VRTV - Earnings call transcript Q4 2019

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Operator

Good morning and welcome to Veritiv Corporate's Fourth Quarter and Full-Year 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, I’d like to turn - Director of Investor Relations. Mr. your begin may you call. Tom,

Tom Morabito

and soon. and Thank Steve a welcoming President all back from of we everyone. and Smith, Chairman you and Financial from Planning and Chief morning joining you, Mary Nebel, us. Treasurer; him Vice our remarks our Heather, recuperating for prepared Today, Thank hear Financial medical to Officer; is Analysis good procedure, you our Executive forward Chief and look Laschinger, Gui will Officer

Following we remarks, the questions. prepared your take will

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

differ is includes, forward-looking and Report in XXXX morning, in the to news Additional to, on Investor from not those contained is release our posted XX-K, issued the This filings. information factors section statements that veritivcorp.com. but SEC at is risk Annual Relations Form company’s limited the cause in in which the could contained in this results

included the our presentation and measures applicable are Investor the measures our can GAAP be of the website. the included of these in A the financial comments non-GAAP to in today U.S. are found in measures presentation end Non-GAAP of slides. at and reconciliation also slides, Relations section

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

Mary Laschinger

we today, financial Tom. our thank results. Thanks us for quarter as review and and Good morning year everyone fourth joining full XXXX you

the We of guidance XXXX important and our drivers will expected on for year provide performance the also full share thoughts some year.

well Packaging improved free XXXX Solutions. results and adjusted cash quarter EBITDA and flow highlighted were consolidated in full-year by fourth Facility margins strong as as Our

our and impacted Print Publishing However quarter earnings and overall our for challenges year. both the negatively revenues segments in and

of All to at prior sales core same net quarter. rate. also fourth nearly declines revenue period declining revenues the segments down the the experienced with our year reported this XX% billion, four were for quarter $X.X compared our Consolidated

choices in impacted planned the revenue was of that Print Some solutions, decline quarter. facility made customer and strategic Publishing as we the

for Print million, year-over-year. EBITDA improved and the somewhat selling in earnings The to declines and adjusted and Consolidated lower quarter about supply was by is Publishing down largely reduction volume margins expenses. offset chain XX% fourth due in $XX

margins segments. However adjusted all EBITDA of in improved four our

Reported net by The compared year rate. $X.X XX% period, down at to core decreased sales the largely and for was revenues year were the decline the segments. prior about the and driven about Publishing Print billion same revenue

Solutions Facility year-over-year. were down However also Packaging and

was decrease expenses a XX% $XXX and by down million, The publishing revenue chain and debt supply Adjusted XXXX bad offset lower and mainly selling year-over-year. lower EBITDA expenses. improved earnings print the nearly by for declines partially margins, was in driven

In core by the U.S. eroded I'd segment. to to performance revenues Now market shift coupled review down fourth pressures like price Packaging X% some were product in year-over-year, further in with categories. the as quarter the conditions

were slowing also down the has weakened half. corrugated second half. products for resin in past over with Pricing the The down and shipments U.S. box industry market pricing based year the in second

X.X%, in year-over-year core the decreased EBITDA decreased XXXX. X% the For fourth down Packaging and market. revenues for Packaging the which the adjusted was year with believe line X.X% were quarter in we full-year

negative year first in Strong impact the despite leases certain of decline experienced the replaced being adjusted to due the relatively of to margin operating kept our costs prior financing leases. increased by management half flat storage EBITDA year revenue the and

X.X% fourth from in increased XXXX margins X.X% the EBITDA the adjusted quarter packaging’s in to of XXXX. fourth quarter addition In of

selling positive to year, to compared first EBITDA And related the last continue improve operational as but slightly we efficiencies. to XXXX, revenues full-year half margins year end from and for expect we packaging the For XXXX. in to decline of focus adjusted on

with These to of Moving choices success dynamics. choices fourth stated year-over-year. our chain by product and line negatively our better impacted as Facility strategic as XX% quarter making revenues segment customer top a results align market, as this are supply customer Solutions in with to for prior quarters, we on our in repositioning core strengths, segment, well decline

by have full-year full-year For down quarter more X%. These were business revenues core XXXX becoming as and in but profitable results. a XXXX choices Facility Solutions resulted smaller, fourth demonstrated our

selling our expenses margins In our than X% as to improved chain supply year-over-year increased EBITDA more the from as strategic adjusted quarter repositioning. due lower well and

