QUAD - Earnings call transcript Q2 2018

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. And welcome to the Quad/Graphics' Second 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. follow the to themselves. invited are along, slides advancing Participants posted follow night's To webcast, instructions on access the the last earnings release. Alternatively, on the under the slide of navigation the access Recent website in & the you Quad/Graphics' Events bar. link left-hand Investors' can section Presentations presentation

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

Kyle Egan

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

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

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

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

Joel Quadracci

to our expectations. with report you, and quarter pleased results were I line good morning, second our in XXXX that Kyle, am Thank everyone.

On our measure deploy, content as complexities print leveraging performance to transformation, broadcast revenue agencies part As clients process marketing a make Through the marketing that reflects, are and strong What our just multiple across included our plan, a and and we on have overall spend manage platform, our of cohesive integrated X, marketing robust representation a is our platform marketing of platform, of one can we produce, clients' their marketing we digital to with which foundation, print, partner integrated featuring of company's unique slide channels. use improve efficiencies and services. integrated continue effectiveness. working platform. visual reduced makes a we progress stack

strategies. Our planning process clients' with our marketing begins

First, we take media the together. the time integrated that build we to understand so plan the marketing compelling objectives can

services planning and include, understand insights, to connect analytics our clients marketing customer Our with help better and customers. their strategy media

grown our design. has to plan place, expertise behalf video, Our $X.XX media radio print, on channels. assets and we buying planning of our clients copy includes help and approximately as photography, creative produce a such the TV, solid in clients necessary then digital writing billion and and in With

Once the of produce the most easier assets our our and operations and integrated and for platform services to to and At to smarter optimization assets clients. include production us to job marketing Our creative their the those that management is faster solutions make we channels. end workflow appropriative allows our allow job deploy creative happen. day, produced, media

right, the and iterations helping maximize we the right make measure to customers at the our engagement best way the the accomplish reach process on using focused are performance entire to necessary and this, ROI. To channels clients results. along throughout drive We their the

wins to them their of and to media as reduce added validate and examples. strategy alleviate three outsource the is further following needs. Quad delivering by complexity depending that offer marketing and ability value on the our production procurement Quad, represented we Recent in clients' working aspects Lastly, that potentially burden giving management client X.X all services wants operational and

national display These which One planning, we are and the process while large spend integrated and the clients include partnered multiple print Quad's complexity spend retailer of marketing distribution. analytics effectiveness. services digital already social, provide, placements, and Through search, to our creative, services platform, recently agency optimization media in for addition retail reporting. production, marketing partners, national using the reduces improving traditional paid printing including with services of efficiencies Quad

recently Another centralize us to their marketing with partnered brand help national services. retail

to an well displays that order signage, consistently less writing catalogue allow with will manage to retailers was and the and but photo print introduced its operations. a forming. recently materials, marketing maintaining stores social prep browse and partnership for configured With improve as back retail, quality that And portal and the retouching our finally, in costly Jackie's have years, relationship online services reduced Quad's simplifying procurement high services. more expanded retailer Jackie's lightning channels, We photography required, production, Quad help, limited as while photography quicker, online amount until recently as well with and solution copy as many efficient other to of in-store standards. is branded We International primarily the its goes XXX resulting production. plus their its vastly

we strengthened pleased Associates the partners have with very and our be in our to in our & to investment Rise Interactive. clients. Ivie value deliver offering Both continue We

earn behalf Rise clients. As leaders, on Ivie recognition of and the do they for their work regularly

ever drive Rise Methodist for excellence earned Search Awards, all first XX Telly [Indiscernible] Search Retail recognition Marketing awards third the recognize has For ability appeared growing in named the also receiving Among the outcomes and Agency Ivie XXXX Search ranked Awards. Land Marketing June, screens. These and Best example, for the recently fastest video and won Xo This Rise top business in the performers in was score and Initiative the communities. of television made SEO Rise's Engine on Rise its consecutive entries Crain's across Agency Year is in SEM Fast television was awards Health category. with premier entry Rise strategies. Business recently companies list. were search The innovative Large year Chicago the on for history its awards In through confirm perfect Engine to search the Systems. marketing list. campaigns

