VRTV - Earnings call transcript Q2 2022

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Operator

Good morning, and welcome to Veritiv Corporation’s Second Quarter 2022 Financial Results Conference Call.

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

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

Scott Palfreeman

update and on our everyone. outlook. update our CEO, my Sal will by share Smith. Julie, followed conclude business today's Steve, will financials. by CFO, joined our After call on After who an will Sal by Sal more remarks an second good you, revised quarter I'm performance details morning provide on Steve on our Thank providing Abbate; comments, and Steve's

for your call will the We then questions. open

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

contained slides the factors Additional Form filings. differ SEC. cause section SEC publicly will U.S. Today's this call included the be Relations those and non-GAAP in are in of website. reconciliation our This turn filed that presentation includes to measures and the is GAAP the the factors to and results available XXXX the could our Sal. information reports described in The exhibits at non-GAAP risks found company's measures. measures time, in on to other from of and these I can comparable the Investor slides call also presentation At will company's the other XX-K of statements end the and forward-looking financial contain with over

Sal Abbate

the million quarter history. for prior and XX% everyone any compared and double representing was financial to to by Adjusted net Good a the and you performance, EBITDA in Thank proud strong quarter growth report adjusted-EBITDA $XXX Today organic morning you, of are revenue income highest digit the joining of quarter year. Scott. increase the thank for an record us. company's another second we in highlighted levels

year-over-year quarter dollar the The adjusted consecutive of quarter second marked EBITDA Xth growth.

to improvement the XXX prior than was which Second was year. compared margin point quarter adjusted basis more a X.X%, EBITDA

the For of adjusted of a The the It's compared EBITDA of of second million, quarter second XXXX year Xx nearly first resulting XX% share adjusted $XXX of Net that growth the the compared top environment, half growth half XXXX. full half consistent approximately in income $XXX which five were XXXX. the EBITDA than of to per first second two $XX our of years million, improvement was that price. in three increase the Despite was the in XXXX. quarter that years reflecting was was in than demonstrates sustainability net worth more margin performance. challenging believe past and growth each XXXX $X.XX growth of year-over-year revenue earnings the both greater straight quarter first by of income volume million, of and to driven chain second diluted $X.XX for we We noting the of earnings quarters, XXXX. supply the line the in achieved quarter

Additional and include of office financial back factors our the execution behind strategic initiatives. continued operational our consistent performance commercial,

food year adjusted the model tenth and and packaging growth and EBITDA revenue operating marked provided revenue of compared XX% to reduce supply Canada, on which quarter. profitable few solutions quarter the our and revenue and segment, chain excellence to in enable by XX% segment. Packaging’s to highlighting organic market worked to of This our XX% helped we health our million. removing commercial year-over-year the EBITDA the this specialized to the nearly to industry quarter was In and sustainable diligently for our Packaging see past growth. dollar revenue initiatives in to expense we above segment of compared our growth impact EBITDA growth grew margin packaging prior the increased adjusted After segments. $XXX was beverage our second Over and impact XX.X% driven manufacturing, in care ongoing customized strong second prior quarter second the adjusted The the streamline continue years customers base, consecutive verticals. the year. increased in divestiture sales of

Our with packaging contributed to of customers. approximately our meet design, our specific second revenues and solutions needs custom customized generated growth sustainable segment's of our solutions, revenue strong along added inventory value quarter. solutions front Today management kitting the also end by are XX% to the during our

product complex are of specialists and We focus navigate who with each needs industry vertical especially equipped the customer. well

significant enhancements their While a inflation, impact. we not several process of last years the wage immune from to the supplier price over have offset of and effects made portion

We event exited to We details provide our now of an Steve? environments over such slowdown. the well to of profiles positioned of it with types divestiture as both year. previously to the for growth I'll After lower businesses Canada to announced pandemic. I'll quarter. our believe volatile certain many performance company have remarks allow perform challenging the have strategically COVID-XX in updated and like These Steve's the will in strategic actions continue outlook provide for the Steve outperform economic and the actions of turn financial to second Veritiv business. an return more on competitors remainder these

