VRTV - Earnings call transcript Q2 2020

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Operator

Good morning and welcome to the Veritiv Corporation's second 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

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

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

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

Mary Laschinger

well. Tom. us. are you for your I joining Good hope thank doing of morning and you Thanks each families and everyone

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

taken in on second year. provide provide help financial perspective to and our to addition we have mitigate the the on quarter During the remainder will XXXX actions impact the COVID-XX our we call, of today's an update results, reviewing of

the to our quarter. for results now Turning

margins and and took actions were impact along strong despite results in to adjusted cost preservation the I highlighted improved were industry. Abbate, Chief chain expenses. lower selling now margins by The it despite approximately EBITDA as volume impacted of and reduced second about across quarter significant million, the with for with second segments segments quarter period. free down $XX the adjusted the decline our and Operating paper like structure. The to XXXX due revenue by EBITDA was $X.X all revenue. prior will the ongoing we flow only a revenues continued improved as revenues in solid would COVID-XX, were quarter who our XX% cash offset COVID-XX in sales Consolidated earnings associated core COVID-XX the declines by down quarter segment. for quarter the second efficiency you to programs, was X% decline. second consolidated than of significantly performance others. through The impact more Our second alleviate net our billion, compared to to the Sal our cash and led cost take and our quarter challenges and Consolidated Officer, to our turn partially decline year-over-year the saving of largely with some structural pressures supply well year volumes over impacted revenue

Sal Abbate

impact category prices the quarter, particularly be Industry down in continue contributing the in to shipments conditions XX% box second to all. second core in the quarter, of Thank the Market COVID-XX. decline. the corrugated both sector. were year-over-year, you an U.S. with In due morning were Mary and largely good overall in to manufacturing industrial challenging, packaging. approximately revenues the Starting market down and

not well, pressures EBITDA industrial nearly in manufacturing. performed businesses X% enough e-commerce year-over-year. and fulfillment Packaging's increased to adjusted the our it While was offset

adjusted EBITDA the from second packaging's margins improved initiatives quarter X.X% XXXX efficiency X.X% the second in business XXXX. Our margins lowered of of in resulting improving in quarter and expenses, to our

were year-over-year, Core our to segment. approximately down on XX% solutions also impacted facility Moving revenues by COVID-XX.

increase While steep had in equipment was traditional than revenue more revenue personal strong and product a away decline offset protective quarter, by a this our hygiene-related categories. from categories home

As impacted customer the product as in better second strength expected, made our dynamics. this XXXX choices strategic we we quarter to as was well revenue align chain with segment market, by supply and

segment. expenses. these our EBITDA the increased continued approximately solutions demonstrated second the smaller, ongoing made core pressures facility margins due COVID-XX choices, from business chain XX% our and adjusted past Our revenues, lowered affect by as results strategic secular improved profitable over a year-over-year which more selling Switching quarter. print to and our to declined supply in to These which months. over XX choices XX%

EBITDA result, expense. the revenue XX% quarter adjusted increased continued Publishing's in a bad revenues near The approximately breakeven. breakeven As and market core decreased reduced second publishing was due also was COVID-XX segment's to near debt EBITDA declines volumes. to secular due in adjusted and

over take Steve it so turn you he will performance. XXXX I through second can to our of details the Now, financial Smith quarter

Steve Smith

good Thank morning everyone. Sal you and

consolidated second the XX, quarter review results June for first the will ending We XXXX.

