Quad Graphics, Inc

Good morning, ladies and gentlemen. Welcome to Quad's third quarter 2021 conference call. During today's call, all participants will be in a listen-only mode. Should you need assistance at any time, please email 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 on the investor section of Quad's website under the events and recent presentations link. Please also note today's event is being recorded, and at this time, I'd like to turn the conference call over to Katie Krebsbach, Quad's investor relations manager. 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 third quarter and year-to-date 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. Our third quarter results were strong with higher print volumes, including print segment share gains from new clients, as well as continued positive trend in agency solutions, all of which contributed to year-over-year organic growth of 7% in net sales. These results validate our business strategy as a marketing solutions partner and reflect the strength of our integrated marketing offering to deliver more value. Right now, businesses around the globe are experiencing disruption from unprecedented supply chain issues and mounting inflationary pressures that began with the COVID-19 pandemic and intensified over the past 20 months due to natural disasters and labor shortages. At Quad, we are working thoughtfully and diligently to mitigate these impacts on our business while successfully maintaining the high-quality, responsive service on which our clients have come to depend. While we expect supply chain issues and inflationary pressures to continue for some time, we will remain nimble and proactive to adapt to ongoing changes and challenges. At the same time, we will continue our disciplined approach to managing all aspects of our business to enhance financial strength and create shareholder value. We are working hard to secure the necessary labor, materials, and transportation required to meet client demand. And to offset higher commodity freight and operating costs, on October 1st, we introduced a price increase for select materials, as well as a manufacturing surcharge. Notably, we continue our focus on debt reduction. Over the past 12 months, we have reduced net debt by approximately 15%, or $140 million. And we will have reduced the net debt by approximately $350 million, or 33% over the past two years by the end of 2021. Also, as just announced, we are pleased to have extended our $1 billion bank debt agreement to November 2026. Our healthy banking relationships and balance sheet make it possible for us to continue to strategically invest in the talent, technology, products, and services to accelerate our position as a marketing solutions partner. We are pleased to continue bringing on board experienced marketing talent. For example, during the third quarter, we welcomed Chris Persons, a former Merkle and Epsilon executive, as our new senior vice president of direct marketing. Chris's extensive experience in outcome-based marketing strengthens our ability to help brands and marketers reach and engage consumers through highly personalized data-led programs coordinated across both online and offline channels. We also continue to invest in our data and analytics offering to help our clients maximize impact for our ability to precisely target an audience, create and place compelling content for the audience in the right channels at the right time, and then continuously optimize campaign performance, including real-time measurements across digital channels using Connects, our award-winning platform that helps marketers identify the specific value-driven actions they need to take to increase revenue and grow their business. Clients value our ability to gather, analyze, and interpret data to inform their marketing strategy, along with our ability to deliver content and campaigns at the speed and scale required by today's marketers. We continue to differentiate ourselves through investments in data-driven capabilities. These investments include print technology with full-scale personalization capabilities that can produce direct mail pieces that are truly relevant to the recipient and, therefore, more likely to drive response and revenues. Direct mail remains one of the most effective ways to reach today's busy consumer, who is constantly bombarded by messages. Further, it is cost effective, especially in light of recent substantial price inflation in digital advertising marketing, and avoids the contentious privacy restrictions borne by social media. We continue to advance our position as a marketing solutions partner by leveraging our key competitive advantages to create more value for our clients. These advantages shown on slide three include our commitment to innovation, platform excellence, and culture and social purpose. On slide four, we share an example of how our commitment to innovation helped a large, well-known food retailer with whom we have had a long-term, strong partnership. The nationwide retailer sought our help with its customer loyalty program across its 20-plus store banners, specifically improving the effectiveness of how it executed its personalization strategy. Our innovative solution featured our integrated client technology portal that allows the client's marketing team to assign personalized offers and content to loyalty members, and then automates campaign execution across digital and print channels. As a result, the client was able to extend and grow customer relationships and create additional revenue for its banners. On slide five, we show another example of how we innovate for clients in the packaging space. For many years, our packaging division has provided clients with sustainable packaging solutions with a recent focus on sustainability logos and labels. There is an abundance of differing graphics, icons, sustainability claims, making it confusing for brand owners and consumers alike. Our Package Insight Group, which specializes in studying brand packaging performance, consumer attention, and shelf impact, conducted research in its simulated shopping environment using biometric technology such as eye tracking and facial coding. The research data enabled us to identify best practices for brands on how to make sustainability logos on packages more effective and improve results. Now we are taking our research one step further, partnering with Walmart and the Sustainable Packaging Coalition to understand how consumers respond to messaging on packaging is part of an effort to address the growing food waste problem, a high priority for many of our clients. The first stage of the study examines how consumers perceive food freshness labels and how packaging could be improved to reduce waste. Additional stages will provide insights into how suppliers, vendors, manufacturers, and retailers all collaborate to reverse worsening food waste trends. For additional information, I invite you to read our white paper in the resources section of Quad.com. Turning to slide six, we provide an update on our labor management strategy given the continued nationwide labor shortage. As I shared with you last quarter, due to increased volumes at our print manufacturing facilities from organic growth as well as new business ones, we have intensified our hiring and retention efforts to support our platform and growth objectives. Since mid-May, when we started ramping up hiring for the busy second half of the year, we have hired several hundred employees into our U.S. manufacturing platform. Our strategy here is twofold, to attract new employees by offering interesting work with competitive compensation and benefits while providing a safe and inclusive environment, and to retain employees through positive coaching and training and development programs so they understand the next step on their career journey with us. Our strategy has proved successful due to our well-established people-first culture and value system that reflects our commitment, creating a more diverse, equitable, and inclusive workplace. On slide seven, we highlight our third competitive advantage, our commitment to culture and social purpose. We take seriously our role in creating a better way through our approach to environmental, social, and governance matters, and are releasing a comprehensive ESG report later this month that details how we've been driving positive sustainable change in our business since our founding 50 years ago. For example, when it comes to the environment, we have multiple initiatives in place to reduce our environmental impact. We are proud of our emissions capture rates and recycling rates, including recycling 100% of all manufacturing waste paper and 98% of other general waste in our facilities. We're even exploring how to upcycle waste streams, like paper dust from the printing process, into viable commercial products. In the social space, we continue to build our diversity equity inclusion strategy. which includes specific goals for creating a more inclusive open culture to benefit employees as well as the clients who trust us with their business and the communities we call home. Additionally, we have upped our commitment to employee health and wellness with a newly expanded program that provides full circle support for employees' physical, emotional, financial, and social well-being. As far as how we run our business, we remain committed to effective governance and have programs and policies in place that reflect our culture of high ethical standards, legal compliance, and reduce risk to the company and all stakeholders. Quad's ESG report will be available for viewing and can be downloaded on our quad.com site later this month. I encourage you to check it out. Before I turn the call over to Dave, I want to thank our employees once again for rising to the occasion and performing well for our clients during a time of unprecedented disruption and challenges. I also thank them for supporting each other through these busy and unusual times. I am proud of how we have been able to successfully navigate the pandemic, remaining nimble to adapt to changes, including supply chain issues and managing our labor to accommodate growth. With that, I will turn the call over to Dave for a review of our third quarter's financial results.