VRTV - Earnings call transcript Q1 2018

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Operator

Good morning, and welcome to the Veritiv Corporation's First Quarter 2018 Financial Results Call.

As a reminder, today's call is being recorded.

We will begin with opening remarks and introductions. At this time, I would like to turn the call over to Tom Morabito, Director of Investor Relations. Mr. begin. may you Morabito,

Tom Morabito

Steve and Today, everyone. remarks you Chairman your Officer; Laschinger, Michelle, Afterwards, Financial for will we from you joining our take and Executive Chief us. will and our good you, Chief Thank Officer. morning, questions. all Mary Smith, Thank hear prepared

could by some forward-looking. Before intentions, predictions and/or beliefs, that statements in the and/or in are of differ future management company begin, results manner. we note today's material made Actual expectations of the please presentation the a the regarding

in and is section of Additional limited in differ this applicable issued information This At at that from the contained on Relations those could is in financial which not the in to morning, today presentation XX-K I'd Investor comments Relations measures XXXX cause Mary. risk to, results slides. time, and of found end can are to slides of our veritivcorp.com. the in the section in turn to the the presentation Investor our this news included like forward-looking measures the contained is and report in filings. reconciliation call also on are GAAP to release SEC at the company's Non-GAAP posted non-GAAP be the the over factors The includes, but annual statements included measures Form website. our these

Mary Laschinger

for we today full the thoughts guidance Tom. our thank on Thanks, us expected and of for quarter as drivers our performance year discuss review And financial Good morning, provide important everyone. first year. joining XXXX results, our some you

trajectory, our been strong driven Solutions. and we've performance Packaging top from past revenue line X Over pleased been with in years, by our improved Facility segment growth has the which improved

were This quarter, revenue in positive achieved and than Print growth, Publishing levels. declines historical smaller the also

when up For prior $X.X the compared net of X.X% XXXX, sales quarter billion, first period. to reported were year

have the from growth investments core core rate, and positive year-over-year a X.X% sales packaging beginning Facility in trend of XXXX, part been revenues. the for due Excluding our significant Solutions' net currency to resulting increased prior in foreign effect sales year. in in exchange improving of quarterly comparisons our resources, Since the positive selling net our

of net quarter our were quarter positive is consecutive in first which the consolidated The third sales XXXX core year-over-year.

first as by the line number EBITDA in with reported XXXX, quarter approximately of million, well revenue of incremental our bad associated margin For customer flat The and to due incremental earnings we plan. of compression pricing as a mix and debt. were factors, consolidated contract offset from our growth $XX year-over-year adjusted including

due the through some experienced the by Additionally, inefficiencies, to process XXXX. inventory and integration us processes increased increases as enable will we management. the which planned to price integration-related better we impacted of The manage activities, price charges of end improvement short-term move

across growth more growth. organic Core from most X% and organic and our growth segment of For by quarter and impacting in the Approximately acquisition we product are X% materially now volume debt short, results. recover with well the than be the as our driven negatively first the year, categories. came largely XXXX. bad X% from expect was American Containers by result higher to than to revenues the performed Shifting of quarter. inventory XXXX. during X% increased in due of margins The to balance charges our the factors diminish to first price. XX% not of the very year-end All quarter-over-quarter Packaging volume expected In strength

the outside had United a packaging strong Our States also quarter. operations

are in we compared higher the and we XXXX growth as view and what increases large quarter as expecting to from of solid and strong more benefit to not in rates adjusted when certain For than growth experienced we Packaging, modest customers. performance XXXX Overall, we XXXX. the less from having Packaging improvement balance but in revenue to see to GDP, see continue because expect as in an EBITDA price first

Facility quarter-over-quarter. grew Our core its revenues Solutions X.X% segment

X trends larger growth rate rebounded we've improving XXXX for been past in the the After hospitality retail, to verticals. quarter and the pleased was the segment. revenue Over in driven building with improvement mostly this in fourth quarter. first services due challenges years, dipped the the in of revenues somewhat by This accounts

a with XXXX, impact to selectively currently caveat of believe that pressures we the we in will some rate our balance the Print comparison. declines to Facility at retail X.X% had a prune secular quarter, higher in by in driven price. the GDP, both our revenues while positive that Solutions Industry revenue and Print volume accounts, segment, sector. For first core revenues mostly declined revenue grow segment plan of market risk market Publishing continued with year-over-year the

