VRTV - Earnings call transcript Q3 2018

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Operator

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

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

We will begin with opening remarks and introduction. 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, Jody, 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

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

Mary Laschinger

you joining drivers results today outlook. us important for thank full-year as our and of everyone, an provide and financial morning, update third our review Good quarter Tom. on Thanks, of the we some

also initial We offer on XXXX. some will thoughts

billion, achieved decline. sales segments X.X% our Solutions by compared the again Packaging period. revenues both while our Print $X.X in Facility top to up for quarter growth quarter, experienced positive third once growth we driven the improved were third net revenue revenue During segment. prior-year the Reported Publishing also and line saw

prior performed rate growth segment core million, as currency year. prior-year effect sales increased negative results, the earnings foreign operating XX% day, from our our effect when X.X% incremental of expenses revenue EBITDA well $XX as year-over-year. pleased revenues once the up major the all was the categories, by from net coming more up lower XX% American very approximately the acquisition. And with nearly one business. to now The All AAC packaging positive shipping period. One is and in driven exchange Shifting X% quarter. to across Consolidated as the were into driven it adjusted It Excluding the year. third are of compared acquisition, strengths again and year throughout well improved from Containers steadily with were the X% performing which growth Core year-over-year organic expected. by we was the has product

AAC in with of having we view continue higher GDP in experienced the Packaging, rate XXXX. For first benefit which we in nine as and XXXX not than the but Overall, see This is from growth revenue revenue incremental Packaging we price less is solid of slowdown performance. growth large increases, to are in we see customers XXXX. expect strong lap the balance expecting growth more modest will to to of as a we months as benefit acquired August because certain from

rate regarding to the higher expect the due factors XXXX, XXXX a as For Packaging in but mentioned continuation a expectation. we fourth of not as quarter currently growth GDP robust same than just

in year-over-year. segment revenues a core Solutions of decline quarter saw third Our Facility X.X%

in service our choices increasingly revenue that prune adverse our align higher-risk the adjusted mentioned capability. experiencing as on an previous selective As accounts in also and slowdown the a These some we customers EBITDA to had this effect segment are and product competitive third be as we growth quarter. we we quarters, with in two continue have in with

believe we Solutions XXXX, year Facility relatively due just For choices will the mentioned. to be revenues to quarter prior the flat fourth

of the to to see we reduction EBITDA decline adjusted the comparison. expect also year-over-year similar in a We experienced that quarter's in level third

a For and GDP Print pressures affect revenues Industry market model the volume declines be year-over-year segment growth. flat XXXX, revenue. for Print a the and Facility significant was revenue adjusted prices. continued Print. third changes. the by to somewhat nearly increasing driven Bad to increases segment's impact offset Solutions by between The type debt X% trend XX% we to price business core in quarter, up continuing positive to EBITDA of declined continues Print's secular due in our be expect issue

which improve the risk is over to result free and segment customer but The manage of portfolio. our to in continue making volatility. time, lower to are earnings volumes, We this reduce profitable quality healthy sustained has and achieve goal may flow. help cash choices for should And

balance the trends Print secular our impact negatively we segment's For continue to of expect the XXXX, industry to revenue.

in we announced the fourth to quarter. contribute earnings expect business However, year Print the to earlier restructuring this

than we worse volume continue for base to see our adjustments offering. market we Print, year as also Next product make could customer to decline and

of the pricing seeing addition XXXX. second increases In price for XXXX, stabilize some expect after in paper we half in grade to

that could incremental negatively be We impacted earnings year-over-year by charges. believe bad also debt

core that increased Finally, we to expect into earnings contribute XXXX. restructuring X.X%. business The segment's to revenues Print Publishing

an we this mix year-over-year. Earnings were in Although shift benefited and industry decline, segment favorable in increase slightly prices up volumes customers. within continued certain to a from

of increases. remainder we price expect the to see a XXXX, in For slowdown

decline Publishing XXXX, For prices environment consistent for are industry volumes stable expecting and moderating. with we with more a