XXXX, XX%. increased about full-year EBITDA adjusted For

For XXXX, full-year we see of Facility expect Solution XXXX. the revenues declines to similar to

similar a mix to due improved volumes. XXXX see lower the to as chain However efficiencies we adjusted despite EBITDA customer levels expect supply and

and results to These quality was driven by to to our well risk. our a and as our credit disintermediation certain portfolio industry choices Switching reduced have affect charges This significantly our XX% consolidation that core in revenues receivable fourth secular XX% year. demand, debt quarter supplier revenues. our lower impacted lowest driven continue for bad of and nearly levels improved decline to decline in actions Print dynamics actions as the by years. the and Print manage accounts market declined segment, customer have and their the of disproportionately combination four

and by down partially year expenses. was and decline offset in segment’s the to XX% lower nearly Print revenue for the due quarter The XX% adjusted the pressure margin EBITDA fourth

industry negatively We will expect Print’s to impact revenue in XXXX. continue trends secular

be affected declines several the perform as to However we lap market expect the we will results. that closer less items overall industry that onetime XXXX and we to

The costs adjusted to XXXX Print’s all in efforts reduce expect into of XXXX. factors earnings optimization to only we account, rate that volume of decline declines to similar Taking in EBITDA partially will the be offset these the ongoing impact XXXX. of

ongoing uncertainty the in the of decrease and our in nearly segment’s in XX% adapt Publishing decline core will we to light quarter XXXX. The in and the to business. In the structural continue about industry, fourth changes infrastructure revenues XX%

as credit also reasons. customer by volume, in well patterns changes Similar to market to due but factors, by for Print, and continued Publishing in secular as other was impacted order declines consolidations

Adjusted slightly pricing improved XX.X% EBITDA decreased the and and reduction due XX% cost in management. for the by year fourth quarter offset the segment in to the in revenue

our adjusted the both However year. and quarter margins did the improve for EBITDA

expect decline XXXX For Publishing's on estimates. XXXX, based revenues rate industry to slower than at we a

We XXXX variable cost decline a based on also that in modest have management. overall believe of in business the our earnings expenses nature could this and

initiative to business and leadership to facilities optimizing higher post processes investing higher brief providing strategy businesses outlined strategy in a update solutions, a the turning margin Now previously into integration. and Print and on optimization including our growth, our by positions protecting guidance. our our company our We our packaging XXXX and transition services, value-added Publishing and

optimization drive our near-term we is are in earnings not to continue working plans reducing and XXXX they optimization margins, implemented the doing successfully in improving and adjusted of We impact so consolidated structural EBITDA the in while enough in are in our costs will and minimizing the print substantial decline publishing XXXX, initiatives capital improvement and which dollars.

we drivers closer to to in but expectation expecting We the to expect to $XXX would EBITDA Print that that dynamics. perform the levels. this given industry industry dynamic million this our challenging historical doing time, be factors growth packaging include expectation to so change XXXX Considering decline, guidance normalizes and an range $XXX over Publishing of million. for be those we Key are our of adjusted and levels of these year all

not packaging the in optimization any and margins and half our potential improvement the include We cost reductions from and industry further in does year ongoing further ongoing in from and The improved in guidance coronavirus. also business the related initiative. optimization margins the reductions to of our second improve impact to anticipate cost our

meaningful significant a The as inventory. generated improvement in flow. and free compared resulted declines impact integration, volume was had efforts of lowering positive accounts in a record and million negative $XX to capital free cash year due we to XXXX. XXXX which improvements working receivable post was optimization Our process cash on for million flow both $XXX a

indicated flow on of we repeat the the level million. $XX quarter and expect we to call, million As cash this believe flow in free annual we sustainable to do cash $XX not approximately XXXX, is performance free third

to at $XX flow be cash free least expect we million. XXXX For

I'll performance. it he the take to our and fourth through can quarter Gui, turn over of full financial details XXXX Now so you year

Gui Nebel

and good Thank everyone. Mary, you, morning

overall the in year and full December XXXX. ending results fourth the review first We'll quarter XX, for

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

count we had As we the the day the the it days relates to of fourth fourth as shipping XXXX of XXXX. because quarter number quarter in in had in same

rate. period XXXX revenues we were of net $X.X the fourth from number the declining shipping year as for billion prior XX.X% down we in Additionally same core days same quarter the Consolidated the had at with XXXX. sales during had

points $XX.X was period. the a $XXX for of less basis versus sold was and of net in of cost million less net $XX.X period, million, prior products up cost was sales the sold prior both adjusted product cost improvements Our quarter sales quarter mix. sold billion, to the segment net down largely percentage $X.X was or approximately as pricing XXX fourth customer from in for million due sales EBITDA XX% the year the XX.X% products Consolidated year

resulting EBITDA the in the quarter decrease Higher the million other unwind a approximately year was X.X% prior a was XXXX net fourth quarter driven in fourth publishing Consolidated of XX% the The by decline drove as as the our the adjusted plan mostly of of quarter accrue earnings. print year-over-year. from and fourth and Adjusted same of decline. segments’ EBITDA compensation of over percentage the expenses for period. balance the decline sales larger $XX.X corporate incentive in

