Loading...
Docoh

Veritiv (VRTV)

Participants
Thomas C. Morabito Director of IR
Mary A. Laschinger Chairman and CEO
Stephen J. Smith CFO and SVP
John Babcock Bank of America Merrill Lynch
John Dunigan Barclays Bank
Daniel Jacome Sidoti & Company
Call transcript
Due to licensing restrictions, you must log in to view earnings call transcripts.
Operator

Good morning, and welcome to Veritiv Corporation's First Quarter 2019 Financial Results Conference Call.

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

We will begin with opening remarks and introductions. At this time, I would like to turn the call over to Tom Morabito, Director of Investor Relations. Mr. begin. may you Morabito,

Thomas C. Morabito

Steve and Today, everyone. remarks you Chairman your Officer Laschinger, Andrea Afterwards, Financial for will we from you joining our take and Executive Chief us. would and our good you, Chief Thank Officer. morning questions. all Mary Smith, Thank hear prepared

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

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

Mary A. Laschinger

us review today Thanks, Tom. we Good financial and morning as everyone joining first for quarter you our thank XXXX results.

we improvement In in Packaging on update quarter, generated for guidance flow, and expected our year and full Solutions. some earnings first our free growth provide saw our business, positive cash thoughts year. XXXX the also the an Facility U.S. important strong will of in drivers had We for performance the

due challenges compared down quarter sales for decline prior-year ongoing to we Reported the period fell while our adjusted $X.X the X.X%. driven segment, net billion, this X.X% our in were on sales the to in first structural Print by core EBITDA largely industry. short consolidated However, net the declined

revenues while led were We core revenues all market Facility Our in business experienced up by Packaging Solutions our U.S. decrease driven by mainly the general Print, consolidated year-over-year our believe segment's softness. was and Publishing decline. segments our

quarter, quarter affected shipments, had the largely was The government products economies driven demand XX% by During year-over-year. and a our industry trade three Adjusted uncertainty impact the weather weak was major on first down of for million, of the broader EBITDA earnings the $XX approximately ride the negatively economy shutdown, and the combination in bad on first for services. decline global factors.

First, volume quarter; the leases being declines third, year's Print; especially first versus replaced one leases. and day second, shipping impact of prior certain quarter negative operating in the financing less by this

saw less $X expenses year-over-year, is million, which the in an which As our our results, adjusted operating based revenues million Lower offset specialty due which shipping certain $X to increase our decreased $X decrease one increased decline. was in first EBITDA. we first were reminder, softness $X have packaging. quarter. performance, the non-U.S. adjusted earnings shipping Packaging's non-U.S. with and impact revenues principally mix million by business, negatively the were partially led costs was of pleased programs. worth and a EBITDA day markets, Packaging the storage core the Packaging now quarter. performance impacted customer year-over-year higher to segment in our by in are earnings up generally by of X% million U.S. approximately day in of Shifting a business The timing of affected to one

benefit expect growth continued markets. some a from to but supplier not XXXX GDP to of increases, expect as as in XXXX, year rate of full Packaging we modest and the a non-U.S. customers, growth robust than large with we certain revenue price higher softness as at be see more For less

last year's rate All will growth we Additionally, higher from acquisition. revenue lap the American Containers

Our revenues improved intentional year-over-year. X.X% efficiencies a driven driven decrease the dynamics exit Facility principally channel selling and our costs. increased and lower was product adjusted customers capabilities. the Facility in are first X% Solutions service of aligned by decline This first and of segment that operating quarter EBITDA saw select with Solutions in quarter not about by

in on segment with market future strengths this success and for our better strategic channel order repositioning continuing choices and dynamics. are focus make by to We customer align to

mentioned. during GDP year-over-year For the declines slight XXXX, adjusted increasing key on by further however, our just expect well product led partially experienced first core of the a by label. we volume, drivers due to affect expect revenues Facility private the focus choices trends see by as declined to below continued quarter EBITDA segment, do, including to as industry core be over Switching a in We offerings, offset in for Solutions unfavorable revenues continuation prices. to market secular our Print to Print revenues. first driven the quarter, continuing pressures XX% improvement

