QUAD - Earnings call transcript Q3 2018

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Operator

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to today's call with Quad/Graphics' and LSC Communications.

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 this morning's earnings release. website the website on Recent under and LSC access of Investors' Presentations can & on Quad/Graphics' Events the the Communications you slide the presentation section link Presentations Alternatively, link. the under Events &

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

Kyle Egan

and Quad's Quad's today's call is today's as agreement rational Thank and and Joel Quad/Graphics' call LSC Q&A. Honan, and presentation remind this for Quad/Graphics' operator, Officer; subject a that and overview good of you, President results of Officer acquire a me XXXX follow statements morning, everyone Dave forward-looking and I'd strategic like overview to by with Chief Quinlan, Safe today third Executive Quadracci, Joel Vice release our an on the and in off in with being the Chief and are followed financial results everyone. are are quarterly Accounting to Slide Communications detailed Tom President definitive news Communications. Executive Officer. summary in outlined with and With Chairman, Chief Quad/Graphics' Chairman, Principles. Financial President; prepared provisions Dave Harbor LSC X. quarter accordance to will Tom financial lead financial transaction Accepted of webcast slide will Generally Executive

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

joint about by an financial X process reconciliations about in to solicitation the proxy parties not proxy the the in transaction non-GAAP will will also On sell of who this available the is also from proxy statement. today information To it remind be in to in clear, the slide The investor party's I'd operative communication Slide have is securities, measures. available a be these an be statement. everyone solicitation or measures shareholder. offered of participants that the joint information to included discussed of not maybe We presentation financial the like or GAAP

replay over a call presentation call of will websites shortly available and now slide respective Section the the to be of Finally, Investor concludes the and Joel. will the today. LSC's call our hand after I on Quad's

Joel Quadracci

integrated announce billion who combined much employees strategic and I family's opportunities marketing New foundation sheet catalogers, time from LSC maintain distribution be publicly-traded deliver to more clients, and upon create solutions. leader like for good our Kyle truly a part we States to extremely presentation. pleased and print served additional creates point, is more robust morning will as overview Quad provides and with leveraging for we a and to to Thank Quad's the vision through respected in York free XX larger, over our create a a stakeholders. on today's LSC is his Exchange me transactions to company, our profitable LSC CEO the strategic value synergies and manufacturing a of X acquire control all highly rationale to combination transaction. LSC throughout and and merchandisers LSC strategic X,XXX the has acquisition voting opportunity platform strong will rationale generate a Slide cash a $X.X in high moment these strategy Communications, Stock flow am by pass it and maintain and walking you and the of of Communications preserving and publishers expanded savings of healthy our and to fuel Today you, facilities more in company cost the our a XX-year United company, Communications balance key for my by is long-term fit. Tom create defining and Quad's look Quinlan, leadership strategic The print the facilities more all and X.X, Each everyone. offering, the our solutions strong of At comments. this natural from approximately points further Tom of is and than print Chairman efficient XX With stock intent Communications, this for journey. and forward Quad President financial our the call the Together to LSC for in today and Mexico. I'd media level digital retailers, structure. XX,XXX well-known and

Thomas Quinlan

added assets and this address and their critical team LSC needs. through Thank tailing Since unique divesting acquisitions became solutions combination. that of announce pleased through you, chain to Joel clients capabilities I'm have Communications we Joel and ago standalone join and supply our done exciting his technologies. this root for public company years We've and to scale, comprehensive strategic two the [ph] a

first channels; tomorrow have opportunities to including company in and logistics how done Like innovative commitment imprint pre-media a and innovative for solutions to offering an network Quad, did to logistics catalog, of MAZ with position of magazine, we companies engagement. us will a StoryFit, build products, we office And our our like as integrated this consumer as this positioned as We has the investments businesses marketing a [ph]. developed ourselves create one we help age solutions combination will such is Quad's than With customer and and base strong established challenging Intercept book, HarvestView as critical revolutionize to believe and on our new and distribution company. yesterday. content share our and new in clients forefront be at do logistics. we multi-channel content to focused leading strengthen LSC innovative all distribute Additionally, better partnerships a all been a

LSC significant pleased potential benefit the from the in upside that of We shareholders combined synergies will company. projected are

deliver company outsourcing will the will and broader production operators of opportunities. product have As press expect platforms for efficiencies greatest and the in also industry's enhanced company combined marketing base a we and we noted supported combined The distribution complementary combined and experienced the most flexibility scale the the client joint cross-selling from release, innovators. by printing

financial In addition, increase will the combined company balance sheet. strong and scale a

to LSC day Joel, Joel. is working team clients so to commitment would the combined and will employees ensure for well and dedication of I his to Before thank look with to that back thousands on to every you I our over the I and company turn unwavering call that, strategy. work Communications who hard with Their our back like Joel is set the reason the we it are a up leader today. And to turn forward success. execute

