Quad Graphics, Inc

Good morning and welcome to QAD's first quarter 2024 conference call. During today's call, all participants will be in 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 the slides themselves. To access the webcast, follow the instructions posted in the earnings release. Alternatively, you can access the slide presentation on the Investors section of Quad's website under the Events and Presentations link. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star then 1. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Katie Krebsbach, Quad's Investor Relations Manager. Please, 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 the summary of Quad's first quarter 2024 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. Our first quarter results were in line with our expectations and we remain on track to achieve our full year 2024 financial guidance. As we communicated on our last earnings call, we anticipated the first quarter would have the most significant year-over-year decrease in net sales and adjusted EBITDA of any quarter in 2024. External factors impacting sales included significant postal rate increases and ongoing economic uncertainty like elevated interest rates, which led to a decrease in financial services direct mailings. Sales were also negatively impacted by the recent loss of a large grocery client. Free cash flow improved in the first quarter, and we will continue to use our strong free cash flow generation and cash from asset sales to fuel our diverse capital allocation strategy. This strategy includes investing and scaling our offerings, further reducing debt, and returning capital to shareholders, such as through our next quarterly dividend of 5 cents per share, payable on June 7th to shareholders of record as of May 22nd. Despite revenue headwinds, we remain confident in our ability to manage all aspects of our business by treating all costs as variable, aligning our cost structure to revenue opportunities, and optimizing print manufacturing platform by consolidating work into plants where we can achieve the greatest manufacturing efficiencies, and subsequently selling assets no longer required for business operations. Turning to slide three, we continue to execute on our mission to deliver a better marketing experience so our clients can focus on delivering the best customer service. Our MX solutions are flexible, scalable, and connected, and span every facet of the marketing journey from online to offline across creative, production, and media, and supported by data-driven intelligence and state-of-the-art technology, included AI-driven solutions. We tailor each of these solutions to client objectives to strengthen marketing effectiveness, improve speed market, and drive cost efficiencies and deliver value on investments. Moving on to slide four. At Quad, we are continually innovating new solutions for our clients and in new spaces. During the quarter, we announced our entry into Retail Media Networks, or RMNs, which are the next big advertising channel. eMarketer predicts ad spend in omnichannel RMNs will grow to over $100 billion by 2027. Quad's focus is on advancing the in-store shopping experience by taking the best elements of digital commerce and bringing it into physical store environments. Our in-store connect solutions builds on our deep expertise with retailers and consumer packaged good companies, and it's fortified by our recent acquisition of Dart Innovation, an in-store digital media solutions provider. Through In-Store Connect, we help brands deliver engaging messages and promotions right at the store shelf, the most critical moment in the purchasing decision. Earlier this week, we announced a new partnership with the Save Mart Companies, the largest private regional grocer on the West Coast, to launch its In-Store RMN. We are also in active talks with several other retailers and look forward to demonstrating how in-store connect could generate value for our clients as we strive to become the industry standard for in-store media networks. Given ongoing postal rate increases, we remain focused on advocating for postal reform and developing solutions to help our print clients save money and differentiate Quad as a market innovator. Our two-pronged approach to postal optimization maximizes savings based on individual mail type, volume, and region, while also increasing response through creative data-driven formats across all media channels. During the quarter, we launched our latest postal optimization solution, Household Fusion. Turning to slide five, this innovation combines various marketing mail from different brands, or separately, various magazines from different publishers, into a single package delivered to one address, creating significant postal savings for participating clients. Our clients are enthusiastic about Household Fusion, including PWX Solutions, a direct marketing and production partnership formed between Hearst and Condé Nast. PWX praised our pioneering innovation, saying, Quad is always looking out for everyone's best interests, and the Household Fusion program is really paying off. We will continue to evolve this MX production solution to drive value for our clients. During the quarter, we also introduced the next evolution of our media agency, Rise, which brings together our full range of media and own data services under one brand. So we're even better equipped to solve client pain points. Our offering shown on slide six is truly differentiated. Our modern integrated data stack has privacy at its core, and it is resilient to industry challenges like the deprecation of third-party cookies. Another key differentiator is radical transparency, something deeply ingrained in our culture and way of thinking at Quad, but still quite uncommon across the media industry. Radical transparency means our clients see what we see, no hidden charges. Our approach minimizes the