VRTV - Earnings call transcript Q3 2020

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Operator

Good morning, and welcome to Veritiv Corporation's Third Quarter 2020 Financial Results Conference Call.

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

We will begin with opening remarks and introductions. At this time, I would like to turn the call over to Scott Palfreeman, Director of Finance and Investor Relations. Mr. begin. may you Palfreeman,

Scott Palfreeman

Steve and On everyone. prepared today's CEO, our our Lency, take we for questions. your remarks you joining new CFO, and Abbate; us. call, Sal After good you, that, Thank will morning, all from Smith. Thank you'll hear

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

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

Sal Abbate

us. you and morning, everyone Good Scott. joining thank Thanks, for

of me Mary, honored for joined leadership, personally moment my wish her by We in CEO, like our effort to we and Veritiv I retired organization in the and new I placed have a retirement. her that results, best advice. very and as role Laschinger recently When the the CEO. broader Board, last our Trust into the future I'm would and even get structural Before in the moved Mary XXXX, thank we made the and to execute third direction packaging from leading quarter her take I of now months to than vision strategic vision our concept in this changes the ability The I'm this us the ever strongly vision. a more believed XX over of toward and against goods have confident company. value on closer embarked to services provider delivery. added

will today, the the you fundamentals our the As is business flexibility the our pandemic. us of the helping on call improving are business of of challenges weather hear and model COVID-XX

quarter's cover balance COVID-XX results, briefly year. impacts operations ongoing over is performance and for year we turn how it sheet our flow. full on and Steve to quarter. guidance cash earlier of and segment the our results, I'll As uncertainty we Due will I into COVID-XX, virtue then discuss to this details impacting our then move of the more consolidated the this

did of quarter. we some second perspective outlook during on our provide the However, last call the year our for half

anticipated today's an a on and During dynamics. we the performance view XXXX our for market outlook will call, updated provide of expected XXXX

pandemic, while to COVID-XX businesses we environment, dynamic of focused the our proud we needs support of continue safety around meeting our are the on During of employees' of employees, and needs and market the to customers. these our unprecedented times challenging a of efforts the efficiently remain Despite the ensuring effectively globe.

flexibility functioning our prefer fully that while from have to the work offices office employees are and to Our employees option. remain that for opened home operations continue our

quarter. results Now turning third for to the our

in lower quarter. costs tough been drove an predict in has earnings. were highlighted results the cash to a better-than-expected bad expense Stronger Clearly, XXXX consolidated and third flow. packaging revenues, free by quarter earnings third revenues improving EBITDA and Our and year adjusted improved trend positive and demand debt therefore it

quarter second down [indiscernible] third segments. lower second the driven in Revenue offset revenues and discipline COVID-XX sequential reductions, in effects the contributed a the supply quarter quarter. along from the improvement and prior for third meaningful that the year-over-year XX% rebound rebound than sustained over and versus and Selling in to second the quarter quarter earnings to started decline revenue year from improvement in quarter's quarter. chain all XX%. with gains the year, reductions, quarter-over-quarter productivity revenue were Consolidated more of day the the per expense quarter prior third versus cost third the in of Our pricing improved

quarter. above quarter As XX% EBITDA third result, year's which third approximately is last a XXXX, adjusted million, was $XX

segment, in revenue Packaging result Packaging compared quarter and wallet were on a sequential we as to of improving around quarter when growth sales sectors. near For sales demand, to are prior the of increased share initiatives, X% levels. third discipline market report higher focused a encouraged our pre-COVID the

the third in industrial and be strong. improvement the During we some quarter, e-commerce while to broader saw relatively manufacturing volumes continue sector, fulfillment

third continue the in than we our sales prior be with packaging space. and year, to that pleased acquisition in XXXX were better rigid quarter Our

adjustment our an offset ongoing strong and improved continue actions efficiency in mitigate cost performance-based remain impacts programs beginning results check demand [ph] soft sectors. by The the along margins with COVID-XX of taken the automotive aerospace partially and potential earnings does However, of compensation. second in to in the third to costs kept the drive saving at quarter. manufacturing were the The quarter to

improve related despite two We had favorable during our impact challenges. have than quarterly years, we reduce and quality customer efforts earnings liquidity more have our been believe on taking debt debt bad by sequential portfolio a pandemic customer proactive expense For the XXXX, of these expense. lowering steps bad to

prior $X third expense compared year's over the debt bad is to quarter. million down Our

the was of of EBITDA X.X%, the points adjusted margin a As these and an in consolidated year period the best for the result quarter company. basis third all of history improvement the XX approximately prior factors, from

going Steve? to review our results more Now Steve to in I'm ask detail.