were above earnings from prior but Print However, with by of The although year than which last this fourth levels. year. moving line sequentially prices impacted Print's rate segment's been bad the quarter improved of recently up expectation, decline negatively quarter our charges higher XXXX. for have in not debt, still were Industry

changes our continues first Print core benefited the from to patterns. increased the although customers' Publishing I to mix decline. speak The During spending X.X% overall a in quarter, model, to revenues which will and segment's our industry customer we the business moment. made significant We

negatively expect segment operating our we industry to the conversions. system both impact earnings. of now and and trends XXXX, revenues to to continue balance Print the our Shifting For Publishing secular

completed conversion was recently planned. Another significant multistate as

you consolidation XXXX. we and XXXX that systems management warehouse to end large-scale Overall, warehouse conversion, have We the by complicated remainder the our schedule. installations. want XXXX, of operating system conversions a year be aware due will is X system be conversions the For complete to additional of substantially

success activities anticipated, are are the our and these company. our processes critical As strains of short-term putting long-term but on to the cost,

to Before turning an made first give business like the the on changes we Print to to update you in significant guidance, I'd our model quarter.

very The the strategy, resulted supporting in be to to declines taking the steps this Print the rightsize flexible will technologies challenging but been this received customers restructuring years The entire made Print changes or The manufacturing base the second business ongoing advantage for and the we stronger maintain that difficult, have more -- resulting by paper. aggressively be part element on the several been in customers, to but financial it The and fewer less long-term suppliers recognize of Many environment. compensation of well these as in overcapacity services pressures resulting for our plan for and the has of Veritiv benefits industry. have the we XXXX. include is and not segment past adapt of price optimization the do a not the model new industry. necessary in segment. position supply sales smaller restructuring restructured in suppliers. half the paper just investing capacity, they resources balance, XXXX are Veritiv, Print more know, of paper prices positioned employees the stability industry our leadership difficult take and our in group of has secular industry. demand you in and our greater As have are to model in and to our managed business as Recently, realized our dynamics, of to well been to a

$XXX $XXX expected our of In Now confident March our This growth Publishing, of we of to adjusted and indicated with Print driven in year I'd declines our expectations which All American our the remainder for along Solutions, full of becoming Containers, XXXX continued year quarter being we expectation of the expectations with EBITDA. first leases plan year, for were and to financing earnings of with like by in for line that our call, EBITDA Based offset on earnings remain million is to leases. by in the and turn our Packaging somewhat results, the impact XXXX. continued the million. we full range adjusted balance XXXX negative and operating Facility

addition, In reiterating XXXX at $XX are million. for cash our we for least existing of flow free guidance also

details so through can the turn first Now take to quarter he over it Steve performance. you I'll financial the of

Steve Smith

and morning, Mary, you, Thank good everyone.

for quarter March results the overall the ending at look XXXX. first Let's

XXXX, Mary of differences. number compared adjusting days shipping quarters for X to that had will have the shipping our you XXXX We exchange in the count speak of quarter additional we first in XXXX. core earlier, the resulting sales day in we X reported X sales, other of to note net when more third walked shipping in foreign day in same through referencing quarter same than of days performance, day I XXXX of any XXXX. and first impact are number as XXXX, the the would the As with having we net in excluding quarter, the

core while of sales X.X% of year we up quarter period, X.X%. net prior XXXX, net first from the sales For $X.X the billion, increased had

to sales. revenue sales segments. cost improving our are mentioned, X and row Mary in net driven environment a line and core over improvement for segment despite the pattern of As investments are a quarterly steadily in sequential net a pleased in is third trend core we positive been by see past quarter making part our years, the is in has and This occurring Print Publishing growth we

