VRTV - Earnings call transcript Q1 2021

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Operator

Good morning and welcome to Veritiv Corporation's First Quarter 2021 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 Scott Palfreeman, Director of Finance and Investor Relations. Mr. begin. may you Palfreeman,

Scott Palfreeman

take and prepared everyone. Sal remarks Steve we our Misty, you Abbate, today's will CFO will that, After hear from Smith. questions. good you, On morning, call, and your Thank our CEO

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

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

Sal Abbate

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

remarks, results, on sheet few efforts, well and a review cash earnings, our business update our will portfolio I a repurchase through as our will our updates our they small our performance. sustainability including segment print also as component segment. walk sale and our share efforts. flow my I relate After will Before an record on of quarter Steve our and balance objectives, first provide of as provide the to capital I

on XXXX, to in repurchase quarter, shares drive the repurchased first our toward is Veritiv return Georgia We provide of to and public its To deploy solutions. supply time, company. quarter and of its quarter profitable the of and held announced When xpedx Strong service remaining reduce all value chain first of expand in Pacific XX% our the priorities. full of context, and year. holding to year. strategy to the a Worldwide first create merged we shareholders. Capital Each support become reflect our continued results and million we management progress capacity Worldwide. of their in improvements XXX,XXX from Unisource capital to allowed were executing Over will and Capital stake update Bain provide this of share company, UWWH owners approximately additional portions full some sold shares disciplined in of for strategic of the UWWH shares plan leading an million leverage, profitability net July our by the shares, $XX including of in Corporation company multi-year earnings of also the provider Unisource Earlier to our Through Pacific. the capital of approximately outlook new products the Georgia the liquidated the end this owned Bain to previously us and and UWWH, The the packaging to to objectives, growth, reflected and a contributing results. in working $XX strategic year, segments

a the and our our of potentially deployment this against stock our ownership partially in position plan. yielding program, a plan facilitated last a on result has high continue share downward exit, share of been lifted. repurchase repurchase to years believe capital, few of pressure We we'll As the our UWWH by reflects execute

converting Veritiv, in paper of completed transaction Solutions, Veritiv industry. print acquired Roll recently focus the our segment. current unit sale earnings. business to part the specialty of end offerings, and impact our will of service to which completed a print business more Pixelle will was allow a an not Roll larger on was Veritiv's this on and the the The core Source of The Source, strategic our become as core focused to we part businesses, moves March. material business sale Specialty at even As product within have specialized future efforts operating of our our on supplier

first our to financial Moving now quarter results.

Robust than to the quarter publishing XXXX across stronger and adjusted business record the financial report year. segments the all the to and the of results, from compared continued that of to operational packaging year. performance pleased are led prior expected EBITDA fourth growth, print We sales across quarter this improvements into first efficiencies

compared prior result, adjusted prior highs high As income EBITDA respectively. Adjusted record in margin $XX the quarter first income, increase record to of for $XX to of remained and X.X% million first million a year. the XX% a at in an in which EBITDA pre-tax quarter, was $XX basis This of adjusted a million plus improvement compared and a both points reached year. $XX million, EBITDA, improvement or reflects XXX and pre-tax

year. also Our quarter reflecting increase a record the EBITDA XX% packaging $XX over segment achieved first adjusted of in million, prior

across electronics, strong mix. Similar adjusting end-use in in sales healthcare shipping XXXX customer for continue capabilities additional improvement sales in other X% specialty by and performance first and when sectors. drove processing, to growth several volume retail, last consumers less favorable to our and a sectors to remains demand e-commerce of ongoing consumer shift of drive the The the food source prior year, compared of lift one customized to solutions day. and quarter, Continued quarter price in

but Our manufacturing slower manufacturing sector, to at the a have to than automotive levels. general customers return pace to aerospace and continue recover, and yet pre-COVID

the product supplier margins in business We across have we both recent with to cost which demand to monitor portfolio of production based due continue quarter. strong industry-wide mirrored segments first manner, resin and changes sales first has led stable price to quarter, manufacturing our through and suppliers a multi-quarter led February increases in Weather-related Thus the to our products. all operations. across our impacts More closely specifically, were successfully increases. inflationary constraints, in corrugated to product particularly far, customers timely