nine to Ivie Rise one is consecutive or on list. make three both all fact, appearances only Rise companies of and congratulate more In on their the accomplishments. We

stock end, X.X drive delivers we further our focused our value strong As are the to forward, providing we strengthen repurchases consistent remained our EBIDTA To to on through demonstrate Quad generation ongoing accelerate move sheet strategy, dividend enhancement we the continue we strategic in in balance strategy transformation, and the and through share $XX transformation flow, quarter. confident and revenue to free generate commitment our and cost and as the clients shareholder conducted sustainable that returns long-term cash our consistent shareholders. buyback million priorities such containment, it to our

call better creating I the And every engaged shareholders fortunate to hand with for are committed to to Thank want to call and Dave. strong to that workforce turn way now future. a day that, our I the have employees over our a Before over you to who transformation our possible. will and thank I Dave, and collective all. is clients We're making our

Dave Honan

for with that to financial in remained financial everyone. our morning, on results and track our first We're guidance. of delivering we XXXX the for our expectations half report pleased Thanks, XXXX Good line Joel. were

the from year-to-date increased were X% to declines annual partially guidance print XXXX impact paper XX to downward the to positive and XXXX increased Net from volume continuing organic sales. which our sales positive X% marketing while $X pricing the the financial a acquisitions a positive declined from negative industry These Rise for the provider. respective provides As X.X% pressures ended June a decline included from transformation quarter the in a sales. positive billion, print by X.X% quarter second organic Rise sales acquisitions and to X with X.X% to impact and the pressures financial of Rise as a and our reminder, date increased to ended sales Slide in billion, continued paper their months ongoing Ivie solutions from $X June XXXX. and three our include Organic due of of snapshot Ivie the XX financial year-to-date pass-through the The X.X% in sales line are X.X% X%. first results sales company's XXXX. increased results and and pass-through months exchange. X.X% and organic after those assumptions, investments X.X% to compared of from a Ivie volume excluding Net impact of offset impact results are and sales the and part six acquisitions as were for of impact X.X% X.X% price investments a after impact excluding reflecting X.X% declined of quarter foreign our from

While our XXXX. to organic to June the $XXX for of million months Adjusted EBITDA ended $XXX our at decline June the to basis decreased as XX.X% million six points adjusted margin EBITDA of in we're and quarter margin end EBITDA to months between to pleased the XXXX. the decreased we sequential six compared or $XX X.X% adjusted first as X.X% organic second still XX in improvement in the declined million XX% EBITDA million expect see in And and versus XXXX million year, for quarter for Adjusted total rate revenue $XX to decline in in XXXX. to our a XX print to XXXX. quarter compared million months at compared three declined nearly $XX ended XX.X% EBITDA XXX end $X the

increase in Free in company our focus our of face a generated during transformation for $X million included the basis the $XX cost paper quarter increased in towards to printing capital, peak in due from continues in costs our be will into to on we during negative year-to-date of to top-line compares solutions proactively seasonal paper working to weighted was invest $XX third The inventories Our a million the realities while team the with marketing quarter. allowing and flow differences industry, anticipation timing line to million still in pressures and primarily more the year-over-year on from which our was matching provider. of in our and second year expectations. end the cash structures This quarter XXXX. was expected the was cash in and second decrease constraints an supply intentional the

the and times, Ivie of million structure the the with year a June $X.X $XX As to cash will due the X half second debt million that the X.X we repurchases Slide in XX. million generated as mentioned second quarter second our year-end And of result, year. quarter share in billion a the strongest our for of investments Joel ratio provides X at be to well our we of and since completed half seasonality. of capital targeted finished of debt to X.XX second Rise range by flow a as free long-term increased $XX cash volumes of times. realized reminder, to $XX summary of the in leverage our XXXX Debt We due times within net back primarily paid the a quarter. of end

