RRD - Earnings call transcript Q2 2020

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Operator

Welcome to the RRD’s Second Quarter 2020 Results Conference Call. My name is Chris, and I will be your operator for today’s call. At this time all participants are in a listen-only mode. After the remarks from company representatives, we will conduct the question-and-answer session by phone. [Operator Instructions] Please note that this call is being recorded. call Finance. Johan the Vice RRD's turn of President now over Nystedt, to Senior I'll

Johan Nystedt

Chris, thank you, XXXX Thank and results second joining conference quarter RRD's call. you, everyone, for

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

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

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

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

Dan Knotts

of sense aggressive in our been Based were strong effectively experienced and We has the protect on we operating for continuity staying my operational you and taking On thank to provide to as Great, our to China a business health our challenging first this time. to disruption performance and through of I'm thank how us for forward. review Good we this of shut urgency navigating with are going environment uncertain and global nearly on chains, operations expect pandemic. ongoing business consumer the been safe business and In today. behaviors period. you're during models what behalf everyone quarter, touch you, to employees, Johan. the response, us and RRD with COVID-XX moving priorities also QX sudden of company very update see at going all month. decisive In our tremendous and actions morning of and healthy results, world hope an this manage to on potential global I joining guide the down COVID-XX today, then RRD, staying impact our of RRD three through severe. that pandemic on current the long-term we focused is while on strategy, economies, and have a sustain volatile experience, safety The supply comments initially

areas. these of each upon expand me Let

in most single infections health we global to operate. resurging very is safety the around everywhere employees. of diligent we our number priority approach world, the new remain our and With of protecting our a XX,XXX safeguarding Our teams

that the to Disease for Control latest screening utilizing case the available the adhering procedures chances the are functional of closely we World are cross to guidelines Organization. from ensure taskforce to Our in process rigid a and COVID-XX Health we continues Centers the lower management And robust spreading virus.

masks staggering accommodate shifts, to employees shields wear reconfiguring requiring operations to all or We physical and distancing times. at are

of our and throughout facilities distancing and hygiene, have posted of also practices. We layer reinforcement positive education as instructional social signage another safe good

our Our across onboard second the work we for our to around provide XX,XXX business. service XXX our to XX remain priority facilities is of to uninterrupted delivery sustain order we operational Due teams and terrific utilize also countries we serve the in new plus while continuity fully clients. than more clients world, operational to the

disruptions working a also are of product As service part operational supply key closely plan, and chain client our we that our any ensure very we fulfill or partners commitments. our to prevent continuity with

third prudently RRD business our through strengthening near-term the challenges further Our while to priority the is long-term. manage for

reduce very emerging lower accomplish being created opportunities roadmap capture pandemic. straightforward. objective growth Our this domain cost and environment the the to to to amidst The is preserve by liquidity the

productivity shutdown, we've On cost by facility lowering suspension furloughs, of infrastructure. front, cost closures, taken total all facility merit have and travel. and permanent actions aggressively include and temporary The acted to improve we elimination operating of the curtail swiftly increases our drive reduction capacity, leverage

quarter, the see that to partial saw second throughout the future and quarter Given plans benefit are quarters. expect a benefit these in in additional we implemented

decisively the structure to We reduction on our recovery. key balance multiple capital long-term liquidity, have make a we a will We've based also our strategy and proactive including component the to revolving increase future modeled to the and facility cost magnitude a scenarios, spending acted our cash preserve dividend, demand economic adjustments of on draw improve a credit to pace of of sheet. in a and suspension the as our during three debt Further on repurchase to multiple of of execution opportunistic the to the hand. near-term XXXX transactions of that transactions we executed senior we maturity coming Since the our our included maturities. reduce now $XXX notes of XXXX and additional flexibility, cash successful are repayment continue the significantly due These debentures using exchanges, XXXX debt year, and quarter our financial debt between beginning XXXX by senior and notes reduced upon the on million. their have

million. Additionally, debt our outstanding $XXX total by the we reduced during quarter

and Now, while new created on sales significant highly reduction by portion market actions, been has the pursuing our opportunity remain committed as cost of focused pandemic. our and attention time to teams liquidity being

industries. in revenue point streams how testing are we solutions. a capture has COVID-XX and of solutions. healthcare, healthcare, diagnostic new through an to me a industry test virtual leveraging need diagnostic given of capabilities these has securing care for leading we're our significant our Let increased for demand few share which across examples to prompted various increase opportunities home kit rise In