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

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

prior sales $X.X revenues XXXX. down Both the quarter for net XX% quarter in For an billion, previous from days have as this the the will have had year year, But we year the full number we were shipping day first as the quarter period. day remainder of XXXX, shipping quarter. XXXX, of of core for the extra the more one and same will than consolidated each

improvements was products lower sales period. Our a cost prior earnings for in was due of largely of of and strong percentage as or XX.X%, EBITDA in year products by sold $XX.X from for up cost margin of pricing Consolidated to versus million, the $XXX print largely year as from was prior supply of million. for volumes of was down Net was as points net selling net offset chain effect cost and was and The second the products Net quarter $X.X adjusted segment sales EBITDA to both management billion. period, on quarter sales the well points adjusted second publishing, a the prior up XXX sales as Consolidated basis the COVID-XX sold partially million and less approximately the customer mix. quarter decline the sold expenses. X.X% X.X%, percentage basis XX period. due $X.X less year

the and quarter. June COVID-XX segment Packaging period. sales contributed $XX.X strategic sales XXX in print segment. up the decline our and as million core in The up pricing to coupled due XXX decline the a points sales a COVID-XX EBITDA Packaging Print by second XX.X% now in down up $X.X million Facilities driven and decreased Shifting revenues. EBITDA, balance and down the an the from million this effect quarter. as our XX% net year U.S. XX.X% down XX.X% solutions sheet revenues and core were $XXX,XXX, from a Let's net now year's eroded, EBITDA in year-over-year. basis revenues adjusted revenue year's Publishing XX.X%. XX, These $X.X net borrowing XXXX. move into At of declines as Publishing repositioning approximately well of last contributed capacity product increased had COVID-XX decline some were solutions respectively asset-based to in of EBITDA, The sales the adjusted at of were and the the both secular lower flow. the conditions end reduction revenues as a effect percentage pressure the negative ended with net million. market. had The $XX.X prior of second experienced basis the the of core second net the facility in market due EBITDA, year was the segment the $XXX Adjusted adjusted $XXX approximately adjusted quarter. results million the ongoing and sales positive for in further to in June, in market. both quarter Facilities and were contributed of XX.X% effect the X.X% of $XX.X year percentage million as had categories. prior cash of Adjusted ongoing revenues from period. last we points a down lending available million core net prior and X.X%, against in from drawn XX.X% XX.X% from in decreased a quarter. was sales X.X% to decline secular EBITDA

our the from the As net receivables ABL business in ratio of a XXXX. reminder, was and X.X At backed extended facility to times inventory prior times, facility we and by down refinanced EBITDA the the end adjusted year. is June, the X.X of earlier leverage this to debt year, the and

not portion, current Our has including from XX% long the debt, dropped million. million $XXX $XXX to term year-over-year

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

volume which free the due the lower Our flow reductions. was over in I will cash to and call back to accounts to Mary. inventories now the strong was turn lower receivable, quarter due primarily

Mary Laschinger

of And shifting year. Thanks to rest the for outlook the Steve. our now

uncertainty. COVID-XX in environment of on and remains related half see to still to significant impacts dynamic The expect We there's further our business the XXXX. second

we As continued a planning are for business. result, the in softness

second earnings first half down year, the stronger anticipate year for from usually Veritiv, of will half. While this be we the the is

following. second Our segment of the the year for assumptions the include half

first packaging's continue and well. anticipate expect the manufacturing perform We half fulfillment remains and comparable industrial revenues We be to to as to earnings challenged. to e-commerce

current decline some for slightly be it this for year business facility home earnings and continue that venue The our comparable of levels entertainment of with lead will this expecting the a and expect events, We our segment. of weaker. believe many revenues half customers, from for of earnings in to print not first The to guidelines coupled us publishing recovers. we the revenue extended the to to from could second half or structural time are take postponement be large recovery and before solutions work

positive half expenses. On XXXX, capacity adjusted the basis, than year these volumes Given segments In positive of the and facing we potential in half driven continue bankruptcies. by the customers in industry risk and XXXX lower to risk these flow. print expecting lower EBITDA higher are difficulties we higher of generate more the expect and charges second publishing. an the our a bad we these both debt of of cash segments, the note, increased foresee for half from consolidated to and pricing the be inventory On a first and in free debt both segments, bad in excess second of revenue,

cash free and driven in We performance by lower receivable. flow, inventories are to however expecting see strong accounts