The growth Adjusted the sales Net percentage due $XXX prior customer year year million. basis was for cost versus down sold associated the of prior well from period. offset XX flat XX revenue was sales first the as and including for was of as basis factors, $X.X million, approximately first Net were incremental number sold incremental sales the as was mix the of of by sold pricing cost Adjusted year net of sales quarter net quarter cost as Our for versus bad EBITDA contract a percentage of billion. from quarter product margin a earnings product our points compression period. was product period. debt. down less XX.X%, to less EBITDA a prior X.X%, $XX.X the points

process we the management. inventory charges to inefficiencies, price some due which Additionally, and integration-related impacted short-term experienced activities, increased

for Core than market its much Let's the revenues increased the move performance. results first the XXXX. net grew is XX.X%. XX.X% quarter segment sales Packaging now In the quarter-over-quarter, segment ended March quarter, into XX, better the which

revenue AAC approximately from the that about of of volume quarter, our X% growth organic benefit from came and X%. year-over-year X% growth was price. the this X%, Of revenues Excluding approximately in organic

net period. increases impacted Packaging basis was the X% down and as first and negatively a tissue, percentage up personal cost the service, and increased in resin can first million points period. protection year quarter from For this X.X%, contributed of Facility X.X%, XX $XX.X margins the prior revenues Solutions EBITDA core food, net towel categories were X.X%. increased customer while by supplies. the growth safety and was The and delivery. higher In mix in quarter, EBITDA, liners, from sales first adjusted year adjusted sales Packaging EBITDA quarter, for the In prior Adjusted the quarter, about

sales well this X.X%. in supply first chain We Canada also the select period. In by as Print expect driven as to corporate XX% which recover principally impact million of by from volumes the a accounted in year. the The had changes margin Print's in accounts. EBITDA and end of large to we EBITDA, XX revenues about prior some adjusted and a Facility the sales, percentage market sales. saw were continued strength decline. mix by a of customer X.X% in $X.X decline shift growth both declined and as off net which segment quarter, quarter, year in cost, core the down decreased net adjusted the X.X% of the of the in contributed segment quarter-over-quarter, rest Secular was volumes decline in most declines for basis quarter. price Adjusted was pricing driven primarily EBITDA higher this points Solutions

$XX.X the and volume net the driven a sales quarter, revenue reduction in contributed period a This from X.X% expenses. price. with down EBITDA, X.X% in a and Publishing most slightly mail. in had by of increase direct in In decline sales The For were our increases operating the decline the Print customers by was books mix, offset million first increase in by core year segment X.X% educational as the the partially adjusted in offset revenues. impact pronounced in prior quarter, an was earnings a increase customer improved first

the from XX.X% earnings the asset-based cash Publishing business period. a expenses. end March, $XXX mix reduction drawn EBITDA, prior increase operating be and to The and first in For and of had contributed to million year we approximately of of the in Shifting up quarter, $X.X in At balance sheet approximately adjusted can attributed $XXX the against facility our million. borrowing capacity had now million flow. lending available the

At business. August backed by ABL a of end net the debt leverage receivables As the ratio and X.Xx, adjusted facility borrowings the was for is XXXX AAC the inventory including to of reminder, the acquisition. our March, EBITDA

the the ratio had of right we approaching after goal XXXX, third X.Xx leverage and quarter acquisition. leverage strategic expect year-end net end By at ratio to net be that leverage our XXXX, been around long-term Our ratio is net of Xx. Xx, of AAC a our

XX, $XX approximately add integration about flow we For million. approximately would the operations cash cash $XX March million. the approximately over ended of cash just negative from XXXX, we flow free negative million. and $XX flow items free $XX adjusted for our cash operations, acquisition, first of quarter $XX restructuring of expenditures back from If flow activities, Subtracting generated capital have from was million quarter negative million from been cash

flow from a impacted year's our segments. balances inventory flow cash cash was was and While in quarter. first Facility reduction Print negative, favorably Solutions quarter free our in by Free improved primarily first last both

We by segment. year-end reduction in our versus XXXX Print receivable our small a accounts also experienced driven

debt and As working fourth pattern also year would that to can the quarter are pattern at bad distort our a strongest. be first seasonal. reminder, seasonality. similar to lightest a expense usually usually expect historic XXXX, but quarter our our note would results capital Seasonality impact plays as We generally quarterly role the an EBITDA our we could can this adjusted our have overall performance in a pace that

spaced bad information, similar year the XXXX, year. $XX about million, evenly last more debt we for your and expect throughout a expense but For amount was

metrics $XX remainder at cash of cash defined capital expect less expenditures. of from as Part flow we is plans free accounts expectation to improve the of least million receivable operations mentioned, this year. for XXXX, our Mary for As by flow the driven our

those We costs that run have will directly expenditures. restructuring of costs. XXXX and income types capital within Onetime be are income $XX between and that run those expected through and $XX million. are X integration the for through costs the integration statement million statement to There

We information in million, to principally to million prior capital systems enable in of projects be which incremental XXXX related is expenditures beyond. Similar $XX for expect spending years, and integration. and capital to integration to this restructuring range the will help efficiencies $XX

expected For XXXX, million. $XX our approximately ordinary be are course capital $XX million expenditures to to

For about integration comparison million totaled spending, $X million our quarter. related to there purposes, was for expenditures first capital $XX projects. Of that

now our Michelle, that concludes to remarks. ready So prepared are we take questions.

