RRD - Earnings call transcript Q4 2018

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Brian Feeney

Thank you for joining R.R. Donnelley's Fourth Quarter 2018 Results Conference Call.

Joining me on today's call are Dan Knotts, RRD's President and Chief Executive Officer; and Terry Peterson, our Chief Financial Officer. At the conclusion of today's prepared remarks, Dan, Terry, and I will take questions.

As a reminder, we have prepared supplemental slides for today's call, which can be found on the Investors section of our website at rrd.com.

by quarter from today’s those the wish follow fourth reference we participants review themselves. to numbers slides page supplemental along we results call, on will who As the advancing slides for The information this addressed of press more at in of which quarter reviewed is in fourth the a rrd.com. call our Investors our section is detail release, will that be during copy posted on website yesterday. information also filed Form to X-K SEC the the was on This furnished we we refer involve strategy, also statements, uncertainties. comments call, forward-looking this and Throughout outlook on will all including to our risks financial which of and Therefore, our results differ current materially from actual expectations. could our

in For included and non-GAAP results a materially, the over useful to call please operations factors and the only. that are discussion our for included and information. references report purposes the to filings supplementary comparable our concerning financial other appropriate the to now non-GAAP Dan. discuss an to performance. Presentation the the earnings risk XX-Q measures reconciled the of measures our under the could press our company’s annual to financial the Form cause in our in release are information the believe factors GAAP release website provided informational to ongoing section They differ on of We will reports Any our with company’s way Investors the provides tab. investors evaluate turn I is refer non-GAAP actual on Form statement we and quarterly complete cautionary of SEC. results will financial Further, with XX-K, presentation

Dan Knotts

completed $XXX new I'm XXX journey we you RRD Throughout the today. our year to strategically the and was States. you, a strengthen since second our successfully navigated million company. significant in under we marketing we year deliver the communications world environment the our segments, The strategic to important produce Brian. business of a initiatives XXXX. flexibility. XXXX sales most our million our best thank improving financial also as company Census. for us number organic awarded joining on performance of the XXX and million Good year as and new call is Thank everyone complex year, growth morning, consecutive a investing by technology-driven production a the that business pleased rapidly services, challenging portfolio, for and platform, business organic Further, including across of reorganizing continued our more a contract and our evolving concluded to the share we one of households United being programs mailed XXXX to than requiring to launching and documents the communication optimizing products census improvement

platform post and logistics, the inserts, letters, and We operational to this questionnaires, leading envelopes print, will cards, our data, required for leverage complete program.

today, and moving on for to with the provide ahead same speed are recap quarter accomplishments the call process Our our I critical production we the implementation teams our several then are full every the with will strategic world. On completing fourth they this impeccable of that year. first review our day around program clients our performance quality and laser-focused

the to to demonstrate and over how examples new expand Solutions share Terry, relationships. few will continue quarter conclude call and client within our a win to Marketing side existing We to differentiated delivered the I Business clients a our performance to Please turning turn Before are also that year. capabilities solid we segments X. leveraging Services

the marketing digital and exit our Marketing print to Logistics sourcing organic the growth returned direct disposition top Print Solutions favorable reported On both Business performance adjusted all in delivering primarily BPO, of Packaging, organic business the growth negatively line performance. the planned the Logistics sourcing and reported products to were business. and for in with by impacted results the XX with the our reporting total line versus with sales categories six reductions decline organic and our Forms with overall organic Overall, Services of our expectations Logistics our favorable service quarter. Print prior sales of of and attributable sales was year. fulfillment planned sale low-margin

a Our our was strong we last post-spin our flat highest to margin business. delivered adjusted quarterly operations quarter income from we adjusted a And which included roughly fourth Logistics Print operating year as company.

to operating flow generated we a report prior in increase versus that cash XX% pleased I'm our Additionally, the year.

drive Turning important to milestones the to our achieved during year X, forward. number of slide strategy a we

businesses meet global clients' premier activation directly communications. client-centric clients provider marketing business programs This of the of to Marketing in and shift strategies. segments: client-centric best structure evolving into our Solutions, needs a Services of our Business to needs multichannel with was our our First evolving two preeminent a important we step transformation businesses reorganized our an a provider to align strategic and

and with our and segment are more actively those their in complexity marketing is the resonating structure clients execute efficiently of communications. segment business Our our more manage personalized engaged clients helping teams effectively

Second, we significant our XXXX we improvement completed our our initiatives to by portfolio our strengthen the represented quarter continue transaction the took serve. cost the step executing of This a core to third efforts. business Logistics Print meaningful core first in and through lowering to sale year which optimization successfully a Throughout reshape our step our business. forward in in

a $XX year related the SG&A our reduction two the to cost percentage ratio lowered and prior point last to sales by delivered years. million nearly a full versus expense we SG&A now over have Specifically

our by of expand on focus capabilities. that to developing new continue we portfolio leading product offerings future our Third,

devices communications launched Alexa new fixed digital capability our introduced form delivery enhancement platform offerings. voice This their we to patented We voice-enabled like our artificial an Google with statements. web SuperDoc digital content content delivery across turn And helps Home. statement solution. technology our additional During interact assistant intelligence-driven we with to our of leveraged and allows offering clients clients business year business launch interactive delivery our into the which communications two otherwise