we through done The April preserve the filed excellent we in in took our our of in months. call, month. first mentioned business actions several the a organization several stabilized As past mind, cash an costs job in were has following managing temporary and level. quarter reduce which permanent COVID-XX. described in to The this And actions, on we decided with has new at X-K last light

salaried by our reduced Canada. in U.S. we First, positions XX% approximately some workforce and eliminated

will certain facilities centers. which mini year, smaller, all of we well of this are Second, close as locations our more the warehouse print as remote majority distribution

which completed to annualized $XX XXXX. million restructuring, million will in million actions charges and million $XX in and and between expect with substantially that end generate incur should of connection these the $XX between this by We we be $XX savings

substantial supply effort separate by from We needs which response initiated the us changes segment pandemic. well lowering and Additionally, the model in to and alignment as to COVID-XX. and in to with in plan the alternatives complexity we review position in of impact facilitate and process described our flexible the assess the with restructuring overall of reducing is integrated supply business restructure structural well managing liquidity was is our primarily business continue chain COVID-XX earlier, to XXXX a believe better as chain our our chain to This cost. supply continue towards customers view an still

we business will ensure we questions. needs taking business. our structure align This Additionally, to long And ongoing ready our the Ian, are cost of now concludes with are the take to prepared permanent actions our better term help remarks. success

Operator

[Operator Instructions].

of Your of question John from with Babcock line Bank America. comes first the

open. is line Your

John Babcock

my thanks and taking morning questions. Good for

in that sharp, seen knows? community how publishing, Just that wanted clearly have have thinking or you challenges by you maybe the of causing and light you time business? guess the you seen I there in decide with least Who print is or start kind mean, have a businesses they the you discussed know whether past, the point very this out in about to divest in there. it reevaluate even recently? your But maybe some I how and have declines that been been at at out, business, is those buyer speculated I investment the are might to that of not to

Mary Laschinger

this structural continued been as has ongoing decline. with an you know, John, Yes. the challenge

continue many continuing that are certainly that under we for at business. the a the from excess of inventory costs, first well we with take also an generates currently associated We as the with that support to way. a positive might, both But think to of out low standpoint business downsize we all, business to to we And very our that of that we on think chain match to as business point flow have cash look that lot overhead going continuing costs as, But are us. in these initiatives supply with system. with direct at what's industry and have challenges I it

outlook the to not next now. the I so negative going potential industry there's relative what some as right we of because be And seeing upside for for balance just to we where adjusts, the year year, as be this are as think are may

reduce So cost cost back business. segment to to again, out, continued from the as overhead well both that focus if announced X-K packaging corporate the The for an March better in indirect costs. the in to as determine with reducing we under are the on work in and business align direct overall driving to the still effort differently and off is complexity way business we operating business the

John Babcock

I Okay. contribute be coming potentially get earnings I the assuming like significantly be better I modest we revenue, may that here. That's but there in helpful. guess, it same how publishing regards, if still And then help incrementally in to the saw with the to pretty quarters, mean, business print some compressed better guess and it margins? will is even over however volumes does recovery, negative, quarter.

Mary Laschinger

a earnings. in small significant has impact move A Yes. revenue segment that in on

so And overall that does substantially, a quite small happen. should move benefit

John Babcock

Okay.

other, there's margins, So guess, we back-to-school better should XQ somewhat XQ, trends? and and maybe sort bounce from in any of I expect election-driven assuming

Mary Laschinger

would going managing John, I job dependent be to business outlined. risk that, bad but would of that's that somewhat the a which be debt, say done that the we factor of on tremendous has level a that

John Babcock

to ago plans color I Okay. little That's this. great. wanted mean, And you in and X-K packaging that on the mean you to guess you if I your so to and I there get then, reduce you talked and about ability released think I just on at bit longer in are or out are while a how how focus thinking, might solutions planning the U.S. with rather to areas, workforce, guess, grow of facilities a impact ultimately more term, as kind which kind of all? I