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

is have commitment of our our opportunities which to available business, our believe until Slide of was value business return liquidity We to shareholders. investing to of XXXX. future our sufficient shareholders. under We significant revolver no the million as one maturities for our shows ways $XXX continued January we and in June have value we returning $XXX needs, current our XX. X in pursuing liquidity which our dividends, million growth And

yielding that Xth of quarterly XXXX of of dividend September cash annual our $X.XX and of $X.XX of August XX% represents midpoint of share only our be at of our flow We've will shareholders the XXth record X% dividend share quarterly per paid is range. per a next XXXX. of to guidance payable Our consistently as free dividend on approximately

share Another way which we repurchases. is through shareholders to our return value

quarter second million X, for X% $XX slide price we represents of outstanding an our approximately on repurchased share shares at per average million share $XX.XX during shown of under million This the $XXX shares. program. repurchase X.X our As

stated granted of our contributions As for repurchase repurchase goal as share our help and to to first repurchase time. special of on to of impact million benefit the XXXX offset reform, retirement the shares grants the shares the dilution our tax $XX end share equity made to the quarter, compensation was quarter under cumulative million previous X $XX program. a million over employees of second offset part $XXX Through impact during plan the million of call, from remained

this provide of a the repurchase and capacity use share future. significant authorized the new the opportunity to the our of of million as $XXX program, Board of an authorized the result shares us for cancellation a As to repurchase program of program Directors into sufficient remainder

the business and on seasonally move sustainable remain enhancement driving we our will improvements. and into and flow generation As EBITDA on cash busiest adding new free focused strong year, time continuing reductions in cost to focus productivity by we

reduction who ongoing We to will continue will our the healthy solutions to already Jaime? with marketing in balance and transformation call our strengthen questions. business debt accelerate taking your to back sheet an facilitate to to through I'd like that, our operator, turn invest provider. And a

Operator

Our session. from gentlemen, the Jaime Buckingham begin and at first with Please question. today ahead Ladies Clement [Operator Research. question-and-answer go Instructions] question from this comes time we'll your

James Clement

morning. Gentlemen, good

Joel Quadracci

Jamie. Hey,

Dave Honan

Jamie. morning, Good

James Clement

had that organic, numbers best you've a been revenue you in public me. have company? don't year-over-year minus X.X% is Is I quarter the Dave, since Joel, front the

Joel Quadracci

that And of to pleased course. Yes, that see are think it is. we I

James Clement

Yeah.

of bit the is that kind a some we year account price, I minus or minus X% about some more trend anticipated where volume, or the relationships better X% now around volume customers you might think pre-existing you've price. all customers a X% with talked Is actually of - terms expanded the had to Dave this that minus think last in on you spending metrics I volume, function a on be X% to on to speak X.X% X% So, point gave over minus wins the price. are so, on of X% Typically, X% of and at to more? said little you've

Dave Honan

We the Jamie, of how instead volumes, momentum X% of print we quarter, of guidance pricing given with on in that we I second pleased thought in to there range with again we saw are with we the that we here decline because be Yeah. in gave, accounts year. some is X% print kind saw we volume volumes which ended brought X% to print reiterated consistent some a didn't and actually upside the see we a could that to that X% the existing that. the

the to trend talking Second us quarter evidenced been long-term does we're a working. to Joel going is that strategy wins, Joel? yes, were to existing it saying it to before continuing what at But in but to it's about And and sell above. your the hand is I'll work it this. Joel, segment for of to represent that answer all I shortly more you continue is think it's is transformation customers has