XX For down end the net billion prior had from December of period. sales year we the XXXX year XX.X% $X.X of

XX.X% year-over-year. sales core Our declined

million product a billion, billion, of period. about of was year the from sales cost product sold Adjusted the a products our total prior sales XXX the approximately the prior percentage EBITDA approximately sold net net sales $X.X as period. was basis For from less was of XX% $XXX.X $X.X for of of year year cost less was net cost year points a XX.X% up decrease a

$XXX.X from EBITDA prior decrease XX.X% of of year for the year was the a year. driven Adjusted Over as prior earnings down the XX% of the lower points by X% net percentage a segment. and was basis the EBITDA the was publishing earnings period. sales XX Adjusted print a versus decrease from million,

both down fourth December ended as for results respectively segment in X.X% the XXXX. packaging quarter price the categories. to the pressures core in coupled revenues quarter and move some eroded, fourth sales XX, and year and In market product net in further conditions now the X.X% with U.S. Let’s were

packaging down X.X% and were year the segment’s net X.X%. were core revenues For sales down

year prior contributed EBITDA of as margin up EBITDA the was Adjusted management. was prior period. adjusted improved basis For from in quarter points million customer from $XX.X down in the X.X% mix margins a the our year packaging sales improvements fourth and period, the from percentage X.X% net increase to due XX process

our the first year half X.X% in in increase to the higher process higher was the fourth For full XX by year by down year contributed operating as to leases EBITDA management packaging offset of period. partially financing impact due net the the million from the Adjusted adjusted year up of sales customer prior the margin from period. X.X% improvements certain mix during Similar from storage the a cost was and while being and points replaced leases. $XXX.X quarter margins prior percentage basis EBITDA especially

success repositioning fourth of decreased better supply market chain with as XX.X% revenue decline the sales net making the dynamics. our core and product revenues both choices customer for a due solutions was quarter the and strategic strengths segment customer as well to align facility to by In

X.X% year increase For sales the core net and decreased solutions revenues facility X.X%.

to and repositioning. year. points quarter for from increase year X.X% by Adjusted sales Solutions the full selling EBITDA the $XX.X and in our as well basis million $X.X expenses XX% as earnings points driven the The XX For X.X% EBITDA approximately was to strategic and as chain percentage Facility quarter increased of adjusted XX up respectively. primarily million in lower a contributed supply margins and basis in fourth X% net improved

as a net a was of experienced made sales segment those driven supplier In in manage actions choices and decline quarter core affected disproportionately by the fourth customer that decline print to dynamics instead revenues. credit This both results XX.X% the our risk. of market combination

For revenues and XX.X% year a down net print were segment sales in the had decline XX.X%. core the

respectively. print full nearly $XX.X to the and adjusted and $XX quarter XX% million EBITDA year For in million down fourth contributed XX%

other The continuous by the The sales and in earnings quarter. impact of the margin expenses. offset sales quarter was credit as pressure as consolidation XX.X% from volumes, publishing year to lower in In to customer secular patterns market due and was partially revenues reasons. declining both the changes lower revenue fourth due declines factors prior well core decreased order net only in

had sales the year the a For core publishing XX.X% net both revenues. in segment and decline

$XX.X quarter year offset fourth decrease attributed adjusted and the to slightly XX.X% $X.X publishing in contributed the be and volume management. full million XX% down For respectively. reduction adjusted cost pricing EBITDA and million in EBITDA The and improved by cannot in

our At lending end approximately of have million. million Shifting the balance we facility asset and against now drawn cash base and available to $XXX approximately had borrowing of capacity $XXX flow. sheet the December

a As receivables is of backed business. reminder facility and ABL by inventory the the the

has of X.X I end current XX% the our to $XXX net million December would down to adjusted was the dropped $XXX prior note balance our times of portion sheet in year EBITDA also that debt from ratio net X.X long period. from At million. leverage on term year-over-year times the

$XXX cash approximately million operations $XXX $XXX roughly million. December flow add would the approximately subtracting expenditures was of $XX ended If for from year been and $XX million. free from flow due million operations capital to integration For acquisition cash cash XXXX from items free restructuring XX, we about cash approximately cash we adjusted flow generated flow million activities of of have XXXX back

