VRTV - Earnings call transcript Q2 2021

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Operator

Good morning, and welcome to Veritiv Corporation's Second 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

will and prepared everyone. Sal remarks CFO, that, by Felicia, for you Abbate, today's will our we After Smith. hear from Steve the good you, call On questions. morning, call, followed open Thank our CEO,

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

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

Sal Abbate

for us. joining and you Scott, Thank you, everyone. Thank morning, good

We achieved second company's record any adjusted as to very of history, for in best report second strong our proud income a well are quarter. in results net as We the and both financial EBITDA in quarter margin quarter. dollars the

due the and year. overall the of of to increase reported net EBITDA the increased second every continued from We $XX.X per earnings quarter which a performance Year-over-year quarter year's increase, income for XX% has also and four an our XXXX. all-time for record by year, last recovery $X.XX to compared compared the of share per in business in increase across sales quarter. compared quarters lows. second diluted prior of prior quarter last and Our all the Adjusted million, double of an quarter XX% pandemic-driven second day record to improved sales the $XX.X was to second XX% was segments million, digits

adjusted quarterly improved of EBITDA the six five has last Our in year-over-year quarters.

strong We earnings to continue our segment. see sales packaging in and growth

in second to the sales prior increased packaging compared Our year. XX% quarter

than year, second compared Our XXXX. of record more was of $XX quarter X.X% in to the quarter, XX% packaging record second margin our growth, million a up increased in to the adjusted of XXXX, and XXXX. second double up the the XX.X% quarter quarter rate in prior from to EBITDA compared second sales EBITDA and of the of increased XX% Adjusted

growth compared Within sectors, Sales to elevated the to healthcare, electronics in our to drove second the consumer manufacturing and year the to prior prior segment, continued second quarter quarter compared in and of second increased and XXXX. trends improve, significantly customers the year. both transportation, packaging quarter

have has in combination and results several favorable increases The contributed of our been expected, led quarter. portfolio. supplier in strong to our also recovery the sales, particular, publishing In across addition of saw segments other quarter. to segments business In demand for second packaging our to product than stronger the rising which continue and demand we price costs, our pace across the strong recover to print

we with closely and worked we suppliers both our proper were notice. and communicated cost our price to ensure internal productivity While effectively with offsets, with mitigated increases customers increases

discipline, stable management margins price and cost were the the half our of first throughout result of year. a As

the record price of for volatility in to It's and not We earnings are the to the temporary XXXX the expected that second benefits positioned that dynamics. simply also is near-term. our recognize or increases short-term have price of market announced well that market continue result important performance additional to half is navigate been

we earnings multi-year from of has our in stepwise acknowledge to improvement the comparisons prior favorable successful strategic year, primarily initiatives. of execution benefit the resulted our the cumulative performance, the the While effect of

of XXXX, a adjusted EBITDA in this XXXX reflection half from these to our improved efforts, then to X.X% and margin X.X% year. first As X.X% in

employees organization. and to and drive it worked suppliers. over our process turn ability to now to I'll Our deliver our to our have to enhancements to improvements more hard Steve contributed customers on provide meaningfully the across These and I'll we year results the remainder some I the for the performance. Steve? perspective remarks, additional priorities of details our also outlook quarter. After on forward. will give as our move historic for on provide financial our updated performance Steve's an commitments

Steve Smith

and details on Sal, I balance and more in everyone. well as Sal covered provide flow having both you, good performance, our statements. With our will sheet morning, changes earnings Thank performance, cash as segment consolidated

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

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

as XXXX. reminder, a full As year than year. less one XXXX the quarter the number And quarter year day XXXX. first this will one result, prior shipping we XXXX than of had day same less All remaining have have of a first as in shipping shipping of quarters the days

second growth across the packaging the driver to compared up of to in growth, million, impact well, were prior and in Packaging’s record Our improvements, compared for the sales quarter. a core the sales in EBITDA of XXXX. prior was sectors the of drive products, to to XX% continued compared XX.X% second management, Market the net up in sales quarter. leading which perform of second all into favorably upward year. our end-use our financial earnings to Packaging’s a the A is year. increase XX.X%, price movement record quarter. and $XX demand Packaging's second increases quarter XX.X% saw prior Improved majority continues or million and packaging very combination of our increased continued cost across quarter, results adjusted of quarter record to in performance change price segment were the second of consolidated the from We meaningful to EBITDA an EBITDA efficient in second a and margin. high adjusted the in year. XXXX, X.X% second adjusted is continue $XX margin and packaging quarter price operational the

core Now, the from away-from-home sales solutions up due our moving quarter sectors. ongoing the our in X.X% Net facilities and to the traditional were prior XX%, increased to year, second of sales recovery segment.