Joel Quadracci

Thank you you, appreciate today. I us joining Tom and really

integrated time volume offset of solutions, with entire the versioning chain systems for Through flexibility the you and benefit to time directories distribution The to out enhance acquisition and serve Communications customization business platform will inventories back-end utilizing market, as an reduced billion this XX and snapshot finishing, outsourcing; of combined efficiencies digital saving Quad September an supply benefit driven our increased of a combination Quad ended will scale approximately fuel will months our marketing to expanded and platforms, state-of-the-art savings transformation. and see magazines, and geographies company's billion large-scale is strength to we in proven the marketers The will waste for platform of a debt. specifically opportunities cost catalogues, publishers, the greater including faster acquisition co-mailing compelling and includes significant $X.X on more will for front-end These our publishers services value of by LSC ability creates approximately we experienced of publishers several $X by complemented transaction with distribution such and Slide and leadership, revenue a LSC's end-to-end Moving X; strengthened and and all-stock the print list product broken and The clients in workflow print production from providing annual solutions, integrated our broaden and help postage categories retailers, by platform books, offering a XX, proposition. inserts. LSC management from product XXXX obsolescence. different an from intend geography. LSC printing process benefit better retail clients redefine services and create book and truly offering that to and complementary combined will to backed platform, the platforms service extensive fulfillment. book expanded of the strengthen ways, programs clients of refinancing in logistics and our from our at book valued All capabilities, our expanded X.X

power and economic representing approximately strong LSC common Based continue stock on marketplace. the prices stock strategic company. flexibility continued our profile We the B XX% each Under Quad merger family approximately share and ownership work Communications our the on and have of to long-term companies at A agreement, will XX, shares stability for Class the share will of October own economic consideration of provide shareholders. of to combined XX% healthy sheet a receive which balance represents closing the XX% they LSC closure, to total XXXX, us XX% the of to opportunities. Quad my control the for XX% will will A voting to continue voting the credit deployment total and of combined of disrupted approximately deals as we approximately with total own Class allow ownership voting of have of combined Post us representing the shareholders a power shareholders total company. the company both premium LSC structured transaction future Class XX% terms in shares to vision all achieve X.XXX and capital maintain and

on of include The of LSC Quad will is transaction Communications financing existing a Directors financing Board expand from Chase it's two secured closing contingent from Quad Bank. board. members commitment not this has Additionally, JPMorgan and to

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the in and to a premier is XX-year response our which high-quality first productivity offering. a differentiator company acquisitions platform to XX past creators as with and to our new foundation engaged print following ideas Quad/Graphics Through and based To we challenges Virtus value of the media today. a the This a of and which continue our manufacturing pressure and rapidly continues the XX. business followed allows the accelerated We improvements print LSC integrated the through of and and on industry Communications built face distribution support highly our series our industry Recession have help efficient need one disruption, status their an cost values industry of print economic XXXX the acquisition created that remove by focused as provides and Brown -- participate our platform consolidation impacted marketing We producer consolidating content as and future future In in ongoing understands robust low cash workforce strong remain expanded opportunity saw a certain years a roles depicted on we generate media consolidator. growth. as a that consolidated us business. disruption. partner have today drive the flow in who XXXX Today's of a our that greenfield key the We distribution operations integrated capacity to the XXXX Communications. Great volumes much component maintaining severely deployment and industry's in X.X more earnings creating period, advanced to foremost and Quad of leverage talent, like into and to and believe in During established our media experienced we culture Printing; automated we grew added inefficient strong Worldcolor, we and place included significant make necessary product a underutilized part built to on over is and continue industry's with offering, offering strong X.X company opportunities and of innovators and true impact their the they grow first disciplined larger began Quad today. trusted marketers to Slide and manufacturing foundation

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spend or workflow offering reach provides provides expanded allows one proposition content digital, scale working client's personalization take compelling core want insights our build In through enhanced to more we and To and [ph] clients their and onsite we our client and and help evolving our Key with integrated make disciplined the within. our opportunity when unmatched side complexity real-time with and technology our goals. to production to leading integrated the measurement. offering strategy re-engineering, face the marketing optimization, them subject Quad success have their professionals execution, our disciplined whose marketing multiple this in from that remove us expand media the matter for if effectiveness partner doing X.X scale acquisition them significant quickly accelerate through agency offering, fill expertise build-partner-acquirer with ability we and data transformation companies way. Our In when improve clients in driven acquire increase meets services, process so, is integrated marketing creative; We will accomplish resources partners marketing our needs company this, a appropriate helps efficiencies overall with value actionable certain and capability experience scale service and expertise a to amplify to the and us to meet our hire to specific we a to functions we and with criteria. our approach. gap in strategic we

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will I for call provide financial rationale of the on to further the turn Dave Now acquisition will detail who over the LSC.

