VRTV - Earnings call transcript Q3 2019

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Operator

Good morning and welcome to Veritiv Corporation's Third Quarter 2019 Financial Results Conference Call.

As a reminder today's call is being recorded.

We will begin with opening remarks and introductions.

At this time I'd like to turn the call over to Tom Morabito Director of Investor Relations. Mr. begin. may you Morabito

Tom Morabito

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

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

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

I'd call At over to like the time to turn this Mary.

Mary Laschinger

year on full our we Thanks XXXX Tom. our Good morning financial an everyone for joining third quarter review update and and today as thank us you results provide outlook.

flow well adjusted in Facility EBITDA third Solutions and quarter highlighted and margins Our as our improved free were strong as results by Packaging cash segments.

Publishing and Packaging. to the expectations and our general below market year-over-year ongoing Print revenues due in in were largely consolidated well However softness structural decline segments and declined

quarter. $XX period XX% adjusted Print as compared third largely for down XX.X%. of quarters and improvements sales in print Publishing Facility sales net revenue year Solutions. this some the and with review experienced for volume net the declining was in earnings similar we in quarter Consolidated Solutions of Facility in of to planned billion All EBITDA offset about down lower third about declines were somewhat the Additionally strategic XX% quarter. the our to the reported cost publishing by customer core quarter now in the X to margin Consolidated choices segments declines due Shifting made prior revenue was and to our decline previous segment. year-over-year. our Packaging The was performance by and reduction million the $X.X

in X% and in in due year-over-year. EBITDA from to in to was revenues customer adjusted Packaging margin X.X% margins core Packaging's year-over-year the due were The quarter just over customer down changes earnings increased improved mix increase mix third over market The process improvements slowdown management. shipments year-to-date. past with market weakened in markets box some to down non-U.S. year conditions has a certain slightly in U.S. resin-based the categories. sales pressures and of price and flat U.S. the products

For for of the the improve year. continue be XXXX and in we margins fourth quarter from to last to packaging revenues adjusted expect soft EBITDA remainder

our Moving on Solutions Facility to segment.

repositioning but in better are quarter We dynamics. demonstrated customer product third by our make choices choices for as a results X% our line year-over-year. customer pressure we on strategic align choices smaller revenues quarter these core being our more put believe Facility These this top with business Solutions profitable third continuing prior decline As significant have result of in to a market and stated results. will by strength segment chain quarters in as well supply success as with to

as credit quarters, improved strategic margins due chain supply certain Our and and were retail repositioning. adjusted as XX% we increased EBITDA chain prior indicated our customers due And year-over-year dynamics selling expenses to exiting about to lower we supply from risks. well

our and business the exit oftentimes During of based companies products known This the array With serve Saalfeld but soft US third X% sell. as approximately in about broad and redistribution US quarter services, business distribution a less Facility the segment. Veritiv's by to characterized for we revenue than decision orders smaller made greater accounted of of non well the having products, core XX% as was rest the smaller of annual delivery Solutions generated as the of distances. revenue profitable

XXXX our a material expect segment. see double-digit the be to fourth did and exit in the so the where affected revenue While results quarter not declines comparisons a more revenue third have impact for will on in quarter year-over-year we

For the of remainder XXXX.

to We expect the facility solutions revenue further just due choices decline mentioned. see to

just was dynamics industry core an driven see over our year, to of Print continuation Print declined the of to experienced decline pressures revenues. the by nine year of drivers disintermediation lower continued actions disproportionately revenues demand driven third but subject which combination revenue market months a and key data X/X in supplier read of risk and year and expect first by impacted XX% that affect Switching during trends. our we customer our However, of study recent to improvement this consolidation to Secular segment. Approximately the by quarter. nearly a the results. certain in

EBITDA impact partially In significantly to have due bad choices been our year-over-year segment's choices have Print quality debt expenses. which and on approximately by the making of decline The offset adjusted revenue our accounts our XX% down lower have segment to margin we may receivable continue was have manage reduced portfolio in charges. and pressure to addition a improved volumes. risk credit Print negative These

with also to certain volume in lower of continue declines in by factors secular into EBITDA offset changes XXXX by reasons. the Print expect Print's Similar of by all XXXX was XXXX. was for revenue costs some negatively quarter. credit secular optimization segment's we only reduce improved in XX% better print to expect the to quarter of of for this trends adjusted XXXX. along impacted impact business in We these account in efforts pricing earnings but fourth of declines model industry will in to than retail XXXX. the partially The to affected quarter fourth and print offset the core Publishing ongoing Publishing the continued segment Taking slightly balance impact will be our revenue XX% decreased executed loss about accounts negatively decreased volumes revenue Adjusted market EBITDA cost nearly third the management. declines year-over-year the due the reduction in The

we greater a For X the expect segment's the XXXX at previous rate of fourth quarter to revenues decline slightly quarters. the than

at same decline to earnings prior fourth expect the also quarter. the rate as year's roughly We