back a customers toward starting blend. we're result, of see historical mix a As to our products and shift

products, near the sectors, the last continued pandemic-driven months, levels. management have on begun prior delivered protective risks of these equipment, types market the have We availability calculated customers, hospitality last critical to entertainment, ensure sanitizers office took recover in from year's for our Our customers. with education, demand. while we - and and customers volatility property our the year, customers and despite inventory within personnel product lows XX supplies, Throughout cleaning to to of remain support unprecedented

As pandemic-related million second facilities charges and segment. a our in supply products channel, for safety $X took we approximately product solutions result in quarter in the chain of saturated

the improve than year. X.X%, and was print which from solutions now $XX.X secular from was paper year Second the lower is charges, profitability for in Adjusted the million, EBITDA pandemic-related prior product quarter second remained period, pre-XXXX X.X% XXXX, efforts margin for XX.X% second the million, up which million Despite in multi-year $XX levels the what second better were of the Adjusted segment. quarter in of second sales increase was core in to facility the up decline quarter from EBITDA from was the solutions our improved believe to margin of elevated adjusted we expected, to pause and quarter X.X% prior temporary this quarter XX.X%, prior $XX.X industry. an sales X.X% in was year. of Shifting EBITDA segment, than and were due XXXX. or the of million $X adjusted facilities net EBITDA a

its to in risk of Finishing segment Our core align increased quarter compared second and sales XX.X% in customer quarter multi-year strong the second business improve the the our the review, EBITDA EBITDA resulted on net have and record. adjusted to and portfolio, quarter, prior adjusted our sales demand, margin efforts market best publishing's in profile to of any this year.

also specialty year. The was points second compared sales segment, in recovery million better to Adjusted to due quarter was EBITDA expected, XXX of increase of million to compared an Publishing basis sectors. prior of the and was an accelerated than the EBITDA book $X.X prior publishing improvement year. margin for for X.X%, performance quarter quarter, in the adjusted second the an demand $X.X

continue their segments Our financial against objectives. execute to print well publishing and

in the performance to are the the proud Shifting flow. half of strong now cash year. team's We first of

XXXX results, quarter’s flow. second our us debt our explain XXXX moment net look our let take at context, cash flow examine a we also our provides significant flow free free to second This comparison, and for look-back not only Before it but quarter helps cash to cash free back reduction.

combination million XXXX mix working over segment level, improved our cash two roughly back in generated capital those to flow Looking the free and of earnings our and $XXX XXXX, enhanced transformation, discipline, our years.

operations, of of second be After restructuring at million. our impact at free three to $XX about leverage $XX ongoing working quarter plan our approximately on least first and we from record approximately guidance free flow months to XX a in raising capital full our we cash debt free cash to million free flow $X target end flow reached ratio, the Subtracting of Due XXXX, XXXX X.X quarter, well in cash the XXth capital XXXX expect our long-term million normalized least the one-time XXXX of be from $XXX our our year second free low our $XXX times. strong flow of our cash ended from results, was discipline year, expenditures below based guidance, half on the to performance net XXXX flow adjusted removing this At cash we For June flow of of million. EBITDA million. trailing operations cash are quarter. earnings the the for generated times,

As our acquisition the packaging XXXX, peaked our of back at after we ratio X.X rigid to All times the Containers. at prior look years, soon of American quarter third leverage of end

have $XXX our earlier, of led improvement reduction enabled our repurchase As a and XXXX, earnings a XXXX, we the ratio restructuring to improvement dramatic flow strong This both program. times. in plan, leverage subsequent generated and to share simultaneous leverage in mentioned XXXX million X.X XXXX in and execution cash

to Our by this XXXX and year. the of expect substantially be with end schedule, the restructuring plan complete with we remains original on the timeline, plan

estimates, are Our lower plan expectations. our with benefits and costs line than original in our restructuring are

still program and is the end we this to by expect repurchase program share year. the Our underway, complete of

business to turn growth, to historically and by will process and very the the in both We also encouraged while initiatives, This investments Sal. to drive efficiencies, for investments we've I now us continue experience. over low We're strategic leverage. make made capital progress it back we improved inorganic growth. organic achieving optionality leverage customer gives organic these on in low incremental are

