VRTV - Earnings call transcript Q1 2020

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Operator

Hello, and welcome. Good morning, and welcome to the Veritiv Corporation's First Quarter 2020 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 would like to turn the call over to Tom Morabito, Director of Investor Relations. Mr. begin. may you Morabito,

Tom Morabito

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

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

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

in in to U.S. Non-GAAP slides. the of GAAP included applicable can section end call financial included of measures measures the At in The website. Mary. of time, are today this are our found to slides investor at the the non-GAAP to also and like presentation reconciliation our relations the presentation these measures the I'd and be over comments turn

Mary Laschinger

all taking are toll these challenging everyone, you both during on morning, Thanks, personally, issues to The COVID-XX we you Tom. and through everyone, the hope thank a facing Good pandemic professionally you us. successfully times. for is are joining and navigate and able

of continuing safely our focused customers. remain on while and we the to our ensuring and company, a well-being safety As effectively serve employees

actions impact provide on reviewing to financial we quarter environment. are XXXX today's address rapidly the to our is changing results, the we pandemic in an the will During the and on having first taking business call, our update that addition

for the our first to Turning quarter. now results

flow free capital. adjusted initiatives as overall in structure, first working quarter by a improvement reduced significant our and highlighted consolidated EBITDA improved Our margins, were cash both cost our lowered XXXX results and optimization

for compared day. year-over-year. to the quarter expenses Consolidated XX% adjusted $X.X improved margins, selling for million, $XX was XX%. largely up improvement selling net core earnings first additional was Consolidated billion, in sales EBITDA were supply quarter reported The the the prior-year with lower declining chain, first and due revenues period, to one down XX% and

benefits earnings the the impact the coronavirus the offset impact impact will significant volume minutes. of year of These did nature were a by operations results. The speak first-quarter balance not on have our declines. in of the coronavirus or I a somewhat on to few

balance I to At Steve hand, quarter, we comment ABL provide $XXX as asset-based borrowing as, and While similar the our facility now extended under had briefly lending the in position. information, on cash recently terms will refinanced more and end the of our sheet in well facility. capacity to million million detailed under on the want XXXX. $XX liquidity substantially We

X.X adjusted through you times who ratio Our times to our now first-quarter the year-end Sal, will I would at in generation cash first-quarter net-debt it enabled performance to segment. reduction a end over to EBITDA XXXX. free from our XXXX X.X by take at March the turn of to flow like

Sal Abbate

the XXXX, improvement first more year the become have in quarter partly good core and X% morning, up Thank which in of down buying panic to you, year, were fourth the Industry although, box over from Mary, everyone. shipments conditions in the quarter, market due packaging's quarter, an March. In revenues were first challenging. is U.S.

EBITDA Packaging adjusted industrial margins and improved over in first quarter packaging's Despite also the our X.X% XXXX. the of XX% was of Packaging's category slowdown initiatives, XXXX the in decline, business year However, the overall pricing year. an X.X% from pressures the by in in increased adjusted the to contributed revenue quarter sector. decline. to manufacturing corrugated EBITDA affected our resulting in margins optimization improving lowered first expenses, market

to XX% over in our was which facility down revenues year on segment. with line were Core year, our Moving expectations. solutions

decline demonstrated this due revenue first-quarter to resulted was results. with becoming choices the and a to first-quarter more strengths, choices strategic business, by segment The making dynamics. but XXXX success have as, better market, for of smaller solutions product, facility in by repositioning customer align our supply profitable chain our as customer These well in as

more adjusted improved our lower to and declined to pressures expenses. margins to EBITDA revenues. in chain which XX.X% print by Print from core the supply first strategic Switching segment. year Secular continue quarter. due than our year Our selling driven revenues lowered affect over our doubled repositioning, demand

also revenues by This revenue quarter. nearly over core advertising, in dynamics, segment's suppliers, Similar of well as the the as our up expenses reasons. partially and customers, decline digital order publishing market in continued adjusted by decisions but offset better secular The to by first was due in changes lower the XX% market year and other impact year print as, service requirements. and factors, due decreased patterns impacted EBITDA products, credit consolidation, was The earnings by customer publishing margins, volumes, print, driven nearly decline. declines regarding to XX% well continued segment's was as, to

the Adjusted reduction flat. improved revenue turn increase costs. over high-risk it this by for charges decreased lower now to due back in and slightly EBITDA in I in Mary. year were margins to XX% over accounts, segment EBITDA and credit will offset relatively year pricing Adjusted