supply that shift that sustainability. a X% our we network the related results our solution. as our distribution in more It was our revenues, our to company national of with a to business, did of national first even wellbeing have to the minimal. ensured quarter. or our premium our Because a customer Fortunately, I for the to chain brief value view and one a core planet. customers weather not impact a people, are like would impact no efforts financial weather a sustainability material We add is now update to on around our than contributes accounting responsibility,

can has social an corporate our company which to website. responsibility team report, reduce sections updated been decade. responsibility found investor Our and our in environmental recently customers published over the corporate committed and impacts helping for We be a of relations

of and more. do We even are proud to eager progress, our

Steve details Steve? on financial performance the will provide Now our for additional first quarter.

Steve Smith

Sal, both will performance, statements. enough flow you, and cash Sal consolidated good provide as having sales our our I consolidated earnings performance, changes well covered Thank segment With of in results, overview as sheet review and balance everyone. and morning,

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

of year relates number shipping we different from have the the due less that day year will decline to had of continuing headwinds As both quarter XXXX. prior one shipping in pandemic And this our the in as X.X% day XXXX prior non-packaging had first result, year of were quarters it have secular count, XXXX in and full print net same the first segments as year. to industries. day one remaining continued than of shipping we quarter market X.X% consolidated a down quarter the the publishing the last XXXX. and All were sales sales down core from and in COVID-XX Various across first days

results, the for due sales upward demand prior sales packaging's X% price. segment net strong year up X. core to first we're movement compared in Going the were to X.X% and our in quarter and

processing, capabilities by were We continue from specialty to and robust customers, our specialized sectors. enabled food those which retail, see our in demand healthcare

change continue margin. first coupled quarter the sector in and some adjusted aerospace but below within XX% Packaging's areas million like EBITDA increased drive COVID with $XX continues recover, automotive pre manufacturing, a to manufacturing responsive for levels. sales record and and adjusted remain prior growth, to EBITDA meaningful Packagings Our operations, compared to was a year. efficient

As a XXXX. first quarter the quarter from packaging's margins first XXXX in improvements, increased result of X.X% of X.X% adjusted the of in to EBITDA these

as end these period sales to $XX.X core quarter, to continue levels traditional million net print roughly end by to benefit sectors the price facilities for XX% profitability ongoing home use Shifting adjusted and from from that segment toward to year. the from related and COVID mix margins likely use record market business and our prior Despite remained certain solutions closures. first food temporary Moving or higher facilities Operating be like first than the related multi-year for improve facility dynamics market year X.X% sectors through prior EBITDA a the high both by of margin customers near solutions sectors. and impacted were a XX% shift less quarter healthcare service were down away now headwinds, on depressed continue segment. record to to a of our to due this in focus solutions discipline, sales efforts Adjusted COVID-XX. efficiencies, was operating EBITDA

demand, sales from to quarter margin year was XXXX. as segment's to debt bad the business Ongoing period, while were and efforts the down adjusted first in XX.X% X.X% drove better million to net market from in first of in quarter X.X% improvement. year. prior improved to Adjusted sales and compared net First quickly declined prior XX.X% expected. core were EBITDA which historically margin XXXX declined of expense the the $XX.X X.X% sales sales well down was as quarter XX.X% this the core first align EBITDA low quarter the than Publishing's

XXXX. prior margin than improved segment for from first quarter recovery better quarter The first an X.X% billion demand XX% Adjusted grocery nearly adjusted of the than EBITDA while the quarter in for was of EBITDA of X.X% sectors. the the sales to in performance better accelerated in and the to XXXX due $X.X of for year, expected education was first publishing quarter publishing

me the despite COVID We an are in volume segments secular These our are financial recent segment, important by publishing ongoing and and play declines. continue to performance delivering the encouraged portfolio of related printing our role on effective strategic the moment early improved let tax across in downstream to objectives our segments, performance and effect financial their Because all a rate. on the take on XXXX. of comment

rate is to tax pre-tax less expect Given the XXXX now and our effective quarter, rate we our high and and XXs are of approximately volatile. million first earnings million. low strengths first XX% thrown Similar XXXX, higher, lending the sheet had the to becoming Shifting tax borrowing approximately in our earnings, At tax asset-based the our of be after to capacity therefore flow. cash for end we to the balance range. available and $XXX quarter facility had our of $XXX against

million the end including reminder, our the the end $XXX of At receivables backed facility ratio our about was net EBITDA declined adjusted at a debt current XXXX. ABL As is portion by quarter, the the the of not business. down quarter times, and year-over-year million. inventory first X.X the of significantly long-term to XX% X.X debt end of our from first from quarter, to the At $XXX times of leverage the