third conversions, in multi-state significant operating business impacted the during as to completed we by be the noted have changes can was as patterns. another planned. order conversion past, in yet customer our However, now quarter, this system's Shifting

of like conversion XXXX, installation. conversion XXXX combination operating scale management will yearend. complex Overall, consolidation, sixth due we substantially to been our We the conversions, final large schedule. warehouse of remainder our have has by warehouse system to the that and you For complete be remind year system's a system and would

these putting calls, processes our earnings programs previous three major cost. on pressures on short-term mentioned As are and

on we long-term focus our to changes. integration, with As the well-positioned the we model of element business which optimization finish print strategy this year began the are

for consolidated year. balance to expectations Now to I the the would like our of turn

operating For the EBITDA expectation of declines of some growth with This adjusted full-year the a bad $XXX along full-year our for being be negative All million. continued American in becoming to XXXX, in million continue Packaging range of driven within somewhat financing earnings other by a to is to by charges debt, and expect segment, leases $XXX expenses. offset impact Containers we

we EBITDA guidance XXXX While on least $XX adjusted remains from level at cash of flow updating for are stated free our million. previously our track,

by process near The elevated receivable. now of anticipated segment driven zero, XXXX to We accounts early process-related be cash our accounts challenges expectations. integration reduced challenges from in thoughts offer higher is free expecting our this than XXXX I year. within to systems to are flow currently integration. as is this growth XXXX due levels on our like We some Packaging would receivable completed will anticipate and our be largely both now

adjusted For over business XXXX, by focus we driven restructuring. packaging, EBITDA expect is This continued print and seen our model in to improvement improve from on growth XXXX. additional margins, the currently benefits improving

the free receivable. processes us inflection also as We see integration the improving business accounts largely an and in that focus performance behind on XXXX to point be cash in impact our flow can will we expect

we As year. next full-year will XXXX fourth we we when year do results report XXXX our and offer quarter each more detailed guidance

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

Steve Smith

you, Thank good and everyone. Mary, morning

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

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

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

million as less for the $X.X percentage the XX.X% XX of $XX.X sales of prior year the year quarter for versus and third billion Adjusted the net period. XX.X% were net sales chain the EBITDA growth quarter product related supply of expense. third less up cost period. million. was efficiencies cost was basis year X.X% in sold for quarter XX sales net operating a percentage Adjusted Net basis earnings was less prior The sold products was up products down the driven period. a $XXX as from the was EBITDA prior sales by points revenue headcount cost of Our sold incremental of versus points approximately

third quarter sales revenues Packaging year-over-year. the quarter into move ended XX, through September XXXX. the XX% the with result XX.X%, Let's for not In segment second core increased net the

was the percent X% in believe performance. of our the approximately which revenues market year-over-year quarter, than we benefit is the Excluding AAC better revenue organic growth

and For of basis higher percentage period was from X% about year quarter net million down sales in year as a adjusted as higher costs customer while by at Facility decreased Solutions resin X.X%. product and offset mix. X.X%, the earnings core from of the EBITDA points prior packaging about the costs, from decreased up In $XX Adjusted third and revenues increased revenues quarter, storage period. contributed EBITDA sales X.X% third a XX prior partially the combination were

competitive experiencing and segment in product that accounts revenue we aligned are As Mary a our to to increasingly as service we better pruned some selective mentioned capabilities. continue risk this growth be in with customers higher slowdown and

sales year. driven year-over-year million the EBITDA prior down performance in have bad as offset year-over-year down Adjusted increases possibly in in quarter partially decrease market adjusted We primarily a by segment a shift and and revenues mix competitive reduction by while of are driven Print was of growth declines we basis XX% business EBITDA seeing by had also margin prior and EBITDA decline secular Solutions volumes from X.X% a a from in adjusted of decline Prints net $X.X increased this points volumes about in net revenue market third X%. the XX pricing roughly revenues sales were customer declined where Facility year the pricing. strengths. X%. the expense was partially and by in period. XX% contribute The low core percentage debt parts offset The the

