Quad Graphics, Inc

Good morning, and welcome to Quad's third quarter conference call. For today's call, participants will be in listen-only mode. If you need assistance at any time, please signal a conference specialist by pressing the star key followed by zero. Slide presentation accompanies today's webcast, and participants are invited to follow along, advancing the slides themselves. To access the webcast, follow instructions posted in the earnings release. Alternatively, you can access the slide presentation on the re-event section of Quad's website under the Events and Presentations link. After today's presentation, you may have an opportunity to ask questions. To ask a question, you may press star then 1. To withdraw your question, press star then 2. Please note that this event is being recorded. I'd like to turn the conference over to Katie Krebschak, Quad's investor election 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 today's call with a business update, and Tony will follow with a summary of Quad's third quarter and year-to-date 2023 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, 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, in the third quarter, we were pleased to deliver consistent year-over-year EBITDA margins and $27 million of free cash flow despite a challenging revenue environment. Net sales declined compared to the same period in 2022, primarily due to lower print, taper, logistic sales, as well as the 2022 divestiture of our Argentinian print operations. We continue to pay down debt, strengthen our balance sheet, and return capital to shareholders through additional share repurchases. We are on track to achieve full year 2023 guidance for adjusted EBITDA, free cash flow, and debt leverage. And by the end of the year, we will have reduced debt by over $560 million, or 55%, since January 1, 2020. We are lowering our full-year 2023 net sales guidance due to industry-wide print volume reductions in response to ongoing economic uncertainty, continued postal rate increases, and the impact of rising interest rates on specific clients. At Quad, we've seen the greatest impact to categories most sensitive to rising interest rates, such as financial services, direct mail, including credit cards, insurance, and loans. Tony will share more detail on our year-to-date net sales breakdown and financial guidance shortly. We are confident in our ability to manage for these near-term print volume challenges, along with long-term expected organic declines in certain product lines like retail inserts, due to our longstanding disciplined approach to managing all aspects of our business, including treating all costs as variable and aligning our cost structure to revenue opportunities. At the same time, we continue to build momentum as a marketing experience company, and Quad is unparalleled in that we seamlessly bring together all the essential resources, brands, and marketers needed for frictionless, scalable marketing execution, as shown on slide four. As we continue to scale our integrated marketing offering, print remains a core component of our business and the largest portion of our revenue mix. We will continue to innovate and invest in print and other channels to ensure we can fulfill our clients' ever-expanding marketing needs. Turning to slide five, I'm pleased to share that we continue to evolve our strategic leadership at the governance level, with the recent appointment of Melanie Hewitt to Quad's Board of Directors as an independent member. Melanie has a deep background in brand development, management and transformation, and understands firsthand the challenges facing our clients. Currently, she is President of Brand Management and Innovation and a member of the Executive Committee at Newell Brands, a leading consumer products company. Prior to joining Newell, in February of this year, she was Executive Vice President and Chief Commerce Officer at Serta Simmons Bedding. There, she delivered three-quarters of market share growth, transformed the sales organization, and built a $1.5 billion innovation pipeline. Melanie has also worked in consumer products marketing at ConAgra Foods, Unilever, Kimberly-Clark, and Kraft Heinz. We look forward to leveraging Melanie's expertise on our board as we expand and strengthen our offerings and drive revenue growth. I'm also pleased to share that Joshua Lowcock has joined our company as president of QuadMedia, and will further energize our efforts to create a differentiated, cohesive, and market-leading audience targeting and media engagement offering. Joshua joins us from UM Worldwide, part of agency holding company IPG, where he was global chief media officer, responsible for omni-channel media, strategy, predictive analytics, performance marketing, content, innovation, and ad tech. He played a pivotal role in developing and involving UM Worldwide's go-to market strategy. Previously, Joshua worked at MediaVest, where he led the Walmart digital team. He also served as head of commercial products and platforms at News Corp, where he led the launch of the company's customer data and analytics strategy. Joshua is well-known in the industry and publishes and speaks regularly on topics relating to media, innovation, and transformations. We will tap his considerable experience and expertise to elevate relationships with clients and fast-track growth in areas that represent significant opportunity for us. On slide six, we show Quad's key growth drivers, delivering integrated service excellence, accelerating market penetration and key verticals, and evolving our culture as an MX company. Integrated service excellence is at the