end development integrates test distribution. to of kit all label product execution and Our fulfillment packaging chain end solution and initial stages from to and design supply production, to

providing at-home professionals many As with services an and components, company healthcare kitting chain kits supply at-home provide consumers. example, testing we're the to health an they test and for of EverlyWell, fulfillment the required

health kits this project. at-home With the insurance for produce these million to regulated to and test turned growing testing ordered one customers X EverlyWell’s highly of kits, nearly RRD demand EverlyWell

expansion retail current require seeing their of industry, operating the companies are the significant in increases e-commerce Within models. an volumes, which

support online then thousands e-commerce which up curbside orders their of we offering, in proud are with changing required to consumers and industry. allows labels gap, order supporting of dynamics providing gap, to decade to their expanding adapt their orders. they pick retail the stores rapidly as the working their After them online of that are we the to fulfill For their are by nearly communication millions needs a closing at the

communications companies confidence. industries, to are utilizing provide we’re extensive the For and those consumer to our hospitality travel capabilities leveraging enhance

develop branded than a each hotel chain remote X,XXX supporting safety that’s is employees environment with on designed We’re In at customized floor door to staff door, and guest once wraps efforts seal guest placed collaboration a room completed. a hotel mirror close their and and and reinforce this claims their details, locations client, cleaning to worldwide. for and leading we ensure safe more

new to capabilities, safely that as volume revamped and they align practices help single also masks, many new during the airline design, options automotive, organizations for By wheel outsourcing at floor cards for materials, unification impacted on global customized return In resource their address their for services, the helping covers, items collectively as onsite this our we digital signage, to to we Creative. to to floor other the steering locations on will locations. the as needs to reopening, driven these and the while transaction number vehicle's their a we this for their the informational to manufacturing leverage of manufacturer managed and near-term comfort with as critical and and Go creative dealership providing RRD to processing educational enhance and and both their intelligent the well returned announced programs dealerships provided our of rollout updating strategic the automotive U.S. our be production for Today, return kits, very sent way responded their similar RRD client to called through executing their to seatback industry we're consumers. a strips, our our consumers shelter-in-place quarter, declines capabilities dealerships. solutions. other guests market same offices including unprecedented and content work creative we're this of business offices, relationship we that helping locations, plan travelers. support sanitizer initially staff they client, clients signage We're better kits, Prior continue aligned purchasing we Building time and And communications internal safety social safety to them temperature and other challenges how platform this of with a and we services that further a time. welcome and at team global country. saw prepare distancing positioned on and group under lounges, the return has showrooms to developed directly auto across essential airlines orders reinforced mats long-term. We’re masks, by I'm decals centralized work. for evolving brochures, safety and supported with guidelines. major execute We opportunities, priorities measures RRD marketing finding their help back the during our seat aligning membership major employees To proud longstanding covers of of they with

organic on negative of quarter changes in from our our were guidance QX next greater sales impact $X.XX surcharges exchange performance. sales the fell significantly the as Actual sales which lower in within and XX.X% our Organically foreign with clients billion, was me decline spend. rates a net Let marketing business. well logistics solutions marketing for their touch fuel range our the despite curtailed experiencing

the improvement the XX.X from company’s million, with occurred May reopen. of quarter, showing million declining month expense. from COVID-XX, May declined Adjusted revenue was as Despite down related total XX in points amortization operating economies Within the of from from sizable decline fixed the sales adjusted the to June income margin year began de-leveraging prior to the the basis sequential and to $XX.X largest year operations due period. our our depreciation prior

quarters basis also sales the margin improving cash margin These as of quarter expense gross focus with reported the XXXX. we results increased our Consistent from million to Operating on aggressive taking versus improved compared manage demonstrate points to in cash reduction swift represents flow period, of prior lowering in XX percent prior basis $XX.X second our cost EBITDA this client year periods. of and adjusted and we demand. strategic reduced adjusted versus actually improved a points which our XXXX corresponding by business as flow a the basis by XX in the consecutive our SG&A to period approach are quarter. the year our Our point serve, XX