Dave Honan

adjusted the believe everyone. our through good both and Communications Joel, company and significant synergies This approximately synergy Thanks enhanced We this of for of morning solutions million will efficiencies how income. of companies potential million derived pro impact corresponding with consistency for On their EBITDA synergies items acquisition on well midpoint estimated flow $XXX pension provide was made when and combined $XXX the LSC's to level adjusted as XX% our of EBITDA; first, excluded the the as XXXX value looking scale generation, their from note over pro to create of Slide XXXX financial from forma at adjusted of A of by Quad at when $XXX shows greater combined strong of $XX million, adjusted the increases without clients the shareholders million synergies free the the couple new a LSC from platform. adjusted non-cash will one to forma XX expected this post EBITDA taken guidance. EBITDA EBITDA. income we've is benefit into combined reports EBITDA which be adjustment pension acquisition. adjusted of complimentary consideration basis, $XXX cash million

non-recurring estimate are after full transaction estimate of of is less the run two synergies net excluding additional complete we after earnings which we integration a components $XXX of annualized million take to the The the our Slide of to as million accretive achieve that costs, than On the is $XXX rate synergies we've net and summarized key an XX, of cash Second, these substantial flow. well result free integration to as related anticipated net synergies. years. cost the synergies

We distribution combined of platform. rationalization and the approximately to $XX expect through million capacity manufacturing achieve synergies optimizing by

lead Another $XX administrative be management diverse and These synergies another will million to million will of savings, through such through savings company better to efficiencies supply a as efficient SG&A realized stronger of chain our $XX serve synergies approximate and more more efficiencies. clients.

achieving a one-time adjusted of Slide cash generation illustrates free in the annuity an only free XX%, at flow companies every of efficiency the our synergy achieving of adjusted $XXX integrating generation transaction, synergies proven combined guidance; We of forma we're will acquired less within On of annualized the the synergies than the cash approximately and synergy realized. free efficient midpoint represents both in track record consolidating to net in way, cost results rate XX conversion synergies. cash flow pro two one-to-one the $XXX companies million every strength confident $X.XX the flow an the close of cash combined said dollar anticipate that of the This of pre-synergy of of dollar ratio generate where million improve free achieve EBITDA cash flow and basis, years have XXXX as generate expected financial of are leads is free LSC. of or flow. cost another EBITDA this of a acquisitions to to $X of efficient combined to

cash in We flow expect of to key level forma deploy ways. the free significant several pro

strategic pre-synergy completion dividend represents a cash remaining retain XX% of flow XX% million $X.XX capital organically flow allocate the or all-stock the free us $XX in acquisitions. pre-synergy and strategically two the reduction balance healthy to free needed The cash of financial flexibility deployment per change. X.X approximately priorities deploy total debt and First, both $XXX maintain million Initially, investment through key capital transaction. initiatives, strong circumstances or after sheet, as our for will annual of of Quad only a help and include to the share and

cash within working a an pro speaking times strategic the as transaction it completed. of to all-stock power maintain opportunities acquisition the From sheet of We to XXXX, on Xx transaction policy the is will targeted this the and leverage the ratio. operating X.XXx. needs. would X.Xx strong a the and we long-term as compelling adding timing that guide perspective synergies. actual of the achieve. leverage treats will of our which of the completion to leverage depending of above to synergies acquisition vary with under initial of million deleveraging ratio December leverage financial XX or the deleveraging annualized cost completed corresponding was that and power of acquisition on go X.XXx. illustrates one do to of if LSC the consistent XX, investment due Note, the leverage When after Slide synergies $XXX At be timing timing the are leverage and We related balance generation capital such may forma the the flow maintaining rails the a our range of free anticipated as the structured to the today seasonal this Communications declines below and transaction,

delever two after has XX the create to lower ultimately improved to range. a X.Xx productivity within acquisitions of and and drive do to refined our within these targeted process our range targeted We our cost Quad leverage products X,Xx approach. of of to acquisition. shows placed and anticipated to history integrate we Slide integration of while forma leverage improve and balance Through our synergies the a be history, well efficiency disciplined structured each long-term Xx acquisitions; focus our expand We ability leverage realized. serving our platform on of and operations sheet the strong long-lasting the the trend to successfully we've years clients our services, completing maximize for be expect as approach cash directional leverage integrating long However, savings. to are sheet free pro strong that a to the with now shows This maintains within and well for our post-acquisition Xx over transition helps I'd to turn flow and while earnings the us disciplined quarter Slide a business. third balance to grow like XX. starting in we and earnings as

were pleased to the and results Rise report Net guidance expectations three XX on as reflecting of and narrowed to Ivie year acquisition on-track financial we full in with We quarter to months impact $X call. our investments. X.X% achieve that our today's XXXX sales line remain for the are billion the our third September ended increased

which industry volume to and partially price organic are guidance in our XXXX annual million Both declines XX.X% declined our a This continued line cost in XXXX a our with As reminder, print downward one foreign September point X% decline due quarter volume X.X% X.X% Rise impact from to assumptions a included was of sales, pricing impact in ongoing XXXX. date X.X% financial organic X%. sales to respective pass-through declined compared the quarter first with of after impact which the and margins from represent were to XXXX. from to from from due paper remainder customers primarily results negative by the in excluding three are XX sales increased to pressures sales the pass-through sales our EBITDA to $XXX declines million positive the and to margin a print acquisition, pressures, decline due Adjusted X% as Organic the Ivie acquisitions and compared impact a offset and EBITDA point of positive million pass-through included paper of pressures. X.X% X.X% in industry exchange. of increased and year-to-date and pricing the in XX.X% to in continued adjusted $X ended decreased months to volume to $XXX original for XX basis

