Quad Graphics, Inc

Good morning, ladies and gentlemen, and welcome to the Quad's first quarter 2021 conference call. During today's call, all participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. A slide presentation accompanies today's webcast, and participants are invited to follow along, advancing the slides themselves. To access the webcast, follow the instructions posted in the earnings release. Alternatively, you can access the slide presentation in the investors section of Quad's website under the Events and Recent Presentations link. Please note that this event is being recorded. I would now like to turn the conference over to Katie Krebbach, Quad's Investor Relations Lead. Katie, please go ahead.

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. Joel will lead off today's call with a business update and Dave will follow with a summary of Quad's first quarter 2021 financial results followed by Q&A. I would like to remind everyone that this call is being webcast and forward-looking statements are subject to safe harbor provisions as outlined in our quarterly news release and in today's slide presentation on slide two. Quad's financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-GAAP financial measures including adjusted EBITDA, adjusted EBITDA margin, free cash flow, and debt leverage ratio. We have included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures. Finally, a replay of the call and the slide presentation will be available on the investor section of Quad.com shortly after our call concludes today. I will now hand over the call to Joel.

Thank you, Katie, and good morning, everyone. We are very pleased with our first quarter performance. Our team achieved a third consecutive quarter of improvement in the net sales trend since the height of the pandemic. We also recorded several new wins in our agency and print segments that will drive long-term growth. When combined with our disciplined approach to cost management and ongoing productivity improvements, we increased our adjusted EBITDA margin and drove higher cash flow as compared to the first quarter of 2020. This strong performance helped us continue to pay down debt to protect the health of our balance sheet. On slide three, we show our competitive advantages that are further accelerating our position as a marketing solutions partner and creating more value for our clients. These advantages reflect our commitment to integrated marketing platform excellence, innovation, and culture and social purpose. Our integrated marketing platform is unique and continues to resonate with clients as it helps them reduce the complexity of working with multiple agency partners and vendors, increase efficiencies through process optimization and content production, and improve marketing spend effectiveness across all media channels, especially through our leading data analytics capabilities. We provide our clients with unmatched scale for onsite services and expanded subject matter expertise, in marketing strategies, such as customer insights and data analytics, creative solutions, media deployment, including industry-leading print and distribution capabilities, and marketing management services. Our dedicated client service teams make it easy to access our 24-7, always-on global platform. Our strategic transformation as a marketing solutions partner was validated again this week through our ranking as number 15 on the world's largest agency companies list, compiled annually by AdAge. We continue to strengthen and expand our marketing, consulting, creative technology, and data analytics capabilities through continuing to add talent, including experts in consumer research and engagement, further optimizing our sales structure to accelerate revenue growth, including expansion to new verticals like consumer technology, and making ongoing investments in innovative solutions that drive client value. For example, we recently expanded our partnership with Package Insight, an organization that uses data and analytics to help better understand the drivers of consumer engagement and their purchasing journey. Now, Quad clients have the ability to test brand creative concepts, and quantitatively assess their impact on consumer interactions in a real life retail setting at our lab in Greenville, South Carolina. We will help expand Package Insights' current research in brand packaging to include digital, in-store, direct marketing, and all brand channels. Another way we innovate is through leading analytics capabilities that help our clients confidently allocate every marketing dollar where they matter most. For example, our award-winning digital agency, Rise Interactive, helps clients increase the effectiveness of their marketing spend through Connects, a proprietary technology that provides on-demand cross-channel insights, proactive intelligence, and automated optimization. With the click of a button, clients can do campaign response in real time, and Rise team members can make immediate adjustments across channels to maximize budget allocations and business outcomes. Through this innovation, we were able to help a mature e-commerce retailer using paid search to scale revenue at three times the rate of spend. Through our commitment to platform excellence and innovation, we now perform work for leading brands across foundational and high growth market verticals as shown on slide four. These brands admire for the trust and loyalty they have built with their customers, have placed their trust in us to help solve their most urgent marketing challenges. As a result, we have been able to expand