Joel Quadracci

it And lot just think the a which especially think lot in couple I a too conversations has disruption a sides as lot the they're to seeing our you're retail, past spanned well. And starting Facebook Yeah. - And to multi-channel in what receptiveness going figure is general. I channels you means is seeing we're there through that see and all mean marketing of see in out the and of years both I the figure been like will Google, And that a of in of X.X doesn't in of it out. gyrations things of fence. places realize to it also truly world traditional multi-channel people that

way printing help digital any all stack to from and conversations the whole way down about And kind product we're media inserts. just retail to stack Dave's ability revenue momentum with I'm multi-channel terms et of full continued this point, buying cetera, a lead so, and the and to because online to referred a all offering we services remember, we're to added our people very And it's as I getting products. of talking approach the that but those pleased when have not of as in transformation, digital, the with the

have. think industry, thing And single but of the of digit the be that look we so, with Typically, is to I we're other we're continuing we retail if like as an types through down seeing continue inserts double you portfolio digit. pleased to percent be clients

the the So, on better have of some and due has ad better, wins. I in a significant is the show in the think but some portfolio, of do story good negative industries X% might more think a And better, a significantly of manage to some and industry. instead low-teens also continues segment challenge in been to course, affected, so Publications, changes out we catalog but industry to might the that's year then the be a wins. little industry almost pages think to and will I side, of XX I grow which that down, bit quarter quarter little ours I but think is is significantly a good to recent I times for up we're bit a we're an to due Direct to mid-teens bit where have I the the also frequency negative. but continues books due people little industry, actually And as Mail, being continues future. think great with continue portfolio, doing a decide more to times than are do story recent there grow to titles year has there And decline. that think a XX lag the to

all to I to that with to bring us. stay you are the to very just the so trying to of want market those fact we also us things print people clients So, to environment added at diligent want craziness in on of they not our kind how look channels being you the that have to all kind more value that and you all bring and us of stabilize think through realize

James Clement

back get the I'll and queue. Joel, So, last in just question

traditional you phrase like making a look more do take X.X and better go-to-market go-to-market base, customer terms So, X.X for customers? how has how turn post into also, customers? at I'm of your print and Ivie of them as customers and Ivie's Then curious taking in customers evolved you plan lack acquisition,

Joel Quadracci

customers all of print Well, And… Ivie's Yeah. were all, customers. first

James Clement

Right.

Joel Quadracci

And I'll remind that…

James Clement

…with your customers also?

Joel Quadracci

in we we're in three integrated and were we've not more other be and all natural from us receptivity that procuring making we've remind what in-house we been broader then had closed that within is natural go going a because them I vendors why of I well, Yeah, for probably that Rise - took big understand of you But customer. business that as was that and was clear had broader yeah. don't a Ivie major suddenly spend just in done who fact won just to in And three here just just win. printer. doing of the the and table lot of direction out that, one enlisted Ivie already literally mean now all within literally digital consider businesses, because not for happening with and the a Ivie, of people's there too. of at have it going that away the natural time much it would teams, we're examples And They I'll we win that those them two. their got that possibility the a to both enlisted interested between made teams Ivie question fit. that a are had the may as have a right they the printing you the terms at so you businesses. have digital it major as because we we blocks this we a being of is Rise, it's long that RFP where Rise customer know Ivie retailers for digital your been was on did so was the which the

of and the this market are pool our it's where the buy fairly try To happening overall there simplify so is quickly. that, all in where using this to. to they silos And logical. thing. marketing they good they measurement it, but then. different not is I In customers, So, a remember again, lot many market point

print times way - may marketing, be So, underspending But overall, Jamie, versa. and additional because that. to in when people we tell less it's do by is insert spend a they the data they these way, retail There dollar having or in the in services sense overspending this said our moving that's logical. acquisitions. vice stuff talents and search two spending margin talent an ramping already ahead. both the building this about externally is and is just $XX I that a we're in not impacts quickly very that which but very very year, internally All million little probably and quickly additional because bit, and

James Clement

Yeah, time. for much you get the I'll very queue. back in okay. Thank your

Joel Quadracci

you, problem. Jamie. No Thank

Operator

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

Dan Jacome

morning. good Hey,

Dave Honan

Good morning, Dan.

Dan Jacome

what a brands win quick guys? for you little also you a Can around it Just some of and are thoughts RFP contract, were wanted printing before of said and talk things just them, you bit doing or but retail back-end then more you the that doing analytics level high question. you're you the new about maybe some And conversations said sounds eventual you for marketing like the traditional nature?