Our debt the have improved. earnings XX and last profile has declined months long-term our meaningfully our over has credit improved as

are Our with lenders this pleased outcome.

to our lenders improved this reflect to We our are adjust working credit ABL profile. with

We will is when this process information more share completed.

operations, For ending cash was free $X expenditures Sal. flow call XX, from cash from million. generated March cash I million. Subtracting the flow turn from of about XXXX, we now approximately back $XX $X will operations million of the capital approximately quarter to flow over

Sal Abbate

you, Thank Steve.

our questions, XXXX we on XXXX plan an to I'd provide to like and update Before your our restructuring guidance. move

July structure to our in business, XXXX the acceleration XXXX pandemic decline a on the plan cost of of announced our with including align publishing and still impacts remains schedule, complete ongoing and XXXX. of it the plan business. on we by restructuring of the of print in COVID-XX reminder, in was The needs the expect As to better to designed network The the the be secular substantially was end industries. restructuring distribution response and originally the the plan

of estimated We to $XX XX% the previous costs million by that to are originally diligent efforts the the estimate. pleased in an range plan be level is from And million, due now to organization, incurred the expected. approximately report of to lower under than restructuring our reduction the $XX

XXXX. outlook Let's to our now shift for

Note of began earnings to its in XXXX, guidance that growth for performance that half the strong our year. is the second we in packaging for because the first XXXX. our to the likely anticipate the the continue in is XXXX. Given the segment be of packaging quarter than remainder earnings remainder year, we prospects rate Growth are second the the for our recovery increasing of and stronger segment in the of XXXX of half or half year-over-year first expected

half it a for As are from XXXX. Components will relates buildings the business to solutions our COVID-XX revenue of of of until hospitality, be the level way our office the second in not recovery and facility and mixed timing to expected recover to meaningful remain like expectations segments, other begin effects of and uncertain. entertainment,

taxes As million million to of a to in to will investments range of impacts to inflationary We businesses. sectors XXXX the full EBITDA be million. continue expect quickly for before and result, $XXX to $XXX respond be range remain our and high growth across year $XXX income $XX million we on to in a focused in adjusted now

free we year at on remarks. be still are least This to remain $XX capital Misty, prepared and ready expenditures approximately our million million now concludes cash to $XX expected flow for take the track. Our questions. XXXX is of

Operator

Babcock a from [Operator question Instructions] Bank You of America. have John from

John Babcock

growth also How about packaging. here out there to get guess you've mentioned be seems or thinking see reasons positive talked pretty kind your could sign want growth some there want be are like fluctuation on. to should expect, some right over back improved be I half of markets in you kind whether we plugging of part to just on you through if on of we now steadily it during And some are in but sense corrugated the comps, to to quarter. and tougher the started kind I start the might expecting Obviously -- expect that here time.

Sal Abbate

Great. And thanks question. the for

growth continue year. packaging through We to the expect

you If first they growth, quite market to and of as look year. as point at the half then but continued strong QX the indicators, the not

ticked in slightly alongside of our And for up to expect that year. performance. we the market by better overall and have So the QX grow actually we than balance the the encouraged fact reflected are the as indicators

so QX periods. of the be is the we'll Obviously And the COVID-XX reflected year, versus continuing so do last forecast. that And in summer. would and then stronger since volatile our rigid to that see part stabilize but numbers much anomaly of second in than QX, growth been latter going still expect quarter, international really in to those being last qualms other see business. and our business say to expect continue because But are to what of I higher growth. our the We has

John Babcock

what over that So you right reasonable what's thinking now? but, time Recognizing are change a assume rate growth obviously -- of here? there long-term to could kind

Sal Abbate

which GDP what grow we've targeted. our we business at to Yes, is plus, expect historically packaging

John Babcock

great. And parts Solutions, US different of just country That's are the obviously, then right reopening, in Okay. the now. Facility

just what want And it you're overall hearing on customers? that of a business thoughts get from could trajectory to What sense, will are your improve how there? look the how and so