XXXX Turning now consolidated guidance. to our

post-integration The XXXX publishing. of print factors goods flow third To generated as approximately had year the optimization Due of segments free and publishing will from the both and $XXX meaningful of $XXX in decline of compared in that XXXX an adjusted improvements expectation the the less free to gross defined was of which be from for to down rate process effect now profit and income idea million of $XX previous we deterioration effects and guidance Print inventory. you assumption at in least of $XXX million. our increase efforts as successful of range XXXX. EBITDA significant. key offset includes at are improvement full year-to-date process our $XXX raising $XX third of our million guidance approximately flow results working for forecasting as and $XX our receivable up of businesses volume this to been million and similar focus The million negatively has are Due to resulted for to in reaching cash range in to lowering of declines post by these impact statement previous expect we of cost million to Publishing decline give on our majority a The due has sold In will both cash continued print $XX flow quarter. we our million. million declines third the Print million. a positive accounts $XXX A the we negative the strong cash sales to capital quarter of of on Publishing the least XXXX XXXX well quarter net a this to integration

our strategy protecting our higher you services would providing thought the our growth year business positions Given into outlined initiatives. our leadership Print -- including optimization our the outlined and processes company we Previously Packaging in we to strategy Publishing update higher-margin Facility Print strategy value-added we transition we have and business and had our post Solutions by with challenges briefly on optimizing in investing our businesses integration. this and Publishing

implementing successfully our our are are optimization and We ahead optimization of targets. plans

to also growth Our into Packaging extent continues Facility with shift to lesser business and business margin and higher Solutions. a mix

goal. near-term pressure However and publishing the communicated previously is structural our improvement print in cumulative achieving adjusted on putting EBITDA significant declines

goal to expect will expected. than originally we While achieve take this likely it longer

February. multiyear more We detailed guidance report full optimization when earnings our will we provide next XXXX a on update year

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

Stephen Smith

Thank Mary everyone. and morning you good

the We review for the results XXXX. will quarter first third September ending overall

day referencing the for note performance core when excluding to exchange differences. net we reported these that any As review we results sales adjusting speak please count the we net foreign are and impact sales of

we in count to the relates of than third XXXX. had XXXX X third day quarter quarter it had As of shipping more day in the we

Consequently during quarters number were same the down days second net we number days XXXX. period for down we quarter X the in reminder had the net prior with sales in from as with XXXX. the year shipping of in we quarter will have core $X.X shipping same billion less a day as As sales the fourth of first XXXX XX.X%. the and having had Consolidated XX%

cost sales largely Net products year well $X.X percentage $XXX up Our XXX basis and quarter as of in products cost sales pricing was approximately customer both XX.X% to sales Net mix. was sold points was sold segment prior of from for period the net as the sold less cost products improvements of a about less million. billion. due as of

versus year for adjusted down XX.X% Consolidated EBITDA period. prior $XX the million third million $X.X or quarter the was

versus as net period. year $X.X sales prior EBITDA segment's versus the declined basis Consolidated third for Print Our driving approximately quarter the was adjusted the prior adjusted quarter. a decrease year-over-year that year decline of in EBITDA XX with million down X/X percentage X.X% a of points approximately the earnings

of and prior sold had not did as there helped mix have an unwind corporate in addition earnings offset the and third other year's of year's incentive chain the Margin headwinds. plan to increase products quarter an costs quarter day compensation this partially X benefit. third an these lower expenses supply as that expense back-office extra management In and was as our well

into changes to U.S. in X.X% due sales for customer revenues down were adjusted in percentage period. slowdown quarter. or million respectively market up $XX.X in contributed certain move Packaging a EBITDA segment third Adjusted non-U.S. in and $X.X prior year-over-year. points basis now core categories. some the as Let's mix Packaging's million the and net results sales EBITDA the conditions of a XX in was pressures price net from and year markets X.X% up X.X% the X.X%

