Quad Graphics, Inc

Good morning, ladies and gentlemen. Welcome to Quad's fourth quarter conference call. During today's call, all participants will be in a listen-only mode. Should you need assistance at any time, 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 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. 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 Tony Staniak, Quad's Chief Financial Officer. Joel will lead off today's call with a business update, and Tony will follow with a summary of Quad's fourth quarter and full year 2022 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, adjusted diluted earnings per share, free cash flow, net debt, 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. Beginning on slide three, I am pleased to report that we delivered strong 2022 results. meeting or exceeding our guidance across all metrics, including outperforming our top line guidance with an 11% increase in net sales when excluding divestitures. These results reflect increased sales in all our offerings, including increases in pricing to partially offset inflationary costs, print segment share gains from both new and existing clients, as well as continued growth in our agency solutions offerings and international locations. As far as earnings, we achieved adjusted EBITDA near the high end of our guidance range, ending the year with higher adjusted EBITDA than 2021 when excluding a non-recurring $13 million property insurance gain. We also continued to pay down debt in 2022 and have reduced net debt by $489 million, or 47%, over the past three years. We ended 2022 with a debt leverage ratio of 2.16 times, beating our guidance of approximately 2.25 times and achieving our lowest leverage level since 2018. By the end of 2023, we expect to have paid off $564 million in debt, which would be a 55% debt reduction since January 1st, 2020. Throughout 2022, our team skillfully navigated many challenges, including paper and supply chain disruptions, inflationary cost pressures and labor shortages, and our efforts to mitigate these impacts included price increases to partially offset inflation. The most recent of these increases went into effect on January 1st, 2023. While we continue to see growth in the agency solutions part of our business, led by our digital marketing agency, Rise Interactive, Economic uncertainty has prompted some clients to take a more conservative approach to the start of the year and pull back on their near-term print advertising spend. As always, we take a disciplined approach to managing all aspects of our business, treating all costs as variable, and will continue to align our cost structure to revenue opportunities. At the same time, we are aggressively pushing forward on our growth strategy as a marketing experience, or MX company, servicing marketers' needs from end to end. This includes an increased investment in our people, processes, and technology, including enhancing our agency solutions offerings and bringing aboard experienced business development professionals who can sell into our critical growth verticals of direct-to-consumer financial services, healthcare, insurance, and consumer packaged goods. Slide 4 shows how we continue to diversify our revenue into higher value and higher margin offerings. In 2022, we achieved net sales growth in all our offerings, including targeted print and international, increasing as a percentage of our total net sales. Large-scale print decreased as a percentage of total net sales due to expected organic declines that were partially offset by segment share gains. The increase in our international locations was primarily driven by stronger sales in Latin America, especially in Mexico, a strategic extension of our U.S. platform. Turning to slide five, I'm pleased to share that we have strengthened and diversified our strategic leadership at the governance level with the recent appointment of Bethann Eason to Quad's Board of Directors. Bethann has a deep background in advertising, marketing, publishing, and digital transformation, and understands firsthand the challenges facing our clients. For example, while with Accenture, she's led C-suite engagements for prominent brands as they evolved and transformed, drawing on her widespread digital marketing and digital media experience. We look forward to leveraging Bethann's expertise to enhance our competitive position and drive continued revenue growth. Turning to slide six, we highlight our three key competitive advantages. integrated marketing platform excellence, ongoing innovation, and culture and social purpose. We continue to strategically invest in our integrated marketing platform, which includes all the resources our clients need to plan, create, deploy, measure, and optimize their marketing efforts across all media channels, offline and online. This is a key differentiator for Quad. We are able to reduce the complexities of working with multiple agency partners and vendors and increase the efficiency of marketing processes. We do this while maximizing the effectiveness of our clients' marketing efforts through our ability to target and reach the right audiences, scale resources more efficiently while increasing speed to market, achieve better integration of offline and online channels, optimize media performance, drive consistent consumer experiences, and realize meaningful cost savings. A key aspect of our integrated marketing platform is dedicated on-site and near-site teams that serve as an extension of our client's internal marketing departments. We have more than 80 on-site locations at client companies where our employees fulfill traditional agency executional roles while also providing production efficiencies at scale for content creation, creative production, and marketing deployment. We also continue to strengthen relationships with innovative partners like Flowcode, the leading offline to online QR solution for building powerful connections and measurable conversions for brands and consumers. Earlier this month, in the lead up to the Super Bowl, in advertising's biggest stage, Flowcode announced the launch of its omnichannel QR and data platform for global brands, agencies, sports, and Web3, backed by existing strategic investors, including Quad. Scan the Flowcode on slide 7 for more information on this announcement, including Flowcode solutions for enabling first-party connections with consumers across all branded touchpoints. Quad is proud to partner with FloCo to advance the effectiveness of marketing products through first-party data that helps clients better identify audiences and their passions. On slide eight, we show how we recently expanded our relationship beyond traditional print media execution with Meijer, a leading regional retailer that operates more than 500 super centers, neighborhood markets, and grocery stores. Meyers was seeking a better way to manage its traditional and digital media spend. Our Quad Media team presented a comprehensive solution for integrated media planning and placement across all channels, including search engine optimization, social media, programmatic, TV, radio, out-of-home, and print. A key feature of our solution was our ability to offer advanced cross-channel performance management via our proprietary Connex technology. With Connex, MITRE is not only able to uncover performance trends by audience, creative, product, and location, but also identify specific growth opportunities and take immediate actions to accelerate media performance. We are also leveraging our cloud-based software as a service or SaaS platform for managing workflow, which includes the ability to streamline personalization at scale across multiple media channels. We are pleased to have expanded our relationship with Meijer and its subsidiary, FreshTime, drawing on the strength of our integrated marketing platform, innovative proprietary technology solutions, and deep experience with an understanding of the retail grocery industry. Turning to slide nine, we show how our commitment to ongoing innovation is driving business results for a large and complex national health insurance company, with whom we have had a longstanding relationship for traditional media execution. This client needed a better way to create and execute nationally consistent and locally relevant provider and product marketing for new member acquisition. We introduced an automated, data-driven, and scalable solution that also leverages our SaaS platform, connecting remote teams, streamlining marketing execution, including dynamic messaging, and optimizing media across all channels. Through this solution, we were able to help our client create consistently branded, customized advertisements with fewer touches and in a fraction of the time. In fact, they can now execute targeted marketing efforts in mere minutes versus weeks, allowing them to focus on more value-driven marketing efforts. We are proud to be their agency of record for their provider program and look forward to introducing them to Media Mix Optimization, another one of our integrated marketing services. On slide 10, we highlight our third competitive advantage, commitment to culture and social purpose. Our longstanding focus on creating a better way is a reflection of our maker culture in which employees not only envision solutions, but also create and execute them. This approach, a hallmark of our company for more than 50 years, inspires creativity in how we address environmental, social, and governance matters. In 2022, we advanced multiple environmental and social commitments, including improving the representation among our U.S. employees and U.S. management team in both gender and race and ethnicity, incorporating diversity, equity, inclusion competencies in performance reviews for U.S. leaders, achieving an 18% increase in annual spend with diverse suppliers, and partnering with clients to increase our certified paper usage to 80%. To learn more about these and other commitments, you can access our 2022 ESG update on quad.com or scan the flow code on slide 10 of today's presentation. Before I turn over the call to Tony, I would like to thank our employees for their continued hard work and commitment to performing well for our clients while we proactively manage all aspects of our business for long-term strength and stability. I have great confidence in our team and continue to be enthusiastic about our growth as an MX company. I'll now turn the call over to Tony from the Financial Review.