Sal Abbate

John. Yes. Thanks

of portion COVID-XX sure. become quarter those higher had Facility COVID-related meaningful of seen become Solutions on our impacts XXXX, a the products, meaningful MPP, wipes, a side equation despite of We with And where profitability growth are more is more skincare, and first have portfolio. in for our of really hygiene rate the this pleased have sanitizers in a the we obviously

third in slower areas return businesses in of beginning returning growth we see most government. as particularly on venue than fact, folks continuing more now anticipated. is we more we third way, the and a accelerated office and of the in those more where originally where middle is large And reopened expect quarter the play to fulsome And particularly offices grow. to caveat X the readily, And here in The hospitality, those than like categories. rely space tend that we the so to entertainment, likely into a quarter, we

those projecting And quite from and second has for already signs up started the they year, events pre-COVID cruise return. are, things and industry sporting so hearing of at to expect to you're reach some starting expecting half are the pick to in X of be rebound fall. business. and some we concerts levels now additions the full are our seeing where the capacity time. in But entertainment line to And like we not a in but we Obviously transportation rebound

what that's year Solutions. so for our projections the the for Facility on of And based balance are

John Babcock

Okay. are wondering heard of might if your What you've guidance go we've rising and the that And and particularly lines about you the side product able across the raised rising then be that and side to obviously the could then have, factors fuel different of also we've right? here. corrugated next that on some driving about what number question, paper price wrong? I So you about talk levels was go could a prices. heard

you if through the kind just that would different be that of So factors impact could EBITDA helpful. go

Sal Abbate

significant Steve ask as earnings expect continue our Sure. second now for packaging to growth we the expense as quarter guidance over then driver we efficiencies increases those performance estimates. some the really cost projected over John. plan but primary full provide into first operational the our I'll the continuing and Also portion start it management and of continued continue. are to again, mentioned, And year. just and quarter in of to drove I'll a our well, commentary

we of by from those cost our ability and moves. well-managed increases communicated has and year our a our price seeing And suppliers lastly element disciplined and pass team onto our frankly with up. a a and the and effects the the key ago and in savings place continues cost to our half cost last effects of year's and customers management, the about which then put able we're So take be and see with to guidance well-orchestrated being both to customers been we'll

of to and We are of for customers. cost we in making sure Now when a increases to future, that materials at versus increases justified things overall suppliers our up driven shortages look also minute. and getting And on demand fuel price increases I'll inflation for talking the talk up are the just about apex pandemic. were to potential heated behalf by that and believe more like our the close these we the of price we're the and do our from pent that and due frankly storms

balance And believe stabilize when so marketing the says continuing for at itself, and we're we the the the middle we in at prices of And year. on that the the it year from of look should market apex. insights the part

And fuel, sheltered in own side business, our fleet. take recall fuel to on so from our markets. We're of the heated respect Certainly the we we arena relatively the in freight freight of because increases that's happening guidance reflected the and to the earnings. what's up have the upward expect in with some impact

I wave shift anticipating high it add So this. year. if create those wholesale that that to the range remote likely built obvious were the there did. the less think I to could could our constraint were anything go why the pandemic, of working, if or on We solutions as potentially. are But not guidance. right, a comfortable strain fourth things as balance Steve a could think goodness that's those were are the a we of on the put third than we we business have But there? that the in moving facilities And our

Steve Smith

just supplemental have I Yes. thoughts. X

in first the bad continuing one being for that low balance increase the very we anticipate quarter, at reason had and the expense, The John, we debt that first the of the on a time year. this for in

so that get calculation, corrugated on in talk secondly, we because adjusted And lower Sal pre-tax inflation bad have upside not resin EBITDA, our there's expense. but. then, mentioned life-of really the So, guidance, adjusted the through that debt much which the fact and rather, the can does impacting it we about, downside in

upside and expense So, on bad downside debt inflationary little life-of on a of risk. bit

John Babcock

if the just flow then could And free helpful. That's about guidance. talk you Okay. cash

worth probably higher some but if be else earnings highlighting, assume With are would capital, I that offsets, there's dealt useful. the working perhaps with, there from anything there

Steve Smith

Sure.