Our prior volume in cash improvements. due accounts was year versus approximately inventory receivable free combined both enabled the and the and to XXXX lowering strong primarily of which reductions $XXX down flow process million by

range performance cash million. is We XXXX XXXX. repeat million. we $XX to not Mary million current experienced of believe As $XX capital anticipate level expected assumes are free adjusted again of level no approximately flow benefit. total this at while $XX we million for $XX XXXX, sustainable to levels our flow Also mentioned flow uses strong and the EBITDA approximately to cash in working of we expect of annual in free capital free do in least cash Once be expenditures This XXXX.

remarks. Operator, now ready that take to our And questions. prepared concludes we are

Operator

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

John Babcock

coronavirus. and if you've of First the particularly far reference of you you I solutions. quickly that, all, the on as I know was it you about what talk you guess seen know pertains did packaging facility impact so wondering could to

Mary Laschinger

impact And going we seen explain So impact would some where course have it's because early but expect to very we difficult our it’s But see might not date our forward. obviously - impact judge. in me any to in minimal of performance. on even let we

could It come ways. in three

we do of of First all, out operate we that companies have there. technology supports an international business some manufacturing that that over are China

that so the it the could working And there, to supply chain. extent impact people not over are

on some although next work be that in going couple it us. the to latest it weeks, to The is of some back have had the could in have material don't word we could believe are they course - of term near to but that the impact we

in huge packaging that but business. particular could it a about impact. materials not it's second China a from - The amount, we where our that impact could but for expect It's us is again have it we source impact do nominal area to rigid

in is area unpredictable third and very our packaging of first that - a The it were our which those could business. both is in

haven't interrupted the area difficult supply it third be we assess, support. it don't bad, us seen I we which is significant. were if of although it Again that have in On packaging but we impact that companies indication also some our global on manufacturing to the would John, believe again that is guess business yet if could supporting chains got very any

again impact where of solutions we're impact company if theme venues activity, to parks, we related stop last our have to time people the cruise reduced service material visiting on we're or modest not provide our point FS not kinds - And more business. domestic area could it a But that those affects to choose a this time. at business lines, is at facilities that's in the expecting

John Babcock

already impact aforementioned the assume, is I Facility in And Solutions on guidance?

Mary Laschinger

because yet. impact an to not seen it haven't It's as No. of we

John Babcock

how And efforts quick optimization wondering relative going was you expectations? a if update to your the in know kind are could just then on provide I you next of particularly

Mary Laschinger

efforts So well. - our going very very, optimization are

felt to go benefits is to was $XX John it have XXXX if a that both cost said least I we we and those we at of we So we are, our we was I we $XXX we margin and early then improve committed benefits $XX million coming Where from could due think at there you - back thought optimization $XXX million to. think EBITDA to XXXX million announced improvement. of that reduction already a point later And optimization maybe that million met that adjusted benefits.

more signaled We is we which we today. what see our that in there haven't upside feel to that do mentioned comments that but and we is, more

terms gone driving well working well year flow very, and as So was you improving reducing has capital, both it generated. this margins of very in that the costs that saw as cash reducing

exceptionally operational three So as I there chain excellence, the commercial, think of we're note on back comments. supply and in the office well levers more upside mentioned we executing is and

EBITDA it we to expect put print and we would and uncertainty EBITDA business tremendous commitment with improvement print timeframe relates back the to out that we We that not had to given $XX around there. XXXX. that in the As publishing million made, in the meet with had the step the $XX caveated million we

sure. it be so, for delayed And will

commitments print declines. negative point. revenue terms We haven't But only margin back in of publishing and out has at and come that made, the those and been said the what - is

John Babcock

the half? you're expecting quantify And of it you're could there the in you that in first I growth Packaging guess about declines - in of about what sound thinking on going levers And XXXX some declines forward? and more the expecting whole and - then half - then you like for does you pull you as were first of half if kind to the second point, you and growth - I are catalyze Packaging, year in talk what sort declines revenue like first essentially wondering all, clearly sounds just what do of on was have a to can

Mary Laschinger

you've on of an mentioned the in seen we and as as is space. both second I of what's see by with driven resin-based think and market we the price volume Yes decline level packaging corrugated you're the yes And - in half I the increasing I going so did well some know are as familiar industry reports. There the s use dynamics benchmarks products. in

as we XXXX. general first So at me half the look we in the let of would year, about talk expect

growth negative of year. a in first expecting the We’re the half

Probably not and half experienced have of too several being in course we're in over we at of year. the then different growth anticipating to to drive And do the pull than of to second what the that levers XXXX. business. year the slightly improve the end positive We the expecting