Sal Abbate

Steve. Thank you,

performance a quarter has Our and last months, business. the inflection in XX in meaningful the the over point signified second

incredibly leader to position were that ago. the We multi-year of a and challenges why in have of we review our these COVID improvements company unprecedented over coming I'd more importantly, the we just of where initiatives myriad like pleased a from efforts and to the result share Veritiv I'd as continued comprehensive with years packaging during now acceleration earnings the a pandemic. are distribution, environment years. for differentiate of like us believe employees Perhaps few as a an transformed overcome the to

to all adjusted meaningful Over our XX years, months. business, the and Veritiv resulting for EBITDA of three fundamental our over overall, EBITDA in the we improvements for adjusted segments changes have last margin performance last made

overall inflection our As such, results. financial reached we an believe we have point in

of solutions margin adjusted XXXX, company a is and half largest Our portfolio has more and doubled for provides Packaging more over since from of including customers, the diversified the to fastest XXX. than customized our to Fortune than X%. segment, X% EBITDA growing

point resulted in EBITDA have XXXX. improvement three efforts a Our margin since nearly multi-year optimization in percentage adjusted

reached EBITDA XX last packaging over margin X.X% XX.X% adjusted in the and second Our months, a the quarter. record

adjust unprofitable XXXX, solutions, to performance facility our high the segment to Our These low to in cost restructuring cost both all XXXX. and of inflationary in customers. to solutions long-term with announced more response from improved align our we improvements facility process XXXX, margin centralized sales us operations In across and more the redistribution exit July driver customers the XXXX, to of of business, activities X.X% A our last to XX plan ensure had earnings margin helped to pandemic, other our growth of a months. segments than over decision was and the we a quickly process year. segments. Also serve, unique streamlined throughout X.X% pressures our to and needs key employees for in price management and doubled this

the are plan mentioned, life are years, savings than running last on the industry-leading expenses And initiatives, I an Steve restructuring In implemented price and we estimates, to growth. would point above further profitable two sales initial are cost discipline, we the out, As and expected. such as lower our incentivize commercial optimization also management, product cycle schedule.

the and in and organization. important print an segments publishing flow continue for earnings our portfolio, role Our cash to play provide and

multi-year performance. capital in our and derisked debt print of rationalized favorable resulting have and We customers products, and improvements bad publishing portfolio working and

adjusted have last years. to last fiscal over margins a these segments improved months XX As three compared the EBITDA result, in the

are we the more and becoming predominantly change publishing business, in we company. print our by segments packaging a pleased encouraged to our While contribution with stepwise are

undertaking Our XXXX, has from growth through packaging the a of an in a XX% months. our segment to intentional toward our segment in adjusted tremendous fundamental was the combination acquisition, segments, is XX EBITDA transformation forma Over of driver divestitures, for mix adjusted packaging of now shift increased our company's a organization. pro and the selective time, overall packaging the This XX% resources EBITDA last over results.

flow. to industry secular to products, these publishing less to and print positive in the cash and have growth of chains print supply our decline made our the to and significantly the Our Due market the business, drive strategic changes of segments results. changes mix packaging customers, impactful is

$XXX more operating future have Our a are and these the $XXX print factors of XX EBITDA due through earnings dynamics seven-year EBITDA growth that of time same expansion of from increased Over million led ended in growth adaptable support in The to combination adjusted segment to now average packaging that margin year. to has to primarily XXXX our adjusted our and segments in our packaging million, rate business. this months cumulative period, X% XXth to efficient generation. models June publishing from sales continued market

positioned and As we both given look forward, our inorganic growth. in growth, strength above-market our well industry packaging business the to our is organic and for in commitment current investment

packaging our to full their We services customized needs. are an and providing meet chain supply solutions essential and partner customers, that spectrum of

key and packaging ideation, design are testing, including from and growth We delivery. in electronics. industry the We intimately healthcare way product to all involved concept high remain consumer focused sectors, on

investing by This We a such with specific and a needs. material offering packaging suppliers. We in-house to to are cold-chain portfolio sustainable broad that approach products and both industry-leading ensures also of capabilities meet offer global products, in network standard is customer custom food as delivery. best comprehensive serve of product supported agnostic sectors expertise a