our relationship into higher value and higher margin areas of their businesses. This is particularly important as these brands shift their efforts to merge from the pandemic from a position of strength. I would like to share some examples that illustrate how clients have come to rely on us as their trusted marketing solutions partners. The first example shown on slide five reinforces how we're able to help brands and marketers produce at the speed and scale required to compete effectively in today's fast-changing market. A leading global apparel company found itself in a situation where it needed an entirely new approach to photo and video content for its broad array of product lines due to an increase in demand as people started spending more time at home during the pandemic. The company wanted to capitalize on the market shift to comfort clothing, not only to meet increased demand from existing customers, but also to reach new customers at a time when they were seeing a 5X increase in online search traffic. The company confidently turned to Quad, knowing our integrated marketing platform had the necessary depth and breadth of talent, creative vision, and flexible execution to fulfill its needs. We performed against a highly truncated timeline that included capturing hundreds of new images and video content for four different brands in just 25 days. Due to the resounding success of our work, we were able to renew an existing agreement for related services and are now in position to expand the scope of our agency services with this high-growth, well-known brand. The second example I'd like to share with you today illustrates how we have become a trusted partner to retailers, both online and offline, to help carry out their most important strategic initiatives. In the wake of the pandemic, this includes initiatives by brick and mortar retailers to engage customers through experiences. As shown on slide six, A large national retailer turned to us to execute its launch for a new high-profile beauty shopping experience, a store within a store concept featuring dozens of premier beauty brands, all of which needed their vision represented consistently and on-brand within a dedicated space. The retailer was familiar with Quad's ability to manage complexity and leveraged our integrated marketing platform to deliver hundreds of thousands of high-quality in-store signs and displays quickly. As our client expands this critical strategic effort across the U.S., we expect to grow our relationship, helping it to refine its vision for the experience and produce assets for execution, among other areas of opportunity. An ancillary benefit of this level of trust from this leading retailer is we now have direct relationships with the beauty brands involved in the program and are actively working to expand our relationships with each of them. In fact, several brands already have engaged us for a variety of marketing solutions, including strategy, creative and digital services, and direct mail production. On slide seven, we circle back to commitment to culture and social purpose, a commitment that goes back to our company's founding 50 years ago. Our strong culture and values include an enduring focus on social and environmental matters, and the benefit that this focus brings to the company and the communities we serve. For example, we have always focused on reducing the environmental impact of our business operations, including significant efforts to improve the energy efficiency of our manufacturing operations. Our ongoing work recently garnered a Wisconsin Focus on Energy Excellence Award for driving down carbon emissions through energy saving upgrades to facilities and operations. In addition, at this time of heightened awareness about social issues, we have elevated our commitment to diversity, equity, and inclusion, not only because it is the right thing to do, but it is also a business imperative that we ensure we attract and retain the talent we need to successfully compete and grow. In 2020, we launched a learning and development program for employees as part of a more comprehensive and sustainable DEI strategy. We also expanded our employee-led business resource groups. As we look to the future, we are focused on further operationalizing diversity, equity, and inclusion into everything we do at Quad, as well as across the marketing and advertising industries as a whole. For example, Quad and my family's foundation, the Wendover Foundation, are making a three-year, $1 million commitment to expand the brand lab to the Milwaukee community. Through this investment, we will introduce local students from diverse ethnic and socioeconomic backgrounds to career opportunities in advertising and marketing and generate jobs. Rise Interactive, our digital agency, just announced its partnership in a new strategic effort to bring more diverse talent to Chicago's tech scene. Rise will lead the charge for a pro bono digital marketing campaign for this important effort called Destination 312. Before I turn the call over to Dave, I want to thank our employees for their continued hard work and dedication. You have been resilient in the face of ongoing and unprecedented challenges, and thank you for being there for each other and managing through disruption in its many forms to continue to serve our clients well. As the economy continues its recovery, Quad will remain nimble so that we can adapt to changes in the demand landscape. We are confident in our team, our strategy, and our future as a marketing solutions partner to our clients. With that, I'll now turn the call over to Dave.