Mary Laschinger

invested by portfolio protecting shared our value how we across choose higher to initiatives expect three that Last post Thanks, our we shifting to packaging Sal, with designed you to In across on XXXX, capital. would grow to these our shift processes do where in our and I commercial, and EBITDA flow services, All publishing solutions, levers compete optimizing create now and investing leading return market businesses, facility strategy. strategy higher-growth, our model. back-office that and in also these to and positions you chain, cash of operations. lead higher-margin and business we business to print, and our mix integration and adjusted to year, supply were a shared with I

commercial efficient and through will including emphasis greater with better to and lower opportunities. pricing supplier processes products our better management, initiatives, profitability more selling improve these on and also higher-margin end-use operations and label, greater our we and margins expenses. markets First, private cost categories, to with expect controls focus narrowing growth Through

handling, our delivery, back-office inventory improvement and third, in drive will in operations. operational efficiencies. drive supply standardization management improvements significant Second, efficiencies will more chain And and greater

strategy XXXX optimization as our and reduced the grew results first-quarter structure, around of working initiatives. capital. improved and was margins evident segments This demonstrated Our continuing around our our we segments, across our cost processes execution our

we decline industry. strategy, X-K alternatives restructure of an evaluation our As print recently filed while to part managing regarding supply the chain integrated the business, of Packaging of the our structural to this optimize

We continue packaging costs, evaluate to to while the and drive market dynamics lower adapting chain reduce alignment print. complexity alternatives with of overall to our supply as, customers as greater well

rapidly turning adjust it are update how taking Now operating and as essential business. to actions unprecedented an an this business is on the to the environment. Veritiv evolving and our is to coronavirus, we impacting

so can with consistent operating officials, the and guidelines of safely meet local our customers. to provided state, continue functional fully is needs business we by and federal, Our

chain, to selling activity. As efforts, remove costs model associated back-office with temporarily and us our a distributor, supply on our business order based allows

cash initiatives, and integration free capital. the our positively we as, processes to to changing our factors contributed manage due shown our the XXXX both quickly environment, working costs to well Additionally, have and in adapt These flow full-year and optimization results. experience as to effectively minimize as

range of of broad specific our certain represents little North and also aggregate revenue revenue. Our particular industries have No within single America. very or in annual a X% business customers concentration in serves with customer we sectors geographies

negative The our remainder coronavirus results of year. for a impact the will the have on

significant revenue experiencing expect segments The duration each print, declines by declines packaging solutions, publishing. difficult facility least our and very We then, and revenue followed of with to predict. declines extent of is in the

to will that anticipate also payments. delay some or fail make We customers

for business greater remainder planning the those potential been scenarios range the For we XXXX, our of a have first for assume than purposes, revenue modeling that declines of quarter. of

current are our specific with as, confident adequate costs, time, well are have we Given model profile our experience financial we this will combined business liquidity. our At flexibility, we as and taking. that actions removing in

significant well as, We as proactive our mitigate help access to several steps to effects have taken decline capital. strengthen earnings, on the our to of revenue the

locations. directors XX% by XX% operation These based the XX%, from workforce actions annual independent volume supply approximately include following: retainers on on salaries our flexing temporarily reducing senior to furlough cash XX% placing for company's position, at staff, business our temporary on for on activity; chain temporarily salaried depending the of a specific leaders reducing depending

We're suspended also the program. our We for employees. delaying increases repurchase merit salaried share

salaried for contributions matching company's plans. the defined suspended temporarily also We employees contribution

are including And capital spending, finally, expenditures. we further reducing

prior will not cash environment, EBITDA, this XXXX and our for guidance be updated guidance flow, we Given at the providing uncertain are adjusted expenditures, and time. withdrawing capital free