even financial embedded Those and strategic well core, While strengthen in flexibility takeout to Together, we we which performance are we our are remains remain and business navigate and are our revenue culture priorities our executing we're unchanged. are in profitability our us deeply priorities structure agile become to immersed shifted driven portfolio, crisis. serving our market. an the cost long-term plan volatility reduced more total near-term adjusting firmly focus and fundamentally cost our our in seeing The drive to through operating we're company. leading RRD strategic priorities market state reshaped to this executing protecting and essential as actions a future our our mix, improve in have the

are behaviors, we future make in their an eye that volumes client As evolving prepared we operating our with buying these and critical clients towards to close working recover. continue so to partnership as rationalize footprint, fully we decisions can in our to assess needs with be respond future the

a budgets, amidst restore For our growth. client Marketing spend economy Solutions, clients of we working to expect as adjust gradual smaller to marketing the see reopens marketing higher return with to demands and

While we the will mar-tech marketing their delayed analytics be ROI near-term. focus on to projects data will vital, make in increasing scale large anticipate more continue

in We expect align offering for channels retail creative across connections We retail in avenue we relatively with for stable design to the for as which content offering for customers. overall of direct execution our a in-store And to channels those pace remain rebound marketing combination and mail solutions, utilize remain digital reopen. a believe marketers their to to continue needs anticipate as enhance may with stores services with our even materials change. client communications will the critical

we related more shutdown For print or commercial offerings. and across of volume will our businesses reduce degradation business These significant client categories reopening for businesses forms as significantly service print services, the demand anticipate increase have spending. products experienced either services and and

closed to indications started of we improvement out early the second quarter. as we Importantly, see

we labels, rebound consumer expect line and our and product For in offerings, packaging, spending. logistics see increased chain supply with to business occur a

impact continued alternate the to will in these we of well shift market the Additionally, improve to as diagnostic believe offerings. healthcare, e-commerce forms and for telehealth serve demand of growth as

of number that awards received. we've to over call the touch a turning Terry, would on recent I like Before to

we're First, report inclusion the Disability and self disability Index, policies included work inclusion to to on best to practices. for the tools that transparent national Equality as pleased of the one places opportunity disability XXXX be a benchmarking offers

power proud clients employees, agreement Energy and across with manner. RRD facilities health committing plants sustainable with and friendly This Supplier to Apple's safety and conduct the we Second programs continually with production efficient RRD environmentally of the Apple's make to XXX% and is commitment work energy. packaging. all Program, take is through to of clients to suppliers in its environmentally an and part which protect and RRD’s Clean pursues longstanding energy renewable activities worldwide are to consistent public all we in

Additionally, recycles chain company material expertise that the responsibly provides extensive with raw has clients options. and supply sourced

This Agency of longstanding year is Age's Ad marketing our U.S. the group that industry Terry. RRD turn WPP, Omnicom to XX solutions and been companies Publicis testament recognition solutions the Report. the in And as Again, agency that the as This of excited consecutive agencies over Groupe. named with leader evolution the has ranked we're top one to in I an the Finally, space. industry is prestigious list. this second such successful that, will annual as on marketing Group, Accenture, amongst RRD call ranking

Terry Peterson

to Slide I you, prepared remarks. Thank turn Dan. Please my XX begin as

we as and accordingly demand period challenging with our related very on first China, critical for the activities: cost pandemic engaged services, assessing impact the quickly a our in preserving was beginning quarter operations quarter, the three global near-term products finance adjusting the and structure to liquidity. began Second affect in

basis feedback, Our as sales clients served guidance. which candid provided for second our us with the quarter

results actual $XX lower rates in million logistics headwinds from were within that despite surcharges foreign Our range, in business. fuel exchange our of changes and

on costs permanent are many our manufacturing actions a including smaller facility As for plan planned base, accelerated in operating these both operations to offices. reduce actions Included basis. and and temporary closures, sales we sales we the XX

quarter, benefited cost-out many as drive quarter While future as will and in actions were savings partially throughout quickly the the implemented these quarters. possible additional second only

as additional assess demand and will structure actions our on we cost based client continue updated to continue will necessary. addition, In

will the Over optimizing years, competencies developed have to leverage which our core cost unfolds. around we structure, we continue the as pandemic

have As liquidity to cash actions extend debt strategic I which Throughout and preserve our draw extra sheet, on reduce we mentioned to liquidity, credit proactive swift ongoing last maintained on our quarter, maturities. balance our quarter, actions following second we strong adding facility. focusing revolving a took the while to included

