QUAD Quad/Graphics

Katie Krebsbach Investor Relations Lead
Joel Quadracci Chairman, President & Chief Executive Officer
Dave Honan Executive Vice President & Chief Financial Officer
Call transcript
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Good morning, and welcome to the Quad's Second Quarter 2021 Earnings Conference Call for Analysts and Investors. [Operator Instructions] I would now like to turn the conference over to the Quad management team. Please go ahead.

Katie Krebsbach

Thank you, operator, and good morning, everyone. With me today are Joel Quadracci, Quad's Chairman, President and Chief Executive Officer; and Dave Honan, Quad's Executive Vice President and Chief Financial Officer. followed today's with a second a year-to-date financial off Dave update, quarter lead XXXX follow will summary results, will call business with and and Joel Q&A. by of Quad's and in to presentation like on today's Safe this being subject everyone I news forward-looking as release would are outlined remind statements provisions slide quarterly call Slide that is X. webcast our Harbor in to and prepared are accordance generally in principles. Quad's financial results accepted with accounting

EBITDA, non-GAAP contains margin, financial also adjusted presentation adjusted debt EBITDA cash including ratio. this and flow, However, free measures, leverage

these have financial the We in slide included to presentation measures. reconciliations financial of non-GAAP GAAP measures

will replay of call to hand a of presentation Investors over the slide Joel. section will I be shortly Finally, call now call on our the the the available after and today. concludes

Joel Quadracci

Katie, and morning. good you, Thank

rebounded second logistics, very our exceeded by Net performance, are with We agency XXXX. period pleased and operating solution to higher and financial XX%, which quarter which in QX sales compared driven print, the of increased pandemic expectations. our sales,

able our agility, alone up past share over These growth hard XX% year-to-date. integrated significantly and strategy, quarter XX% XX% the were the included cash and which reduce clients, trends, and offering of business positive approximately well to our in months. net services by the were success marketing to new marketplace. reflect higher having we from as work print flows, Thanks as our debt the is strong Our XX gains and the performance in segment strength the offerings employees' organic

talent leading products as marketing competitive solutions Slide we discussing partner integrated these strategic simultaneously spend healthy to a create excellence, our today accelerate for with solutions partner. how a balance we distinguish our I some marketing investments marketing advantages, social innovation key purpose. position continue will while a will We These and bringing maintaining to value innovation, on our advantages highlight that in and and commitment as through on time technology, are more driving we're talent, services focus culture Quad making board. On advantages X, new platform clients. reflect starting and and to sheet, growth

we with Turning Revenue an work Ad entire This partner spend of engagement approach and market, strategic in a Quad ideas in Executive to welcome Josh insight as advocate Strategy expertise into along big has Publisher Golden, reducing In uncomplicated efficiency, those key place closely President Market solutions and July, addressing me, drive Marketing Former portfolio. includes our X. to helping effectiveness. to The Chief industry visibility Josh as Vice and for of expertise and Eric brings and of Julie Product Age Officer, Solutions; Currie, Josh marketers with agency. what to improving singular our President and offer important highlighting our and with Officer. continuing to and create President is he accelerate brands and and where Slide Chief position across growth increasing Ashworth, marketing with specialized an incredible relevant the challenges. to marketers our a of Quad the Agency our ease of marketing will our complexity, solutions we energy to through-the-line deep is is

Josh with We our part future about as the are excited of team.

Turning to Slide X.

channels is know that oil spend helps for increasingly performance. important platform where that a and optimization connects next expand, achieve without in efforts. of agency, each to leaving MarTech of to of its invest its marketing solution ROI just technology investments media marketing optimize Sammy. solution with to This goals. the MarTech business driving informs includes allocate solutions where budget clients the awards become prestigious Rise growth their a our own cross-channel silos performance to their year our the digital help We based platform, has the one sales brands innovation interactive, dollar type markers marketing number measurement, that marketing tech-enabled are our their which continue with or as at product and on which long-term marketing Connect

and unavailable the to value-driving helps real-time This Connect volume take to business. disparate transparency to they the actions need data, grow specific media able sheer with else. With marketers performance anywhere at take the eliminates of of noise which their identify opportunities focus immediate management be need in to on life marketers to drive sets innovation know scale data to and and cross-channel action. revenue brings

proactive demonstrating a win, when retailer solutions. one, this an brands a as also As brand digital positioning win. while partners, more drive notified challenging national well, it that the partner of could opportunities with it because its historically real-time sales retail won integrated co-op partners ad performance. do marketing products for selling we on by was on proactively of identifying was getting to focusing and budget by This win, helped a particular and recently our rise secured Brands information capitalize from more sales help from example get retailer platform, partner. times for dollars, more value we were By the of the to performing products retail incremental strong a when well, power won are true advertising demand chain, as coal by their spend the their