Steve Smith

provide everyone. flow, program. as repurchase to and details Thank well I our you, morning leverage performance, cash more share on our Sal, related as and updates good segment will

review speak the Rollsource Canada the businesses. our these please the we to are of of excluding As to impact we reported that referring results, and sale note organic results, we results, when

quarter Starting revenue year, prior quarter packaging Additionally, second a second compared selling on same the our basis reported X.X% increased to XX.X%. last year. revenue organic the the increased number of while the segment, had XXXX days with as

sales health higher and organic beverage digit market verticals such prices verticals. food in and related specialty Revenue the quarter double kitting Asia We cushioning, categories to driven volume. in by saw nearly product quarter Strength digit and and due was by volume the shutdowns. all growth primarily market broad double revenue categories mid-single somewhat mitigated a economic of digit extent manufacturing, in across by items. increased reported was growth lesser to We key our softness Second COVID-XX revenue led second growth of U.S. in of corrugated, as all industry and growth industrial product in care. range

million. For adjusted the was the which margin EBITDA of an $XXX.X improvement XXth packaging adjusted to a reported consecutive the segment of million, quarter second adjusted year record year-over-year compared Packaging's was the and prior growth. quarter for the second of EBITDA EBITDA basis XX.X%, Shifting dollar XX.X% Canada for X.X% sale, XX year the adjusted prior the increased and last XX.X% compared business the revenue points reported second declined When organic $XXX.X last Solutions year. quarter the segment, than to quarter versus the Facility revenue to for higher year. to

segment was reminder Canada and a solutions As business products, verticals. highly that within concentrated margin and and lower across industry print the solutions customers facility primarily

performance within Our home by was personal hospitality in can sales facility benefited strong solutions the home towels, expected sales verticals. lower entertainment away segment products from activity Robust the of as and partially such offset equipment. away service protective and from related food the liners from COVID in return tissues, XX

X.X%, improvement of adjusted basis resulting EBITDA the million, prior quarter prior for an year. improvement EBITDA the over year. XX.X% adjusted quarter XXX the a was point over second which solutions margin record $XX was The for Second a was facility

compared segment, prior For revenue second to year. the reported while increased increased Print Solutions XX.X% quarter revenue XX.X%, organic

mid-single supply year, remains margin volume range Although digit quarter, EBITDA versus the as second strong Print of disruptions the generated continued. XX.X%. declined the prior price print an second record in $XX.X EBITDA million chain solutions and adjusted quarter In adjusted

improve operating sustain model changed last the addition model several fundamentally and at we conditions than These profitability. changes levels. to market in anticipate of to risk changes market higher have performance and years historic our to the lower favorable our us foundational enabled Over to segment this have operating proactively

Moving now flow. to cash

ended $X.X from million, capital XXXX operations June flow cash flow quarter we operations, the quarter. the cash free was flow from of second million $XX For generated in of from XX, expenditures million subtracting $XX.X cash

Our results long X.Xx net a target trailing debt record below adjusted was ratio our well based to low Xx. month leverage XX of our term EBITDA on

and a continues free support optionality and growth repurchase to low provide conclude flow financial share organic leverage Our strong long-term profile inorganic historically I'll objectives. to and with generation update. strategic cash our

made the fully we or the roughly turn of rest now have end we've our I'll X% quarter the an provide are diluted shares call XXX,XXX with for the program. shares repurchase the approximately pleased the and second XXXX million to $XX remaining under Sal? back to repurchased outlook for Sal program. have million of the $XXX updated Through with share our We progress year.