XXXX We Our actions second down debt several significantly three near-term successful debt is of during also completing first and senior debentures debt took maturities and XXXX. reduce quarter, from outstanding to the beginning quarter coming hand. down exchanges, the Since June including repaying $XXX the debt notes total cash they senior to is the versus million. opportunistically have XXXX we notes on matured our and our repurchasing when our additional successfully XXXX using due in year, by XXXX reduced

and that duration and the dispositions, stronger XX.X% us previous points year's an believe our COVID-XX closure in in due a which XX% to which solutions. a a accurately net lower XX.X%, On organic were point a post X.X by were a right including the in decline associated and While predict pandemic, marketing three U.S. down included the quarter, stronger X.X this services Chile business a we of On COVID-XX percentage included percentage can pandemic impact the we of none another XX.X% make economy. of actions impacted business reported the segments focused company us and Both operations, price are of volumes were with basis, will basis, decline reductions. of down modest dollar. associated negatively on sales in with sales of reduction

packaging, new logistics orders. products cases logistics make like addition, marketing, where disruption print, like many business. and benefited pandemic in the in By other and COVID-XX the was fulfillment additional a and we from related direct contrast the less demand. and in business Across labels, more reduction supply and negatively experience saw can clients different services, and print product categories quick orders reduce by service is digital commercial transactional segment we greater services work saw to fuel lower categories how demand. in chain differences In in our impacted surcharges impacted its notable categories, decisions and In XX

planned sales ongoing we from And Our certain declines reductions by continue of unprofitable we like while our the pressures are decline closing to from are commercial print, continued those also in including impacted secular facilities. product differentiate was there that the to categories business, impact impact COVID-XX. unable believe in

quarter, were net economies Within the to hardest May our hit sales as strongest while was the pandemic began reopen. the performance local from volumes June

in up work mentioned quarter. this wrapped previous our calls, I’ve earlier Census we most As of

past the each Second volume quarter Census X/X delivered was approximately the of volume of quarters. three in

be continue not awarded While On $XX.X to was third XX, be operations we quarter we versus Census to of during income million the quarter. significant Slide the the do volume of work, expect additional lower related $XX.X adjusted second XXXX. million from

Our corresponding XX a related operating de-leveraging depreciation company's to aggressive taken to the actions amortization XXXX cost margins from pandemic year, impact from decreased expense. basis was this to the offset X.X% The partially point in due with associated quarter. throughout reduce structure by negative X.X% and its decline

lower from In year, incentive or down and current the expenses, reduction dispositions. per the the SG&A interest quarter basis prior was aggressive reported by favorable second in the was attributable in prior benefited recent expense. XXXX reflecting to quarter as the net from XX.X% quarter $XX.X a and expense $X.XX loss operations improved share to unfavorable exchange from lower offset structure our an addition, from variable effective to $XXX.X from from in loss sales year XX% percentage is period, changes rate second lower tax and efforts of the as adjusted of in impact impacts in million income in points compensation healthcare XXXX SG&A partially million, the XX and $X.XX quarter. to foreign compared Adjusted XX.X% employee our Adjusted cost the rates. Adjusted the reduce

and quarter, domestic effective driven on negative adjusted deductions rate limitations X.X% in tax foreign was tax earnings. current interest Our on by the

our interest quarter lower recent in benefited a from lower credit exchanges. mix facility debt by the shift favorable on partially expense and interest offset and Our the rates term loans from the impact debt to

associated of quarter $XX.X results our other COVID-XX. restructuring for GAAP million, pre-tax response aggressive to including Our with charges the and cost-out in charges actions included

related included quarter for ongoing and of recently $X.X Brazil. primarily the exchanges addition, the investigation In charges costs to debt RRD million other completed

on the XX. Slide Turning now cash balance to sheet flow and

XXXX As activities XX, including liquidity, facility at increase of as debt working hand end second $XXX payments from availability quarter the million. driven including XXXX. by This Act. quarter $XXX.X improvement credit lower of on of the The of XXXX facility. million CARES cash million our the of of $XX.X and had was a and were Net and reduced which COVID-XX to million in the the compared Remaining million, total the total and XXXX, on lower available June related pandemic was deferrals against quarter million tax level Census capital $XXX interest an is we quarter consecutive second the and plus compared the Capital credit $X.X improvements $XX.X facility by primarily billion, of is in cash cash million outstanding for improvement. million and period, $XX.X China $XX.X during on $XXX.X primarily drawn spending was of total the hand, represents relocation. decrease to expenditures provided the investment to cash was project in the operating