years, and e-comps challenges recent marketers. workflow have Turning spaces The in X. Slide to evolved dramatically for exposing significant retail

managing these where Quad's In a Additionally, more and efforts. the collaborate shifted home automated light approach excels. daily This is work-from-home pandemic their client technology demanding forever basis. are have to marketing requirements a team on increasingly of disruptions, clients teams marketing

processes configurable and software challenges. of Currently, address developers leverage than than team to Our their solutions, technology experts XXX workflow designed our scalable help optimize more with their clients more UX and users. our with highly clients XXX,XXX unique

organize signage regionalized and simplify and company, centralize retail over as the expands all highly footprint our workflow leading helping and next year. it management a in-store content foot this global its optimize grocery promotion Our efforts experts client's e-commerce regional and marketing deploy technology We solution complexity. deployed client in-store and are presently to advertising

assisting team change business also process the management. Our implementation is with and

of As integrated a our platform. solution, transitioning to in-store client the production its is our signage result

revenue analytics beyond able this and also solutions dynamically the track of to our client introduced innovations our and client grow each relationships extend limited through company. We create types our to these are and clients is effectiveness It that of we engagements additional for campaign. to

our XPL to QuadExpress, consideration for Canadian marketing the divested Group, At business business, leading our of a million solutions marketing This to as our supports global to divestiture, our that freight a commitment other We as of and product to for service position and also a portfolio parts and optimize the platform small holistic end represented strategy continue a brokered of $XX strategy stakeholders. solutions business, established accelerate excellence value provider. which total align those program. a June, our strengthen we our our invest and our more clients with logistics create to logistics portion partner Mullen of in our

are for QuadExpress team. to the We -- home pleased great

ensure the employees growth intensified to offering design have print increased labor on combined nationwide objectives. and through recent retaining focus we with Given volumes talent to our manufacturing our and a needed support we at our have approach platform holistic attracting facilities, shortages, to and

pleased and hiring are with about I concerned to ramp back labor Quad's career with recent I'm to our of program business continue half resource These complement continue connect our and a as the the especially the create traction we which environment. getting up historically hiring include expansion in shared shortages, inclusive accelerated While initiatives of the issues that training robust efforts, employees for more year. busier be with retention interest we efforts groups, backgrounds,

well-regarded the for independable our industry and be employer stability, and We a among and operating clients in agile continue performance. are to strong reliability our

built urgent attract and Turning their direct-to-consumer. marketing to loyalty our they our categories and to while have to new growing innovation commitment packaged their we their Slide excellence, challenges. clients us help in existing simultaneously in Through excellence presence solve customers expansion platform verticals, the like technology, to and from X. goods consumer admired critical brands with most their These have for trust placed continue

and focus XX social and purpose, through will expanded as broader back On we share the our Slide economy to that culture continue growth, and to growing to market X, attracting a as offering. well services clients return goes to As marketing new continue founding on commitment ad company's we commitment recover our years our address ago. to

Our strong focus include values matters. and environmental, enduring social and culture governance on an

of X,XXX amount tons XXX,XXX place business processes reusing always we recycled space, operations to are from also When recycling call seriously and and social XXXX, In environment, tons all the we materials, social, economic comprehensive increase strategy, a manufacturing we role and it which whenever the better we building Currently, sought metals with We way through industry raw contributions. For tons possible. and and employees in that minimize but of benefits a only XX.X%. in home. paper, nearly more minimizing to initiatives take XXX byproducts the have waste, environmental, impacts our of in XX% our of we material have communities our and and the of recycled not to our sustainable by our to our plastics. conserving comes multiple along example, creating DEI

other forms economy we the our work we and serve to challenges, the the thank call continue anniversary, milestone well. XX-year navigating many in for I a I hard which pandemic team marked and and want July of the now in to environment unprecedented wider the dynamic Before on I proud disruption been to turn supporting in them of and and our and spending have recovering, on each over for Dave, XX. managing focused face ad growth. resilient are them dedication thank been with to its clients has our on The truly congratulate through employees how we I'm continued

always, nimble turn that changes in With now the we so will to landscape. the demand As can over adapt we call Dave. to I'll that, remain