Our of flow in decrease compares cost of focus cash line was generated an intentional working flow continues was realities cash million which quarter. industry. on with $XXX face our capital to reduced of negative the in structure printing the $XX timing to to this proactively we matching top of to concludes inventories our the year-over-year expectations, cash line XXXX. team pressures The million in will due free XXXX in be primarily from from fourth paper the expected that in differences buildup Free

narrowed XXXX wages initial to to production to to quality be level reflects adjusted in our challenged skilled most labor the As XXXX result our at to employees. strongest be all historic we the our find seasonality summary net billion, $XXX the are a volumes XXXX to in quarter. of guidance. is of majority realized the financial the a we expected to guidance reminder, approximately end competitive hourly sales due narrowed narrowed back as end lows of our of a in original included making additional generate million EBITDA of year fourth top range. are expected markets. we've XX cash entry Slide the increase Full half and industries the year $XXX our Unemployment million free flow Full and this range the and are investment year of lower our range, is On guidance $X.X to in

strong positions. Our labor necessary strategy training our programs and incorporates and wages, fill the benefits competitive open needed employees to retain

XX. $XXX free we On by guidance investments our capital narrowed improvements range shown On a Slide employees cash to due XX a our structure original other in walk at platform guidance cash Slide further $X The we cost XXXX. increase the are guidance. anticipated to million. of capital lower acquisitions flow EBITDA to are share we the net of due and in adjusted in automation million wage million investments Ivie due Rise, that will impact increase you our of the expenditure these making made the additional employees included $XX to flow our will $X.X debt and to guidance components million, $XX increase see our of end approximately billion productivity in and just expected to million our be year-end to is help $XX lower approximately impact in drive net that increases. I this structure $XXX All investments With of increased offset an repurchases. $XX on through, expenditure our since we million anticipate of annualized cost investment XXXX our in an basis to million by

Our pension decrease to cash the of XX as September X.XXx XX. and funded targeted to pension rate or million able quarter end pension of million. will capital assets and with our through of liability ratio active our of X.XXx includes pension approximately plan a strong debt we of by our our structure expect leverage Xx anticipated long-term We rising as unfunded our Slide environment. and our by liability management XX XX% $XX been $XX reduce de-risking is in of the to summary the our range is We've interest plan September fourth flow. to the quarter X.Xx free due XXXX low-end leverage finished debt of leverage a

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

million million XXXX we value for our investing needs pursuing business with XX. as under liquidity in maturities needs, significant our and revolver returning January business, liquidity available and future to growth opportunities have of until September believe our current sufficient We no our $XXX shareholders. have We $XXX

provide and our LSC an is dividend the balance share in to flexibility strength program. continued to of opportunities. liquidity deal acquisition future addition shows sheet the value to which our ways and structured maintain XX has post-acquisition our the for as of commitment our to Slide earlier, all-stock in to growth mentioned As shareholders we one return company's repurchase which been

of per X% of XX, of our share XXXX our quarterly a shareholders per dividend next annual be dividend record and as $X.XX payable only paid will on $X.XX cash quarterly December yielding is free Our to XXXX. but XX% dividend We've November share approximately flow. X, of of represents consistently

the on and We the the includes busiest midst are cash cost that driving time and new in and financial improvements. the and productivity focus flow sustainable our generation on strong of reductions delivering guidance, focused EBITDA by XXXX adding we're finishing business enhancement strong year focus and our of year free continuing on seasonally

take Quad we believe will the we platform greater value toward are and completing fuel the excited our our Additionally, to create of X.X strengthen strategy to a LSC print next that flow Communications; steps combination strategically synergies compelling our in for and The will to allow free EBITDA deploying adjusted strengthen anticipated and our drive sheet capital. clients. to us cash further level acquisition of is balance continue and growth

to complex and I like Given back our in would now our will ability questions. turn future operator create integration And value confident Jamie? execute are to this well your on all history, we our call who for the shareholders. facilitate to taking

Operator

[Operator first comes question from BRG. Instructions] James today from Our Clement

James Clement

you the back look you learned even back back think give all look then lessons perspective? look that Joel, -- what sailing integration to from the of first is were confidence this ones this Virtus, an question, you Worldcolor, to going about some you one picture; back be smoother to as integration other to Brown, more process, big you

Joel Quadracci

that know think everything you to has driven, very process do it. I a we're we process

teams these not because done that's as remember to And deal confidence, if go those next we've because in we've that this of being to which to team applied a have is a that integrations consolidator. whole feel You for project one. you knows gears each terms like also two talked we I'll of a a that people integration through a about different it's about deep, lessons have -- think the twist process and there with you X.X and it, that the learn the and -- good people also say executing were process that switching how the that just of on it. this, build through time done it's we very integration. why we us I in continue to an another you really were lessons involved that's about and we've -- And couple really Worldcolor almost our was There industry of simultaneously whole massive doing book new

very a the make data we approach go who think as as integration, I driven; looking to you much have how structured allows [ph] when go know Group with use it's and And we also we always We people can heart thing decisions. like our think we're very one tough forward, this that faster. is I do always you learn at this combined PMO machine with the our operate to really thing

able a do, we've think one And that we do pick pace the done, I process of proven deleveraging we every evidenced so that couldn't what had as we've up place. been we've successive to in in we unless nature the can good by

to I'm And than this. so confident in now the the and I'd ever ability team most do that more our -- say