Acuity campaigns The to in mail our support before also with that more to predictive component relates by launch. of a strategic We introduced testing direct and of our our sheet cost-effective marketers strategic repositioning objectives. balance validate they quicker provides RRD, program a framework way final

and in make and as changing XXXX. increasing seamlessly current brands and competitive vying communications and between online, remains accounts which $XXX in and closing In first addition matures prospective are landscape our on of million of $XXX effectively facility future customer Print attention a gross close. interactions offline Slide of Logistics pressure for the January To certain The around environment. of debt connect are by we China business that our assets facility Loan B increasingly their we We track mentioned our significantly on-site successfully to an channels for proceeds our loyalty Further, clients approximately X. locations. Term with XXXX of which a previously engage maturity customers, is sale personalized. and profile clients for rapidly to move million highly including improved facility we the those companies to every each and and this of the international sale monetizing with day U.K. our world. relevant are sale the closed The in under relocation see quarter; and two our

the innovative need health cost represents marketing from programs that be of statement, that their to company, connect our and clients customers; package, customers business to new in product simplify it provide portfolio Services with a other to marketing a care kit across business and that enrollment We're As and customer improve to clients' a reduce representation they their label, the meaningful complexity, In with entire effectiveness a an communication connect communications business acquire the Business customer we're to to important business our and of better brand providing service, communications solutions with an our services type products and our inspire client business leveraging time. leading each inform is relationship recognize we they integrated they any use transact customers opportunity the the a to and of a repeat tools way. and segment, clients marketing or communication over of use those our communications. that

to channels both that's their transformation digital redesign digital and over Under customers. to clients seeking statements. a on new recently client's and with this customers awarded scale focused holding presentment inform bank and statements communications are our interactive transact multi-channel and web, connect better statements, company undergoing across new will We were including enable service with their business checks we We across bank tax ways new and delivering at time. communications personalized help to agreement, regional business print a notices, letters, with e-mail customer-facing this

message customer's content delivery previously to helping each use can responsibility also and delivering suite a customer and our from of managed by record. that capabilities, this audit improve implementing according their creation Through their We've which including manufacturer and client communications portal delivery client also support track social expanded was relationship by agency program we to automobile a with are delivery end-consumer are engagement include We online large offline to integrated our client's channel. of preferred to their proof, of interactions. this format this

this of all client local to execution their We partner with the will across their manage events markets. of

this bank will we're optimize to to materials, -- expanded which and client. drive seeking conversations help a savings branch collateral content large banks will yield our our personalized would and that client activate focused on integrating insights, Our all creative solution, support Solutions management of their segment, all We more holding event inventory the relationship cost printing of their an print environment in procurement campaigns. associated marketing integrated customers. with clients and company. This for and in Marketing with include order which In recently and digital was significant services our in create capabilities their data-driven

composition, Prior included and company. and to them previously team this creation commercial helping to video this collateral the branch this editing of work manage, the for We've which produce their opportunity two mobile through for the environment also taken existing to its support, brand on client's install large this agreement, new guidelines awarded extend for ability production pictures, those signage deliver proven and behalf. client through this and support workflows locations. creative of in-store for and support new client relationship, campaign and for their our production will materials. and third We and solutions a consumer services on print launches electronics for and internal store online client, client's the We mobile this is retail our call action in-store solution to a supported because print were training displays support each expanded multinational to of services Our device web seamlessly messaging new to execute a that provided within launch customers. on-site we

also I'd awards we and our to Terry, innovation to over technology call like mention the that turning reaffirm Before capabilities. recently received several

First, of of won we through provides in which Xplor Application International. our was a on-demand multichannel management hosted the Award communications from proprietary recognition This service the delivery portal. messaging customer and composition simple real-time given award Year

I'm its in the complex in in-store RRD proud of year core Home recognizing way The our to Entrepreneurial each for driving Award to vendors Home recognized industry Foundation the at pace merchandising Depot strength received experiences this share that Second, customers. vendor's deliver year's one in as Spirit in to we Entrepreneurial ability unique and in Depot's were Event retail adapt a that Spirit Award the specifically the volume of programs. Home innovation Depot provides that creating and to change for high of

our path to take world. we over the the is and day details we objectives. past employees you. it made pride particularly over deliver the provide Terry financial awards represents turn every receive, we to rewarding around our the in execute each in remain one that forward our Of And we this clients While outlook. spirit over because of drive the that that, confident of more with progress to Terry our year that to entrepreneurial each on the continue our I'll and strategic to as great and performance call

Terry Peterson

Thank you, Dan.

to perspective well performed like begin against on speaking Overall, I we high our quarter last slides, year. to would exceptionally fourth performance. the strong my share quarter level an I Before

we despite cash operated delivered post-spin. higher operating And in EBITDA margin inflationary year. since quarter expected was a we flow the up operating company cost increases, and versus standalone Our significantly best than adjusted our have as the prior

exit of with sales overall the expectations. in and logistics meeting margin sales sourcing providers to mainly But that profit from sales Our former business was our print planned low our not minimum to line outside overall, declined our due net certain requirements. were production

and percentage higher of which per previous guidance earnings below diluted effective will adjusted share remarks. supplemental more sales our address our by fourth the in On rate basis sales in and RRD. my fully a a quarter in a inflation tax services later because our we sale down higher snapshot were the Finally, X.X for for X.X% with quarter. of points of reported was growth six and services the significantly I X and products by net XX disposition slides consolidated categories, performance provides geography segment by by Page this experienced net Marketing, After Packaging; at which Page Digital, quarter in X beginning and quarter logistics sales of Logistics; associated a the adjusting of reduction BPO; shows print the organic third our Direct products Fulfillment; and trend and Print, year. Forms. included

which since our XXXX that happy to performance organic delivered XXXX. report topline of are growth We X.X% all annual strongest organic of we is for

to X.X% quarter Our reductions fourth down sales work. planned organic due in the sourcing were