Steve Smith

Sal and you, everyone. Thank good morning,

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

day the XXXX. of number relates the the have shipping we The quarter the number of same fourth previous days in as quarter to third have quarter As had count, year. of third same shipping we XXXX of days as will XXXX, of it the in

reminder, year year, XXXX. a our for an had in with we flow. Sal cash first having have one this consolidated With XXXX, sheet in I full extra performance the day shipping so than segment of the and we performance, on quarter As balance more along covered will focus day

versus at our first the volume we the look year the segment be second of earnings As in half to we packaging expectation, the and similar than in expected performance half.

our adjusted and better within compared X.X% Packaging Packaging in in to quarter food growth strong. and were net and bolstered expenses prior down current as the a and sectors trajectory. both be customers this rigid were by Packaging's core However, the as manufacturing sales are earnings products. fulfillment sector positive than to the packaging sales Sales expected. our segment's increased year-over-year. customers sales and year-over-year continue expenses, earnings to demand With relatively to volume year. industrial stabilizing increase well XX% were therefore levels, on EBITDA in adjusted sequential operating to our revenues

this XXXX margins Given quarter in from to in year's improved third X.X% of third our adjusted XX.X% initiatives, efficiency a quarter. of EBITDA record high Packaging's the

Net related to to shifting were COVID-XX. Solutions headwinds in XX% segment. continued Facilities core sales the with Now down year-over-year

product of we to equipment During protective quarter, categories. and sales signs related those see the of in saturation remained strong, but began hygiene third market personal some

improve Our from much and traditional to as dynamics of share sectors which up market continue make as away current segment large not did be home by portfolio a expected. this depressed

prior segment XXXX Third better quarter EBITDA and by with despite to improve to XX% continue in improved mentioned. the choices the our align to significantly the and the decline impacted secular COVID-XX. net was gross compared made from to to the as strategic lower but core this segment The the business. to for more year. These compared expenses reduction This make up lower in as revenues strategic revenue margins handling. and supply experienced as results due a strengths and be profitable ongoing to Facilities year, the well choices chain segment's chain prior market, choices helped Solutions product the These both and to we as dynamics. as Adjusted effect as of the negatively margins supply segment was decline both customer delivery by approximately Print selling such XX% smaller continue both a revenues strategic costs directive driven strategic the support just sales well

the from had improve XX%. fallen continues year. from net However, quickly than The third $X.X core $X.X last volume sales million align sales decreased EBITDA, down both prior to and Print sequential Publishing the second over quarter only quarter to revenues, contributed print business costs in this net as adjusted XX% expected quarter. million trends. did year's faster prior

decline with the in adjusted was our down million $X.X due the the in Print EBITDA from segment, an million, to secular had the and revenue market of $X.X effects both As of lower last COVID-XX. Publishing year's flow. had third borrowing approximately approximately cash available million against $XXX facility sheet to and end and we asset-based September, capacity Shifting the now of At $XXX had the drawn our balance quarter. of million. lending ongoing

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

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

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

in working of efforts to Sal, our quarter before turn back days sales One last inventory hand lower I strong over on and will to the flow continuing free earnings, quarters was due by days it to driven sequential comment Our outstanding balance who the XXXX. the cash improve on capital. comment primarily positive

earnings volatile earnings, continue in tax rate to due level by to As to we variation continues improve pre-tax the jurisdictions. be our of pre-tax our effective

in do in We back jurisdictions. not will believe XXXX. impact at our for rate over continue to valuation it changes I turn all will now need time in We to tax increases taxes deferred our allowances in tax any our that paid cash this the Sal. evaluate

Sal Abbate

dynamic we Shifting and uncertainty. our Thanks, The still COVID-XX, environment Steve. of impacts related expect to businesses. the see our non-packaging remains our significant on for balance year, primarily is to there related further to business outlook to the

a sales for once we As the shipping quarter's quarter third expect fewer to days. result, two net to remain consolidated similar levels adjusted fourth

taken announced we have we actions COVID-XX. this earlier in to As reduce costs year, permanent of light

announced are on to target. pleased July on in plan as remains report the We restructuring schedule that and

EBITDA adjusted as this will At time, the quarter. our business since full we our lowest EBITDA. our improved the the XXXX full second drive showing volumes year quarter in have increased leverage of expect above benefits earnings Our operating is fourth XXXX adjusted year levels

expect improve expect in half Regarding packaging the corrugated particularly market market year through situation COVID-XX dynamics, mind, XXXX significant as With despite our we the performance remains to markets. we volatility the first that of pricing in potential resin-based pressure headwinds, and uncertain. the

of business half the softness work to hospitality continue We be sectors by the to shut expect suppressed from home entertainment office the large our remain first trend year, and driven continues. and venues through and Facility Solutions entertainment continued as in down

We for full products, fully. increased open ensue more our a expect to not see will sectors continued recovery demand back until up but these hygiene

results Lastly, while for ongoing Publishing already Publishing shape will two for secular worst declines XXXX. in have and experienced quarter Print year, of downturn our this the and we we believe Print

proactive be our We now in volatility. to are questions. prepared This will responsive future to continue Operator, concludes take we ready remarks. and market addressing

Operator

first America. Bank John [Operator with comes from Babcock of line Our question Instructions] of the