our industry. scale ability in a to and improve fragmented the of desirable enhance experience continue leverage capabilities We to and will in highly invest that supply selling customer chain our

stepwise encouraged be America. provider our remain the in improvement and executing against by North premier vision in our recent the to We focused results, packaging of are on solutions

our Now for guidance switching XXXX. to

Given stability first year EBITDA as expected rate, both in our the the share. are increasing for per performance year, we million of and as to the now guidance income strong to we our of adding earnings guidance are also prospects half adjusted full our Because a remainder million. strong the $XXX of earnings $XXX range through tax well of the XXXX net year, for

cents per the year $XXX income of to net $XXX XXXX year earnings the of be be full range share to in and million, $X.XX in range to expect full We million are to expected pandemic-related shares we outstanding Despite XX the Diluted million year be back-to-back to shares. expect and record full $X.XX. XXXX. XXXX report for approximately net headwinds, performance to income

packaging second the is As that expected to in drive very it holiday growth continued relates segment. XXXX, market strong our season anticipating sales of the is half to a

the to quarter adjusted for year. half the second second We for also margin packaging the expect levels of EBITDA continue segment,

our latest are across given supply. categories, information the and constrained to In array the increases demand indicates a remainder of product hold of strong and expected recently implemented market wide underlying price addition, year, that the announced for

ensure We notice. suppliers and volatility with to and will customers continue is to with market effectively closely proper work managed price

are outlook be continued to of As free estimated our capital This are take $XX now we be close million. our are at flow a we ready full to raising result remarks. full to expenditures still to also Felicia, increased for and million. the questions. working earnings discipline, concludes $XXX least cash our prepared year year for Capital expected XXXX

Operator

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

John Babcock

and thanks over on guess, congratulations are also the out starting out quarter. morning, the good could packaging saying my customers of demand your on play Hey, year? what and balance questions, just the packaging, taking how for I in

Sal Abbate

This for the John. question. you joining. morning, Good is Sal. Thank Thanks for

our seen Box - most historically do strong. to into be We bit you've second anticipated have continued We driven holiday that and strong, primarily the the third shipments in in quarter and continued fourth a strong as e-commerce little season, quarter, suppliers’ will a although box seen shipments have continue quarter. then by reports demand very expect be too, to second fulfillment. strong have packaging particularly earnings of the tapering another in

guidance And so, for that is earnings baked the the balance year. into our of

John Babcock

we of lower Thanks that guidance, that about Okay. to what you end And and the range, end? think get also that. to regards the factors for then should high with

Sal Abbate

a question. It’s good

like us perhaps range. we'd not including impact the also that then more lower to. facility it, an our Steve and fast the as it getting to lower solutions as speak LIFO on recovering impact but inventory increases have think and I And end to do on range, calculations, could can the of price the

additional we seeing to office, facility the variant So, the to to are new lower and could that this suppress our of guidance. Delta with end return delays solutions our strain,

it for in of end Anything demand be as the are the sector has the there? to higher in John, print. second end add I And quarter, continued print packaging the second range, strong strength been and half to on will the On be would us expected where positive price range. continued segment, of the impacts the healthy higher very the segment, get demand mentioned, to the in

Steve Smith

the debt of higher half the in higher extent experienced possible, sorry. limited add end. first half, continues the the would just the that to And it's expense. to also this bad to that John, I'm that not and very thing year, mid-point one the us end the we've from range although help toward move second of that our for guidance,

lower So, expense. debt bad

John Babcock

Got Where bad stand my quarter did expense. questions relative the on actually was That you. next one during debt last of just to was year? that

Steve Smith

Yes.

basically drive back the through zero was has incredibly it multiple down, quarter, John. four to disciplines really that ago. to So, years in company The try hard worked starting about

million first have I of And And not the this four was, said, just debt. roughly we're half year, over basically average as reserves the we've in the half averaging we bankruptcies types in This bad necessary. experiencing so, years, a of been year last zero. million, second And over the rate. of the half $XX.X run $X

such patterns know to to because one upside our some it. there's so, doesn't And unusual is customers. COVID But causing

John Babcock

and XXXX? for Okay. rest right your in the company what costs, seeing of are And terms now expectations is other inflation then the of where