X, We and existing the last expanded we while in from of work our significant fourth adjusted business, million sold client XXXX. Print was of $XXX clients of with quarter page continue of income work to July results versus the quarter On lapping million fourth see new Logistics lower wins XXXX. was produced included new XXXX the The the operations packaging which year. benefit in $X.X

versus operating results to improved our combination ongoing The and period from XXXX positively rates, same $X packaging XXXX increased corresponding changes X.X% in approximate million year. exchange margins X.X% an impacted our benefit this in the of cost in initiatives, efficiencies foreign Asia reduction XXXX. our in in operations, Our from

quarter results $X.XX quarter expected as the period. by primarily was higher adjusted the higher in year The reported by pressure modest XXXX, in than effective XX.X% impacted to a tax Business in negatively was XXXX costs. to mix, rate reduction Services in labor fourth as price compared However, rate. XX% tax prior XXXX compared of quarter's product Adjusted diluted were and period. driven and The effective per was unfavorable $X.XX in paper the the share earnings

three to of rate As XXXX guidance IRS. quarters, first but from be XXXX the reform, expected, improved unfavorable the tax including the by impact versus recently the from significantly negatively issued impacted continued

produce reduce interest expense in our tax help other to We expect efforts years. ongoing among initiatives effective our future will rate

GAAP impairment $X.X quarter in pre-tax for Brazil. related million, and other primarily and charges charges to of including Our pre-tax restructuring results other operations the included million, of $XX our

value During long-lived commenced of the Brazil, aggressive shortfalls. we quarter, assets have we actions wrote in down profitability the address our to as

of In to tax previously a adjustment also addition, XXXX primarily $XX.X results for an with the recorded quarter million, to included provisional taxes net unfavorable the associated tax charge related reform.

will previously favorable disposed foreign business discuss shortfalls offset quarter After and our to of price and sourcing mix in down are were XX, of sales exchange of modest Print was Profitability million which of category. planned reported packaging, the cost rates, categories result XXXX mentioned Latin of On accounted forms product sales the exchange income of earlier well the results improved operations XXXX both to Print in versus by which page volume Logistics as for segments. our the year. primarily Commercial We the net Print million, the and Business and reflected productivity increases X.X% $XXX.X segment XXXX. as prior highlights a growth in I $X.X Services organic in sales well million unfavorable quarter. for decreased as of XX.X% which included period, our in quarter the as the Logistics partially $XXX.X decline effect in BPO, from compared as our disposition, the $XXX.X Adjusted of each pressure. million inflationary rate adjusting America, product billion Next, for $X.XX for or due up of in a foreign product logistics our changes, fourth reductions

page decline both, digital to fulfillment in year and the our Marketing quarter million the million Solutions by segment quarter, up $XXX.X on and prior offset Turning organic products Increases marketing in net were were our print direct sales to a XX, an creative and $X.X partially reported digital of basis. for X.X% or and solutions. a in

unfavorable Our results affect services which, segments, traditional a quarter. shift increased million page impact comparisons cash of the than operating which This million, improvement by continued income million On included digital market year, for increases. of away and inflationary prior expenses compared more million was provided down were impacted strategic continue Adjusted cost our $XXX.X was an an from of activities the shift the as for to the $XX.X of productivity non-core and $X.X as pre-media sales solutions sales Fourth $XX.X unallocated net will XXXX. $X.X for creative offset XXXX from to strategic of expected, the from performance quarter as quarters first XX, two non-GAAP million operations XXXX mix negatively by was from XXXX. period. $XX.X corporate gains million

the unfavorable in lower capital our the capital benefits As provided in tax plus $X.X ongoing reversed, compared $XX.X XXXX to the XXXX working build fully were and period. million of million higher expenditures quarter payments of first initiatives working Capital reported expected, quarter. the further

Turning the sheet. now balance to

under facility. prospective $XXX the -- year. from plans billion non-refundable $XXX and of the $X.XX year Planned Total of million million, our all pension is XXXX actual $XX at plans post pension the $XXX outstanding other was a facility significantly our Remaining end, to other cash post-retirement debt recorded requirements contribution contributions $XXX.X $X.XX which had to of As hand less cash XXXX. level is XX, on in XXXX be are unfunded from we is XXXX, cash $XX in of $X total is at our than due were million end up as primarily from in compared XXXX. post-retirement $XX $XXX.X end. significant hand to and which of XXXX million credit of was Also $XX.X last The approximately be underfunded position, to million expected in in down in from availability billion December OPEB million, reduction increase in deposits million which lower last million December XX. on $XX all printing contributions The million, including growth million to as is was of due from buyer expected in collected Income by approximately in plans year the down China's on expected XXXX. million plans.