John, is flow cash yes, by with upside driven, So the associated performance. it

has to just XX steps of through just me let walk provided at million. least of So the you couple it we that guidance it. a And three

we a guided up different year $XXX which cash midpoint XX our is lower about have usages, revised of start million.Cash cash borrowings X of down to we this guidance of payments. And we then CapEx, First million. of EBITDA coming $XX million. prior, to which million. and million. $XXX total because which Restructuring adjusted lower about are which rates expense, Those around Interest over $XX interest taxes, are with

least As capital with will not Sal the in business And a completing $XX million of that but mentioned last have in and that with and packaging our script bulk support that associated we growth of capital XXXX $XX we efforts XXXX cash. receivables. about as then to use are little bit And of working our grows. million cost of anticipating inventory about working our

sum $XXX million. total items, those is So

$XX get of point starting the from that subtract about $XXX you million, million. and You

we cash year. of for free So flow guided least to million the at $XX

John Babcock

could to And question, just how about year. then, you turn want Yes, strategic was for that's incremental What little already about just before a really I want this bit talk last you make I have you're and main what is wondering, Sal, you in to priorities more thinking to great. it the over. just place. accomplish, it this

get a here. for is kind to the completing program, we you're sense restructuring from obviously of but So, focus the what want

Sal Abbate

John. Yes, sure

to I business the a more but that we've of customers those footprint drive we our continue about. that part business. print supply talked as sectors footprint beyond which growth really operational includes efficiencies we will well. print particular, are chain robust front talk with model working, to initiatives, packaging serving our of consolidation. that our working the capital North about restructuring To American initiatives, down And publishing the in you strategic plan, plan, side, stated, our that successful are as driving that's that much didn't very in of completion And think, align restructuring tactical, and our while bigger And rightsize just and going in end. more kind well. the packaging those But our

So if focused earlier recall, on year. late concept agency the on That's to year the our you delivery testing launched we model vine front in of last of the really design kind is and and and packaging packaging. and business, which

with new Continued and synergies retail and is our our across business our globe growth then and doing acquisition incredibly rigid growth from electronics with business. specialty our customers the packaging AAC, in which continued consumer well,

the our young digital business the way. history we So would are organic with is we to our than for customers And have to lastly, of do and making a as at we're that And obviously technology keeping future our of threading growth all our that, going initiatives. is say, cash those would now I have, core, where I solutions then opportunities more Veritiv. digital well. the we in pace call providing growth And and ability I what we sure more focus guess omni-channel on with solutions where of the and frankly, in through our leverage then are ratio inorganic always our with so position, look

Steve, our got focusing the think and respect putting and And significant And be integration and this to that? in accelerate add investment very in that transformation cost-effective our for well technology, as do I is us again, that, earmarked to to beyond a area I so big now technology. our with and on growth think behind really a we've going help to And more as particular way. year for anything us will

Steve Smith

program strategic facility. the just X-year give year is facility us our prepared John, an that we've a ABL was We're performance it on going so capital increased then to when treasury strong. side, mentioned ratio server and Dina to our extension. facility, flexibility. we're A Bell, because leverage And in thinking extend the as remarks and through Yes, about is we're continuing our ago purchase Sal. group amended working also, we're low our we needs, we that our as on still

Sal Abbate

in you, the Misty. asset saw Well, and in our our first print our and segments. exited we record each up, a Great, repurchase quarter, successfully improvements profitability wrap against We executed earnings thank to shareholder segment across program. of achieved non-core

with performance are the significant made well and our longterm strong our pleased year, We start progress as goals. as financial toward the we've strategic

of the review Thank again call quarter stewards local us together. XXXX so our continued you in more the to can careful you initiatives. and for with responsibility working the group on August we look forward world sustainability. also external Please second to to our healthy and established senior our Veritiv again stay improvements effectively we and journey management efforts communities in We look today. our team sustainability we you. develop to Thank stakeholders a be group and XXXX, and with throughout In results. customers, talking company's internal suppliers, working and guide to drive goals. regarding corporate sustainability This further this I is team, our forward safe, collaborating joining when with

Operator

this gentlemen, call. today's and Ladies concludes conference

You may now disconnect.

Veritiv (VRTV) 8 May 212021 Q1 Earnings call transcript