Print calls, our has, making continue may to and offset last previous was segment The the of credit the choices of somewhat expenses. have, improve an Print help lower our on we volumes, manage of The by of adjusted quality are impact half should year. customer on EBITDA segment's that which about mentioned also earnings decline we which impact to As revenue risk our portfolio. was in

customer we to could product negatively expect We in impact continue will make segment's than trends base declines offerings. the industry XXXX market continue revenue. secular and we see to worse volume as also adjustments Print our For to

the we XXXX into We EBITDA in partially all segment's Taking XXXX core The expect decreased only effect XXXX. Publishing XXXX will in earnings XX% account, in of these the lower first the changes revenues than level. business offset Print expect meaningfully factors model declines to adjusted volume implemented the be Print quarter. we the in

the quarter. in decline lower price, helped impact which The than expected volume revenue some greater segment year-over-year an continued of of Earnings inventories. industry's down were only around the decline from decline centered the increase industry offset volume was selling partially by volumes to benefited in as expenses. this Although for decline, offset we the in

expecting XXXX, with industry stable declines are environment more moderating. our For volume for and with declines consistent we a Publishing, prices

roughly same expect be in level earnings as to the at XXXX. We

we have noted pattern. in can As order in the business impacted by past, changes this customer be

Turning now be $XXX million call, to earnings on $XXX our consolidated our to million. adjusted of EBITDA we February expected the to indicated XXXX XXXX range guidance, that in we

rate to believe declines to for revenue reaching of to million Print due range the our we Key $XXX the are the Print XXXX our achievable. in $XXX million. in this assumptions in continuing the revised trends now be growth range guidance GDP is EBITDA However, of about business, these efforts, a we adjusted mid-teens. market segment on expecting and X% and earnings optimization the includes Based assumptions in low the to

February and cash we quarter As our million In behind process receivable a strong continued improvement, first quarter flow to an improving performance expect now process of to in flow $XX to we declines XXXX, of in XXXX. to receivables cash on and a lowering of expected volume and focus can the business point indicated approximately we we see integration cash earnings our processes, inventory. free free including us be is The compared quarter performance flow in flow inventory. due $XX the free inflection improvements, the generated at first and call, the especially in accounts focus million first accounts negative post-integration increase cash largely post-integration on to and in now was $XX XXXX Due as least XXXX with million.

so Steve the he through it details quarter Now financial can to I'll performance. take our turn first of over you

Stephen J. Smith

everyone. you, and Thank Mary good morning

of We overall ending the review first will quarter for first the results March XXXX.

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

it count, shipping first had the had quarter we of XXXX quarter day of As XXXX. to first we day in in the one than relates less

as have day one in the the will in with same and second days XXXX. fourth shipping quarters third additional number having quarter We of the

we our result, half. seasonal slightly the As had more XXXX we but second in have the into the number difference during same days already of in day earnings XXXX, shift will a will shipping as count

quarter the day for sales prior-year billion, core $X.X of X.X% a while from the after down and X.X% XXXX, first period the impact net adjusting of down difference we from had net For currency. small sales were foreign

a Net on period. and adjusted for products sales XX%, quarter Our how versus less of segment Of products of million. change from was expenses, million first of and negatively was cost sold affected net the also the basis for earnings points EBITDA less supply prior cost the approximately or are $XX decline, the one Adjusted was products a sales down cost first decrease by X.X%, shipping percentage million. by about a EBITDA of these about the $XXX the sales treated and was about up XX first the Packaging efficiencies, from percentage net offsetting lower EBITDA as sold administrative sold pressures Slightly for an based accounting business. $X was chain factors billion, earnings million $X.X basis for about sales the the Adjusted quarter. accounted $XX our EBITDA EBITDA in the those of net perspective. period. $X XX year's as prior-year less prior-year Each the Adjusted lowered of quarter nearly points versus prior-year million XX% $XX.X period. versus U.S. were of growth Print was day leases down in adjusted selling the million, operating quarter