XXXX, provide you our would update an priorities. Before expectations ongoing with for like I to shift our I capital to of

China, we facilities As to quarters, of business we that facility I new an continue in continuously a in make both for logistics organic can in make facility to mid-XXXX. investments of investments and In report evaluate pending our and our the opportunities sale assets. acquisitions sale international have which will sale other a to past we in relocate business, business value, progress like construct the stated expect existing to Shenzhen, portfolio our planned facility, regards our is to I optimize now stockholder printing to we of recent print strategic the and including potential and utilize

fund expect and enable plan deposit in required use to also non-refundable to deposit We help remaining in the this XXXX. we XXXX will collect that one we us will meet that construction cost to milestones additional

expect the believe also a to significant late we remains and transaction governmental close at on the on in the which to record sale. receive time XXXX We gain final project track will approvals

sheet our on focus improving also flexibility. We to balance continue

As matured this our outstanding a notes facility. our X, on previously of an we we quarter. Further demonstrations using proceeds early senior credit from announced B XXXX on Loan notes Term million repaid February the and in with million $XXX secured that facility credit senior balance we commitment, of closed those $XXX

notes forma in notes capital the XXXX in which to issuance of effect XX reminder, structure. slides these our a outstanding our giving interest debt various of as our As on addition at the most XX.XX% was maturities Page maturities after XX of repayment the to of year December February supplemental by the the X. bore pro expensive show

XXXX significantly XXXX our have since XXXX, improved our XX sheet and September XXXX balance of We flexibility. have now reduced maturities and

year are full XXXX page XX of the slides. supplemental on Our reflected expectations for

For by Print $X.X billion. $XXX negatively range the to full comparison million impacted to XXXX last the Versus sales net year, net $X.X July. sales business Logistics will approximately we related to be in expect XXXX, sold from of sales billion the

of awarded Aside $XX of disposition, approximately our impact performance, assumes XXXX including the from organic the of flat recently the sales range mid-point from million Census the project.

approximately a variety of the point recognized factors. of sales but full split impacted value can the be is in between of clarification, As $XXX by XXXX be the the XXXX million, versus to contract a portion Census

foreign focus from assumes the strong expect guidance. cost to that $X.XX range mid-point from Adjusted our share or is to changes. which impact our We operations The to effective continued range higher Adjusted to rate. of neutral $XXX our expected $X.XX, from paper from reduction and estimate initiatives. million rate stated of will a mid-point within expected and range is labor exchange from increases higher range tax per decreases reflecting include on a impact earnings our fall cost income million of the continued both diluted $XXX

In cash expense of our is repayment to XXXX as to our addition, a our notes. of flow. decrease the Shifting senior result XXXX in XXXX estimated interest

$XXX and will tax had in higher million we cash our that million. We which XXXX. flow be expect refunds We expect $XXX between not will operating repeat year last

to range to million $XXX of million. cash Capital our relocation flow in of we be cash as related incur third-party work additional when our $XX use approximately addition, relocating conducted. to mid-year printing the operating expected In to to from XXXX operating this will expenditures we facility severance to outsource million, expect increased which $XXX relocation printers XXXX. is a as and not cost impact and are being while in is repeat will move well estimated China cost, total The

due be capital large projects. XXXX temporarily spend to expected two higher than Our is to

in complete spend XXXX. the in to of facility to the second to First, we approximately our $XX $XX of capital plan million printing quarter. adds expect the early million China construction previously This mentioned

in we year additional investments Second, binding, equipment printing to the XXXX the as Census make early in other to announced, and contract. related previously plan

expenditures we our to amount. XXXX X.X% expect to of beyond in to a capital which CapEx to million to X.X% range the translates revenue, Looking $XX return of $XX reduction XXXX, million versus our previously stated

deposit China expect sale of also the of our approximately $XX XXXX facility. collect million to We to a in non-refundable related

recall, you to this sell are agreement non-refundable for buyer, and moving payments to severance from which expenditures. and required the to facility provided may As us specific incremental help offset intended capital deposits for the costs

XX, December non-refundable XXXX, of of we deposits have buyer. collected As approximately $XX million the from

cash As to I like on comments would conclude I emphasize my our for key XXXX, one flow point. expectations

includes $XX the cash That XXXX and XXXX. $XX the repeat Our higher CapEx none facility the to China, which facility relocation printing spend to of of guidance million with both new in operating construction. will range of million flow our associated related impact to cash the includes in our

outstanding expect We cash the to hand our the do the fund from increase in not with project from buyer. expect cash debt United has specifically, on to States. or this And China, to been us we use for which given

Before of I wrap to up expected for first quarter our on comment my comments, would the like year. the performance I

continue and the execution on-boarding our productivity improvement structure initiatives our will our business large plans. on of focus We clients and reducing through new cost

in down reported sale and In two due do quarter expect work business sales Logistics of on of to the XXXX both expenditure quarter. our net the to planned in expected higher of in drive our We our initiatives, first low-margin be are which sourcing addition, sales. primarily sales first XXXX; from of we intensely XXXX million levels the $XXX business, significant and the quarter highlighted: China net which continued first in reductions in Print be I capital The will Census printing focused relocation the of the have to

prepare We and planned new printing facilities China. Census certain low-performing also we the related are for U.S. U.S. growth generate as expect reductions cost production. both half Sales client, Census in start-up the currently to last cost the a from expected the the perspective, U.S. for of a From we are on-boarding work closure have to of and in to help year. the organic incur we

negatively during China to to but facility relocation and disruptions will period. we this our third-party transition further expect passing labor our also plan to as to paper QX, new continue on impact clients. client to to printers will be progress the Additionally, do margins during production impacted these outsource we minimize costs to negatively make increases our Higher

expect for these has Taking consideration, of year's diluted higher. these let's reported be Also share line into all last lower year inflationary our to We full to our debt pressures bankruptcy questions. our expense amount. be factors in favorable and been similar favorable we XXXX. client expense the of through FX guidance. due the expected offset to notes And reductions, tax cost our adjusted reported per loss expect quarter following expected bad expense in these continued is to considered of to each factors to operator, repayment and now the partially up XXXX in be open Interest the is