Joel Quadracci

retailer who I crossing what what talking between think just over and segment we then that wins the digital you're have. bought about we're

not but new continue bringing client, spend that share it's singular up we like culture either So, category, pick or count to customers. the and a might the in more have of in more a

retailers been have - little a pressure. So, I'd that it's under the say bit

can really they're at all to is pressure most. channels and because traffic, Again, of retail it's look a they're there trying our and dominate drive have out lot there that Internet - segment, traffic. things. So, I company resonated to in major the they're a mean offering seems the still you you still has drive to using under

the publicly more could so catalog, sell have toys. they launched We

because they fact that they and certain And that more do more I deploy timeframe degree content them So, segments the it cutting underspending how they're ROI the think in not seeing they the overspending with much cutting a making others. play. with offering cost all to combined kind to dynamics it were importantly, where our come that to content. create content takes in they get by and efficient better just of about you're how that is the And these into create

Dan Jacome

helps. That then Okay. just one more. And

if So, math I And mean can have component go your because or of XX% definitely if XX% an it guys is don't I sounds like services that where encouraging my know discussions you can this for you sort on encouraging. right penetration board target but some is do now, comment of ratio revenue. internally

think I it like couple years XX% was of a just ago.

So, I'm trying to some trajectory head where idea help just because could your other might multiple of benefits? definitely get that and it

Joel Quadracci

continue both $X.XX Yeah, to you you to That's also that think new see make and the will on includes remember have other like print, also have digital. obviously includes at organically grow. And because products for grow but or on our those also we that But said, it spending radio and services decline that's TV, less, customers I true. buying conversations, we as we're we X.X, media invest capabilities. least in tends to absolutely create, as billion which

greater, services sort revenue when segment decline as invoice than will as the I which way the much managed the be grow get And down the you well. of the so stack we'll print size see it's out. but to continue numbers are balance so, those creating percent, it that a to the think that will will all wins, kind wins, of because you And the the

I about it as holistically, grow of think continue So, to I it but directionally to will offering. the think you continue correct, to a total you're think have percent

Dan Jacome

Perfect. Thank about that. All thought not you. Great. right. I had

Joel Quadracci

next Operator, question? welcome. You're

Operator

Buckingham follow-up. ahead next Clement Our your Please follow-up from with Jamie from go is Research. a question

Joel Quadracci

Jamie. back, Welcome

James Clement

thank I'm you. you up. Joel, glad it brought

to to growing? the Us' it's that think the around report originating going So, this is going have more yet, I kind brick deploy the started from of said that but of What and don't reports that summer holiday and ask gone out that I e-tailers mortar was your "R" I don't the gap. was to catalog percentage earlier gaps, around assume it I perhaps maybe season the holiday is business Toys catalog fill fill know you be season. roughly if Amazon number

Joel Quadracci

see because past about marketer e-tailer. just to XXX%, the every talked a converted every would we've a and e-tailers the retailers of to XX is is where I didn't encouraging plus we e-tailers, think Internet print plays, have, in most degree say degree, in who is by way But this using cataloger if to I've at what's pure also use you a retailer some about I look an retailers it before. excess you are - But e-tailers. catalogers they they're are where

something easily breakout, again So, advance the encouraging mix. that continue approach But think to include it's because it's not you people channels. can thing I all to the is all multi-channel

So, mentioned become people who do bring maybe in catalog. is a retailers one, insert with a talks we're other while CMO you retail the digital we company launching should to a suddenly their who are saying or

and just to decide it's at then a you if and because say next, look cohesive future that's stack wow circle starting that an what accurately and integrated our was so can stop, channels in sort it plan is So slide you noise ongoing together then washed that I it that don't do that the is event whole measure realizing great. of one to the think that's of doesn't get out and people are measure that you whole all marketing the

plan and measurement on. on and that use Does You the to on one and the make next sense?