Sal Abbate

of driver primary our sold. goods is obviously of inflation So, cost

we inflation half those our to all to we've the customers able very of mentioned, we in the those products, increases as and But the key our and also our pass been as our those second packaging our inflation. those, inflation. seen on on, guidance we've customers. pass fuel Again, a are have year, to been across of baked as wage in well disciplined in to some see cost to So, - but for to and actively costs really, factors some improving internally processes both And of John, for rising We’ve print not solutions. we're products, that facility fashion. our increase, are seeing

from fourth on down inflation although corresponding coming capacity it's packaging the third capacity. quarter of board late that indications in is could the print tamper that quarter there because help and industry coming in could a print the bit, a have the Now, increase

print as So, to see may their from our ease, print switch additional packaging should and packaging, suppliers factors. inflation capacity

John Babcock

you in for and the Typically, that talk then publishing. sense. dynamics together, in Okay. but these this expanded about that print, makes print driving contracted question, Yes, And margins it next quarter, margins last seems just while publishing? segments can move in margins

you color provide would any be So useful. there could

Sal Abbate

I'm and primary industry Yes. between mix customer publishing between and - The mix. print difference and sorry, packaging is

to So, their we on are grades in margins which effect print. lower the having seeing a is mix publishing, versus an

Steve Smith

spoke also see, debt two that John, We ago, few expense impact bad we the significantly to moments a segments. those

half, quarter of results particular or a influence those on comparison, a a year-over-year see in has temporarily. that favorable. a in two which happening for account, reserve And if So one their look we'll what's troubled segments publishing, then is

John Babcock

cash then it Okay. of flow of things to kind and attention to there? free pay the before question I through just overall key last turn us walk over, guidance you And the can kind just

Sal Abbate

you want that? do Steve, to Yes.

Steve Smith

Sure.

So, a least John. midpoint, at $XXX adjusted EBITDA. flow, $XXX we And guided free guiding million to cash of we're of million to as

that from XXX. items XXX are to cash driving roughly us So, down through that are uses walk the the us let little taking over me five a

usage. about of $XXX million cash to that's So, million $XXX

to shareholders. from XXXX, to our higher cash in just of $XX benefits we're a about have the typical about a is in of those higher as order which million size, well projection, a taxes So ’XX, neighborhood cash given items our XX little $XX than the as as for ‘XX year's because forward year, in carried note, million million, tax we earnings cash than are, but to which, Act taxes, going this benefit some of CARES

of $XX cash cash we $XX of our for of that million restructuring capital. about $XX million million payments of cash $XX for working about use capital million So, in expenditures, about announced taxes, XXXX,

about investing $XX we're of expense. finally, million then revenue in capital. working interest And our is As growing,

little those to we guided you XXX, you’re over and XXX. EBITDA of a together, If add

a bit to would down that bring So us under XXX. little

So, that's said XXX. why least we at

John Babcock

rest right. of Okay. the my questions helpful. for for luck answering That's All again thanks of the very Well, and year. best

Steve Smith

you, John. Thank

Sal Abbate

and Thank positively the improve you, customers, months our organization can this world. how employees, we an for And In the been Over past as for John. individuals and time, have evaluated questions. conclusion, thanks your XX unprecedented around we environmental Sustainability initiatives. of people responsible company-wide to In impact Chief and May operate and our a be year, sustainability, where the in stewards we to governance communities we Officer, lead environmental, appointed this in. Compliance

We OSHA by organization, the our safety our responsibility as last and corporate continue our foundational three years, a recordability safety this during elements, and and enhance criteria, health to The of year. social health priority meeting the so low program, our low employees less than strengthening far critical such of a core initiatives. of and is - rate one, record we're pleased was a injuries that

look we to the to with working culture commitment, others connection for recently Action support as Pledge, CEO signed in forward of In are well. sharing this and important Diversity with, this create learning the inclusive initiative. and equitable, and from in business We community a diverse, more Inclusion and

a opportunities manner. innovative seek sustainable also We operate to in more

we reduce For on west emissions. the and ways consider electric coast, example, launched program pilot sustainable more use recently to truck an we energy as

results. to you, of our and in again, you further quarter again when stay look We Please talking and safe, actions are review we joining proud XXXX progress. to third forward on today. the of with taking, we committed we call Thank for healthy us are November, the and

Operator

today's And call. Thank for conference this you participating. concludes

may You now disconnect.

Veritiv (VRTV) 9 Aug 212021 Q2 Earnings call transcript