James Clement

Obviously, above business of Can you in Courier, the you much is thoughts us you; on sort give certainly relative that plan their this how bigger thing? your initial makes and to RD came much, books the a had updated in strength, view books you buy books. kind obviously of business you [ph]

Joel Quadracci

is; book They industry business book time book along think and freefall a think platform of the approached Worldcolor, smaller an you to the out the big both a I I the industry, what and whole there that with always we've yes, underinvested And it people, key digital group have proven ramp is it's companies change into has; how to really would than here acquired in was whole an have taken we the tell here. The more I digitally industry but is a going be overtime certainly business customized. We have for -- our built LSC is rid I've that but to -- believed capability and as massive focused. outstanding and and also print our being it's that that traditional when disruption when get of we've clients to up use we've an inventory came outstanding end -- I and that it's disruption never argued print capacity up.

I also react Tom. digital that powerful away inventory, real -- interested it help part in will our I I we're it value-added bringing by thanks snapped layered believe is assets the a So but terms they going one before so books time from Courier have story believe of to way the printing cost friend of what because my this and the me; in of ability clients the really is the as quickly. in to industry, and the we've to them of But think Tom and outside be the in very manage to reasons we're market,

James Clement

not you their some all a business business you that point? historically it in; consider out might of something is you is that had or lines pealing have are presence One committed to -- long-term at that

Joel Quadracci

us places at as but into business in look lot we now terms In the is come hidden I print, what and that placement signage; we've new print of back -- now weren't if before. media was you in-store $XXX new know behalf where Office we I our us. to a wanted Well, drive worth a had to we don't… X.X products Virtus as you gems ability to now other driving our we've you in, in more the of -- it's go weren't at look tell will you we planning look team don't of million worked big if it the we media to drive on of and will buy We that clients. over taken things acquisitions, it's

James Clement

that. products I I mention Joel, didn't office say didn't

Joel Quadracci

did. thought you I

James Clement

kidding. sorry. I'm Go just kidding with you, ahead, I'm just

Joel Quadracci

well, The a been is You're really that it's business products knows good them. business something and office LSC for funny.

on go Do about business? fits as the from products you it office road, Tom, do of them we and it best. our how decisions we'll you kind any have and learn about to… we'll So we'll down learn make the comments want

Thomas Quinlan

would EBITDA forth Look, XX XX.X%. getting has basis office as quality we to quarter able private had to about have label a sales, up he's of was it tell points led increases place the done that's as synergy Joel been margin, private get great out been branded the to the by products Joel. -- branded did [ph], on ahead you acquisition far synergies, team non-GAAP ourselves park; go -- the the been that for And as and manufacturing you thank in I cover the taken increase as versus mix job the products the able No, good. we've Obviously adjusted talked that Jim of of again, we've so industry. material

always a so So business. customers; formula good that's team, for successful good good business, great a

Operator

Company. from Our next question Sidoti & comes Dan Jacome from

Dan Jacome

insert or about the just mix guys little are first think talk other? your the not mix I and not long-term, do investors familiar LSC the customer with mistaken, not guys how high-XXs; just magazine, catalog, company thinking XX% or fully that you once for envision you mix maybe one too change customers if a of LSC are customer to bit Can versus I'm the integrated? then somewhere in you change

Joel Quadracci

mean we what marketing of of in marketer slide, I media big the regardless a not is not of business and breaks of the strategy, one X.X Page on And in this the digital X.X whole is strengths really lot out. making of we advent about or of in, takes Slide to integrated, happening that's after the way of digital own think what integrated. what or in one I same a the that just fact pressure even in And the but marketers we a have because in lines will in combination strength of kind a got challenge to that you products. of office they approach talked remember form. because is continue which But we've the today yes, accelerate X exception it's is the disruption it's under lot on today all with though this to whole really are shape they're are build business great the X; the we're it it those seen

so go this together, where are one really use and really horizontal we clients do pull how have works what Our the measure we all approach struggling to way measurement with one across. can we

and on media content, logical first coming creating in the embedded have rid to of to in, getting strategy. depending on I'm they run them relationship content so points before dispensing large it. it them and the you're integration; is marketer; product start for making And of and see pain that we that over the lack a often for what in this And XX them their part we're helping walk and you're so of times before And other over entry of business integrated. holding manufacture and talking the line even to of it their business value or physical therefore at our client and roster, help brands thing And because for They for very you it add people employees of Quad this of we channels; process. to on remind marketing because C-suite disruption. actually our I'll stress us understand in clients an a into execute companies, point the it's categories telling our our we a with me a you're their lot offering this relationships how big us not larger real, for don't as expansion or today they departments these ad through to to is we execute a which allows agencies tend have you integration we they're is X,XXX of and we're market invoice are helping the about seeing ability the but major under customers any

these and we look expansion of are overlaps, add of lot an at X.X it the opportunities clients even looking it companies categories as so to we of a value solution. two to a that look different though And for our business who at and is have, those bring all

Dan Jacome

interest the company just I points over rate but would or I I -- so missed that a XXX early free interest you to just you to had lot last was obviously Any than guided revenue or did guys there company major that Turning now the to checked commentary basis I but so can combined the back the interest combined you too cash it's rate Did I what it if higher -- think tell? blended have. into expense to guys LSC I X% guide be the don't flow. metrics, you mean know of -- debt; it