increase print prices. up increase business net the EBITDA third as an increase in $XX.X period half. had in in and For adjusted XX% quarter, earnings X.X% largely decline model the sales first from expenses, X.X% that and segment revenue core offset during was million by contributed selling revenues. the driven due the This to more the change sales than year prior print impact quarter, the administrative increase Publishing occurred in In the an and by the was the of reduction third

quarter sheet EBITDA $X.X adjusted third earnings the from had balance the $XXX the The Shifting a lending period. approximately of at and prior million. contribute the we facility September borrowing capacity our million increase publishing about drawn end of had For asset year operating to to reduction and in slight flow, now X% in $XXX up contributed expenses. and million based approximately cash against available

As the the backed business. reminder, net EBITDA inventory end At the was by debt ratio of is facility receivables ABL times. a leverage our in the to September, X.X adjusted of

Our continues X a around be times. ratio net long-term leverage for strategically to

$XX prior cash last the flow from a million operations add Subtracting flow flow million we $XX zero. year's free XXXX which of from XX, we improvement If approximately approximately back cash generated negative roughly expenditures September capital For cash quarter. million its was from the $X of from quarter $XX our was the about and third from quarter, for about to million expense of operations the $X from restructuring integration would $XX quarter, third items the and the has million. year-to-date that million experienced due bad cash totaled have million last $XX third acquisition, We flow third similar debt activities bad bad of adjusted debt cash $X to been of year. quarter of up approximately approximately in free million year's

the bring about of debt the are XXXX approximately of million total quarter which $XX quarter the expense fourth anticipating in similar of We bad to XXXX XXXX, $X fourth million. to would currently

of year cash As both receivable growth challenges. Mary to for by flow now largely inventory. receivable our to Packaging as find potential levels driven and near The process-related be expect accounts from mentioned, zero free less and higher-than-anticipated the to capital for in within as flow operations, for is due segment increases the we expenditures accounts cash larger,

than we higher some be Print Our inventory our forward to may Publishing levels customers. of and also due anticipated buying have availability products certain for to in adequate our segments ensure

the in initiatives and working XXXX. in capital We are working on improve several fourth our to quarter

costs integration expenditures. XXXX costs million. directly within income the statement capital integration $XX through that through One-time of will to expected statement are We those costs income have two there between types run restructuring the those million $XX that are run be and and for

and capital spending information expenditures to systems approximately help which capital expect be enable We to prior have will million Similar related this incremental efficiencies. $XX future restructuring to is integration integration. principally for years, projects

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

million totaled integration $X was projects. that ready about For in questions. our the quarter related comparison to spending purposes, expenditures there to of take $XX That we're prepared remarks. Jodie, now capital million concludes third

Operator

moment [Operator A the roster. compile to Instructions] and We'll a Q pause for just

Your ahead. of go line Barclays. comes first Please question Scott the from of Gaffner

John Dunigan

you? is Dunigan Mary, morning, actually Steve, this Good how Scott, for are John on

Mary Laschinger

today? how John, you are good, Hi,

John Dunigan

Good, good.

of mentioned you higher is this going some year's So there a I next free processes out wanted gets accounts XXXX, in the the cash was from receivable, really pushing particularly expecting reduction million Obviously, flow. $XX to that as touch this you're first free the just into fixed year but into XXXX flow? on cash

Mary Laschinger

We're be for question that is on to not the month giving in will our work specific and in drive over any systems but with - opportunities target complete cash a year free at time, that capital of this being are for answer that. AR course with to next next completion, there generically more flow the your integration general considerable guidance for working improvement

John Dunigan

year, higher a was is the closer Xx that I'd have end with do for be assume bit the aiming little this this now to but year? And a of you flat leverage target - free Okay. of now, target has the the flow that cash end for to year, that you're originally specific for

Mary Laschinger

Steve?