number Looking quarter the ahead same as to of of we the have days second in will the shipping we quarter, had XXXX. second

have of of the once mostly impact storage by we the our will that The which will but reduce by reflected lease triggered in as will segment for was million, lease consecutive will no will in $XX in have annual be specification our financial fourth EBITDA cash be statements. Packaging these flow. cumulative expense the approximately addition, on effect adjusted July increase our changes quarter, In again costs XXXX an absorbed

the core impacted of EBITDA about million Packaging results trade contributed XX% Packaging due uncertainty year-over-year, business. year-over-year. down in move our U.S. flat led let's the for based the of net by into EBITDA, increased Adjusted to first quarter. were X% and So segment by our were non-U.S. negatively global adjusted $XX.X Revenues sales now segment and $X mix net impact timing the was revenues customer as million certain businesses specialty shipping the programs. percentage of down prior-year costs approximately a basis approximately increased have of of certain due sales $X higher points decreased non-U.S. markets, decrease which revenues the packaging. of decreased and day X.X% to less X.X%. while from storage core was one in XX X.X%, principally Facility softness Solutions period. The the earnings sales net million, or a

market by increasingly this segment. in in segment was as X.X% revenue Solutions capabilities. secular channel dynamics $X.X we decrease was in These Mary costs. mentioned, margin primarily and adjusted credit increases The EBITDA are customer net and manage making choices decline core EBITDA, are XX declines due driven and by by had growth million volumes improved a as competitive operating we we service partially off segment increased experiencing Facility year-over-year. up that the a EBITDA risk The basis were well driven points market this As making sales of in fact percentage are product that pricing. align the contributed Print adjusted net sales selling The in slowing as revenues declines revenue XX.X% were efficiencies choices and offset in the to our to lower in increase XX.X%. quarter. Adjusted to

in reduction were first the The million lower chain was The XX% decline was sales and the an an price. adjusted be of in volume, earnings in the million segment by decrease contributed net in selling earnings revenue impact year-over-year. Publishing decline of attributed $X.X driven offset by down The in primarily offset adjusted supply increase EBITDA, adjusted core only year-over-year. to impact in decline reduction a XX.X%. a XX% in down revenues Publishing Print partially The EBITDA, by sales the volume. can and $X.X somewhat EBITDA For contributed had XX.X% quarter, expenses. down

and nearly expense, company, of lending the expense quarters we XXXX. that it which million experienced Shifting with $X end first the of has our against we flat At facility the lowest $X debt Of the within $XXX now For balance asset-based and four million quarter approximately Print million. borrowing in been segment. cash of had quarter, sheet is $X had to approximately available $XXX first occurred of the the entire bad capacity March, million in drawn flow. and the million

At business. prior-year by backed is facility of end net the debt leverage receivables ABL the ratio and X.X adjusted the down the was from reminder, period. a inventory times to of As the our March, EBITDA

Our times. be net around leverage ratio a of long-term goal to strategic continues X

quarter roughly million. $X add million. flow the been million from acquisition, to the cash integration activities, cash cash expenditures we $XX the back ended capital our million flow approximately XXXX, $XX $XX we For would $XX Subtracting flow from flow adjusted cash operations generated March million. free of from have XX, was operations, of If of items about quarter first and cash for free restructuring due approximately approximately

For due receivable balances. and quarter to cash the our lower free of flow XXXX, was first inventory both accounts positive lower performance

as expenditures. As least $XX we XXXX, now mentioned, Mary operations cash in flow million at free flow defined capital anticipate less of cash from

prepared take Lindsay, our expenditures our total to to expected questions. capital now concludes XXXX, be For $XX That are we ready approximately are remarks. million.

Operator

[Operator Instructions].