Sal Abbate

we of business our Thanks collectively across are with pleased each and performance quarter summary, Steve. second our segments. In

needs our business long XX XXXX customers. solve key our problems, meaningfully our execution footprint we of reducing have rebalanced multi-year fundamentals leverage. our warehouses improve restructuring through we where complex term announced our relentless through exited of plan, end customers of the summer of the our to was our approximately across align ability enhanced efficiencies our warehouse have strategic the of business strategic driving network. packaging plan, second From XXXX, within while when our initiative better We to of the we initiatives, which further One and XXXX the the quarter with the

and the our of needs was of on-going to office business. distribution initiative with the back the reduction expenses Another align

benefits in these from exited Finally, not sale in such efforts strategic adjusted the Canada nature business. we multi-year margins improve recent margin EBITDA chain. certain volatility strategically of our also we actions these as are from going us expect These the to benefits and continue lower one-time to residual supply have the businesses have The allowed despite forward. initiatives

through has discipline also Our future financial us volatility. to business manage effectively market our prepared

as economic market exceptionally our seen our put position. anticipates actions in the a would strategic yet slowdown, an I we an financial by not Well, slowdown have have us As broader results. economic strong evidenced note

shareholders. potential balance with only capture value but We prepared weather a sheet a also for slowdown, fortified economic not our to to are

in portfolio industry earnings as provides As I not are a any degree customer. of diverse before, our verticals or stability weighted customers industry of and over we vertical mentioned one products,

to not unlike performance the Additionally, correlated markets. competitors is commodity some our heavily

highly conditions allows advantage us model, faster a low distributor changing have We than a manufacturer. needs a to to as also flexible capital operating market have to adjust the and which

than base Fortune customer representing our than businesses revenue. more half total Additionally, spans small to the of from X% with XXX customer greater of no

like to industries growing year. in staples, healthcare I also which talk outlook about rest are would for downturns. and now are We the more of historically resilient our as the economic consumer such

despite million range $XXX million EBITDA of mid-point the performance $XX our Canada strong million. our guidance to This increasing guidance from of prior to the to million. our $XXX of $XXX of the our XXXX reflects increase to EBITDA adjusted adjusted through a $XXX year divestiture are million full of we half $XXX year first Given and million range business, the a a to

$XXX of income. range expect to which We the double million net XXXX be full XXXX’s income to than net more $XXX year million, in is

We outstanding year XXXX. earnings expected expect than be of per to XX.X again Diluted $XX.XX shares. approximately full diluted are range to shares million be double to share $XX.XX, more the in

continue some XXXX. To demand to to lead million cash we $XXX remain segment expect of million for starting stable we market full approximately the Finally, year times at the expenditures capital to packaging flow of supplier expect with improve. free approximately to estimated and continue level, $XX provide visibility the segment, and

does trending entertainment, see to our offset related While to the from continue changes restaurants meaningful manage future customers. travel, proper Solutions we verticals. Facility with for to of equipment. their will reflect year, price COVID-XX strength outlook to away-from-home pre-pandemic the toward notice remainder any Traditional in efficiently personal levels, we we are helping partially as through verticals will and industry In our and not any declines protective continue changes hospitality believe such

as these commercial initiatives, We the margins excellence and our of supply have Canada actions business chain will to fundamentally recent improve well We changed believe our continue divestiture this business. to our as Print demand rest from capacity Solutions paper systemic due Switching continues to supply away outpace domestic shift the of the significantly throughout our grades. of mill traditional to to outlook, the year. segment

current for into balance XXXX. XXXX and We the expect well of print market continue to dynamics the

historical will levels. adjusted believe As above we margins produce our print to EBITDA business such, continue well

packaging As to customers. strategic of next execution we questions. the for on our to focused solutions, remarks. ready initiatives, provider comprehensive of the stay relentlessly Julie, leading will a are business-to-business of prepared long now and continue wave best-in-class take concludes This a providing we our term experience

Operator

Instructions]. [Operator Thank you.

first John Your Please Babcock Bank America. ahead. go comes from of from question

John Babcock

morning, Good my questions. taking thanks Hey! and for

helpful. clarity other some price Just of you any out results; strong be the wondering would I on be provide part starting I increase. paper if but of comes might there color was assume it to from the drivers the the also increases, able guidance potentially XQ