core of who we are and what we do. Quad connects every facet of the marketing journey efficiently and at scale, providing innovative data-driven offerings from strategy and consulting to data and analytics technology solutions, media services, creative and content solutions, and managed services. As a result, we hope companies reduce the complexity they experience from working with multiple agency partners and vendors, increase their marketing process efficiency, and maximize the effectiveness of their marketing efforts. Turning to slide seven, we show how we are growing our presence with well-known brands in our target verticals of consumer packaged goods, finance, and insurance, health, direct-to-consumer, retail, and publishing. These reputable, well-known brands include Amazon, Walmart, ConAgra, American Express, and Abbott Labs, and are all admired for their excellence and the loyalty they have built with consumers. We take great pride in knowing they trust us to deliver on their marketing vision. To accelerate market penetration, we are focused on growing awareness that better marketing is built on Quad. We are gaining visibility with new brands, including blue chip companies, through our participation in industry events. For example, we recently participated in the 2023 Forbes CMO Summit in Miami. and Advertising Week in New York City, where we connected with brands and marketers about their marketing challenges and how Quad can solve those challenges. On Quad 8, we show an example of how we're growing momentum with a premier brand. Titleist, the golf industry's leading performance equipment brand, recently engaged us for our brand design and product launch expertise. We will be updating the packaging for its flagship Pro B1 golf ball, the most played ball in the PGA Tour. and the number one golf ball brand in the world. This opportunity represents significant positive exposure for Quad as the Titleist company produces more than 350 million golf balls every year. Titleist selected Quad for several reasons, including our exceptional approach to brand design in which we focus on making brands a favorite through measured potential, consumer action and reaction, and connections, our comprehensive creative services and expertise, which include brand positioning, design strategy, brand identity systems, adaptive design, packaging, and retail environments, our ability to leverage our own in-house consumer testing for brand package performance, FHIR Package Insight Team, and our proven product launch expertise, which consists of our strategy, creative, and connections planning to build and place attention-grabbing campaigns that bolster awareness and drive sales. We are excited to be under a multi-year contract as Titleist's trusted partner for this high-profile brand building work, which will be in market in early 2025. We successfully competed against respected sports brand agencies with deep category experience for this win. We look forward to expanding our partnership with Titleist's parent company, AcoucheNet, for other top-rated equipment for golfers. On slide 9, we show an example of how we're helping another thriving consumer package goods company achieve brand growth. Cacique, the number one producer of authentic Mexican-style cheeses, meats, salsas, and other products in the U.S., is experiencing rapid growth as demand for Hispanic foods soar. Cacique chose to partner with Quad due to our reputation for delivering breakthrough creative and brand growth in CPG categories. The company came to us by a word of mouth, recommended by another client for whom we are providing brand strategy, creative and campaign development, and more. As Cacique's new creative agency of record, we are focused on building awareness and loyalty among consumers seeking authentic ingredients and high-quality products in this category. In addition to brand strategy and creative and campaign development, we are also leveraging our data-driven connections, planning expertise, and support of Cacique's aggressive business goals to reach new market segments. Our work with Cacique is just underway and will be in the market in 2024. Cacique is an impressive brand new to our CPG portfolio and one with tremendous revenue growth opportunities. Already, we are in discussions with this client for more opportunities to refresh its brand and packaging and provide printing services. Turning to slide 10, for more than 50 years, our commitment to creating a better way has inspired creativity in how we address environmental, social, and governance matters. For Quad, ESG is a business imperative as it underpins our growth strategy. We have made progress on our ESG commitments published in our inaugural 2021 report. These include maintaining our focus on diversity, equity, and inclusion, prioritizing sustainable resource consumption, and investing in employee safety, health, and wellness. To learn more about our commitments and how we continue to create positive, sustainable change at our company and at the communities where we live and work, please access our newly released 2023 ESG update on quad.com or scan the flow code on slide 10 of today's presentation. Before I turn the call over to Tony, I would like to thank our employees during our seasonally busiest time of the year for their continued hard work and daily commitment to providing the highest levels of service for our clients. As we move forward with our growth strategy, I have great confidence in our team and continue to be enthusiastic about our growth opportunities as a marketing experience company. With that, I will now turn the call over to Tony for the financial review.