Next, be the government the to sale. the million $XX and scheduled complete quarter. the will of so deposits, in transaction our deposit third we in our a optimize sale. of obtain temporarily approvals next us to with printing have they in Today, opportunities are sale in pandemic, at time pending to reducing China, collect like buyer which a expect to the capital continue collected as will our evaluate $XX facility liquidity value. Slide further we our to the to significant top on with provide for in and we portfolio XXXX on regards buyer's we we work stockholder Shenzhen, business for investments million we our the experience, continues of a the XX, obtained you are I necessary while previous can close approvals, the such the on estimate Throughout record to required to priority our In would the priorities. is gain COVID approximately Based preserving reminder

XXXX the as terms purchase the requires June comply of year. even senior million. maturities to XX. on XX them RRD final just pay if outstanding XX% the of $XXX is Slide terminates to the December price contract the of XX we in any and XXXX the of installment agreement fails to In at is due down approval debt further Since beginning liquidated the If XXXX billion beginning $X entitled reduced or Our has reason, government's amounts and of for in now buyer the from have delayed. in notes which these year, various damages. retain the our aggregate, of shows buyer with is debentures our successfully the maturity the to by the maturing total $XXX million, over the

the of quarter, matured XXXX three senior repurchased in completed opportunistically notes in when we they and notes our and During debentures debt June senior repaid full due in million $XX exchanges, second XXXX.

business, existing have extent of at Our in using flows estimated the liquidity. which to and impact to The or results repay expect $XXX we operations, this been time. pandemic financial them XXXX and be maturities will aggregate our cash cannot fully now predicted million reduced to ultimately position

through to As conclude as my such, are would RRD the manage Slide perspectives quarter said, pandemic. like liquidity With unable remarks on performance our year XX and full on prepared we guidance. our we our third to provide I typical with that

and continue recovery permanent cost scenarios, we reduction which financial update both We models guide temporary develop our us execute for actions. to various and as

and taking down assessment, to among of this products including from net $XXX current have the million strong to on consideration and repeat. our other pandemic $XX we services for sales quarter from reduction consideration third quarter period dispositions. will prior XX% sales impact into a in demand Organically, projections represents the our updated not be prior addition, takes this year In range business of factors. expect third work $XXX we recent XX% between and a million unfavorable to year forecast Census that into further a million, approximately and Based

expense. In benefit and additional interest lower results addition, cost third will from reductions quarter

of availability consists the liquidity XXth, total As on on I facility mentioned of hand. credit earlier, revolving million. RRD liquidity At cash our had and June $XXX

maintain pandemic. higher we and to credit future outstanding foreseeable the facility on the amounts our expect flexibility financial for through as We balances cash preserve

preserving addition, receivable management accounts structure are In we through our collections. of our and liquidity cost aggressive

vendors continue operations our maturities in on upcoming believe as XXXX. well as We our liquidity we pay is as to early our to time sufficient fund debt

to real monetize assets, of and we and non-core estate sales including certain investments In addition, opportunities pursue continue businesses. to

are we to financial open our up our And subject debt line which maintenance let's questions. covenants Lastly, currently now operator not financing agreements, in for reduces risk. the

Operator

Thank you.

We [Operator Instructions] CJS. question Your of Charlie will the now Strauzer question-and-answer begin from comes session. first

is open. line Your

Charlie Strauzer

Hi, good morning.

Dan Knotts

Good morning, Charlie.

Terry Peterson

Hi, Charlie.