Babcock comes question America. Bank the first with John of of Our line from

John Babcock

morning. good Hey,

out, about at what's also, some Just the and could want provide see you your and generally detail to if revisions. risks talk just could wondering more the you latest a if start guidance you I as driving to little of bit opportunities was

Mary A. Laschinger

Good John. Sure. morning,

guidance, the the as both big revenue noted, we on risk guidance. in business. publishing before, risk we've by we say on that's -- -- So the side packaging in the has and The print levers and our that the the market in flip conditions margins greatest industry opportunities the our improvement driven is the in said in of opportunities anticipate primarily which and of would uncertainty the risks strength certainly print I industry. in both continued side, our continued as business, is

improvements as in continued Solutions well our As earnings Facility in businesses.

line. adjusted characterize how EBITDA So that's I'd the and the risk on opportunities

driven optimization factors, EBITDA downside again, In upside terms front. of feel continue more to processes of terms also around by to about improving capital. our is an to very flow cash work -- efforts But continue confident on than and there that we we the there's some flow, impact again, on obviously, our that that probably similar I'd we cash but has that working our say in

Stephen J. Smith

add initial on as we detail I far there. John, from And forecast, the of one could a next, to maybe move guidance the how as couple one comments

that done in at type we've basis, at as we've the and just mentioned the quarter what on that relates miss the our levels remaining Print of we So first of it in and have Mary looked risks similar to opportunities assumed is continue earnings had three the the that quarters would year. segment the

there earnings $X bulk that the would to level noted, in million of you that that, roughly reduction is as of our that We a for XX% in year-over-year XXs the decline, occurs, as midpoint would low the assume far midpoint quarter. be earnings and in from guidance. miss As miss the would account

Mary A. Laschinger

And could not that but change obviously, there point. extent to industry we're trends in that, the the banking improve, that at this be on a

John Babcock

what think in the quarter split a given you still get through it year, that you're still balance in expecting expect if what between tended I then the and half that. be I XX-XX. has XX-XX want sense the mean, in you're first just I second expecting, the to of And to of first to kind earnings aggregate, split between more Alright, past, happened somewhere be less the half or range. And the whether in appreciate and just the and

Stephen J. Smith

second because point an it's bit to a John, half to shift a day little shift. And fact difference more day we adds extra weighted heavily the the extra have that us. So of several

second first half, XXX it XX-XX, -- XX% a that in the so points half than a be -- bit little in a higher bit than and a something rather the little you higher little the quoted. might basis So lower few

John Babcock

It on way in Packaging, gauge moving is the any are in then then there. was what the of I been you And you sounds if talk Okay. was kind to U.S., a markets. bit like that a little the growth improvement a just wondering could of And in there's seeing there whether challenge also to quarter? about non-U.S.

Mary A. Laschinger

business characterization of of a us. non-U.S. Sure. Yes, of just market, that the so all, little for first terms in

this support market. non-U.S. market to do large a So support here the markets, project-based and quarter. projects do projects we for U.S. is launches that the located two dynamics And it's One big there's product that we business is in customers and us there always factor occurred a and a for Asian manufacturing are associated that with -- off with coming on. timing in coming

and into course customized back anticipate do particular second in that highly those products specialized we're of the in timing was and that We the of factor. year. half are selling the addition, there here play coming also some In improving year, into and a that, of so over the

dynamic beginning or of the acceptable other movement experience because other move outside The to of and manufacturing we're trade, is more the predictable into we for that to trade. around looking see the of where uncertainty China more countries

that of was course is over months facilitate the manufacturing. that some the inventory timing of occurred to believe last there unpredictable of transition that builds we and Some few that

our from long-term of movement it's timing a timing. both inventories implication, a and of along standpoint, So not with project it's more manufacturing

the than than growth our of that categories terms growth with U.S. was business. others. some part experienced broad-based, in was business, it price we a big A growing of and greater in significantly In higher U.S. product X%

stronger and For our example, digits double as others. some business market grew rigid an are segments than example,

John Babcock

during X.X% that that the marketing that from seeing been where in in have quarter the or mean, rate but? actually something be I demand, had a down slowing seems were back, down you box signaled actually business. that's has And that bit guess, the pulled might units are assuming growth I obviously, case so little in because Is spend to you Okay. been, a part

Mary A. Laschinger

of combination John. a it's factors, Yes,

expected as prior we for moderation price to we've shared supplier year this all, increases. a quarters, One in of is the few reasons. be lower of First

We a bit. also going board -- that some lapping of had activity lapping on that a to customers slowed coming of little large and that

We seeing well. to saw saw a of and bit down also the products also last but benefit AAC's quarter. top of you we for in had put And the the were shipments on U.S. resin-based were box as were the year. -- are of then quarter We impacted, also that, for the we as for softness growth down marketplace

well. dynamics there as are occurring So some market

John Babcock

before And a for was that. just question more over, year. working appreciate last I could your a bit about capital little if then turn talk you wondering I I the it assumptions

Mary A. Laschinger

Steve?