Operator

comes Buckingham. Our the ahead. today Please Instructions] go Jamie line question [Operator from of of first Clement

Jamie Clement

margin business and good of and of why what history doesn't you history business kind Hey totally why maybe the low of a in was of sourcing fit clear -- services than sort it doesn't marketing lesson not the gentlemen. it morning Dan, I'm little it of communications that's bit just and your strategy. other there? a Can kind just with give

Dan Knotts

continues play chain our supply role manage Sure business just to clients. itself entire behalf of as And sourcing to a key on our Jamie. absolutely the we clarify,

strategy. bottom some of work it call on company. there an What particular about as that our And contracts, that way part legacy our the referencing work margins do have company within cases, the want think vast all sourcing margin each a cost-reduction improvement remains and from how the -- of history top line of a we all as are the across business business, actions little of down collectively overall a our to the here, to we business So we of goes the is are top majority the core of that From take bit part improving initiatives our we to emphasize the these still sourcing work. as -- beyond our threshold. the the line bottom just at of that down contracts, contracts looking we to meet businesses? on I that, And is of standpoint some as in the the not

as engage its expand makes platform, So then to two our to it's company. work to on being do the increase time platform efficiency we any pursued with history our to doesn't a where At as to sense contracts and produced we them produced serve our those work continue rising complexity And those there to has those communications. the it none those make relationships. and some sense it being help bring clients to ongoing don't with and to reductions are our clients, and of outside see work our of particular against and things, of over been for the so cost their work point volume see on opportunities relationships we those of backdrop do us simplify development in

forward walk making we contract through improve to pieces difficult go choices we those the think don't from of opportunity business. the to those there, If away negotiations, we we with intent the as are move those So profitability. is

Jamie Clement

Commercial if I And I Print and business? apologize. number that related may Okay. I how the year-over-year have was the much But of did, decline missed to

Terry Peterson

difference but I'll was the you it Jamie, product that business reporting versus of quarter for sales, separately in our reported organic between an tell company fourth take broken will piece We've in the decline. organic that. I growth that out not

Jamie Clement

the reporting for Not the not just company the Organic segment. segment. -- Commercial Print growth not

Terry Peterson

well. a It would have impact similar to that as had segment

Dan Knotts

Jamie. answer to is, the yes, So, your question

organic For the it had have That's correct. company entire would growth.

Jamie Clement

it. got Okay,

Chinese particularly guidance So to have your so you're of and you're Terry, going have severance. the thing. that -- Obviously relocation to around going sort to moving

going you out You're training presumably to to unclear going to have to totally that operations, adjusted those things. have of – be kind What's I'm costs -- of is about get going is of are all of that's going to some there? of from non-GAAP-ed treated. or me be not income of that to how is clear in all going kinds

Terry Peterson

or flow. those of would roughly referenced it have impact the I question. of related operating $XX the some have will we are and for of about business on the outsourcing That $X margins relocation activities disruption million non-GAAP to restructuring all cash hit actually will million so that stuff. the our Jamie $XX would related relocating. you, to from thank million about in $XX Most part that of that a million while -- be Yes, lower

be numbers. So as out to of restructuring our is going that called most part all of non-GAAP in that

Jamie Clement

other Okay. million talked already about and that inflows collected to related in so balance we outflows think have Now so the right -- we to expect you of Is the should it? the And XXXX. you've the million? in $XX $XX terms the about way that

Terry Peterson

We're another through we've of XXXX. XXXX when will million XXXX. $XX so the in we collected close end in late come million balance late Yes, already expecting and the $XX XXXX then XXXX/early

Jamie Clement

Okay. I Thank very you much. get queue. all will in back

Terry Peterson

Jamie. right. you, Thank All

Dan Knotts

you. Thank

Operator

Our next of the from ahead. Charlie Please question Strauzer CJS. line comes representing go

Charlie Strauzer

Good Hi. morning.

Terry Peterson

Charles. Good morning,

Charlie Strauzer

do Of coming million. net in hand coming would be year of so there. remaining amount million $XX question just from in What cash you The what up got cash Obviously that's $XX be? think net this is the million you Jamie's the remaining that? the likely on the Hey, think $XX remaining you do will picking on you in China XXXX. to another last

Terry Peterson

asking for Thanks Charlie. Yes. that

same. back recall to the gain paid cash over are taxes calls expected about time all cost the $XXX -- recorded million is for we've today left to bring everything back bring the by you have and cash and likely bring all we was factored I've the put and past about everything repayment that in That XXXX. and everything, is that the all inflows If we're our talking view that of and enough eventual cash $XXX on back outflows into all guidance. multiyear that of to still million, estimate debt That the referenced

that starting has been been that all the back core CapEx. Just debt always has the cash of not now the the to stuff of net the section meaning paydown has is for contemplated. and time that changed. But come spoken to Every when come year amount amounts of lot a through XXXX I've all operating about is contemplated financials flow and

to still $XXX million. is Our current estimate $XXX about million

to a rate is Chinese exchange RMB. Of the course all with that subject

Charlie Strauzer

all of the correct? and cost right, basically construction things and the other that's And taxes it. the Got the and all stuff net other