Charlie Strauzer

off start little current and to of want a little kind just our I with of more bit trends. bit just QX a discussion, also

business and areas into still had terms in clients discussions seeing you think of what to XX, If areas in the which looking you most had look I lines are future you've at QX, QX, are the with business? Slide – it QX various and impact the was which that pickup are potential starting see some

Dan Knotts

Dan. It’s Charlie. I'll Hi, start.

would June In terms explain ask period the demand to end of that to of I for about that economies think seeing the think categories. – began I three reopen, we're across to areas the towards people the is how quarter in what's as us

driven around marketing is one spend. first increasing to demand that’s and The return by going be their clients to marketing

reopen, they to They’re that. think marketing restore go. campaigns, component growth from businesses marketing obviously, expect need space obviously we we to a see as they clients Feedback ready for that increase. think about are to businesses as spend their about absolutely a critical mail, direct as of in – and So we their re cetera, the et in-store marketing efforts are

business to and relates consumer second The for demand products. category

think And we as opportunities reopen, that we getting to is hospital demand It's we of we're late And about environment. the by level which economies and labels products as So on in all a or movement regulatory begin predicated think to on purchase to of started to all and that and portion either starting second with products, to really see on that packaging based healthcare see we about the around the third on demand And our in predicated think predicated and normal businesses. visits new quarter. also logistics, about requirements. consumers the we're that's is along compliance the in of healthcare business. and capturing some type to category recover of is back space

relatively the the much we that's stable has ahead really as been throughout hasn't changed that look one in and dramatically here So near-term.

looks I like market shutting for part caveat begin other and volatility, about of the are flow relative about is ask relative we campaigns to as and the down choppiness and what is launching to of to the reason in go, choppiness, think we for of demand businesses, projecting as their the think do but that consumers sharing just to and again volatile, go the shutting the and demand. people and not information that we –opening do about clients uncertain this So the down opening, demand of as products products well. that the marketing start/stop that recovers to the that space the And as economy marketing

So down I of those break categories. three kind

on see June from We in as with July, recovery May align are seeing – a we our did forecast. and early

to continue that to a expect see little We bit.

Charlie Strauzer

forecast your talk about too does the organic Terry, that thoughts be include in work? XX% and your or it. Got little a then then margins could XX%, Census down also And you QX on exclude may bit is to

Terry Peterson

third for Census organic beginning be quarter. does XX% the us the Charlie, XX% include will work. in That to pressure

that So even margin pretty down comes in in how margin stuff and at reflect hard Census when and offset in a XX% demand the your the that results the our you little means standpoint, the work absence those, held is, out performance adjusted challenge to our the margins a your increased we and our comes which We're From quarter – quarter range. the bit. of XX% bit. working structure. variable protect fixed we look The to to nice of are it that saw cost evidence does second margin when impact of third the the is you portions easily of EBITDA a quite

to element at least margins the a going aggressive can we kind to the cost past. structure, So, that to that the onto best have that that our of offsetting so the of hold in lot we do are fixed at really actions get had after we're

our – the in say our increases last seasonal our At we kind from what in As we of coming those think business our of hearing that last have will do that in increases clients, do hard the we half I demand to about point, part ahead we expect this so quarter, the we're but and it's fourth the to into the of we third much year, go with as do – year, see quarter. ahead. think

up probably economy we seasonal extent Just build have the same coming some is I to expect not they past, in reopening see that that here. of the think to do slowly, but

the into think just up picks in presents of that challenge for hard cost quarter. the pressures continue that we've always heavily volume that I the years on as great one added an is see added us that leverage and that to really margins So prior we'll third takeout on fourth work enjoyed front to

quarter. is leverage really that cost why significant, increasing those the is structure the which so see you So much in margins on fixed really,

we we that expect peak that will the in of So, little volume not have bit for those a increase some past, little about to again, that to this a year see to as with half. less what in well, won’t margins bit extra high create as seasonal the year so we the think the us probably that of back because pressure in past, we as extent as

Charlie Strauzer

sequentially, versus QX at looking in to you're some QX see to when QX. expect and And – sequentially improvements least it. you at QX Got QX

Terry Peterson

when for absolutely. especially just Census, you're Yes,

Charlie Strauzer

– great. where of about year and other a talk there's ballots this too about election mail just about, lot it, and bit and could talk And Got maybe things potentially do pick can you benefit a see some Dan of here on then little early terms QX? of yet? stages related you in to work at extra that. to think the that'll starting that you Are you more print up Or that

Dan Knotts

that flow efforts. election it the we the – again and utilizing comes our through of along Charlie, season support that expect to print Dan. our this – in commercial year it’s We're revenue platform revenue some now. election participant and with seeing do that, to those be a The commercial primarily that

with on each they QX. our the state. to performance see through every individual our to that, piece, as to more and those connected flow expect work, And staying Relative mail we've and the in the ballot Census, work very We states Census our on we're decisions. given close those leveraging of make

much unknown some there, yet unfolds. is So degree as but participate we will in that it