John Babcock

be expecting coming the be And my wondering that seems mean, help there. thanks there maybe could for have might like sounds should and it if full perhaps allows bit XXXX, obviously understanding for which I to taking some or think morning lower the anything XQ XQ. But you overall, guidance little you Good in me we than you're you here? earnings that's shipping was XQ. two year into to should questions. it I mentioned that, the expecting that I bit Starting I Hey. for play Is a room fewer mindful obviously with interpretation be quarter in you than like be days. to be little else a higher

Sal Abbate

expect Sal. you we year I question. year. Thanks morning, over it This which summed Good know, is, for to is I improved the up, think last be our full John.

be last than to to shipping be do rate and We expect QX days fewer QX impacted our year, foot then run two similar year. will QX, for to out expect the be to but full by we lower

John Babcock

you the it's you be the business, clearly, business, have color had for I should ultimately to Okay. like was provide the on in margins also factors any might there? might were on And where margins be the here very obviously helpful. about pretty able that And good mix and then Packaging That's significant those of some term? if talked in and wondering, improvement you also, improvements some other come play improvements there but into example longer

Sal Abbate

Yeah.

just comment overall I'll So on mix.

up packaging. the then margins choices factors segment of the And ongoing due driving couple over our One, to margin improvement. years. of shift mix So the consolidated in packaging, toward are past that overall made customer inside are our are that we've a

a year, is, in second put pricing our supplier discipline perspective. perspective both from last The a which we customer and

us helping margins pretty what's the XX consistently so. months last throughout hold really or is that so And

sustain in next now. where that in can, be as that going mentioned quite and they're some future though, we able similar to discipline our beyond expect do to front in we year where on and allow resin we we the Again, best in headed, processes products. to quarter as us based as we're will believe be to pricing going heading the into where are of around corrugated terms we're pressure fourth the In I today, our

there in for planning products seen resin You've have announced we accordingly probably those John, and corrugated increases. the are based both that for increases market, been and

John Babcock

part Yeah. Okay. actually my was question That there. of next

the point some those guys as you in get the implement fully look in part vary next at quarters you producers that to perhaps at that then some help margins, So that what over fully as corrugated as because all? mentioned and those start couple expect I as mean we you the pressure near-term does on out increases to ultimately, of increase of spread to if containerboard of

Sal Abbate

market the ongoing cases the John. it year. Yeah. many fulfillment really already is and we the and and entire seen in sectors will wholesale That's It's strong due be quarter already and then -- that and from a really fourth e-commerce, therefore, in anticipated taken action implemented next the the have It which actually right, are we've to strength into -- increase in that. in to around quarter

say, to as comes packaging have of QX additional as look will what next folks of their as online into, Now prices shifting that head capacity future year. a are might assets print like determination we

John Babcock

was packaging I We October, the is front? then wondering holiday early anything pan Amazon look on And you on now saw just the what have, read that you. quickly you question, Thank next next can the really share if on was that holiday season, season. Day of sort your Prime on in initial business, might might how out? And based

Sal Abbate

as did the into well e-commerce shipping positive well, the we see also our luxury that bit strong, home, processing a you well the we the are really that's electronics, in I coming in there consumer in is is -- from effects business QX, as protracted dip is think actually mean, in down all and segment in are QX, food the especially QX. market, -- more we be the the retail international as little driving Yeah. But seeing COVID-XX. a fairly processing business, trends of market strong segment, lock in if will food a holiday following doing QX is those fulfillment which grocery actually our which

John Babcock

then it just I And turn Thanks. Okay. over. last before question

if you on working be should full Just might year? on the for flow, provide about I some cash was wondering we think how color capital to able

Sal Abbate

Steve, please.

Steve Smith

Yeah.

So good morning, John.

and be a because expect far addressing It the patterns. statement sheet will impact, fourth COVID that expect looking over this our our know in their the we atypical customers into balance we balance bit at that own as at that sheet will the will little flow as year, be we year-end So of some income quarter. that

do not fourth the we inflow so And quarter. in an expect

and we We flow to free cash expect capital But the 'XX, leverage, improved actual but fourth working this quarter given flow, fourth be the quarter. in and toward quarter expected cash into fourth net in that the continue an over cash march John outflow year-to-date probably flow metrics of the will in will an flow, excellent negative set our year. low

John Babcock

the you, Okay. all Thank details. Appreciate Steve.

Steve Smith

Yeah.

Operator

queue And there comments. for the closing turn I'll Sal this at are call no Abbate further back questions time. in to

Sal Abbate

questions. and Well, you Great. your for thank thank you

to Our results and of illustrated last ability nimble in continued dynamic over have the our unprecedented an fundamentals improve. The be two quarters responsive the business market. to

speaking for environment, thank CEO, former [indiscernible] our we well as Mary and vision we As joining look and and results. Langer for healthy against us quarter to with her strong our full Thanks vision. conclude we operating unusual executing Please March many who fourth share today. during our XXXX you quarter employees this this are a so safe stay forward and in year we both shared

Operator

This concludes conference call. today's

disconnect. now may You

Veritiv (VRTV) 7 Nov 202020 Q3 Earnings call transcript