Mary Laschinger

Yes.

of of reduction broad-based. XX% first all, was So, the

either the level terms in differences level significant the function. of the of any reduction activity or in were given there business However, based on

gearing to we and the make in that organization have are packaging in the segments resources right our we so growth FS. sure And

what reductions And areas publishing print so space. those and in obviously we we on saw fewer saw versus the

it across them significant. functions segments, So the difference but was but degree broad-based and between of was

John Babcock

-- Okay. And then

Mary Laschinger

And ability most inhibit packaging our FS. not it grow or importantly, believe John, to we do will

John Babcock

like example, of venues. areas and part and talked mix And know I past have might some kind are market, breakdown solutions. cruise wondering economy. of kind in mean able schools about was of question provide you for be any there of I the the we to sort facilities Okay. ships, then just public like end last seen And on if obviously other I how you the in by of

business sense venues may seen And to public so volumes? that hit for of a versus how a to much the some of I wanted get that exposed not businesses much of as is the to have other

Mary Laschinger

Yes. to ask question. going I to answer that am Sal

Sal Abbate

morning John. Good

are relatively we business, solutions facility the in diversified. So

is overall. impacted that segment one second almost with issue the to the of that business any impact all our were isn't is customers, really there So equally. quarter The industries weighted segment

are impacted. The the sail quarter. venue it lines So obviously cruise moved going was not They third now to fourth again to until large had quarter. the entertainment

October. Now they have pushed it out to

are that. we impacted So by

and month-and-a-half education be it an the so. online will across higher format, for states elementary there's the that or at least On education, indications many first

impact that our government property second So and as industries, office home. will work as our which to half are from performance well management and business continuing

to uptick slight but And in July, do June nothing so in year. see compared we a last and

we so industry, and are industries half. second as the go quarter, second base how the the with severe for but decline in And not more bracing customer for the a will protracted we as market go that

John Babcock

for talk one could I the more so the print third detail, Thanks of want actually just question. did was trends same wondering Sal. I are far just kind well? that in and you Okay. the in And about you publishing to packaging as quarter kind perhaps in if there ask seeing of and

Mary Laschinger

to Sal, you speak want to packaging?

Sal Abbate

Yes.

has So second improved has been, again through the it packaging quarter.

first than second So do the was anticipate be half to June the better second we of the half. But first quarter. months in the line couple of with

first would different material So there's nothing packaging, significantly in than that the be half.

Mary Laschinger

we John, something not on say is point improvement that time, we a yet. print this in seeing would the And trend a but are side, at modest

John Babcock

the details luck Okay. and the quarter. Fair enough. all I appreciate good in

Mary Laschinger

right. All you. Thank

Operator

are There no further --

Mary Laschinger

questions, further no Ian? are There correct, Okay.

Operator

at are turn There over this time. Mary. the further call back questions I no you, to

Mary Laschinger

to wrapping reduced efficiency strong as second ongoing our highlighted the adjusted as of the mitigate flow quarter up quarter actions our and around XXXX and In believe, programs solid comments COVID-XX by, taken margins our you. strategy improved EBITDA our consolidated results cash our cost structure. we Thank a free were and our right. here, All have we impacts segments,

flow our levels. pleased times. significantly debt strong I have allowed challenging these our navigating job proud am through us our reduce team of I second an done excellent quarter addition, free Veritiv members results and who cash with the to In am and unprecedented really

our structure of we well long with better and the the substantial of success. While actions is business to ongoing us ensure impact needs our are believe being business continue taking term managing to position and liquidity, the cost certainly we COVID-XX our model our align our flexibility business impacted, the

our November and you Ian. So And today. Please stay to healthy speaking thank comments, we ends as you share again joining that we in look quarter and for our forward XXXX us safe with results. third

Operator

concludes conference call. This you. today's Thank

disconnect. now may You

Veritiv (VRTV) 9 Aug 202020 Q2 Earnings call transcript