Terry Peterson

to what to everything. we Yes, the the basically expect $XXX That to net is million to able States. is $XXX back be million United bring of

Charlie Strauzer

Great. Got Excellent. it.

you about is? is talked those liability You pension where million what the you think down. said remind Can me being again? I just pension numbers were the $XXX was it what

Terry Peterson

from is of pension $XXX at year. the and end of the that's million down of end XXXX $XXX Yes, now unfunded liability last million as the

Charlie Strauzer

thoughts that. much related cash coming And of be how just it. in Got to payments on then year might this kind

Terry Peterson

good Yes, progress modifications a with some asset good and and we've made as performance well. really some changes

amount, expect XXXX down was to $XX be from We of outflow the $X million. in and outflow is $XX it which of that an XXXX million cash million

Charlie Strauzer

okay. that there yet? when pursuing it, the to asset Have referenced other as you And And you still then of other I asset. another mean, quantified asset well? close? And sales then that sale are Got you're do expect U.K. you sales

Terry Peterson

proceeds. was Yes, so of year for at the reported full was still year, first That U.K. quarter property XXXX. $XX being million our actually in last of it's in numbers the

activity for And continue look continue from beyond. generated as smaller facilities proceeds So are have small smaller generated other XXXX are individually, that our we activities generated expect have we of and opportunities we cost-reduction of and but some have. we of facilities -- closures us. has those larger that other have we to absolutely we is certainly owned. some Part that leased, continue do we'll into selling of those have behind those some move to And assets proceeds as to we And well.

Charlie Strauzer

and could larger business monetize? you other Dan, could pieces well. maybe if core the on then of you kind And potentially you of look that the feel But still opportunity, in this you chime your not the that business at are as to pieces essential are

Dan Knotts

We Logistics optimization efforts. step I'll Yes, important first being short that talked the sale is, in our Yes, the portfolio Charlie, take yes. about Print our an answer one. of Dan.

As we we go build forward that the that fits our Reshaping for looking some believe we to need to means do of two is we strategy going things we is our match see we the building there. essentially additional core we businesses the market opportunities part mix forward? some reshape we we have have our right of core future. ahead. future the do and up opportunities And other the capabilities And for believe to

So much remain the balance between those two our sights of forward. very adding going optimizing our in new capabilities core and

Charlie Strauzer

It that's I Right. lastly, with like -- program basically of was talked last opportunities. ended. kind that kind And -- reduction seems the SG&A flat of Terry, then cost about you additional QX know year. has on

you If the to what reduce are talk SG&A forward? can maybe about opportunities going around

Terry Peterson

off both SG&A well I of SG&A favorable Neither we those I our $XX past the some our than years, incentive I the it's you cost savings And look at end. Yes, of refer that we long-term million. mean, is of as generate goods down face statement. or hit offset of to helped those two had actually meaningful again, about adjustments $XX that when million. some to And to our those one that those say if over cost comes this our gross of what compensation the year, of year both profit more But did mean, about as last we for that hit we talk will reductions pieces. the right has income us. sold the down year reductions. And about actually

drive XXXX we those still well. initiatives will those generating So, are those active, to as and still going are into continue

but thing want savings, we other that expense. meaningful is interest and minute too around very I really to what just it, a discussion take is to that sweep with cost don't it highlight The done we've into

next reduced base at expense kind annually interest guidance about our by million. look of our year our we if have for year, year our you that If hit being of $XX spin, we will

really line another above. we statement nonetheless, part meaningful results. put bottom our that's income energy just not that contributor of still in It's the big of a of managing lot margins to So as But element well.

reflected to is is is results million. and for what's million looking next guided $XX million in it another almost of $XX $XX which what XXXX at, million that brings already $XX year So, our we're

Dan Knotts

the our to further opportunities of to Hey, serve And to activities parts been reduce Dan. platform. and add other means as and efforts within front. it's in particularly to we eliminate SG&A -- Charlie, relates exploring our no activities, redundant heretofore our has I'd to done consolidate just SG&A cost by in are it

repeat change are forward automate and those activities machine pursuing rinse that AI, way functions significant we being I think that and really using the are performed. a type that is real the opportunity number of technology we're of going around actually number with proceeding to performing around and a standard learning

us no There's are required remains by stop to going and opportunities. pursuing we to very stopped lot the lower be investments to a pursuing So, serve. imagination to those but stretch our we a front have cost center of it that a that of will company automate for stuff, as or overall

Charlie Strauzer

I'll Thanks. in queue. back Excellent. jump

Operator

of from Citi. comes Please line Phipps go next representing question Our David ahead. the

David Phipps

when very quarter. Hi. except organic the you Can quite you the for helpful. businesses divested and questions it's for my for you second clarifying the much -- Thank taking the sale data have growth, all for the

while trend reversed at plus and handy maybe that the went third that be the quarter Can would quarter. And X.X% about minus in you have modeling. was If a that, for looking you bit? business X.X% talk you're in helpful fourth European little the it

Terry Peterson

question, Sure. This the David. is Terry. Thanks for

the balance kind so the a of business all, for quarter where part in some of second percentage the year, quarter in greater year in capturing quarter, in there with we smaller a in That generally results impact. that months Print your purposes that for this revenues those And impact the sales there. -- smaller, results. product, produce move modeling we again Logistics, of kind fourth quarter challenges Yeah, into first a was last with did, volume is impacted that And of had six the season. photo those that is will $XXX million a dip the number, in of versus $XXX one is that million again, European smaller First has we we second question so first caused be difference And those this are put have which -- actually as new as quarter the a was holiday books That's out trend we of the we books, quarter. off past photo our then adjustment your the was? larger.