Dave Honan

our financial a and Joel, good second morning, results. of X Thanks, Slide quarter provides everyone. snapshot

delivered strong exceeded results operational the financial and we for mentioned, Joel expectations that As quarter. our

to significantly our all previous quarter the logistics, building debt XX% from better more as XXXX, $XXX impacted gains And print, clients. which clearly were by solutions, growing are own a our Net of and XXXX, as second sales print than clients which leverage. million is rebounded of included outlook as gains increased our business new for our of second year-over-year, outlook from XX% financial well XXXX sales growth. expanding $XXX increase and XX% agency share sales we sales, in EBITDA, confident to their an net Net result, segment Our recoveries. quarter compared adjusted the businesses, across the pandemic raising in million and quarter, net momentum of are for and

And flow. by cash importantly, combination from in As free reduced months in net the into we the net sales growth we $XXX debt sales, with of converted XXXX. million X proceeds strong asset first

facilities. to was on in sales, first the XXXX, in net was net in XXXX, approximately with in to pandemics X% our related the to net agency Adjusted to million million the Our XXXX, rebounding EBITDA temporary measures billion, of quarter wins. savings impact furloughs, benefits our somewhat second has resulted a the sales pandemic as second primarily quarter, XX% XXXX. print, temporary reduction pressured to by line the growth despite margin XXXX quarter solutions the earnings nature offset as and focus nonrecurring year diligently quarter quarter, offset growth expectations as COVID-XX temporary included in cost our net final months Adjusted year-to-date were due savings. cost a due temporarily cost on initiating down over sales XX production hiring the be permanent the worked into in savings wage implemented pandemic that client a reductions of sales. in to in balance with net over past impact in quarter $XX XXXX approximately debt increase, which primarily represented sales. past net the of on several the challenging compared to flat sales basis, in the new quarter's and second business primarily would sheet the second conditions. convert manufacturing quarter quarter nonrecurring margins in EBITDA On annualizing decline during at suspending which from earnings to of $X.X first compared response of the our The second these implemented XX.X% reductions, XX% last due nearly in in freezes abrupt year, impact call noted from logistics, sales the and in was our first higher $XX the to majority and net the We've due of temporary This our strong X.X% we

flow change and balance in XXXX, Adjusted of net our first net EBITDA and of reduced $XX policy. primarily XXXX allow reinstated million margin related vacation to capital capital impact to XXth. debt lower by activities decrease X.X% opportunities. debt to to June of peak months, $X costs, decrease strong some the subsequently in flexibility as improvements million reductions to related sheet $XXX million in $XX provide a X% restructuring adjusted approximately the was the EBITDA offset capital during of The expenditures. XXXX. since million Slide these in cash of full-year over by support the net a by million were $XX XXXX sales summary we've stability more approach reduced million, in the was year-to-date was half managing a or as in $XXX is due second compared operating savings outcome However, cash the to in compared XXXX, the to for ended nearly $XXX of as or partially of quarter adjusted XXXX half from pandemics' quarter XX $XX of in the our million benefits This benefit our times, the the temporary X% Free second in increase as same million during $XX nonrecurring June We've and end of cost disciplined the million in by sales back in growth provided XXXX, structure XXXX, allocation impact $XXX XXXX. XX, primarily XXXX. uncertain recovery in XXXX. working net debt from higher versus an a cost to of X advantages EBITDA includes driven impact capital temporary months The as cost, for And XX XX%. continued to well past take million net of period and

as service XPL in past book our past position our clients units, had and and of of and attractive $XXX our Xx price established to an we the business create strategy adjusted and optimize These of million, X sold our divested divestitures QuadExpress part brokered XXXX, business represents that The a $XX EBITDA. QuadExpress solutions business are product representing and this parts logistics logistics portfolio was business stakeholders. for a more partner year, our in a of printing During part quarter. marketing XPL freight over other invest those our our value in and with our the of product offering approximately business global multiple and revenue million in for small accelerate

operations. months, of in, past our realized XX we've second In million. quarter, proceeds the and better and addition, trailing production $XX to $XXX million focus from result leaseback allow flow sales million for XX-month our cash further in more facility of from allocation, sale generated business million All free the capital completed during $XXX Chalfont, was cash The and asset $XXX we debt over transformational on also a Pennsylvania have approximately strategy, reduction. of