Steve Smith

Sure.

than the model. given to higher year at end capital X.Xx of the the the discussed, end will leverage current X.Xx be working in result so we just of topic So we'd that the neighborhood X.Xx of we

John Dunigan

facility forward reduction from Okay. the to growth And then GDP low that flat improvement there seems solutions something due that - continuing somewhere think be rate? I is rate moving mainly the just on, business a going prior, said that pruning margin sales between you that GDP, be would or else for and volume around is of to growth impacting

Mary Laschinger

So here in 'XX, example, flat, do risk what on the of focus is trying to margin flat for is said fourth trying forward that accounts that What we it to could the accounts. at roughly that we're couple the not high be really segment and a is One is to talking really as to terms consider that we different pruning ways. in of expecting retail we is, revenues that space. more might business, a profitability more some segment GDP are those nature to improving - not look to we're for in accounts with be due What going we're the into what but quarter we're about growth. be just in we're you lower do of

accounts more seeing because chain we're our The have that is taking are our in supply we that underway increasing some aligned selective are deliveries with more types the about is we segment. on of seeing to that we second competitiveness chain supply be capabilities initiative in because

it's a being selective parts of So segment. risk as managing we well in of service who and that combination grow to want as some with on more

John Dunigan

on increased the you a on to or that then services, bit competition that adding seeing the And clarify just in pricing more? just that is expand segment, can more little on you're competitors

Mary Laschinger

where - and that around We is there not not on smaller competitive comment choices business so increase chain and are we're that's the space, this both so smaller in - space. a to terms Yes, pressures compete going in not I product taking to a in competition that's measure - the try want because you're more this and what some well as you but of hard delivery types we're so as that capabilities pricing to I'm there that seeing well of in as we order, who's such proactive think supply space, very an where in markets segment. see in in

John Dunigan

one reason quarter? line up you in notice if The understood, bit, Okay, just quarter, a just, that's quite guess, in and explain for going and that to can diluted the I jumped the know, with you had share last I one. be fourth

Steve Smith

what fact the by So in is we the income entire difference. it driven the dilutive net a where was you're that as it loss - dilution that's had and so be a net quarter's seeing would

John Dunigan

turn it I'll Okay. Thanks, over.

Operator

question of next from ahead. comes the Your Keith go SunTrust. of line Hughes Please

Keith Hughes

Thank you.

GDP comments a think selectivity margins customer to given zero So just this I these back switch side for positive now? and you 'XX, talked back get right should minute I - growth Solutions next through for the the to on about Facility you're right, going year heard

Mary Laschinger

at commented that business this Keith, growth focus segment say though, improvement. point. more what on will to on directionally, we do on line What haven't I less that trying margin we're and top is to with

Keith Hughes

And - of well, for certain a Okay. or certain of compression of is let switch over that's or back the this is - type causing we certain it that a type step a problem? products me on if to that the there causing are a category customer minute, some

Mary Laschinger

It's supply terms having profitability, as the to variation with that more in product. types in chain customers get alternative the do well certain that of of cause sources costs as they of competitiveness can

Keith Hughes

the is with And challenges you're right one now, online… of dealing online

Mary Laschinger

more serve. you'll that don't more that, the as noticed That's some have and have fine-tuning not it's growth we Keith, more well But the about space this what not is, into it's business. - getting it's type strain very think being mergers play. it opportunities looking so want in this say there's so again as for this for Well, are small space general other more because more to about we around activity target and the and been about us hard of we also where acquisitions about in of in distributors we have that put to fine-tuning customers to selective but they're space but we that order us tried that I and for business any

Keith Hughes

nice a top for question, terms you is line. Okay, run of final guess in of continuing I Packaging here

'XX, you the any difficulty] that to we've growth look would recently? seen from As [technical reason

Mary Laschinger

year-over-year factors, that of growth increases we're saw price Yes, that of for we manufacturing the less 'XX, couple terms not off One play would base. because that of be as we level would anticipating we're is quite and in to of the more they a comes the expect 'XX into in significant supply in demand that were tail expecting Keith. some

would that which we primary growth in So with an year-over-year we drivers of of our also and that be space. has larger in the anticipate modest of customers one gain the then the the have some would AAC revenue impact benefit and growth on more 'XX don't

up, you all grow planning at above but in general, when GDP expecting that not of as add So and as GDP hopefully 'XX. we or we're high above, that

Keith Hughes

Thank you.