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

Steve Smith

and Thank you, morning, everyone. Mary, good

results the for XXXX. quarter first XXst, ending We the overall review will first March

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

of relates count, to we day XXXX. than it shipping XXXX quarter had more the in first one of As quarter in day had first we the

year's same comparable number will at of the For Consolidated period, net quarter. the the XX.X%. were sales remainder previous shipping of days prior-year quarter down revenues quarter $X.X XXXX, the the core for as with XX.X% from each billion, declining have

products Net for sold approximately cost million. $XXX products was the Our less billion. sold $X.X of cost the of quarter was sales

additional as, print or pricing, Net declines the improvements largely X.X%, versus was EBITDA Consolidated EBITDA percentage percentage management, net sales adjusted supply segment prior-year was XXX The XX.X%, due from prior-year the less quarter expenses XX% volume lower well largely both the to in first was as one for earnings as prior-year and a nearly and selling Adjusted first basis of products somewhat selling for quarter of day, chain, period. publishing. to period. up as due double sold was $XX.X the up earnings period, million $XX.X and in mix. from cost the of million, and strong sales by in margin sales customer a lower offset net points improvement

were as XXXX. and further U.S. Let's product eroded, down revenues now segment the with some into net ended conditions categories. Packaging X.X% XXst, pressure X.X%, for sales core the and market pricing in the move coupled respectively, in March first results quarter

in As been also slowdown the industrial mentioned, affected sector. we've manufacturing Sal by the

prior-year million Packaging X.X%, points in down a XX% from up was improved increase basis business XX.X% the which and decline of net net expenses $XX.X due XXX The contributed lowered adjusted as the core the prior-year EBITDA percentage initiatives, solutions margins from period. in Adjusted up period. sales were EBITDA, was decreased and was in by our optimization Facility to offset and revenues sales revenues. XX.X%. earnings partially

over by supply revenue to better a customer strategic for was to choices Adjusted year increased net was selling customer contributed XXX with in dynamics. decline strengths, and product, to as EBITDA earnings the due of XXX% the The year. million well supply EBITDA, chain expenses. repositioning primarily from X.X% our segment driven lowered as, and points solutions $X making The in strategic by market, as increase up Facility of align repositioning, success adjusted basis our which this quarter. chain percentage sales margins improved

continued in decline in over decline. our from experienced the decisions driven and revenues the Publishing net million products, down well and decline prior-year's due revenues partially customers, year segment requirements. core contributed market of up offset better core the suppliers, as dynamics, sales, and to lower XX.X% Print was sales declined were an quarter. XX% margins, regarding print expenses by nearly decreased $XX.X This as, XX.X%. and impact earnings The XX.X% service year revenue adjusted EBITDA, by net XX.X%

lower in order revenue in $X.X market over EBITDA, credit digital continued patterns and to and to due charges increases consolidation, million can volume cash customer offset year. for Shifting in reasons. improved the lower was high-risk due to The slightly Decrease attributed in credit declines be in reduction down flow. the Publishing in costs. EBITDA contributed adjusted by secular advertising, and accounts, balance sheet now changes and to pricing year volumes, XX% adjusted

$XXX approximately had the asset-based drawn $XXX facility lending approximately borrowing of million. against capacity and At end we the of March, had available million

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

the to Regarding we refinanced the ABL, the recently same substantially XXXX extended facility and terms. under

of XX% dropped end sheet XXXX. debt, the on long-term of of March million Our end portion at March the has net the million at from XXXX current $XXX $XXX balance of of to

flow Subtracting $X from from quarter cash expenditures operations XXst, XXXX, March operations, approximately about cash flow $XX we million. $XX flow cash of capital from was approximately generated of the ended For million free million.

cash Our payable in to improvements. and was enabled primarily flow reductions volume strong lower by quarter due inventories higher free process the and accounts

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

Operator

[Operator instructions] question of Your Babcock John from line the Bank America. first comes of of

Your line is open.