Our end improved compared to X.XXx of to XXXX. X.Xx debt the at leverage

will to reduce ratio continue during leverage is this range debt XXXX. above to leverage we of targeted Xx our X.Xx, long-term While significantly

our the we debt XXXX. to ratio expect leverage approximately X.XXx improve be As of end further by to

our senior XXth, $XXX cash availability XXXX, with of agreement $XXX X% outstanding. credit maturity Quad's on liquidity rate debt X.X%, we due and notes our hand. position under $XX interest million our up million to and May As our unsecured nearest is which of million of June has was of maintained blended strong revolving

or the we As in it ample well-positioned relates upcoming their are believe our to to senior notes' at liquidity. address unsecured we maturity, maturity XXXX notes the with before

we outlook As Slide on financial review our and we confident. optimistic remain XXXX for XX,

of XXXX, divestiture half QuadExpress for XXth our are the half net our in X% into heading of outlook impact year. the momentum back sales which of for strong have excludes to of organic sales growth year, June We and we the second the full-year the increasing X%

to range million. we In be adjusted the $XXX $XXX EBITDA addition, full-year million of in expect to

free expect from by X.XXx sales to the further flow asset to below approximately outlook cash with operations at which previous our debt our strong in proceeds we generate from be Finally, leverage XXXX, combination end X.Xx. of reduce significantly is to of

helping of cash continue and as reducing margins marketing of clients generated financial improvements, objectives us free Our meet earnings debt strong integrated as driving offering, generation embrace cash to sales. which and is flow from asset cost revenue through growth, through increased well the our management, effective productivity and our

efforts sheet With to All like drive flexibility back our in continue we turn strategy and these that, scale liquidity and Katie, of today's financial value. balance will have and shareholder will continue I'd to of the call. accelerate compiled review our the questions ensure strengthen advance to to to to who call

Katie Krebsbach

Because we the advance a to Thank ask call, submitted will enter compile Thank we today's you, callers in not questions to question. of you everyone who Dave. for queue.

X submitted. top that were questions have We

first segment you past. more The What is you question competitive are in standpoint? It have share print on wins highlighting you than Print segment the a often from seeing been have revenue. reads,

Joel Quadracci

as very challenges. our in to I'll I'm shown continue in we've disruption pretty proud There and a up has of a take shore been in a the positive clearly just business, way. been very lot there's every actually But legacy print how that. we've in of through much but this, lot managed specifically Katie, past Well, of you business, sheet year the balance

of lot looking a seeing people what now just so And we're stability. is for

more about our to that looking what's show with asking stability. to other we into logos an putting be so it's us. but exposed them we And We great whether current the stuff uptick able those relationships that the have on help can also is bring that like as them efficient doing, we've more that we're coming clients just only their and with current for we've or all reliable can get them work us workout, logos new actually seen do not sell that been clients product. of to in to And they fold,

very logos them, we the only the look as that the this of not disruption be the and clients. prove them because grow that to picking in, coming about, only help I'm can so part up we actually existing of but can new to forward we work sort partner of And from we're stability businesses. provide But excited their legacy platform not

we're we're seeing. able a done So be we beginning. the were than at always out we've what to think managing very very about the of tough again, side good other job come through And to stronger excited I times on

Katie Krebsbach

sold Our and second from detail QuadExpress asks, question how is and continue regarding more you can on does logistics why was business that Quad give run? QuadExpress differ the broader will QuadExpress, to

Dave Honan

Dave, color QuadExpress take broker part that of as for acquisition of a logistics that was It's reminder world and as third-party acquired non-asset-based back the I'll one. XXXX. a we services customers just in

So the of of innovative over SilverExpress our nicely and services management this technology, time, transportation development including combination they a can really expanded we've business grown system. with offer

part key technology a this So business. growth was for of

of the much QuadExpress overall We're We're brokered is not business. of selling offering. our our smaller a it. portion just logistics selling However, freight logistics part

optimize marketing a our we clients product partner established to shareholders. more of value portfolio, our solutions as create service position and for part our ourselves and As and strategy as

Quad to to final really outcome I And more of process. going services to was. which attractive the transportation logistics to to Duplainville thing clients of sales of global larger group, brokered we $XX trucking So transport, compared what million. the operate directly and a by is, as in-house our model logistics the our business, were services broader realized I would pleased the price and includes provide we're much a sale continue We really say think QuadExpress

we over of to found in had nurture multiple business we as As the can and grow like levels. different Xx I before, buyer And importantly, that the strategically represents an who I it adjusted past said take a think EBITDA. and

for QuadExpress. part for So business and that's the employees are who really good our of

been for So we service for to really over us. thank employees Quad, they've those past their decade successful really in

great I a think outcome it's QuadExpress. for

think we for I debt. marketing a capital outcome for and allocate those accelerate And can our employees Quad. better and that group decrease it's solutions growth further great to now in

Katie Krebsbach

question XXXX you half gives more the reads, speak final It you the in outlook. Our you to that second and raising year to what relates going seeing target? client your are the confidence can trends into of

Dave Honan


keyword I is think the confidence here.