tax typically paid to data onboarding platforms that connect, control, and activate data, enabling us to maximize our clients' dollars in working media. We are confident that our enhanced media offering will drive revenue growth. Today's marketers compete in an ultra-competitive landscape and are required to do more with less to resonate with their target audiences. When it comes to creative services, marketers are often faced with having to choose between high-quality creative and consent or speed and scale. We are answering the market need for smart, scalable creative with an integrated and flexible new solution launching this month. Our solution integrates all our creative business lines from brand strategy and design to campaign ideation, pre-media and adaptive design, and content creation and backs them with our 24-7 global production capabilities. We believe this combination will redefine creative excellence, putting quality first regardless of project size, scope, timeline, or budget. On slide seven, we are proud to provide an update on campaign results for two clients, Nielsen Massey Vanillas and CLR Brands, with whom we announced new partnerships on a previous earnings poll. During the 2023 holiday baking season, our Taste Vanilla as Vanilla Should Be campaign for Nielsen Massey Vanillas propelled it to be the fastest growing extract in the market, outperforming consumer packaged goods benchmarks by generating a 13 percent increase in loyalty and 1.8 million website visits, according to our client. Since our Been There, Outdone That campaign for CLR brands entered the market last October, the cleaning products leader reports it's realized 124% increase in store late locator visits and an 18% increase in sales. And both of these examples, we connected high-impact creative with expert media and data analytics to ensure the right message was delivered to the right audience at the right place and time. Turning to slide eight, we share an example of how Quad is helping a lifestyle and personal care brand increase its marketing effectiveness through our integrated offering. Raw Sugar Living, a disruptor in the clean beauty and personal care space, was seeking a partner to help facilitate the next phase of its brand growth, following a rapid expansion into retail stores. They chose to partner with Quad due to our great reputation for delivering breakthrough creative and brand growth in CPG categories, coupled with our robust data insights and media capabilities. As Raw Sugar's first creative agency of record, we are now providing brand strategy, integrated campaign development, and content production. We are also providing media strategy, including connections planning, as well as omni-channel media execution and optimization. Our first direct-to-consumer campaign for raw sugar launched this summer, but already our team has been hard at work helping promote the brand. In April, we helped the client launch product in Costco stores for the first time ever. We also supported its 2024 product rollout. by hosting a pop-up market for 60 social media influencers and media representatives at our New York City office and event space, as shown on slide 9. The client is thrilled with our partnership, so much so it recommended us to a large health and wellness company for which we are now providing creative and media work. On slide 10, we show another example of how the services within our MX Solutions suite work together to provide a better marketing experience for our clients. SpinLife, the nation's largest direct-to-consumer retailer of durable medical equipment, recently engaged us to help it strengthen consumer connections to drive increased response rates and revenue. Our work at SpinLife's new marketing agency of record includes high-impact creative delivered at speed and scale across online and offline channels, including print, web, and digital, fast, flexible catalog printing and distribution, and data-backed media solutions to activate campaigns with ease, including an expanded digital presence through paid search, paid social, marketplace, and affiliate media and SEO support. SpinLive praised our integrated approach to account management, which enabled us to stand up the account within three short months. They shared it with the smoothest and fastest onboarding they have ever experienced and said, we are excited to see the work coming together and the teams finding the efficient and effective way to drive our business. Already we've activated two digital campaigns and catalog work will enter the market next month. Now we are in the process of establishing a client dedicated team integrated with SpinLife's marketing operations to provide further support and through which we can introduce additional value added quad solutions. SpinLife is extremely pleased with our ability to address its creative, production, and media needs all in one place, decreasing the complexity of working with multiple agency partners and vendors and streamlining processes for greater efficiencies. We look forward to continuing to partner with SpinLife on new initiatives to further ignite its brand and drive demand. Before I turn the call over to Tony, I want to acknowledge that May is Mental Health Awareness Month, and in keeping with our longstanding commitment to taking better care of our employees, we are launching a new mental health liaison program in partnership with the National Council for Mental Wellbeing. This program, part of our existing robust wellness benefits for employees, will help educate employee volunteers to act as advocates for mental health, removing the stigma and connecting coworkers in need to Quad's emotional support resources. This type of program reflects our strategy as an employer of choice in the workplace for the marketing industry's best talent, a key driver for growth. With that, I'd like to turn the call over to Tony for the financial reviews.