to as XX.X% of choices the EBITDA solutions The to a adjusted Approximately revenues by basis the increase X.X% XXX earnings while channel expenses core and prior from dynamics driven in chain in net The decreased sales customer Facility credit impacted as customer combination revenue also segment earnings that supplier margins of The this increase ongoing decline well margins increased as XX.X% net and year up to from driven mix in of in line. experienced primarily capabilities. points to year-over-year. lower the fact disproportionately EBITDA strategic was manage Print results. from Facility made service period. to X/X our due was product as $XX impacted certain were actions customer of selling a effect we've X%. percentage dynamics repositioning. increasingly these Solutions revenues making top margin competitive and improved our decline well and our our was management. this a contributed due process sales was and and that sales which The improvements are XX.X%. market million supply net down choices by decline we improved core Adjusted decreased as The segment align risk

contributed quarter EBITDA adjusted the million Print $XX.X third XX% For down year-over-year. in

net offset The management. revenue The decline for XX.X% in sales due earnings continued revenues and adjusted some Publishing's secular decreased contributed prior XX.X% decline only lower and of loss attributed reduction and EBITDA credit and partially volumes year sales XX.X% expenses. impact accounts the industry by from core of by the in be pressure retail the to cost margin respectively $X.X down slightly was in adjusted was and to pricing driven Publishing EBITDA The offset the reduction can volume reasons. improved certain quarter. a the primarily lower decrease year-over-year. in million in by

the third $X.X of quarter of million in XXXX. bad debt $X.X down million expense entire company quarter from the had For we third in the

experienced cash lending consecutive borrowing approximately X For expense years. to basis in quarter reduction $XXX level September in available was second it the facility and and the on our debt had bad an sheet a asset-based Shifting drawn quarterly Print Print's now segment of absolute year-over-year flow. end At of balance approximately the capacity million $XXX against had we million. and the lowest

reminder prior X.Xx a the net ratio leverage of from the period. year EBITDA business. by end in backed the and ABL of the adjusted As September facility is At debt was our X.Xx receivables the inventory down to

balance Xx. around net million to year-over-year the Our I also long-term net has goal dropped of $XXX that a would debt current $XXX long-term note of ratio continues on to strategic sheet million. XX% portion from our be leverage

operations Cash add million from approximately from we the was $XX capital for generated of about million. quarter operations cash flow from of flow expenditures flow have been integration restructuring third and back activities $XX adjusted approximately $XX free Subtracting cash $X roughly $XX million. the we to would items cash If flow cash approximately due million for the quarter acquisition of free million.

and as comparison. our shared our our guidance in as have for cash anticipated and as the well cost expenditures capital annual as As both well integration declined restructuring with quarter-over-quarter nine-month

million by and versus both Our which year down due strong quarter. the enabled are primarily was $XXX of cash reductions. improvement flow accounts quarter prior was approximately volume free receivable X/X the the to lowering combined third Approximately of inventory

several X/X by improvements optimization for which and of process result last years been our other the The had deployed the initiatives. was many of of enabled integration the

As versus cash a cycle quarter. result improved the X prior our conversion year days has

flow performance $XX that expect year-to-date working While uses cash of cash duplicate do this this adjusted is approximately annual assumes benefit. in not of to free We EBITDA $XX guidance flow to strong range XXXX. free This capital million. we level sustainable are experiencing level believe the we ongoing of midpoint the and million no year's

capital any guidance lastly currently our flow total free And working XXXX million. expenditures While anticipate we expected be are sustainable our in in incremental assume to not do capital approximately we for reductions benefits cash and capital working XXXX. $XX

take questions. Denise are remarks. now That concludes our ready we prepared to

Operator

with Thank from question Your first of you Bank [Operator comes Instructions] Babcock John America.

Your line is open.

John Babcock

wanted I sounds was to Just XXXX. should want on also well this kind has also plans. that to could you generally earnings think everything if Good that optimization -- morning, sense of there how just wondering and get but -- pretty for start like the year in how it I a we about was impacted going

Mary Laschinger

call. John Good the on morning, thank for you being

we costs and initiatives So around as -- haven't reported back that over of similar imagine updating terms based in ago that. that add quarter had going actual and that as ahead. in some this but we something the laid XXXX. broad first benefit you year would significant optimization we were we the improving been Go as may a out margins for year. to Steve reducing it well benefit can has expect It -- anticipate and of has do

Stephen Smith

could total which get X/X of point John also improvements us the have how tell as you some been And have reductions into of it's and X/X we about think been year about cost you this benefit. margin that benefit about at we impacting the would

