Veritiv Corporation

Good morning and welcome to Veritiv Corporation's first quarter 2021 financial results conference call. As a reminder, today's call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the call over to Scott Palfreyman, Director of Finance and Investor Relations. Mr. Palfreyman, you may begin.

Scott Palfreyman Thank you, Misty, and good morning, everyone. On today's call, you will hear prepared remarks from our CEO, Salah Bate, and our CFO, Steve Smith. After that, we will take your questions. Before we begin, please note that some of the statements made in today's presentation regarding the intentions, beliefs, expectations, and or predictions of the future by the company and or management are forward-looking. Actual results could differ in a material manner. Additional information that could cause results to differ from those in the forward-looking statements is contained in the company's SEC filings. This includes but is not limited to risks and other factors described in our 2020 annual report on Form 10-K and in the news release issued this morning, which is posted in the investor relations section at veritivcorp.com. Non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the applicable U.S. GAAP measures are included at the end of the presentation slides and can also be found in the investor relations section of our website. At this time, I'd like to turn the call over to Sal.

Thank you, Scott. Good morning, everyone, and thank you for joining us. Before I review our record first quarter earnings, I will provide a few updates on our business as they relate to our capital and portfolio objectives and including our share repurchase efforts and the sale of a small component of our print segment. I will also provide an update on our sustainability efforts. After my remarks, Steve will walk through our segment results, as well as our balance sheet and cash flow performance. We will also provide an update to our outlook for the full year. The results in the first quarter continue to reflect progress toward our multi-year strategy to drive profitable growth and become a leading full-service provider of packaging products and supply chain solutions. Each of our segments is executing on their strategic objectives and contributing to the profitability improvements reflected in the results. Strong earnings and disciplined work in capital management allowed us to reduce net leverage and expand capacity to deploy capital in support of our strategic priorities. Earlier this year, we announced a $50 million share repurchase plan to return value to shareholders. Through the end of the first quarter, we repurchased approximately $25 million of our shares including approximately 550,000 shares from UWWH, the holding company owned by Bain Capital and Georgia Pacific. To provide some additional context, Bain Capital and Georgia Pacific were previously the owners of Unisource Worldwide. When Unisource Worldwide and ExpedX merged to create Veritiv Corporation in July of 2014, UWWH held 49% of the shares of the new public company. Over time, UWWH liquidated portions of its stake in the company and sold all of its remaining shares in the first quarter of this year. As a result of this exit, partially facilitated by our share repurchase program, the downward pressure of the UWWH ownership position on our stock of the last few years has been lifted. We believe our share repurchase plan reflects a potentially high-yielding deployment of capital and will continue to execute against our plan. As part of our efforts to focus on our core businesses, we recently completed the sale of our specialized paper converting business, RollSource, which was an operating unit within our print segment. The transaction was completed at the end of March. Pixel Specialty Solutions, a current supplier to Veritiv, acquired this business as part of larger strategic moves in the print industry. The sale of the role source specialty business will allow Veritiv to become even more focused on our core product and service offerings and will not have a material impact on Veritiv's future earnings. Moving now to our first quarter financial results. We are pleased to report that the record financial performance from the fourth quarter of 2020 continued into the first quarter of this year. Robust packaging sales growth, stronger than expected print and publishing results, and operational efficiencies across the business led to adjusted EBITDA improvements across all segments compared to the prior year. As a result, both pre-tax income and adjusted EBITDA reached record highs for the first quarter of $30 million and $60 million, respectively. This reflects a $30 million improvement in pre-tax income and a $23 million increase in adjusted EBITDA, or plus 64% compared to prior year. Adjusted EBITDA margin remained at a record high of 3.8% in the first quarter, which was an improvement of 170 basis points compared to prior year. Our packaging segment also achieved record adjusted EBITDA in the first quarter of $78 million, reflecting a 31% increase over prior year. Continued improvement in demand and additional lift in price drove sales growth of 8% in the first quarter of 2021 compared to prior year when adjusting for one less shipping day. Similar to last quarter, our customized solutions and capabilities in the food processing, specialty retail, consumer electronics, and healthcare sectors continue to drive strong sales performance and favorable customer mix. The ongoing shift by consumers to e-commerce remains a source of volume across several of our end-use sectors. Our automotive and aerospace manufacturing customers continue to recover but at a slower pace than the general manufacturing sector and have yet to return to pre-COVID levels. We continue to closely monitor inflationary changes across our product portfolio and operations. Thus far, we have successfully mirrored recent supplier product cost increases to our customers in a timely manner, which has led to stable margins across all business segments through the first quarter. More specifically, corrugated sales were strong in the first quarter due to both demand and multi-quarter industry-wide price increases. Weather-related impacts in February led to manufacturing production constraints, particularly with our suppliers of resin-based products. Fortunately, our national supply chain network ensured that the weather-related impact to our customers was minimal. Because we are a national distribution company with no customer accounting for even 5% of our revenues, weather did not have a material impact to our financial results in the first quarter. I would now like to shift to a brief update on our efforts around sustainability. We view sustainability as more than a value add or a premium solution. It is a core responsibility, one that contributes to the well-being of our business, our people, and our planet. Our team has been committed to helping our company and customers reduce environmental impacts for over a decade. We recently published an updated corporate social responsibility report, which can be found in the corporate responsibility and investor relations sections of our website. We are proud of our progress and eager to do even more. Now, Steve will provide additional details on our financial performance for the first quarter. Steve?