David Phipps

Good. And some some of on maybe clarification the guidance.

add-backs million we've So start if growth that reasonable can that you reference, things $XXX you But million given the adjustments. the out should -- million gets that a some $XXX the call into about income Are directly anything adjusted EBITDA organic flat, sales $XXX or which so baseline an extra about, which you got number. of think million. D&A was typically other with don't is building operating are at we we at And midpoint? $XXX there start is that of you midpoint rate to would there

Terry Peterson

No, I have to do one more out. call thing

of and with given multiple of implied income up see you'd that an and the of different where that of line remember needs ways. And come year pension Last You to the need way. kind couple to do at of million. at enough there's easiest $XX delivered of you we've kind range number look which the midpoint a information too roughly a And range is last you that if that the that flat income But there. you to up. is what ways shortest year. was described couple probably That to kind we -- added lot shows other in a EBITDA number to our be go

David Phipps

fantastic. takes the is Can we about? order you you last in for year. what of kind think some -- the impacts the and about puts the -- flow That magnitude of of operating of talked And the cash could this of Okay. tax restructuring, and cash one

Terry Peterson

then XXXX to cost was which level a years. level offset that to there will of and expect those into relocation business will pension of $XX even costs go slightly restructuring there's actually higher $X the past my and things associated further bit the lower with many funding savings improve both have than little factors that. Cash that OPEB reference Taxes the be China I during -- prepared that of from made remarks million that And which higher later once we There's the one you the and highlighted I cost, contributions. million impact taxes transition. business in larger in than a around and XXXX

David Phipps

my Those time. for you questions. were Thank your Okay.

Terry Peterson

All you. Thank right.

Operator

go we'll have with follow-up from Please Clement a next ahead. And Buckingham. Jamie

Jamie Clement

it where you And of and Dan, kind along? things, how paper Plus again. shortages business is trying have specific of in of you it rough the to I've is get morning, pass of just of you you've was like looking been good sort exposure the always other Where my a can -- -- you're of pass you're kind the you lines real but not roll arms stuff with I'm contracts eat you have get the, trying quasi-contractual it. along to business trying that. around that allow to where pass Versus to to question along. I of Hey, just it a kind one that's know have given of how the a like to just have. actually print much for RRD mind things better you word a and do sense of percentage lack spot? the of kind increases in Yeah. struggled at kind those of much business your like

Dan Knotts

but to the versus the relationship Jamie. overall to kind the to you're short not number contracts between guess, of a have of pass govern even spot the I have down cases aspect contractual piece in the But along you I still…. complexity breaks is The being contracts don't able it. question where that from contracts add of question

Jamie Clement

Right.

Dan Knotts

…competing programs right? they individual on as through, come

Jamie Clement

Right.

Dan Knotts

business think the just look if – different dynamics. at I And you

If look that. within more volatility platform Print Commercial the at you

contracts at platform businesses product running paper of statements you type what about you're where pass price year every increases would our what along here's its break think so cetera, month buying -- But you you ability that. In what couple a think so know where between is specific there you're that way that's you a and getting paper forms. of et been I issue down how you is the -- oftentimes And intervals. about issue. I'll of what has significant should been It's the you're of of primarily would a Regardless you're all it have statements to problem. I effect If -- differences compounding look et cetera, contracts at an using an too. we tell know in lines

Jamie Clement

it. Got

Dan Knotts

marketplace. up we're come pushing competing that the In that intervals quoting we're where those pass embedding transactional the in we're cases as to those that transactional prices we other work on in along. into are So marketplace work that's new

lag So as know covering extensive experience a your there. the industry you from there's

Jamie Clement

Yeah.

Dan Knotts

new time. believe that that that are will new with we up signing. every And make to with lag and rest sizable contractual catching we work and opportunity But are we we progress assured, over aggressively pursuing on contracts

Jamie Clement

everybody major else Obviously Is obviously All right from of same of other ink rates -- is retention thing. plant then challenges of level local market a sort at like who that tighter give the itself labor how still kind called has labor. And item out that's kind to sense the market. a of cost Donnelley this and in for living puts R.R. operations other on pretty only switching and us the -- but paper is industries have the kind can just terms level strong? tighter your obviously labor about not of manifesting the thing? of kind you at Is said are

Dan Knotts

answer Yeah, Jamie. two-part give that sure, so a to I'd you

higher once to been the are of always quite is answer stay historically has level. entry first level turnover our years And for a they at The here long a than tend folks unskilled level for number time. our skilled

recent where at level labor skilled changed at bit bit shortage the has we a a skilled turnover more dynamic has are -- the that that the With seeing level.