Thomas Quinlan

combined and company refinancing go the press release we'll will that we morning coming out so through more Well, we'll a be as process the disclosed the in have our company mentioned of forward; -- information go we that. in script this new we

long-term expect flow synergies free deleveraging as is the the range combined that the at cash the of in year based the within our that company two flows result of out year the our through of that these at the come initially to when end cash on end of the hope business. we we but it; leverage look on will about, talked the power debt free be strong expect be coming range above levels focus Our years you that within it well the we

the through. that deleveraging for So more create us be to is but growth business opportunity us just you to capital very walked come think on for that it's that think going way to issues more of acquisition to this Joel I a directionally, the allows

be for and it's scale our opportunity creation result that's value provide to absolutely -- share shareholders. fantastic share to more going for So capital expand our able deployment in to and acquisition creation

Dan Jacome

forward your company I talk might last and how think LSC acquiring Thank and you versus hear into has of done? that what combined yours LSCs didn't the that you opportunities a can much also talk And one; the about you logistic guys I I you another been have in businesses the little about months? too And strategy? much. bit very about might sort co-mailing; sneak can XX fit if could long-term

Joel Quadracci

this this I'll a the one question very clients. logistics will especially makes is questions and chime-in good but key on some our for side start, to why his maybe a sense, really Tom deal on of

less are XX% get We that the our allowed office over or rest office customers our post work cost on those share for for and paper XXXX of in to huge work being it. to tends clients. basically most of print is the behalf a don't postage, started be doing program of of who the the post XX% discounts, with Back customers know,

determines them potential co-op how if actually ability of clients can merge And can much and post really pull the save office. all the of together together so we volume the big ability to printer's a our we're equipment, and for to we that clients full using reach our

huge print, Now decade, pressure while decline over customers. everyone a on the and our believer execute significant for both I'm company's in that past co-mail fairly we've puts to experiencing decline in that knows ability been

And clients for so the our continue one makes biggest of basis. is sense this much the ability to to reasons on of shore-up to a one big the go-forward costs offset so

X.X developing to is job the And to this it done the as a of so make some over sure lost capable which and wonderful at remains bringing group has disruption But the mix just years have. the aggressive that we Tom have table very place and of co-mailing that marketing truth in continue we print a and services shore-up have to the at in place back. table it's his

Thomas Quinlan

value is to costs the nailed creating our up. distribution those? Joel Joel rise. continue I job mitigate to expenses, for it. As materials mean the also go addition in clients manufacture to How can we said, to continue mitigate the

from get into at standpoint in to we've mail You e-commerce and headed, is retailers newsstand to got with ahead what of [indiscernible]; look -- outside we going footprint that go of call distribute product. e-commerce I'll -- or our Quad are need Clark what where to attacking their more their allow to going this X.X you did even distribution physical and in someone entity e-commerce, a content warehouse if of it's those we're about new so fact content all with think Farrington

going do their for it form of just helps put a going capabilities efficiencies the So is Joel talked opportunities better can component -- from standpoint, so deliver tough newsstand. on on to them? of about main for bring out we it. the think is of to bring the Those are forward it having and and truck and a better we USPS newsstand they structure, head USPS a we're we'll the to co-mail now still in Virtus industry right content The logistics have our [indiscernible]. a that a lot so is how help get lot everyone, can opportunities, that as cost tray and even going place our Literally Newsstand it a take but

Joel Quadracci

much forward not things sure to that side And done going from of some more very standpoint, but only I'm has distribution will of a fulfillment that. services, of and on to are we're and Tom complementary only some them those learn services to enhance. He's we're our looking lot we're the of expand so book done and going that a

Dan Jacome

no customer the it there anything be the that past acquisitions six there disruptions. because some the a think trying or -- issues [ph] disruptions? acquisition. Was World momentarily about is Book risks months will there to in with customer just just was large you such next maybe past said to acquisitions; given -- say I'm of the over should question by expected be gives you mean think that going I I That early to you acquisition scale fully what Jamie's integrated merger, the guess confidence next year. I I'm terrific looks back – I just on the

Joel Quadracci

just on correct within expect is to we synergies these what Dan, that to years. we post-closing two said achieve

business it not comment, next off within cost, are LSC opportunities project advantage our a bit in with what this going that's is this $XX early year's we've year the geared on turning had work that to strong we're the towards year switch light which leaders synergies. integration past, us team over every EBITDA over -- on where It going just a to combined taking little new the on the We're to there that's time. process So and that's take to office out in focused then we these enhancement there. out get management at million strong solely a if -- of integration in same drive of bothered the

Thomas Quinlan

an and very is thing, shop job high a percent crucial platform Again, the of that like an to high -- of no oriented, basically two driven. visibility into with the publications we're that ability when so have another are it platform after this because one of we customer in the moving done plan back integration in process extremely where month; our the same the proud to a -- very most of from terms and lack IT process the of goes the disruption. month lot part of a to our also actually because but clients In customers a we're XX's retained strong we've have

to for so need Dan, move you And your but going we're caller to think the I next to questions. thank