Sal Abbate

This morning! Good is clarify John. thing. one Sal. Yes, Sure, well me let

remainder increases. not the any For does price unannounced of the year it include

the we the I have the Canada to line you provided. despite second businesses year half of continue will increases segment, Each divestiture. than business for be any the by we of it the will segment last see or in by no price greater down know So year If break packaging growth. numbers

exception and we the imbalance in the this see a in We and expect, packaging, the see season Asia terms had be our to for quarter, significant market the QX, see – what margins we and stronger know would and QX estimated and – improving. expect step although any to access approaching and basically help verticals with the greatly steady quarters situation, a and you segment think balances expect imports the and of expected a consistent have supply of strong week Print while QX frankly year caring do and and strength allocation demand as holiday market our with fourth that's half third so seen office, from third of don't bit and know to fourth in increase pre-pandemic of a I QX holding had in demand we've the either be levels more a product and between continue and in quarter into know shipments, we with we sales into and supply the we most a we to Last had from QX in in to print. influx box back and healthy still back you I taken does little going in expect we of

drivers strength the to the anything second of half are that? the of the Steve, to those in So year. add

Steve Smith

Sal. time this at Nothing

John Babcock

wanted growth seeing And Okay, you're could of And on sense demand to I of you provide just just slowing. that's then seen there. if from get on know comment you month-to-month if from a I quarter. mean for in the our packaging, perspective you a helpful. kind next color sort what any also then, you're trended any could

that during You a know I points useful. from heard of that you would producers on you quarter, any additional number the so we've know know know be

Sal Abbate

separate I’ll of then between our and business, and John, international Sure the traditional kind domestic business. core it

what would in on quarter second flexible, call healthy we in actually corrugated box shipments. what So for we're in the volume seeing U.S. the particularly saw business, number particularly and a the I market compared to

organically So then you our X%, volume U.S. quarter and packaging the second about to or was up and takes mentioned. Steve so combining price, XX% that it

by market diversity seeing driven The healthcare as were we across in market second definitely all by mainly versus particular lines, beverage, saw less product but food manufacturing. strength as and hampered customers, that's and downs. maybe heavy areas wasn't are COVID-XX and the we shut volume So saw both in volume. in but where Chinese international mentioned, above It we the performance quarter the first the quarter, as growth strong we

weighted in in did business, the artificially growth the particularly the our here believe Asia, that chain. chain as international first business but declines in again for the origin market driven quarter, then and in supply the COVID-XX see so from volume supply see heavily and by [ph] did And not we suppressed business we international our and as our is actually toward above packaging pandemic. some to them volume, But so be international And quarter, challenges all-in-all strong U.S. second

John Babcock

Okay.

should macro it’s over about if play kind the might in couple the was too quarters, to XXXX to out continue scenarios next wondering different for still the but you could provide soften. recognize I environment of particularly business of know You early talk guidance, probably I that

Sal Abbate

I’ll John first that of back don't recession we a in built so to the have comment Yes, half XXXX.

general While guidance to yet, some overall. give will not prepared XXXX I we're maybe provide color

You and know more break in segment, expect, because do maybe down by we some others. that there's than clarity I'll

in the Print of through imbalance into and do end supply carry XXXX. of know the expect we demand XXXX You to

six and see of we say the and side so what's hard and rebalancing that months supply and do in but those likely packaging clear It's going the us, demand levels. healthy and businesses so into in from call, elevated to healthy again isn't I'll getting are November see going probability on to comments that to So to the we XXXX. again happen as become in to pre-pandemic a supply continued chain improvement until refrain shortened nine our to XXXX most next FS back return

balance I the year, XXXX back on are initiatives those sustainability into is continuing into margin mention. we our those and that XXXX, and see four strong What to that of maybe into season. the with we comment going demand holiday some a the of can So the of relatively continue

and that market inside respect our First, is and that and price to waves cost of is have increase. a improvements might know anything price do future the we company cost discipline with from happen you discipline price excluding

lastly They XXXX next Canada, so the have XX% than that fourth improved our Othelle and being plan commodity are into initiatives. are resin the of and to also markets Rollsource, north primarily anything I businesses, know margins drive like based margin And solutions, from highly XXXX have half and divestiture ancillary office the of the year. Steve, margin and packaging the recall to which will you help operations our back the then second margins accretion and XXXX, and mix going in packaging products and continue have and continue We chain half coming things continue and in and and the automation, our that add we higher customised in customized portfolio [ph]. of have less solutions quarter to year into drive kitting other like from driving our beholden corrugated, of into is into second the of to lower less mention XX% ROIC We'll to kind third commodity XXXX. just supply might to and the segment that. markets, next business, we year. will year margin that packaging that restructuring the tailing back the half that's of improvement that come into our where