we've our what peak we services business. products last demand throughout so exiting we. clients growing and Its advertising of building improvement, marketing out have been confidence, of rebound, of that the think been and impact for quarters the saw the few pandemic. our And I have growing improving, as and

So our XX% we the coming XX% thought we at quarter have we where lot of quarter. out sales XX% heading net of into above confidence of were the a what second significantly versus to growth

guidance So, we've a out the for through. year. of the of again, And of really confidence just year, increased in the that excludes rest walked in back the divestiture impact for put guidance the I full-year the a reminder, of guidance half strength the QuadExpress the gives lot us how

in increasing of range growth $XXX the half good, QuadExpress. the for growth that's business. the so organic flat it for really that guidance down now to to million, slight takes so million to the And X% sales we that in X% back increasing lose momentum EBITDA sale new EBITDA consideration important to of It's $XXX from year Adjusted of in to really us. our the from in also the net And XXXX. of

we've I year. made We've we the what at pleased is the the this the of accomplish of year, essentially, So also what and could end on thought half first accomplished progress in particular, think we side. the we're debt really about in tremendous

could for do end could by So big was deal we of because us we getting the get leverage the we year. we guided, thought to a and was there X.Xx we thought earlier previously than

forward think get happy is momentum us by end of and the at Xx is EBITDA to early $XXX the the great quarter we additional million the on where we're guidance. so adjusted midpoints business of the some carrying year what's our year Xx by asset it leverage we'll sales, of aided And and

sheet continue that positive and excellent for position really in accelerating and we balance strengthen is to product in which for our the it many to on the sheet, we business, developments segments of So compete, us and which further capital the provide those, the where balance one of healthiest industries puts in believe our transformation.

Joel Quadracci

those Yeah, various to and because do the is exceeded of continue X.X% portfolio, be backdrop. will if us. primarily challenged color. just been -- due every and sort sort we growth market were newspapers, of will actually for let me segment that the our some categories you category doing flat the That commentary metrics quarter more the add of we're in carrier Retail categories the really some give we rest whole. of But the like in of we're of to context a to second to walk the has in the categories, inserts at you part look specific through what GDP as the using in etcetera. But

USPS the pages were X% So volume actually periodical we publications, for for quarter in market. in publication at down like the press was if look the X%, I up

for stability. of, combination the say, a wins but people that's so look And we share have, also clients the continued that quality of as segment I'd

our there XX% was and the a a marketing a of XX%. XX%, we Quad of wins quarter, overall growth is through healthy and a the print the pandemic up But and been The because side, as saw in above between were part there's as was we've mail, purchasing. then over the XX%, people a been were change up counts rebound packaging, up a and of as XX%, And the in increasing nice which segment quarter. habits them how industry of whole also, up again, in had what bounce-back few industry itself. that catalog about their nice pretty the the we're industry a lot a X% the pre-pandemic On the about volumes Direct of even health had clients packaging to that of who have several XX% sales mix accumulating. of were proves business quite health the of the seeing

that, services is of in by solutions talking that the I'm proud about for excited the long offering, quarter agency one lot in the been investing quarter, and been of XX% entire the XX% up things a things second place and So and in time, the very I've of a our we've year-to-date. we're

variant And to we're eye of that good for I as momentum talked goes hire kind Despite of this impact as the job even again, do on variant. that through cautious about have of the we adds able labor very the an done We've country. retain Delta them a Delta so my comment of We remain and them shortage. it mobiles this any keeping helping momentum, being showing to people and about capable really people. become building better brands. the we're But about

you'll office it but gets hopefully, times we'll of seen and is haven't we won't. segment thing haven't come an rates announced and a before when of yet, that keep rebounding I because news you lot many those know we eye impact increases much about see it. immediate the other on of that, comments impact big all and an post that's in, an But from good share made reduction. in is of interesting we a and yet, dramatically here pretty is The The increasing the our August. seen But that

very And to now we're growth. be our all very focused in on excited doing, those headwinds, outlook we growth so will very despite and confident continue about and true and what we're

update the to you that, with continue so we'll world And play how see out. on we


the the Joel today’s closing of portion Q&A to would turn like now call to Well, this And back I call. remarks. for concludes

Joel Quadracci

helps on I process marketing want company’s in today’s and and brands strategy our better employees as milestone and of in and our that our legacy XXth our joining our Thank to day. team you, call. I’m everyone, again challenges. future solutions our for marketing a and anniversary solve their a every congratulate partner marketers confident creating way

return economy our As the talk committed growth, broader quarter. continue revenue new to and market our team and next ad offering. innovative Thank to recover marketing we’ll to services remains expanded you, and from to creating you


conference you presentation. The Thank concluded. attending today's for has now

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