John Babcock

plan XXXX think guys to vantage to early about but at XXXX. about realizing how to should you helpful. key least the factors earnings already That's and from XXXX that then our maybe think Okay. bridge point we little a And it guidance bit from for have assuming also

Mary Laschinger

Facility specific haven't Packaging that year-to-date our similar we estimates have the the not Well what in we could our is as on but in continuos fourth think to outlook is Saalfeld maybe business We given continue to growth. do you key We going the focus to anticipate to given to of we the Print our expect the of we business and revenues looking today what but saw alluded be how with print we due business saw as in biggest see as declines we share margins Publishing. continue and area guidance our to factors at in quarter are would haven't degree and are the an to grow business. as look one Print we we in we I same XXXX where that the structural across that well and business board at improve we Packaging what decline already we exit is Solutions

around a revenue Packaging decline is segments making it's growth. the margin terms So in combination whether in estimates revenue of in or growth it of X

in business We by cost supported will also our additional and Facility our have then margin driven with improvement also decreases efforts. optimization Solutions those

guidance We February will haven't in we obviously given but yet specific do that John.

John Babcock

And able then by longer-term fair do kind thinking Ultimately year? achievable quarter. What then kind the bit down were you what of like you you the over this next like target? think as this net debt it of that to of a of couple are sounds bring And years? end is

Stephen Smith

So the in leverage seasonal $X.X an we first the is we that have years. of have trough John accounts our as payable all the a fourth because million outflow last typically of quarter few fact the in

back outflow of so And up that we AP. expect tick of would in quarter the because leverage to fourth seasonal

the down see we With to the will forecast. in LTM brought trailing forward EBITDA guidance also being down coming

up. will to also that go So leverage cause

lower of So to earnings leverage and up. slightly go seasonality the a cause combination stream will

purposes we it of might with acquisition have AAC to to above Xx our times term ratio target. investment going we that times long-term where below due flow. cash be as a strong surpass we at for longer the There'll relates the did leverage it we as As that targeted go where

John Babcock

Packaging the a And I you to sense there. ultimately in that a provide wanted customers? the to of how solutions types packaging just has sustainability how generally business you then And them? harder that become is get serve also Okay. topic impacting And

Mary Laschinger

continuing in do sustainability also So strategy with topic of customer Board out of meet a various just the of actually array we is shared our with needs. we space It offer that you that products and build important of packaging Directors ago. is we're today. agree We and a incredible is very couple an that pillars that the broad already our platform to a weeks of one

have needs and a are that agnostic So the fiber-based a And substrate product customer not demands. is product that area helps resin-based customer or meet we a will constantly more supplier product we friendly. that customer well where in we're those because today from or to the meet as it's what we're type offerings tied like we specific that needs. sustainable that products developing product fact all we're that But position going feel needs with benefit And forward. a on environmentally support in our about the working partners are to great

John Babcock

Okay. then question. just And the last

paper the the in signs next are Just seeing quarters? couple America. quarter? in started of improve at that have and improvement in it any like Print about channel you to far how And this least the over inventories also North you Are of businesses thinking looks so Publishing

Mary Laschinger

the inventories lot there's slightly So you of we would agree industry. that going in are the but a on changes with improving

making of well. all next no credit In longer as what the impacted implications made be do there's longer channel we high choices choices that well we the the negative disproportionately decisions for anticipating Because product will we customers have into sell -- the not gone because had. we some around as year. products we look some to year similar fourth we're we've of some to quite that risk channel that to all alluded that the And And distribution are example revenue consolidation of through certain saw as that which the support that them customer we have no that. would of quarter distribution some been have impacting mills them as

our expect would XXXX. as revenue to we they in declines so as not were severe be And

Operator

Mary at this no further call Laschinger. queued time. the questions up turn back are over I'll to There

Mary Laschinger

Thank for you your John questions.

highlighted and performance in to enabled very third well margins were Our by us significantly results increased EBITDA Publishing our as reduce and adjusted improved debt. flow cash quarter of which The been and Facility has businesses our Solutions free as Print challenging. has Packaging strong

of have on has flow. However well us which results. improved we in quarter as share Publishing resulted speaking our you margin declines gross Print done began multiyear The unanticipated much we outstanding year Thank with executing look improvements early year and our plan significant forward profit to next a and today for fourth optimization and optimization efforts full great XXXX reductions cash cost working segment. which again job excellent in capital as offset in the joining our and an team as and our you day. XXXX has in Have

Operator

conference This concludes today's call.

You may disconnect. now

Veritiv (VRTV) 5 Nov 192019 Q3 Earnings call transcript