Veritiv Corporation

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

Thank you, Angie, and good morning, everyone. I am joined on the call today by our CEO, Sal Abate, and our CFO, Steve Smith. 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 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 the risks and other factors described in our 2021 Form 10-K and the company's other publicly available reports and exhibits filed with the SEC. Today's call and presentation slides will contain non-GAAP financial measures. The reconciliation of these non-GAAP measures to comparable 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'll turn the call over to Sal.

Thanks, Scott, and good morning, everyone. 2021 marked another successful year of relentless execution against our multi-year strategy. This morning, we are reporting record net income and diluted earnings per share for both the fourth quarter and the full year. The commercial, operational, and back office changes we made, and we will continue to make, significantly improve the fundamentals of our business and lay the foundation for future growth. Over the last two years, we have consistently driven earnings and margin improvements enterprise-wide. The fourth quarter of 2021 marks our eighth consecutive quarter of year-over-year improvement in adjusted EBITDA margin, despite a constrained and challenging supply chain environment for all of our stakeholders. We achieved comprehensive improvements across the business, which drove year-over-year adjusted EBITDA margin expansion across every reporting segment for the full year 2021. This morning, I'll share highlights from our most recent quarter and full year results, and Steve will then provide a more detailed financial update, and then we'll conclude our prepared remarks by sharing our outlook for full year 2022. In the fourth quarter of 2021, we reported net income of $57 million, about an 80% increase compared to prior year. Our record earnings performance was supplemented by the completion of our share repurchase program, which drove diluted earnings per share of $3.67 in the fourth quarter, or nearly double what we had reported in the prior year. Our adjusted EBITDA for the quarter was $116 million, or about a 90% increase compared to prior year. We also reported an adjusted EBITDA margin of 6.2% in the fourth quarter of 2021 compared to 3.8% in the fourth quarter of 2020, a more than two percentage point improvement. Supplier-driven price increases across many of our product lines continue to drive revenue growth in the fourth quarter. I will speak more of these and other inflationary factors shortly. Adjusted for day count, volume also increased slightly compared to the prior year. As a result, sales in the fourth quarter reached $1.9 billion, or roughly a 14% increase compared to prior year. For full year 2021, we reported record net income of $145 million and diluted earnings per share of $9.01. more than a four-fold increase compared to prior year our sustainable and stepwise improvements in net income and diluted earnings per share are the result of fundamental changes to the business and diligent efforts to improve the quality of our earnings our full year 2021 adjusted ebitda was a record 343 million dollars or 83 percent above prior year Over the last three years, adjusted EBITDA margins have grown from 2% in 2019 to 3% in 2020 and now to 5% in 2021. Product price inflation by way of supplier-driven cost increases continue to be the most significant source of inflation within our business. We work closely with our suppliers and customers to ensure product cost increases were passed through efficiently and with proper notice. Our cost and price discipline has ensured that recent improvements in adjusted EBITDA margins were not unfavorably impacted by the historic number of price changes we and our customers are experiencing. We also continue to see other drivers of inflation consistent with the broader market. Increases in wages and other related supply chain costs continued to impact distribution expenses. However, operational improvements throughout our business offset a portion of these expenses. Recall that Veritiv manages its own extensive delivery fleet and coast-to-coast warehouse network, which helped to mitigate many of the supply chain disruptions that impacted our customers across North America. While supply chain challenges continue to impact product availability from our suppliers, we invested in strategic inventory positions where possible to minimize the effect of extended lead times to our customers. For packaging, our fourth quarter performance built on the progress made in prior quarters. We reported over $1 billion in sales in the fourth quarter and showed further adjusted EBITDA dollar and margin expansion above prior period highs. This marks our 11th consecutive quarter of year-over-year improvement in packaging adjusted EBITDA margin. We saw strong revenue growth across all major packaging product categories and customer sectors in the fourth quarter. The frequency and the magnitude of supplier-driven price increases accelerated in the fourth quarter across our broad portfolio of packaging products and was a meaningful driver of the 15% increase in revenue compared to prior year. After adjusting for price, volume growth from our customers was more modest in the fourth quarter, but we believe better than the broader packaging market. Volume growth was strongest within the wholesale retail logistics and manufacturing customer sectors. In 2021, we further established our position as the leading provider of packaging distribution services, products, and solutions in North America. As a trusted leader, we supply more than half of the Fortune 500, as well as a broad range of smaller companies with a comprehensive suite of packaging products and services. Our packaging adjusted EBITDA for full year 2021 was $394 million, which equates to 70% of total adjusted EBITDA for our reported segments. we will continue to make investments in above-market packaging growth and shift our segment portfolio toward these higher-growth, higher-margin businesses. I'll now turn it over to Steve to provide more details on our performance.