James Clement

is much absolutely does. at if your these we Yeah, of Dave, could it how I How be like in December increase thinking be paper, of of inventory how thinking much terms you. should of we one item, about line is - XX XX it should if versus it just inventory follow-up about we all it? in should I that March ask to look versus or

Dave Honan

with been increasing paper. based prices No. placed on on paper you as The have have we had, tariff been impact know that that

pricing, in increase natural just… a ahead is purposely there So, brought levels and inventory but of also, because we

James Clement

know June at Yeah, I don't over March. approximately ask looking be how June portion, latter December I of was and there. that's to like you over back much if I The or what that going should

Dave Honan

You look price impact between related increased and at $XX paper. inventory ahead is of our June to buying to increase June on the actually million of

Joel Quadracci

I ahead. think Yeah. And go - Jamie,

James Clement

clearer lot my No, I than question. think, answer a Dave, was your

So, thank you.

Joel Quadracci

that Jamie, though. working had Well, it's to for tax print some about the A been personally of Canadian Commerce of put I also the add aggressively dumping something news bunch it taxes that and mills on I'd now. on Department is the months

In is working in has hosted damage a who in Northeast. call our a see to it. And to talk really on, the come he to out want then me neighborhood that then the it's and Ross. plant, well. plant the talk to because the Washington from met talking to then And me been really week informed too I he got wanted ago since about early newspapers Paul Ross to fact, issue. very doing I Wilbur then our about come effective And we've this with, [Indiscernible] Paul Wilbur his directly who been as with in Ryan

So, know to and today then We'll I it. is on this to think date I their that by had then the International that rules just productive which do there where Monday the needs the goes because Commerce recommendation Group Trade legal went conversation. Department tomorrow, the final

it. that and players did has the testified who the But around have got got Senators we've who few the it the will testified of their out come rule picture they the Congressmen with tomorrow. side ITC we've we've the lot make of to has And on think with Commerce August a ITC, we've decides going on decision final I to on quite build then worked a tariff, to we there, XX. so, and industry then work also keep tariff if And to fairness this

on pull if the it to have they to decide rule number that so, August. a will it back will And degree that back, the in be ITC pull to

why United conversation logical I'd if different at million the news certain print is X demand with tariff worth only There demand other is productive. are that X stuff So, you is in of the look they of million lot tons those regions. dealing there million this than States, worth only because reasons production all capability tons the a are and say very felt of tons in and

story. logical pretty a it's So,

in because again, it's ahead think to it of So, tariff question XX% the sense that - answering of with that. load everyone up inventory that's way I a going increase long-winded it's plus of made a kind your for but

James Clement

stories that I there a to after now Joel, I some some in of up, think right. new of it I you make - sure brought did be those and notice wanted inaccuracy I And Yeah. you I'm - bit that may stories, on new

stories new that absorbed cost of That Quad's theoretically cost back, really right? by be, to Some theoretically the million risk $XX $XX say absorbed increased pull be they could obviously And need of could would said million be the that by customer. Quad/Graphics. should

Joel Quadracci

million also circulation, Papers a Paper and that's for Yeah. pass-through the a that is newspapers that customers. going cost. the the our because down, circulation very And first we get all retail carrier is hurt get $XX significant important distinction. is hurt of because through the do inserts through

good had. but I a days but to out So, we little for map think I will tell Commerce time have favorable we've about and laid predictability, conversation tell, very road XX very outcome from a is feel good with different these in fact, here, a the place Washington will hours bit now

James Clement

Thanks time. great. again Okay, your for

Joel Quadracci

Operator, questions? any You're welcome. more

Operator

this At showing additional questions. am I no time,

Joel Quadracci

you Okay. us. for Well, joining thank all

our We pleased are very with trajectory.

view out of going next you. our talk you Thank terms window in quarter. that with of through been pleased the very Quad's front the to long-term we'll and are We transformation

Operator

today's conclude conference you does that gentlemen, and attending Ladies call. thank presentation. for do We today's

now may your You disconnect lines.

Quad/Graphics (QUAD) 1 Aug 182018 Q2 Earnings call transcript