Steve Smith

you balance we and So scenarios taking as the ’XX, sheet, in is remarks look down know, at X.X. will at the just for different to prepared as as the leverage balance we commented a our look sheet net John

softness be perspective. ’XX, from feel we prepared there a driven pretty macro should in well So that

John Babcock

Got sheet, that balance on long you. And term long actually to on the just like – point term did it look debt declined. your

debt Just of you want there – some to mean you I there pay down know full at about or clarify, stake did was there. a is timing

Sal Abbate

take want you that? to Steve,

Steve Smith

Yeah, sure Sal.

So we debt. did pay down

proceeds increased was used quarter. reduction the as some from in performance, the the came proceeds the John. of asset Canadian the program income those repurchase Our share debt well during of leverage what that We as LTM to EBITDA the led that, for both statement and on-going sale is

John Babcock

about think absolute I decline I wasn’t but you million $XXX that is talking about ratio, the the that just tell Yeah, amount would Okay. also or so.

Sal Abbate

Yes.

John Babcock

here a think Okay, I should about absolute you are I is is of kind already know are great. will guys how of level bottom well that’s a from leverage comfortable mean pretty or mean mean you at. an debt like that of level curiosity, you that? out where I Out standpoint, there but we over there you

Sal Abbate

Xx will it Well leverage. John, historically look under we be have we signaled that for,

you out, significantly are pointed below that. we As

is So or and minus. around term Xx plus we goal remain our optionality do some long have to

over you and is next looking that pipeline that to months. some before, both scope actively scale to and to allocation us give that? nine M&A are the regard. mentioned does we that anything active to Things decisions with Steve, add six want we've for opportunities So attractive, the here make capital our

Steve Smith

No Sal.

John Babcock

was Alright, you then flow then I free over. just kind thanks. through And and it I'll typical my wondering bridge the of can question, last if turn walk cash

Sal Abbate

Steve?

Steve Smith

sure. So Absolutely!

steps about think let’s we John in it do the, as two it. So

range – from it. reduction the Let's whole take income can XXX you and XXX XXX, net to the is of now and four walk. mentioned, as The midpoint, the the income Sal then we has so to in net adjusted to of get the cash to flow, to adjusted elements EBITDA range income the EBITDA down give of mid-point free net

LIFO $XX have only million, expenses, approximately $XXX million $XX taxes are that’s We then of will $XX running be in about interest million. the million. and expense now D&A neighborhood that's Other mostly

approximate net are to and net From about So $XXX net four of $XXX items we'll and those million million items to $XXX million was $XXX items that the the That those reduction. free that from of four $XX to us XXX go is cash midpoint takes EBITDA then, happens million. flow income million that approximately total have are of also million larger from items sum income.

to of the have of $XX bad D&A the working of of like $XX capital non-cash taxes use, deferred backs of guided million approximately add about given $XX CapEx First, million. and of of debt and million. We then subtraction items the use million. the you The increase revenue again about $XX

four items us from those about about a takes so million. approximately million So $XX use, to million, $XXX we $XXX the $XXX to guided million which net of is

John Babcock

Sure perfect! Thank you.

Steve Smith

Sure.