Operator

our Dan of line Jacome Please Company. of go the & Sidoti And from question final comes ahead.

Dan Jacome

food Hi, specifically, of across good segment differences those markets you different in differences you're the play on medical, any if course, more, wondering any little markets? your end morning, think the can trends seeing? there's just fulfillment base also, I beverage packaging touch in and and a

Mary Laschinger

of materials, parts GDP broad equipment spaces across strong and and areas growth cuts the try such spend higher that obviously where industrial. the but fairly growth in manufacturing is more seen supplying manufacturing some well We've as those some in and packaging of all, on we are general focus we than products transportation as space. as we in first space, Hi, general, so Dan, based to building

companies warehousing. X% e-commerce providing fulfillment, and XX% do and We greater we in the doing more area target to transportation also do of support but some focused fulfillment, that and seen growth in we've are those range on

overall in have less - space food to And evolve. So supplying seen food industry been space, the we marketing as has growth those continues in huge growth more operations because there modest then in that that overall.

but manufacturing space, have And and in than fulfillment. what so, saw less retail we some growth both in the again, we seen

Dan Jacome

Great. did and beverage, say? Maybe food how on topic evolving just it the exactly you was

Mary Laschinger

Well, for space are focus more food somewhat us, to e-commerce the and tend of in we we food. on processing,

stay do delivery, in space And trends processing. the see less large for participate e-commerce we from so, that food food as consumers. away support and we more well in processed general packaged continue as manufacturing towards food We

Dan Jacome

what's the of go Okay, orders as kind And focusing competitive horse, to got to potential be going on be a going going it. guess, to we back size just Facility beat then not get to dead larger is Solutions, but it just challenging, more market to I forward? advantage

Mary Laschinger

products entertainment, as universities. across bite actually lines so, that entertainment, things manufacturing is selling airports, as we providing focus No, another provide customers parks, and Where with such our can we their focusing and are it's do in the principles, that. can that. And technical that theme sectors need bacteria more as like than for manage and - manage the for reduce things this a to those broad that, and for in it's Cruise where them. venues verticals value-added spend have on consultative we to order are like a gearing well segment them large in sellers them we in example; provide that, general, solutions where sale where help in space come and cut we

more so also is larger specialized it's deliveries that focused venues. in more a And into pallet sale

Dan Jacome

participate specific helpful. in… very that's Are targeting of these some Okay, guys that new vertical you a entrants

Mary Laschinger

us. from new space, are we not focus competitive the that just that They No. more more away are spaces. entrants in for It's developing move

Dan Jacome

Okay.

Okay, thank you.

Operator

I'll back concludes that the now for today. period And over turn call Laschinger. Q&A to Mary our

Mary Laschinger

questions. Thank our quarter everyone you pleased your are we third with results. for Overall,

do year. adjusted complicated the to by guidance despite XXXX, the of strategy. the of - now the of long-term closed set ahead at EBITDA are our of complete to beginning element we substantially our we be the year, initial optimization to with are the looking end we initiatives, expected provided integration completing the With on remain In track

our look revenues everyone, next an expect see as packaging we and continued have point expectations. consolidated joining as XXXX earnings, fourth as to today, an EBITDA, results, details us for cash and on inflexion additional for to year in growth good adjusted currently improvement we and Thank in day. XXXX well share a quarter full-year forward and free Thank flow. we and you and you speaking give with XXXX, you our For

Operator

This concludes conference today's call.

You may now disconnect.

Veritiv (VRTV) 6 Nov 182018 Q3 Earnings call transcript