John Babcock

wanted talk seeing the I so if about to XQ, guess start. different businesses. that was you just I wondering you're could morning. far Good trends in the I

Mary Laschinger

morning, John. being then, speak to I'll speak to Good Sal to call. on and and packaging Thanks the FS. and for I'll ask publishing, print

Is segments correct? come the seeing in So your that of as we're are question the is trends the what we quarter. out

John Babcock

here. more in given Actually, XQ, coronavirus kind impact Yeah. of the the and just

a better on to that. trying just So read get

Mary Laschinger

OK. Yeah.

we to April, space, first quarter a did we came April. significant So the and in in ending as decline into relative the see print April

a space. You've publications from coming the the in of other lot recent people seen

reasons down would in with the looks in similar stay like. we for experiencing that. the that It's unknown -- publishing absolute would of of space roughly down that what something that an something couple print. similar saw for see what We We're the expect to next quarters same to XX%. also could We recovery be to it as

I'll we're packaging what And ask print publishing. Sal, that's to so, to seeing respond And and and in FS. you

Sal Abbate

April see In the we the in approximately second for times of we Mary. about the the the balance of off packaging were for an morning, times off anticipating one X quarter. half month. the improvement of Sure, Good later And the rate segment first but we're QX, being in John. did quarter X.X April, rate

is on depending After really economic the year second to with difficult quarter, happens predict, the reentry. the what the rest of

sure us We from as For QX times solutions. but approximately you gaining know, facility in greater against some facility first demand, our shortages off decline I'm the of the solutions, we prevented you inventory rate for X.X were quarter. had -- categories

packaging started to times they March we in X.X solutions. late about see about times and X and those in into rate declines So, April, rate carried the facility the

John Babcock

think to if on That's could also, And particularly Okay. then kind helpful. go some of I you in little industrial bit. the just patch a you And mentioned back side. weakness,

there Are generally, the right how some other -- trends areas are business of in now? just of your

Mary Laschinger

Sal?

Sal Abbate

Mary. Sure, Sure.

in manufacturing-based print and customers not aerospace, our all automotive, John. significantly though industrial segments, large segment, strength packaging right, and but The overcome offset e-commerce heavy slightly in food that's So manufacturing, also, they're and strained, then in industrial declines fulfillment, companies. in the by enough to those

are bit do We work. workforce. a folks in see XX% to we're return in strength the tracking capacity most as customers anticipate May of of XX%, the they than April as to little But coming reenter at that start more we

John Babcock

was whole. stand kind if print, you wondering of in as of That's on question your I about what guess, helpful. inventory was And like kind bit then, for had kind of I facility inventories and where customers solutions, about little a publishing? talk next just packaging, can previously, on were the I a talking touching you

Mary Laschinger

Sal, and give to solutions? on our do want customer inventories facility packaging some perspective you in

Sal Abbate

Sure, Mary.

shipments a the packaging propped-up-March we was conversations buying front relatively So are and and and our the on good But We in why suppliers, that those with did front. saw indications inventories forward coming second there anticipate in in that's we on shipment. have with March the folks some quarter. shape Packaging in box down

and we're improved facility improve shipments began a most down and we be the of then, are middle of our facility positions see have to our the early of to to really segment, very middle, in they one would In part starting occur. throughout strong inventory we that run-up solutions, did month starting in April. constrained the through shortages stayed part see in the solutions still And items see to but demand. or some But two most March,

Mary Laschinger

of of inventories board, and across that ended a of to soon the reason see being across because May. not And were lot our April have into board began mills, then, believe enough in that canceling not up of we print lot a we John, on the customers, likelihood high. The orders falling just relatively side, is those the but the and the with canceled for

would that high And reasonably we be our could inventories anticipate customers. so, at

John Babcock

strategic then and packaging? in of improved forward. about of And your going was plan you Okay. growth kind spending kind to if wondering more higher orient talk to vision next, drive more I how you mix can to

