirements status that healthcare in Quad HITRUST clients deeply is are were status earned CSF to of the CSF us to thanks and all and focus that week by Quad we and demonstrates earned differentiator the key a HealthVision But place. and all our employees key out in strong vertical. industry-defined about appropriate all in Quad process important possible. regulations Solution area we vertical. data healthcare for certification security has information for we an that places security made elite healthcare. data the proud have high-compliance our for requirements We managing have X.X for the risk appropriately and This who more met that message environment of having group worldwide a this organizations

will on ongoing strategic we emphasize the confident to cash how Before consistent hand With accelerate will Quad flow, X.X, the EBITDA X.X. drive providing our returns Quad I remain the and now and strengthen generate focused to hand sheet, to want we balance I over long-term that, free are further I strong enhancement, our sustainable demonstrate continue call to to over commitment shareholder in Dave. priorities call to to continue Dave,

Dave Honan

Joel. morning, everyone. Thanks, And good

were on for our line our financial guidance. with XXXX Our and first quarter we XXXX results remain delivering in track expectations,

also the to in financial of results provides both marketing XXXX acquisition XXXX to quarter majority results in the assumptions $XXX sales down declines guidance XX% reduction $XXX also downward and activities Organic to exchange, X% X.X% X%. XXXX is includes organic at on previous XXXX. completed snapshot which This X.X% of on ongoing after industry million million, XXXX. on declined due to Ivie X.X% XX. of the Adjusted annual acquisition and in February from organic digital million the XX.X% to pass-through sales first increased was and to The are pricing sales from acquisition. impact Interactive. Slide X% acquisition which offsetting compared our of agency & included as X% XX.X% decreased purposes, organic XX. declined comparative quarter our line The volume to sales Associates. quarter our For investment a increased exclude March margin And sales Organic $XXX marketing provided strategic first offset stake contributions from in by impacts paper positive Rise $X XXXX the included from acquisitions. decline, million first cost the this Net we guidance, sales quarter print completed our price includes are pressures compared sales continued XXXX. X% by as end a declined in and adjusted firm foreign the volume partially We EBITDA services to investments from the financial call. were earnings in financial of to results X.X%. EBITDA X.X% decline compared to our in X their including of our pressures date that It sales, from with excluding print due

excluded As default without adjusted to requires income be adjusted US began a due GAAP income and non-GAAP pension from pension EBITDA. XXXX, by to a EBITDA in reminder, operating that beginning in reporting we income change

excludes both As income of XXXX. XXXX EBITDA a pension result, and QX adjusted million in $X

$XX offset a insurance adjusted benefit change press our vacation with realized EBITDA XXXX from which a a Our fire, associated policy. was $XX a in from XXXX million partially recoveries gain in net includes by million also

second be decline more working capital due to realities on in We matching as EBITDA XXXX adjusted performance our XXXX structure to cost our we the pleased continued from primarily weighted margin provided fourth towards benefits expected from pressures our cash capital the was revenue will still $XX million the during working differences an our timing The Free in reflects in industry, as XXXX, flow was the and expectations. $XX invest in is team’s cash face between decrease and focus realized line the free it result, year. allowing EBITDA our with of quarter quarter. generated in cash are the the be back the as in and compared in in to as will proactively year negative primarily with quarter, X.X and company strongest the print while flow the to We seasonality, Quad transformation. of due half it to of in a XXXX half the our million volumes

of of conversion over our to full of of flow $XXX flow expect dollar XXXX as acquisitions to Slide to and our the which first cash $X million structure of that Rise Debt free a at includes year for cash We $X.XX billion XX. million of every EBITDA million Interactive free summary net paid midpoint $XX guidance of Ivie March increased X $XXX adjusted quarter between cash capital we million, our a cash due at for end earn range debt the the the quarter. represents $XX during ranges. to

in during $X from help grants million equity shares equity to of offset granted partially $XX benefit quarter repurchase quarter from tax also shares part as annual our made We to the also offset employees. in intend of dilution back continue and shares for investing into grants. to first to contribution offset to in more the dilution million special reform We a of portion retirement we the repurchased our

of March our of well We finished program. within of share share authorized of target to times X.X our $XXX million and with times, repurchases the under leverage available X.XX consistent $XX quarter debt leverage. repurchase million XX, As range X XXXX, long-term remain