that. large turnover in opportunity the other them larger your takes is to businesses much pull you attract more is The but the and communities around pool other location facility. pool cases small dynamic dependent ability In some the shortfall impactful. where they're particular your labor other upon is in labor not where your important geographies the cases, that second that solve they're there particular is important better that -- time In -- around of so really it in very from to do have to

individual for forward is of cases One a our this at approach. core in each of of looking our there truly the the us going managing lot exists locations changing labor understand dynamic elements to that in

there's just skilled as into role us an lot much market turnover a obviously within and bring skilled example not of to right going those going our internally own labor people that step So in the our on developing quicker opportunities focus can folks higher for is skilled our if that into local priority. position then who high becomes utmost

up So bit a short we side. shortages. labor on has are we skilled seeing impact -- is It the answer of the are the ticked

unskilled less pool everybody's competing of for the there. same the there's On and base a side,

that's developing But are for challenging we be of focused our a strategies issue here will So on this for think a we well. labor while. each as because locations

Terry Peterson

again. Terry Hey, Jamie, it's

help labor with the demands that's a is The very well quarter, and seasonal other higher, our impact see more resources to QX saw there quarter, unique with thing, scarce the And on and lot of unique of seen specific historically all bring business. the certainly rates as bit this year those of us that temporary more as And availability of in we in fourth more that the the we've past. temp being being well although for than fact XXXX. we fourth similar did a in challenges to there of -- we the

Jamie Clement

I'm this. shot take Terry, a going at to So

say that R.R. were compression I if mean margin lot for your Donnelley XXXX $X.X So be the been fair have of not versus a it you not would up labor for of would revenue look I billion were just and it saw, year-over-year? it big-picture margins to XXXX paper

Terry Peterson

up of that couple our why we for They the one factors absolutely. cited guidance. bottom missed would been end of have as key I a

have then of we our China with would inflation were same bit this not to case. quarter time all business but in year over doing and little the at thing of executing and cost successfully couple were impacting year, in States. customers. worked that's And been in absolutely and more it's anymore, China now that about logistics able So seeing transportation. last this the remember of the United to the our we the last fourth us -- seeing were in paper on It's of We increases in issue we particular those a pass a the and quarters

Jamie Clement

time Thank as your always. all you very much for

Dan Knotts

Jamie. you, Thank

Terry Peterson

Jamie. Thanks

Operator

Charlie come will go today the representing ahead. CJS. question line final Strauzer of Our from Please

Charlie Strauzer

follow-up. one just Hey

if can call you talk impact to we're think those specifically on answer Terry Logistics you If about you out by quarter can -- numbers? Print sales this. QX starting the business. the up Can QX for decline midyear I asset and lapping maybe have But come there about year-over-year the

Terry Peterson

Yes.

On for QX, $XXX for side, $XXX million revenue it about total. million I'm $XXX it's $XX QX be million the and million -- sorry would for in

Charlie Strauzer

Got EBITDA for it. impact quarter? the And then roughly each

Terry Peterson

than business so low-margin was for an That that's us, side. impact revenue the less much of

that year smaller low battling of cost were so for transportation So profitability they increases impact plus there last there period.

Charlie Strauzer

QX, then Logistics for excluding margins year-over-year thinking Print how then in and that... rates And kind as of it. modeling about should Got well think terms just we just organic of growth about

Terry Peterson

produce business. generate an non-GAAP a the a to I while our us, been going I that print hit to number we've would of production that expecting as relocation to are that work the even first out cited and to -- we moving in take start remarks, for as because of organic be we couple going outsourcing a numbers sourcing to factors. some in the year. the on-boarding. I is like That Census too expect mentioned now that well I'd cost on quarters in are come quarter, my stuff we looking is organic continue the of Yes growth what in last with and client of -- half Certainly, the decline will China new

of time, our that but quarter. in little will less a for hit short So to first margins start period will be very us a bit

along but progress quarter inflationary We on quarters. and as that go through will the into are work continuing cost passing future increases, we our to

end to going of So that’s last these EPS sales up, adjust pluses a take -- minuses, perhaps of close where bottom mark to line, decline small expecting we're were and some pretty if organic you you're year. for overall and kind an we pretty

Charlie Strauzer

EPS you flattish last versus could Maybe even... year. So,

Terry Peterson

but Yeah, Plus minus, flattish. yeah. or flattish

Charlie Strauzer

flattish you of margins kind do as think well? And EBITDA

Terry Peterson

that client an because bankruptcy last that's On yes, basis, have EBITDA would a had charge. margin year

Charlie Strauzer

Got it.

Thank great. very much. you Okay,

Terry Peterson

You’re welcome.

Operator

the the I'll back turn to final speakers comments. call over for

Dan Knotts

a to your clients tremendous here, our I'd to to moment in I'd closing the world like to to ongoing RRD and for Great. our take -- Thanks, commitment everyone. like team thank thank around company. a to take moment our

year as in your I'll has to efforts. a thank as Your resulted significant to turn and and a hard With leading to we accomplishments work RRD want that, of marketing communication Brian. continue over advance back the for call business you I company,

Brian Feeney

Thanks, Dan.

the a in RRD fourth press quarter reminder, our the a quarter website Donnelley's replay fourth A telephonic which can of Thank fourth at XXXX you us our be copy As release. found earnings call. of for Investors section information posted of rrd.com. XXXX call access results that joining on R.R to is quarter concludes and

Operator

AT&T We executive for and our using conclude participation, your today. the does thank that you gentlemen, teleconference. for and conference Ladies

disconnect. You may now

RR Donnelley & Sons (RRD) 27 Feb 192018 Q4 Earnings call transcript