First all around of just in and more focused business. us has all better done business gotten the understanding - past the managing and optimization the the year work

our is, anticipate of we continuing to offshoot that an well. margins is And actually improve as

And business dollars at just so integration. post our on continue is managing even better the margin to gross improve the will if challenged topline total based

the to are specific accounts - have We we well that well a programs capturing as as because as. existing new launched sizable as growing accounts also within marketplace player ranges from that we've in

the accounts today. some marketplace of on Putting of one we're because more national players national focus few our in the

with end well. feel process year towards improvements structures we the more focused believe and growth a that can And We and we between positive as driving positive agenda. margins more the growth and of generate so,

which things in got better can through in it benefits One is price integration margins. cost efforts - you see we delivering both addressed optimization management is that of through our and once of the we've the and

John Babcock

impacting the wondering factors And then could just was next of if talk free flow working items? I cash you - about and the some capital other

Mary Laschinger

talk and about Gui in about I'll working free talk cash So flow. capital general can then

but well capital - integration working of cash saw improvements to process a as result sight was we volume particular again the systems, we information our we're on it on better accounts only receivable chain receivable on as so our the because as throughout integrated. in entire as as well supply - of common declines, levels significant order from And improvements and not inventory get better line post in inventories. Again of continue having we're to accounts

as through our of of in And improvements network supply we've we're process worked most we installing - as inventory. of the under that's generated so, the order-to-cash chain having the work And better line improvements completion bring management able the to DSO. systems through with of and one of consolidations, sight warehouse improvement mostly

out able the We’re to take level that integration. haven’t prior a at able to working been capital we to

speak levers of the So, business. on And let those to Gui are big flow overall working I'll the capital. just cash the

Gui Nebel

year that cash for the capital. - flow Yes in cash working driven John, the strongly the was you saw the performance by free

One we expecting of comments made that see not XXXX. similar a to is the are we benefit into

adjusted walk a you XXXX. range me bit let million of $XXX gave through EBITDA. thinking So how million $XXX We about you the between we’re to little guidance

you ABL of the you'd to the based $XX use million $XX If interest that, to somewhere take get cash. of million on cash of between balance midpoint

CapEx $XX talked about We of million. our about

do the $XX math a So before few you items. get to million you’ll about if

XXXX. read merger integration not complete. once or our related restructuring capital we're XX-K said expecting also use to And for source of working the would plans we out you that are So material is

So expecting we’re items. outflows those to any related not cash

by $XX down And factors. least So accrued liabilities. driven that just cash about million minor of some the and for difference between cash $XX I backs small associated at add is running through million maybe with walked you

John Babcock

between EBITDA Yes about wondering will gap about, whether time and over. turn a was you of decent over should investors last and kind adjusted I then before it and if EBITDA, know a there's of I kind just how just you clearly close? still that could gap talk question think

Mary Laschinger

out. start me let Yes

There’s XXXX So XXXX and look of the and change then just Gui to actually all material XXXX. - first is we on what made based a and earnings. of between quality at this XXXX comments a as

is filings that had and we've look see had the you'll you earnings has And almost if or we and that of the year-over-year. go doubled in there quality so,

Gui Nebel

we just XXXX? million restructuring to $XX to integration Yes, our as going XXXX for more we're talked that and items about one to be in that lot a related though number zero that cash fact to flow item - closer of is looking cash

Operator

I to call like closing time, CEO, Laschinger back turn this to now over remarks. our the would At Mary for

Mary Laschinger

Well on thank you John all who for today. your those are for questions call the and

our XXXX results a adjusted again improved of cash by Our well subsequent debt were free and in as highlighted four reduction our strong segments. as flow EBITDA margins in three

In job reductions as addition dollar and our improvements working publishing print the gross businesses. Veritiv as has team had our which portion has in and significant profit done in a flow margin of offsetting plan executing we declines the optimization an excellent resulted and capital cash cost well improved

- of to print to with and structural we publishing growth, will the portfolio these optimization continue mix During in of our margin our us higher will to ongoing initiatives in we the transformation our for margin businesses believe benefits adapt year. industries the XXXX, and and execution the decline continued higher benefits drive higher efforts combined

joining us results. our Have speaking call, quarter look May good in first day. as you we you and again, So the thank we share a today forward with in XXXX to for

Operator

This concludes today's conference call.

disconnect. now may You

Veritiv (VRTV) 27 Feb 202019 Q4 Earnings call transcript