Charlie Strauzer

been times A e-commerce system by of share stuff. of slower some maybe on seeing your delivery just has And Terry, you impact driven that’s of for this issues. any lastly, their delivery a packaged and fair having lot all? Great. from lot of the the is you, Are customers at postal then

Terry Peterson

really office We relationship. the connection to relative post folks are working our with close not close

the delivery cases With of impact continue post the really support us not deteriorating we working postal alongside seeing well. sort and are of office, any very to post in many from office they

Charlie Strauzer

Great. Thank very much. you

Dan Knotts

Charlie. Thanks,

Operator

is line on Jason Kim a of Goldman question. with Sachs

Your line open. is

Jason Kim

and Well, morning. thank good you

source event It The cash was a first in of which a seasonality. question of is a is terms not nice capital. quarter, typical working the during

So think of the how should balance working year? we for the about capital

Terry Peterson

that this initiatives and going capital Terry. had to answer work even the to We've and I'll really working into Well, – place actions extra pandemics. improvements is one. see in hard

accelerator come manageable the little been to pretty just degradation but and seen able side, we We on DSO really has we've the got down So, of it's through June. the receivable have as been bit a harder month as the on it's little up. that like something put certainly of plateaued a in pandemic

wasn't we here. are for that too us news from for us, impact liquidity negative extreme preserving so as very the that's So a good

hard. also continue need business come we has capital bit, down the Certainly down. working the little come to has it work So as for a will

help flow the some as provided well. that's So cash with

So some a how to depends your capital pretty that in up to support really half. recovery, it quickly a lot in question, aggressively kick fast really on rapid of recovery build happens when some really recovery because And of have the to – working how with we'll does the back answer and that.

If So not capital going and of of to initiatives I we some absorbed is is in recovery that see with while or working favorability we that scenario we're through going to that capital. something – don't would see working same reestablish we're expect coming level the that some – will that would gradual progress might results more more favorable you get there slower almost hidden of – replenishment that and too. produce if the the

an there. So be impact a there can of offsetting bit

So recovery how I is. – a it lot the on lot think, what we'll really see just of sharp of in half that of, last depend a

Jason Kim

at out very makes your active through sense. view structure updated priorities? pushing this options how exchanges. now, available debt strategy capacity point secured What sheet? manage the to capital that you've then if have you to I be been What us with you that maturities And you show the to very much And from in balance love the continue Okay, get to your would helpful? would on are debt are can here.

Terry Peterson

of debt on right Yes, because there. on now first capacity much that's XXXX lien debt the little a not capacity debt. the bit junior secured springing out There's the on capacity secured there's new there's covenant a

facility. that right reduced temporarily the now just really extra have is that we the credit on However draw of because

normal the balance up the that lien take kind in So at draw we for of sheet off first and treasury dollar immediately back some literally time, and returning down there the to comfortable of operations, when the dollar. free we're cash bring back capacity will point

you current really that probably to been secured really has is every on, lien the the terms that credit there, single now taken think credit right those with of So those as will XXXX-ish very debt left bite-sized actions we other issuance as see we're And debt capacity, one source down the the of now really then that our and sources and pieces. that's pay focus facility. to have maturities in to up of if do - what just to free opportunities just coming we which maturities. a starting with of – biggest first will down been down lot not has near those mid-term There's XXXXs, be we

be and off the in be it amounts there might expect opportunistic most will dollar at those they just as marketplace. small available repurchase there not would So, I an any amounts, more picking be became would large here

lot be very have really a to done manageable not really left out that maturities the of of those. clear us, for very, really So behind was runway to [indiscernible] very for that us make us. on and which to initiative I'm kind work those critical thankful

at is probably current of for September end I due. step credit the think in us the facility coming the probably – next due The comes that's facility XXXX.

a to we at just we'll here that. on that normal or focus that term that a will that, year whatever – timeline of on do our turn see would we a extend we that’s the out. start And to look need being do attention So, just that. We'll that's I renewing process out some at get what point to is normal still there. of left two. remain with loan Bs we the out And

free we flow right paying positively now. of are down terms cash debt, generating In

down that monetizing liquidating the real debt opportunities do revolver, of stockpiles or to still We look of and that to look down cash We pay estate to at when the parts for we kind still assets. even it that so as helps So further. we well. monetize portfolio pay down least can pay non-core

as and the still investments opportunities sorts as monetize are those we on well other are balance out sheet to well. that of So, looking there as assets

that our quarter. So opportunities in there we're different and on is we've us then It got the out a on. working you be than second from of saw being far will number things certainly of incomplete. what focus list But

Jason Kim

Thank you very much.