Stephen J. Smith

Sure.

noted So was in outperformed the quarter, own continuing internal prepared expectations we year, we And that quarter. the further. as -- if not first in anticipate the level of improvement, the for it remarks, improving for our the

So that at quarter, XX/XX. anticipate year-end performance first we the in of fiscal level also occurring

in fair risks growth. the have with We of a degree being and confidence seasonality that, Packaging

John Babcock

Thank you.

Operator

Our with Barclays next question from comes Dunigan John Capital.

is line open. now Your

John Dunigan

for all thanks Hi the Mary, information. hi Steve,

business would Just that typically to of just market? percentage are to business back we that go considering in Packaging touched of of that and non-U.S. specialty, types you go is that exactly the into what what terms consider products of non-U.S. on, you part

Mary A. Laschinger

Yes.

roughly, Custom packaging packaging they're is are quite specialized. delivery. revenue often as the to you proposition protection to well of in times that's product, concept is in the XX% requirements that specialized from Specialty, go us from if back product and and shelf-ready products, or of very design, our So custom-made, specifically so both it's that anything this our molded accommodate to paper as Packaging gave designed size. marketability that space products the have that to so foam things packaging, value the of recyclable customer the the business, to non-U.S. around roughly in characterize

the So sourcing and to design it's the of of point concept package, use. delivery

John Dunigan

here you the the are you these operations delivering it point customers And it delivering delivery of U.S. use, are or to their China? in to in to

Mary A. Laschinger

the We're chain delivering deliver their processes in it it supply -- in we Asia. to manage operations

John Dunigan

levels, touched than you believe was that you than far this XQ, kind call the are a mostly Okay. how it last somewhere given points things ago. slower of and I to And in Print earnings that lower expectations, of GDP then on the so of little I upon the year? at kind a had being assume bit forward the the volumes around assumption of months looking the expected few rest same But carries weakness

Mary A. Laschinger

factors. mid-XXs on quarter that's reductions I drop And so There've with what announcements few will been first in the we so see first playing But down you end inventories carried seen were because quarter we operating in that by, being we worse is inventories on second year-end over system -- were mid-XXs. shipments with there at think, see comment even in a two for, Yeah, quarter this shared won't I which capacity -- already of driven the all entire the there rates the here. the quarter. than our industry as channel were what we the at I out call, to the fourth and were specifically that One, being demand into adjusted from why channel comment have throughout the point. we believe from

starting are meet assume to announcement, the based to inventories this that mills to well. on adjust the take demand and their as channel of trying out so I manufacturing they're And

to hard on with we a probably the we how by going balance to what anticipating it's made as play an year expect, similar from manufacturers hear But had our we assumption. out. we what And all first by quarter. you, in shared appropriate based and to appearances to this is generally we're So announcements customers, that's would all say the

John Dunigan

change guidance, free -- looking Steve, can the updated the then free cash lower from And the at flow just guidance the flow the what guidance major hoping cash EBITDA was Okay. changes in the were? you I bridge to

Stephen J. Smith

Sure.