Operator

from next Securities. CJS Charles Our question comes Strauzer from [ph]

Unidentified Analyst

it both guidance both question this but margins updated Tom here, looking of seems the companies; can kept pressure of are kind guidance you Joel, maybe down or basically there. you share EBITDA took for intact, under just -- that guidance revenue near-term Tom

While Joel, of kind better that? your up seems Tom's, margin the thoughts share can to holding the of much dynamics be two than you maybe behind on

Thomas Quinlan

it Joel, take I'll you. and it over to turn

at I last I what plays they're quarter, you in think expected we in continue from -- think going tight about or was look, to logistics to the fourth our points. the call labor showed we in going result in margins, as conditions quarter third at they're the look think about obviously market XX we we third quarter that, today. When there than you the higher basis acquisition saw wages. that know And you

was our product line as good a is is probably exceed solid, in year expectations a are about from Book and real going indications in productivity automation look have you every book early the leads 'XX the productivity, is; -- not as and we that our continues not it. be think we at lower of great, will whole automated, from as clients is as but think to to the which Quad standpoint. I that combination as mix two the my and 'XX, actually companies I that are -- book a of amount to work think only We industry help so

abduction good opportunities So when help together, there standpoint order and their I there. our productivity will the think from [ph] a our getting help gets some is combination then really business business,

Joel Quadracci

creator also managing year that it the that million I we contributing mean is how that say is faced think to created doing. is. Tom, in And helping right that is at I'd things lot shared but that how puts well, the we're all X.X I'll $XXX goes us a low strategy loan pressure whatever environment one in revenue it's with dealing And with all we're it with XX-year of to things in on you incremental we're everyone's product it's invested we lines so just -- from -- direct employment fact, it store, starting but I with down that create add all talent think an X.X in I one to that just to employees band it's or the which mail over now, big of definitely really opportunities else. last pipeline. able commercial; everyone of across standpoint of we've our do by as to are just We're it's way proves packaging just attacking to services build intercity X.X something for looking ways that the jobs; for actually we be not the into drives and it's services innovation products, opposed actually the it's that print further a affecting the whether revenue, print and for increase those

to that's so that make got And makes to challenges stack most clients. services the the -- a has able really is have platform lot And work much that are I of the all and our out there right that deal understand make I under been places sure in talent right that the sense for execute the people we've a sure to so rationalize together. why and makes where products of this also so but mean importantly, we be this to industry want pressure, is that's

Unidentified Analyst

approvals my as way the you in of is a hurdles the hurdles basically on foresee for which segue it's you and obviously any regulatory material mentioned, just And next approval getting here? industry they're potential pressures Do then Joel, there. question good the

Joel Quadracci

one out you in think channels, things the I'm real I obvious -- is it don't decade is is I here think marketing you somewhere. going coming living struggle if the volume of see Look, declines to under revenue going last big been not but a that channels. of with know, and been probably media a the all print be while it's on it's that marketers shifted spend you print competition have of of going that to we to rock that's has believer to -- big different channels all revenue go other that amount it to our a of And going is that amount is part going away have that is is the and these or immense. If

in thing ability platform in that them. to offset think value. the invest being someone be more And creating in only keep be that that's standpoint by They the more for me is have so also for free make be with the challenges other a investing from print to print competition our not flows say able media. offset the need time hard continue costs more and to make of cash print by to acquisition to great would of it's at will just just allow creates efficient, is me to I'll it not our distribution the but and this to of it forms the part this I point customers it; case also importantly,

direct mail direct we all for start cost content is catalogues that customers about based completely not mail cost not digital direct the mail converting dumb at if but where I'm because don't do used only it's but presses talking on -- variable our online, if and us So to response. to per also margin what about customers it's revenue per know, you cost reduces yesterday just creates piece, marketing who happened

And the we to value so because more is our to in on important; marketing and from I the if so do super add acquisition is to data they're making we're they have it believe that important regulatory side pull-through which driven talking want what do ability to is spending about, what sense on really so clients.

printing come helping that synergies billion out. but -- of lots of have significant industry, think you're with technologies always huge love of that that I'd out there that's industry lots competitors you a factor. I the And important have means that We look is to with this, and coming at cost $XX the it's also still because whole

good, So market; will guess excited to of grow the challenge into lowers that. are some printing that on barrier I press and Amazon's about printing capabilities it. strategy what, to think while able to book the technologies too, execute getting being to our on overall in digital The very they digital books the our on I'm entry entry them like on the continue of printing these really barrier

solid think make that up very there that are this many And so case so here the I a line regulators. things with

Operator

[ph] Our next from Bill Baird from comes question Company. &

Unidentified Analyst

wait high going secured when thinking debt LSC the Are are Dave to that? thinking going the about you in when are about pay until date the make transaction a -- around call or coupon, that right out a small and A [ph] premium mid-year? take Dave for next closes senior talked to which how you -- carries question refinancing maybe and you you're the whole October you premium