Mary Laschinger

at what now, you, is higher-growth on getting stronger is businesses, with our what already I choices. we've And stronger we 'XX to So announced and higher-margin terms those as strategy was facility in back was packaging which as and shared the solutions be in focusing of frankly, going time. made

lot to felt as see can end FS. well put So, the we into that use growth packaging, of as, in a product estimate results. very focus, quarter balance category the in we're today for about you to little all both what use impact going this hard of -- end It's of and effort as first the be our where in of here and segments, is with going a segments to the ultimately, our good year

of segments. would the higher on It's have But better growth the it's management to costs. end and improve categories profitability a that the lower focus a focus all right again, the and product our board use on post processes integration across

John Babcock

impact forward if footprint And toward see your Okay. efficient with the facilities, you what kind on you of having do more move strategy as of operations, this commercial any?

Mary Laschinger

to of Part the restructuring issuing looking So, operations on changes will supply potentially supply chain of we that the on an seeing to I believe X-K perspective to chain was there think our chain reason I we and in was do adapt could that the at We that be we're operations. think give operations. the impact mean already, some some actually chain supply supply in you it impact print. issued, February be the for

get go-forward to footprint company, has the packaging what right-sized different print. which also And in we requirements than is service we the for part of think what the see

in some the changes of anticipate to would supply we the months. So, XX over chain XX course next the

John Babcock

That's some are was on guess, over. obviously, going I And you mean, how question -- they're wondering at touched bit. debts kind and to I talked then it point. bad of if little before of last reasons trending? I about have a great. just I imagine you turn different up that you credit kind can I this And seeing

But get to I sense you goes as that how the year wanted for a are imagining forward. progressing

Mary Laschinger

Yeah. Yeah.

Okay.

we anticipating with that are going challenges, So, be there mentioned, as customers could some bankruptcy. into I

space stay got risk higher some well, risk, considered portfolio an over The frankly, in in those in we've been beginning company. of the very our of successful but of seen we our managed print bad that When whether you've the good to the debt retail and is and through some managing sure that in risk process customer in place, excellent it very the 'XX sure done, space job lowest of space. a we've situation been and we although, which publishing, has history Hard some have We print actually. 'XX went to customers, which we're making in high-risk the very it will in is in see the we've course predict in space, probably I'm announcements. look particular, way, again, right and the at you

but also be to their holding large are are expecting probably of firm see, and packaging customers request from that. it we we're we on and and FS, huge cash continued will right our is packaging but pull very feel been been pay, we extension so And some such surprises. to more -- able business that FS, for not know now and has stable. challenged, managed to business payments. The have where it's in beginning extension area that a well they're back We've managing and have in an that's Again, very like particular that

John Babcock

That's the help. great. I appreciate all

Mary Laschinger

Okay

Operator

remarks. the over questions Laschinger Mary phone I at further call to no lines time. for the are closing over turn this There

Mary Laschinger

call your Thank thank this and you on everyone, for for you, the morning. questions, being

me up Let quickly wrap here.

first-quarter EBITDA structure, both improved optimization were flow significant results by initiatives Our margins, highlighted in our cash XXXX reduced capital. improvement overall our consolidated around and segments cost a and and lowered free strategy as working adjusted our

strong debt addition, our In cash the free helped significantly leverage reduce flow ratio.

results proud has an I job which these pleased unprecedented navigating the Veritiv excellent team, and of and I'm am challenging very first-quarter with our done through times. entire

believe America, model, customer we our business coronavirus little do of and business and support. North the being with the revenue sectors have specific very or broad I concentration thank suppliers to and have industries range on terms of in employees, is we within While hard the work flexibility our serves impacted, all we business. all certainly a the which positions our manage like geographies of would well us to for our impact your customers, --

will of remain While to committed we success ensuring and long situation we predict while cannot serving how the this long-term last, current our customers the our company. employees supporting

look forward we Thank quarter you and and us our that's as wrap-up. we results. again second safe, stay today. you in with August Ian, Please speaking for share to a healthy XXXX joining

Operator

concludes today’s call. This conference

You disconnect. may now

Veritiv (VRTV) 9 May 202020 Q1 Earnings call transcript