and that throw assuming John, would that, $XXX be an the breakeven And net maybe right EBITDA the So would about start rate that that of let's approximately $X, off income. million. of adjusted tax we're given about with from midpoint at guidance, for effective

have. February. gave year, had the or guidance and change for that would first net $XX that From that level, the that income we the So the from back we income year. will in to lowered first in so our the about about you'd in that be zero million add prior quarter, back you add $XX subtract -- figures noncash those about the expenditure million the capital as three whether this has which $XX last all years, or to. guided that $XX back million, to we're they're from so of figure the The capital averaged that And net year a $XX onetime XX We We're D&A ongoing, of well assumption items. other running year. -- be we've around million expenditures, about million, adding

cash changes have flow capital working $XX as before $XX current million. that the million. was source assets our we current the to that first note quarter, million have you'll So our the minus then note capital of to In liabilities $XX you'll was sources least $XX of and guidance about a at at would least the working million to get of

So the million been order to able quarter, our we've in to to that level. $XX annual get hit target in

that in I confidence maintain Again, the that if able risk million some be growth. at be $XX and earlier to believe have least Packaging seasonality we upon our not, we'll mentioned the we So that, improve will it. for

John Dunigan

terms biggest the that in free in was working just flow bridge, And of the for move guidance cash change capital? the

Stephen J. Smith

performance. previously the higher, for had we're working year. We yes. given to guided quarter's to first the capital correct, And lower a That's now, figure guiding

John Dunigan

rebound accounts Okay. inventory down? sustainability and And is in free then cash since coming out driven flow the kind consider of would of receivable looking by most free the the cash flow past how you of XXXX

Stephen J. Smith

to future elements that X are there change. the so Right, might

That's flow that was We unwind to at and you tend generate working free some anticipate view plan the continued, haven't segments. capital of generation contracting long-term announced, multiyear optimization which capital. flow. improving, we EBITDA guided of to cash would would the part our additional itself see least, intent cash would our of in free but working our And unwind

free $X And $XX could so million share a $XX million approximately range cash near ongoing believe, term. for in be on an the we to or basis the flow, that

would because Packaging at capital. just rate growth they working of grow Beyond that, user see to we be what have largest the would of

John Dunigan

Thank over Understood. Thank much will you the with it context you. and very for that. I turn

Operator

[Operator Instructions].

Our next the Jacome comes from with of line Dan question Sidoti.

open. line Your now is

Daniel Jacome

me. Hi, you Can hear good morning.

Mary A. Laschinger

Yes, we can.

Daniel Jacome

Terrific, information. of a calls couple terrific, missed apologies if I this conference thank you Juggling all morning the it. so for

So cash of the the flow obviously. end day, the upside free at

we give the contribute year should from expect the years you can look receivables at you of one you're us balance Just the as of or a through source really sense do quarter a what of past to expecting of course, it most cash and because only that of cash And year, expectation fourth source then, and the I'm been not. have reason it? there larger was last I a asking would is quarter some think of the was

So I'm a much. to understanding just trying get of very you Thank better that. a little

Stephen J. Smith

items outperformance capital So flow. would we year-over-year. expect, contributor Dan, working But the on increase given that the would to the cash Or accounts largest line item receivable within what be to we prefer not give guidance was specific if you see year, quarter, the that able AR. about in XX% that to maintain quarter we improvement of first the first for the balance in in working are would the capital the happened of

expecting year. to that of continue same we're And of so for the the balance level outperformance

Daniel Jacome

much. Thank Okay, very got you it.

Operator

questions further Mary no time. at are comments. in turn the call CEO I'll Laschinger, Veritiv, there over to closing this for And queue of

Mary A. Laschinger

our everyone you, We in the your and decline Thank revenue in for coupled impacted conditions, challenges several questions. faced EBITDA. negatively segments and first adjusted our our with Print These structural Publishing ongoing market quarter.

of optimization as the well flow. was our impact both in are the our However, progress on growth our free segments in cost with positive and quarter our cash cash strong we efforts very having the and as pleased are flow

Print position businesses joining in operations. across long-term optimizing well for the Packaging believe forward and to efforts and in our commercial, market share us higher long-term of Solutions, you supply us with these our look again back-office Our growth, services, speaking quarter Veritiv. We XXXX strategy today, remains the in when positions August Thank for we by Facility you higher-margin same. results. and second will portfolio our we investing protecting mix to Publishing processes success our and Shifting our business chain, and

Operator

call. This concludes conference today's

disconnect. now may You