Operator

comes Staphos question from America. next of Bank Please go ahead. from Your George

George Staphos

very end to Good the comfort of guys the look be a what difficult out Hi supply the question had kind then year. taking this of be print chains or first and in allocation for said to I it'll it’s I differently, in of follow-ons. that, gives and on question. open with I any might I able when quick know on Thanks precision. everyone! Any through had be But guess why up you'll very morning. you thoughts tight couple and far

Sal Abbate

the the supply gives to year. out, capacity least us says the at come the that of the supply end suppliers, and that with key we’re in given U.S. our the suppliers isn't you and say that Yeah, know continues balance chain the chain, domestic Print, in before of Thanks the With fact the our respect predictability dialogue improve of visibility just question. to good going George! year and morning to for European

a the slowdown to really but You you takes from to what imports might a obviously change we know chain the and point say in way, that think tipping additional a know dramatically as create the current change that that, would about macro-economic be the would I demand Asia imbalance supply would and and good the fill giving to challenges what's containers will the say guess for six so angst there’s water, six on I I us with product tight that's chain still months you nine comfort and at months. know next, remain supply it call or would that least

George Staphos

Okay.

point with So folks to in print producers you have customers Europe? the view a triangulation Asian in North and that on America are that also been have so are to touch to cargo some and to paper relative talking what companies of your saying and on your get vessel

Sal Abbate

so I we understand absolutely the be guidance, months XXXX doing XXXX demand really next what to and supply outlets. a better reaching that in balance situation out to comprehensive frame. – on shape we’ll know Yeah, try all like term comment capacity several and the that November help to are will time you our and actually inform we mean in are that long looked over we're To through us George study the

George Staphos

question. that. forgive and gears, the I Switching Okay, elemental appreciate

think have hours. So price recently some last box in I increases like been XX there the board, in XX, announced

benefit left Thank the of on more the the and ‘XX carton benefits what's or beyond. you business from then more be left in you terms really. our process corrugate what And and business not to vantage at from that rest on me, the that is folding important, in know improvement, of might all ‘XX the importantly point your year affect of really you. that to know remind be happening the results is does going You could what in recognize could restructuring

Sal Abbate

Sure Steve, and turn take increases packaging And at to George, and comment over year. on color the to the least question segments. maybe the regarding improvement it the you on I'll all I’ll first some give of half of process the benefits then for balance I'll the specifically price

particularly packaging, do you print George, would I have we I that price of or the of in on in that as five guidance we be four supply the see that to – we end months. next facility because the provided chain, imbalance further solutions, higher we guidance not print or did you and the five we know in more decreases solutions, any than continue or expect today would mentioned tell increases we but packaging in numbers earlier for in would increases we the this know You and would frankly months, expect

we into bake guidance be if we range have through, while end you would over of So like the didn't know to increases and continue our years. price the pass range, on necessarily that those in last we come it would it the believe higher do we appropriately several those

George Staphos

a Right, mean effect board have what just box much? happens business in corrugated one quickie. I when significant your relative to or so not

Sal Abbate

sure. for corrugated, more weighted corrugated heavily much no. to as No, as much we're Not

George Staphos

you, on process? you. thank And Thank

Sal Abbate

you bet. Yeah,

Steve Smith

plan several elements to small so beyond. year, that arterial and there's that. a this the benefit trickled of mentioned so George to Yes, into ‘XX Sal restructuring XXXX there’s

the helping have the We mix segment also margins. consolidated

years, divested the we and as forward discipline future business that of we there’s seeing a volatility that is in in cost are we over future years. As lower carry will carried you that into Canada into been in price also lower put also being and ROIC prices place and the know margin, market

enjoy we an didn't but operational back to efficiency, not years that now. do enjoy four office we’re we it it’s efficiency three a ago, So

George Staphos

you, turn Thank over. I'll it Steve.

Operator

call questions closing Abbate are back for the Sal this turn time. over there to further no remarks. And I will at

Sal Abbate

employees the track Thanks I quarter. helping of delivering all employees to Julie. Well, lead that and way. would that are for performance. Julie, delighting on for outstanding concludes year focused Thank you, call. like our our are customer customers another we to of you. record Thank financial their an to dedication thank and our our talented

Operator

concludes call. This today's conference

You may disconnect. now

Veritiv (VRTV) 9 Aug 222022 Q2 Earnings call transcript