Operator

comes [indiscernible]. question next Your from

open. Your line is

Unidentified Analyst

given from decline just not the for Guys, why thanks little seeing understand is rates better in strong are you're QX that recovery taking QX. sequentially different to a wanted the question. my as not I

that So what guys out there? are you seeing

Dan Knotts

our Yes, those rates, well quarters. the especially much are our and stronger quarter, third – and quarter remember again, third fourth

saw in an here. quarter the increase still showing what that's in we sequentially, So, of business second levels from

So, because of it to harder the similar the about think business in to gets or little them rates in a the results seasonality are our decline. see while

a also full absorb too, for earlier quarter asking work, Census third, and decline rate this the in that was first quarter the next that fourth, Charlie quarter us be which benefited to for will in this and has the then As of absence now few year. of true third quarters

there. those that will have three So headwind quarters added

estimate. the doing read we're cost structure. decline are try and to about it's best that need seasonality. the of actually up clients XX% are our of though the forecasted decline the when how similar, XX% even we sales rates with And listen to estimates to saying what are and to – we So to we are to of think go guides to And have leaves that do to again, tea our what kind because

down So is three and hey the than months that. they now to down missed only nothing I cost less a much XXX. And base. because we here from were XXX we our would structure much more kind say And something love of to sit than stronger contemplated lower

kind know that's there. what seeing volatile hearing always and a off this kind little there's that risk in We more only of we're a of and possibility. environment we're So, be we could what

and we case, hearing So right prudent but now love for of XXX to what to folks, we're think from seeing that is the I'd the with be to XXX. we're that what – expectation

Unidentified Analyst

margin Great cutting the cost and enhancement. job great on and

to year? flattish should margins QX to expecting last be we For be

Dan Knotts

us costs. to will see cut continuing You

that see full actions the that quarter have in a quarter will third You impact second quarter. will took the in we

that be So benefit. will

also didn't see So structure shoots that’s in third is prior fact that quarter up to volume the you fourth get a will years related. because leverage wise. a off from of that second in quarter volume the lot will see cost that our one base and that variable fixed continued we third of improvement introduced as fourth lot in that extra we so of seasonally and all quarter, much our cost in the the be And

will the in some early again, extreme it expecting lift that not but this is reads right to as So – same year. past. Again, that now there, of seasonal that not has the be been are positive we

margins will the of to bit our is them and year weakest little that second a So compare quarter. put I pressure we lightest when – on think usually quarter prior our too, versus

quarter last quarter when than a will they seasonal be sharp is and bit fourth a benefited COVID get quarter we increases comparing it to third year to easier So, when due this little to work. from such

to we extremely using way our the that structure the preserve structure on cycle to preserve control there over because that's the front closely the is to we So, again, are elements that that sales beyond here, margins is right to goal cost cost that we all we watching that that and guide which aware really margins, actions to our now. way were that we're Intel the our have And now. are are that be when right our focus know

Unidentified Analyst

Thank you.

Operator

to now no are Mr. I this time. call the at will There Dan return further Knotts. questions

Dan Knotts

call employees closing, emerge for thanks, in us I'd be world you Great, especially never, confident presentation. express we're Johan, all the though crisis, at found for of fellow stronger appreciate in hard set remarkable. our you're and even would Chris. today will and ever the the that you. is everything the RRD Slide around of like back a of from be leaders Thank wish I key we like it. A my that on can of doing. to truly this. and seeing It's one the future. of work doing XX takeaways to And in I'm all up gratitude times levels appreciate We cooperation, focus, an the RRD teamwork crisis to we're appreciation summary my RRD to sincere you.

Johan Nystedt

Thanks, Dan.

webcast website found second call. our replay for As a of rrd.com. the And section that the quarter can reminder, RRD's on information at Thank XXXX second results to earnings call you of XXXX RRD be joining access us. Investors concludes quarter the

Operator

you may now gentlemen, disconnect. and Ladies

RR Donnelley & Sons (RRD) 29 Jul 202020 Q2 Earnings call transcript