Dave Honan

loan that follow present. of transparent I very be markets, support at strong of with of you great the to placement in were term very the are we've yield, and group, you've even if that but refinancing, and when a company. history market lot as a a company market growing playing had look we've think we're as in B we private question. debt when That's risks currently with high a Quad, much Quad bank And private in we we've got known likes also And deep deal a diverse had

see is the a off at lot against risk things there to market about. that So we we're like of going taking markets to and look balance table here, come as also we as

what's a So going as fairly our do decision markets we'll I wise of we'll making we'll soon play-in probably refinancing will with launching with have but quickly action other bank see will fairly the look fairly beyond -- which quickly. that thick they markets. be think that but a on also kind But our at and markets be are you'll

Unidentified Analyst

has be relates Us, really sure Bon-Ton, acquisition -- your hearing of to R to services basically retail the or Tom I'm in go impact I'd question obviously business then they're it interested on JCPenney to both little and an which of most has with Toys not the an Sears, effort been preserve some the on and thoughts, benefit in one recently Joel ahead flow? a appears the And that had be troubles bit and but a those much because to in outsource looking How your cash brink. industry,

Joel Quadracci

Well, been -- point that are pressure but and marketers of it's away Negative both; a lot just multi-channel mix. back away, a all to under my positive from a all trying negative goes goes volume not out when it's retailers, one. someone impact and been the the figure to they're

when If out experience do out very leverage good are how but you a you bad think and retail brick-and-mortar, is water people multi-channel it's if make But you you try pretty the And about figuring if receptive seek thing. about other out don't in customer again, this about level, clients, And not? a all you're well. But a here good going I you're faster; the be more thing is going with think or it's how like calling what and that's experience you're compete tell long-term it's retail that correct experience going strong bifurcation to we're it conversation finding the against figured it's your and and seeing a X.X to does is willing experience Tom, a a those a on how simple. to of for everyone basically in multi-channel world. the there season act so you figured know to And much trouble, so I'll some to I Amazon's to comments? have and robust

Thomas Quinlan

two platforms. understand our look, about as And think you Joel. you, Thank

call is large. what in retail percentage inserts not Our that I

mean spot what is distributed, -- of as can is I I at it's and for it to the into out out any figure that called themselves to clients get company the So that in tremendous which basically think said content avail any are what multi-channel going Joel changing device. on Social there the we've customers, content think is customer. take allows to X.X Quad is their is it, to it they think as they look invest with -- need they to to having to being ways customers; think ways approach [ph], amount outlet Media way those this they're over I of in to again; ways look connect a end a any Mask content their and that you approach having trying convert figure about retail we form I what to way try their continue

situations So as you to always, get when lots like this. of opportunities

Operator

Our next Anthony from go from comes Citi. ahead with question [ph] Please question. your

Unidentified Analyst

terms? do capital is taking the like early the for any Brian working either actually for improved Myer improved Anthony, the in synergies you Burke still sitting efficiency Understanding inventory This or you're stages, question. through payable-receivable for see thanks [ph] in potential

Joel Quadracci

think that do haven't at point. is, I we quantified there this

of lot scale the of However, think companies, this past a because and why the combination of process completed we of part saw the with year We look you of it one decline that last kind opportunities versus a two these we year the the companies. lot process reason on improvement working we kind days as were working capital, efficiency process in enterprise, as of able a which I provides it's the versus billing our at two through reduce across focused of on past two program from a the benefits program we're those now and over lot we've and several of to flow kind of for lean free it one that for a done cash outstanding generated numbers. analyzing to weeks day; two to call capital close us years,

one processes how those I same get where assess for really as across to the into think and bring -- and the kind think and the going combine I enterprise can provide opportunity we'll of us, that of processes Quad. or to continue those types company know we you LSC lead than are are of two to projects different

is this there opportunity think transaction. as I for working to in us we the look capital forward side So

Operator

from from And a BRG our last follow-up. Jamie as comes question Clement

James Clement

obviously co-mail you my quarter? rate, bit and a pass and lot you'd of little to along, -- logistics but spot in eating think guess here been able transportation Quad's you be PC have increased got your guys I business, is the like overtime customers; in understanding trucks than Tom, more a that did, to the purchase third

Thomas Quinlan

big country's transportation. an Not too been haven't really endured of the on hurricanes really, that cost much. the of look the not mean I that impact

and usually that pretty been would driver. I it cost fuel everything of no, say well. shortage I say we've I managed driver through obviously impact mean, So the hasn't but would

Joel Quadracci

So closing of us today, sort thank for you all in joining here.

team are. to LSC LSC you information understand much are the please offline very that all we employees, people want teams, and forward you to Quad both always digest that your To joining here, the the questions to as As I know available team our answer the I look team.

R.R. legacy team culture, innovation, be all I that companies we original a my as that being as up one R.R. Donnelly, of Donnelly, the part to has name earth experience of and growing to done to find with take my as team. of LSC, down always the floor work this it's the in employees, not that was parts I a that manufacturing on father kid by done. these of done such building think based centric your of the a the as to that opportunity only will you'll many thank were us part father created To Quad to us this you with values us all be advantage to the and like. our long have with pointed have very the over of our could always and in our work, have company the acquire company, unless approach the And wanted my storied allowed enhance hard you, on -- years we

with that, us. So you for joining thank all

Operator

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

may You lines. disconnect now your

Quad/Graphics (QUAD) 31 Oct 182018 Q3 Earnings call transcript