Quad Reports First Quarter 2019 Results

Quad/Graphics, Inc. (“Quad” or the “Company”) reported results for its first quarter ending March 31, 2019.

First Quarter Highlights

• Increased net sales by 3.8% to $1 billion primarily driven by the acquisition of Periscope partially offset by a 0.6% organic sales decline, and realized a net loss of $23 million, or $0.45 diluted loss per share.
• Achieved Non-GAAP Adjusted EBITDA of $70 million, within the Company’s anticipated Q1 2019 guidance range of $65 million to $75 million, and Non-GAAP Adjusted diluted loss per share of $0.15.
• Expect a mid-2019 close on the all-stock acquisition of LSC Communications (“LSC”), and both Quad and LSC have received the necessary shareholder approvals.
• Reaffirms full-year 2019 guidance.
• Declares quarterly dividend of $0.30 per share.

Joel Quadracci

“Our first quarter results were in-line with our expectations and reflect our consistent execution against strategic priorities,” said Joel Quadracci, Quad Chairman, President & Chief Executive Officer. “These priorities include making long-term strategic investments that further accelerate our Quad 3.0 transformation, such as our recent acquisition of Periscope, a leading independent creative agency that further enhances our integrated marketing solutions platform. We also continue to prepare for and work toward completing the acquisition of LSC Communications and expect the all-stock transaction to close in mid-2019. We believe this combination will strengthen our print platform to fuel our Quad 3.0 transformation and create further stability and value for our clients and shareholders. Our Quad 3.0 strategy is working as evidenced in new or expanded work with clients and is a significant driver behind our best quarterly organic sales performance since 2014.”

Summary Results

Net sales increased 3.8% during the first quarter ended March 31, 2019, to $1 billion, primarily from the impact of the Periscope acquisition. Organic sales declined 0.6% after excluding a 4.4% acquisition sales impact. The organic results reflect ongoing print industry volume and pricing pressures partially offset by an increase in paper sales.

Net loss attributable to Quad common shareholders during the first quarter of 2019 was $22.5 million, or $0.45 loss per share, as compared to a loss of $3.5 million, or $0.07 per share, in 2018. Excluding the loss on debt extinguishment in 2019, an employee stock ownership plan contribution in 2018 and restructuring costs, Non-GAAP Adjusted Diluted Loss Per Share for the first quarter of 2019 was $0.15 per share compared to earnings of $0.58 per share in the first quarter 2018. First quarter 2019 Non-GAAP Adjusted EBITDA came in as expected at $70 million compared to $110 million in the first quarter of 2018, and Adjusted EBITDA Margin was 7.0% compared to 11.4% in 2018. The Adjusted EBITDA variance to prior-year primarily reflects $22 million in non-recurring benefits in 2018 that did not repeat at the same level in 2019, an $8 million impact from strategic investments made to increase hourly production employees’ wages and the impact from the organic print sales decline of 0.6%, partially offset by the earnings impact from the growth in Quad’s integrated services revenues.

Net cash used in operating activities was $58.6 million for the first quarter of 2019, compared to net cash provided by operating activities of $2.2 million in the first quarter of 2018, and Free Cash Flow of negative $101 million as compared to negative $22 million in the first quarter of 2018. These variances were primarily due to lower net earnings, increased capital expenditures on long-term investments in automation and productivity improvements in the manufacturing platform, and an expected decrease in cash provided from working capital. As a reminder, the Company generates the majority of its Free Cash Flow in the fourth quarter of the year.

“We remain on track for delivering our 2019 financial guidance,” said Dave Honan, Quad Executive Vice President & Chief Financial Officer. “We continue to expect a decrease in Adjusted EBITDA in the front half of the year with growth in the back half of the year due to increasing synergies and revenues related to our Quad 3.0 integrated services offering as well as sustainable cost reductions and productivity improvements from the additional investments in our employees and automation.”

Quad’s next quarterly dividend of $0.30 per share will be payable on June 7, 2019, to shareholders of record as of May 20, 2019.

Source: Quad

The preceding press release was provided by a company unaffiliated with Printing Impressions. The views expressed within do not directly express the thoughts opinions of Printing Impressions