Our XX% rate fixed advantageous floating, X structure an interest debt X.X%. is blended X% capital with and of

shareholders. of maturities with our of which and of ways liquidity January our our one return March our to XXXX to which value in $XXX of significant until dividend, million under no $XXX revolver XX million debt have shows we’ve our the is as commitment We available -

dividend of will of quarterly as May record per of range. only XXXX next free of cash midpoint represents consistently of be is a $X.XX shareholders the X%, per at flow on dividend and payable to $X.XX of quarterly paid guidance share dividend of XXXX. June Our our annual share Xth yield our but our We XX% XXst approximately of

that marketing running pleased We much results of process ground multi-channel our the delivering create track financial remains effectiveness. clients and in our our While are integrated expectations and year and for shareholders with line offerings guidance. complexity, front increases our acquisitions Ivie the value and we we integrating an that through Rise the to reduces about on of our services that still marketing improves remain were opportunities quarter and into first on our hit us, spend in marketing platform XXXX are our excited efficiencies for more

Now turn the Anita? questions. back your I taking our would like call facilitate who’ll to to operator,

Operator

We Our comes Instructions] will now first begin question-and-answer question [Operator Research. Klima] the with from session. [Jamie ahead. Please go Buckingham today

Unidentified Analyst

gentlemen. buy the the Rise, and Ivie over could on the with you marketing are whole X look Joe, Hey, you where with or sense of investment us build a think mix post acquisition Good terms morning, partner you Hey. services of in was versus I years, you X out bigger kind give as the next side? versus wondering, in

Joel Quadracci

the there. brought loop it it. into the closed I the conference before. scale Ivie $XX as and couple talent of demand million all want to to that's they of in mean think year that major deal, another call day already where in were interesting, I need doing have we a in we Yeah. this Rise build alone, the mentioned continue going we because investments last soon it to really because we're of was is we as to participating X where And RFPs, we we're What's

because with. the really very they're what it's integration. we've They they're a built our as world done simplicity into want want resonating the us is complicated so this And They they dealing customers that with telling want.

and because media behalf the But So script. customers over on $X.X all is it is reaction today the there is we're the that spend, buying doing of And our I is mentioned customers' will for Ivie. great. the with demand the think I reflected which but in stuff can numbers, Quad billion and not well we it's worth channels efficiently -- as the TV in radio everybody. us different really is not media acquisition buy so And we of is large not aspect important growth new that forward our today go of to

go And are so we the it's Rise impressed and fact I'm so that the about the together things Again, Ivie at with the can I integrated. talent all and in -- kind similar of not really at look cultures doing we're keep this life because so both that -- there with a that able how be many some is announcements about does to can brain in of the right who have we’ll that not cell more we been now of future. killed conversations lot near It's we do long what. faster, active customers

quite So yeah, tech shakeout lot I bit to going home There in is marketing a happens. mean lot it really ad shakeout of a depends marketing on There the right the world in be tech. of is a changing is now. and

products enhanced top, stake, is we've people people really and the of with through marketing so now conversation it's sort going the it's I all coming tangible these stake. mentioned of understand we in that important of so because as And about have the right store, different all think I part need at combined services stake, the got products, any print, things in X.X, we're at we clients the bottom produce that with packaging any those that for, the all

how the we could stake quickly. goes all works someone that in services retail it conversation So have leads mail the and together conversation. of to inserts. it's on leads cards to up selling suddenly well of happening an It depending kind can direct could business down be and result stake, that And kind effective or a and we

continue remake very with a X pace. very I'd X itself it to And years, pleased to Quad fast in see So you'll it. say, at

Unidentified Analyst

Yeah.

a still side? print of be consolidating on type acquisitions open So the to would you

Joel Quadracci

up. follow Dave start and can Let I

Dave Honan

it very it's always Brown, stack, to -- to whether a disciplined. And question. add think And the disciplined Color, our Yeah. get from fair the total was very We’ve been mindset, a have lot. Vertis. World with we’ve looked an And a about asked to it Joe solution. history It's question just services at consolidating known important I we a of acquirer. as as you've Jamie, solution kind to acquisitions execution talked have as a the it's as is marketing assets

the feel deals our where is, just with of And sheet. these of strategic fit? that it? we because really we it balance of properly. And way to the doing can criteria sense? look And for so And of it another so model we economic business, is it comes we’ve walked have valuations. through down away business successfully integrate One, different didn’t take make acquisitions: we to than of kind way the four we doing does by economic it final Two, Three, integrate from sense company’s can care

And sure balance it we’ve after the of strength was the strong is place so than before. into just that had the we sheet a to chance synergies want put to make when the acquisition

so we to of needs there’s terms now of those channels. capacity and valuation. of probably consolidation. really making amount highly It’s And look segment The itself still, economics the back that in thing further from the criteria print media Print make comes significant and It’s having sense. that compete highly, underutilization all most sure right against important to a fragmented at

there, we think be to is So going there very opportunities patient. but are I

to there. deal, we are to return that assets to a whether going those of metrics understand synergy true achieve looking generating price move those get that allows dig for price. for also and such the are the as goes just the are a cost the value heavily conversion at money free a us synergies kind company, earnings quality of very synergies. sufficient cash of amount up into have that we realistic to flow the the hard instance, spending, well beyond the not at disciplined cost of disciplined associated We are on the or And the on with And to the to

continue And as the reflects reality show its we are discipline so the continue of appropriate we’ve until true going company’s patience a done we performance and to in will valuation to this and true past, to outlook. show its