Operator

first Your Gaffner from question [Operator from Instructions] Barclays. Scott comes

Scott Gaffner

on the account Steve, receivables. just questions a couple of

part of customers. strategy you Solutions, within walking from As the Facility mentioned you're away retail some of these

walk First, year? through accounts receivable those there as of away why some customers? receivables to additional you is of you improve accounts can the you believe the going your from are there And as move you about at risk talk rest

Steve Smith

Sure.

we risk not we of make. work retail receivable in our first are all, exchanges necessarily we relates be accounts So that we question, the applied the as it Scott, -- to choices with as first our and do any partners, would incremental expect

relates year, this conversions the integration half next. particularly of have year will help as they moved time, price of the some that number for amount AR these profile. it inefficiencies. a business activities our to changes occurring the where 'XX system That same number a and our we well, second and as as Secondly, units. in improve of our within one and to from system had away will the billing fall our caused massive at we systems activities Unfortunately, we the that into of pressure And improve integration-related integration migrated of the data balance on

Scott Gaffner

some the of quarter guidance, kept there's And sounded just to about commentary obviously maybe they that guidance gave we most year at we as few than before, think the as of a fair? were headwinds Is the anticipated metrics least commentary Okay. you same but time. you mean, first full last I when you more like the reading the wrong? the are the Or the

Mary Laschinger

probably integration not recognizing would you're that we this the did the reading be, completing but exactly into right. would that we about I heavily have the we challenges We're year. thought say Scott. commentary No, where quite with

to appropriately feel are be. -- continue right felt to like we we we where expected we planned So and

Scott Gaffner

When Okay, we mean quarter, the in I moderate volumes, you they noted figure for thought you what's you question strong volumes? the a look bit about you move me. through obviously volume you the as little at -- in Packaging X% is last that might Packaging but extremely the can year, noted talk moderation driving

Mary Laschinger

Sure.

that between organic X% the as of volume, things the and X% had, we balance so of X% And price. the was growth. year. occurring of you We saw, a now see was couple

to to increases be are on because year. prior price compared there's impact to just year, last increases as rolling place all, less that as price going into we of the First of went

more about same it's we increase last price comps, So saw as in of activity level X/X year-over-year we're not anticipating of the and year.

nature, growth. So the that, by very is reduce its going to

That expecting are are international how projects us and off. strength also we We they in our of less tailor business, and come in front is and what very recognize project-driven, Scott, business. on

And so versus we know, have you growth. modest lastly, we're guess, our fine-tuning or we as expecting less I large account focus as accounts. less And that had to more growth as choppy, then well we account growing tendency of comes expecting that as are, play and a -- growth With base there large we're XXXX. into business coming very that, into on XXXX more our

growth as X quarters. quite experienced still we've but what last aggressive the as again, So not in

Operator

turn remarks. Mary further the call I back closing queue. Laschinger have I over questions no to in the for

Mary Laschinger

our and Packaging Facility performance to you off I the declines our flow. well, remainder the reiterating for year, we outlook our like and Publishing great free as are coming solid we're our with for a from XXXX cash in feel Based questions. Well, existing of Solutions quarter for and secular guidance first your to quarter EBITDA first in planned. perform start Scott, a Print. also in full year thank the offset results adjusted and results on continued helped

integration be of we to optimization quarter substantially we the the generate our element we Have by strategy. progress. expected is to for our a are business leadership begun long-term speaking forward to recent Key again return. Overall, of part with August today, in better our with and us we Thank second protect when in Print of the results. that you now joining XXXX, position pleased With complete made our the restructuring and day. great have end our we look XXXX you share optimization

Operator

Thank you, conclude This conference will everyone. call. today's

disconnect. You now may

Veritiv (VRTV) 12 May 182018 Q1 Earnings call transcript