Joel Quadracci

Yes, good that at a our strategy, well. maybe that you fuel transform And continue it continue of really at and I it play of is look boxes pretty lot will kind those check significant if to manage do we can add this. and together, we’re all role. as you does continue print you But it well as believe can really to that we a to that create you so really to do

of together; again, that being very think been kind all everything I but that the aspects works in talked So we’ve about disciplined good about. Dave

Operator

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

Dan Jacome

Hi, good morning. just couple of I questions. had a

appear will on that free to what be my cash just that you intact. you general year? First achieve That this the seasonal was Can as confidence -- guidance later you that components just aside, question. first still flow gives very able

Joel Quadracci

and Yes, into conversion quality the every of the so high cash it’s cash earnings those the really currently flow. have generate over $X.XX $X of we We of of for earnings EBITDA. flow

capital we’ve we going of But to be manage capital. improvements working was We've substantial well amount to we we’ve about days to And us. how $XXX comfortable made So of the flow terms towards our going where past EBITDA calls a have bit. inventories. down to was to more lifting we’ve talked headed is terms are on heavy what the item. the in it cash done in and and manage in production collection that’s this takes you'll that continue because better free knew result on we for in improve in able working slowing so our been reduce benefits yet lot for our we those just seasonal days us through to improvement increased really, that, really -- see of and capital year generate about feel been continuous Working of our timing capital flow. the But million creations those of to a working a getting we're bill, over cash a

will that into so And fourth quarter. built the

late And business, fourth there. our you’ve seasonal starts of of see kind of quarter nature quarter You'll hit into cash as because our all the we like third a with that printer it peaks. the major of seen lot in coming any

Dan Jacome

Okay.

skew say, things Just for one, inventory would modeling if discipline like purposes, you it be would had you to DSO? or to more pick

Joel Quadracci

it amount It's a It's days and of collected. been and primarily the that billings, get DSOs us. for been bill to take reducing out get

standardization the of from seen, So of that you come side. inventory terms. would then the it our And most rank – would and is third all it’s I improvement just be payables receivable from

Dan Jacome

bullish sound these wanted and definitely the you numbers flat so just second demand, demand incremental of term, then radio I'm to that that seeing or down think, up TV trying great, nature. to to very has ad longer over brain Was TV customers things industry seen? pretty and many out marketing then radio a are level, guys better sort have hoping you and And you're for a promise, X%. Okay, helps. But on it for I statistics high from year-over-year with? spend for on pick seen your various changes there everyone what And channel. of that what but to understand I've just

Joel Quadracci

and of is less have ups missing. about much is, services strategy media it just reality matter we fact still those sorts marketing able what any most you execution of as And but get are to verticals. we It's is need it. to involved But someone's the TV going over radio in of do one or of downs Whether the and take buying. marketing we're the know the there the trajectories in all be required it's it, strategy, that on, or we is more of the

north on media of up. $X us see as a significant be sort fairly we of this other to buying we'll now media able on And but going could short so build channels, our spend order I certainly of we'll more part in is to in but going in the I continue this. the billion build And by adding capability, think be it, to right ramp

that repeat being want I’d marketing again, is to disruptive. So

not speed about disrupted. all marketing disrupted So printing it's alone, of is this

WPP, change without resignation it's the watch it that for many to the CEO with going it, the with gyrations lot fundamental holding on and the that in are measurement a over-indexing the issues aren’t just has the can in the so The digital of actually company. the that around prerequisite with You his been everyone And and model. fact different to figuring out. in along is marketing has much there overspending verticals, go issues,

the really demand why but fast different my are kind people simplifying the into the thinking at growing shifts it to spend? cash what out something? areas of so really I register, effective spend that's So Does of we're how doing work together. When Is and position also are They it is this that about. looking these it visibilities the make of how money, is sense? of channels getting it all raining

Dan Jacome

Absolutely Thank it does. absolutely. Yeah, you.

Joel Quadracci

Operator? welcome. You're

Operator

now This to I like back turn to our concludes question-and-answer any the would closing session. over conference management for remarks.

Joel Quadracci

Have thank Well, week. next you quarter. to a for forward you us. joining great all rejoining look We Okay.

Operator

Thank now attending This you conference today's for concluded. is presentation.

You disconnect. may now

Quad/Graphics (QUAD) 2 May 182018 Q1 Earnings call transcript