RRD Reports Net Sales and EBITDA Gains in Third Quarter 2022 Financial Results
R.R. Donnelley & Sons Company (“RRD” or the “Company”) reported financial results for the third quarter of 2022.
Q3 Key messages
- GAAP net sales, including the impact of foreign exchange, increased $113 million or 8.9%; Non-GAAP organic net sales, excluding the impact of foreign exchange, increased 10.8% primarily from higher client demand for most of the Company’s products and services
- GAAP net income from continuing operations was up $26 million versus the prior year period
- Non-GAAP adjusted EBITDA of $142 million increased 18% over the third quarter of 2021; related margin increased 80 bps to 10.3%
- Non-GAAP adjusted net income of $64 million was up $21 million versus the prior year period
- Cash used in operating activities during the nine months ended September 30, 2022 was $221 million compared to $29 million in the prior year period; current year results reflect working capital investments due to increased volume and inflation in addition to $80 million of merger related payments
- Gross leverage ratio of 3.2x improved 0.5x from September 30, 2021; net leverage ratio of 2.7x improved 0.4x from the same period last year
- Trailing 12 months adjusted EBITDA improved from $410 million in 2021 to $510 million in 2022, which represents an increase of 24%
Financial highlights
The following table provides an overview of RRD’s financial performance:
Click to enlarge.
Net sales in the third quarter were $1.38 billion, up $113.0 million or 8.9% from the third quarter of 2021. The majority of the increase relates to higher client demand for most of the Company’s products and services, and price increases to offset inflationary cost increases. The Company experienced significant growth in Commercial Print, Packaging, Labels and Direct Marketing products. Organic net sales increased 10.8%, excluding a negative impact of $24.8 million due to changes in foreign exchange rates.
Income from operations was $100.1 million in the third quarter of 2022 compared to $74.5 million in the third quarter of 2021. During the third quarter of 2022, net restructuring, impairment and other charges of $4.7 million increased $0.7 million from the prior year period.
Net income from continuing operations was $54.9 million in the third quarter of 2022 compared to $29.0 million reported in the third quarter of 2021. The increase in net income from continuing operations mostly reflects increased income from operations. The 2022 effective tax rate of 27.1% decreased from 42.6% in the prior year period primarily due to higher earnings relative to the non-deductible tax adjustments.
Non-GAAP adjusted EBITDA of $142.4 million increased $21.8 million from the prior year period. The increase was primarily due to the impact of higher net sales, ongoing cost control initiatives and favorable foreign exchange, partially offset by continued inflation.
Non-GAAP adjusted net income from continuing operations of $64.1 million in the third quarter of 2022 increased from $43.1 million in the third quarter of 2021 primarily due to higher adjusted income from operations, partially offset by higher income taxes on improved pre-tax income.
Other highlights and information
Cash used in operating activities during the nine months ended September 30, 2022 was $221.1 million compared to $29.0 million in the prior year period. The increase in cash used is primarily driven by working capital investments due to increased volume, including initiatives to accumulate inventory to better ensure availability for clients, inflation and $79.7 million of merger related payments.
Capital expenditures during the nine months ended September 30, 2022 were $49.1 million versus $48.6 million in the prior year period.
As of September 30, 2022, cash on hand was $237.5 million, down $42.7 million from December 31, 2021. Total debt outstanding at the end of the quarter was $1.62 billion, up $155.7 million from the prior year end. Availability under the credit facility was $159.6 million at September 30, 2022. Total liquidity, including cash on hand, was $397.1 million.
During the third quarter of 2022, the Company elected to change its inventory valuation method for inventories previously accounted for using the last-in, first-out method to the first-in, first-out method. The change in inventory valuation method has been retrospectively applied to all periods presented herein. The cumulative effect of this change in accounting principle on periods prior to those presented is reflected as an adjustment to the opening balance of retained earnings as of January 1, 2021.
Distribution of future earnings releases
As part of its transition to a privately owned company, the Company plans to publicly issue a press release related to its quarterly earnings and post the release to its website for each of the quarters in 2022. Beginning with the first quarter results of 2023, the Company expects to no longer issue its results publicly. Instead creditors, investors, clients, suppliers and other approved parties may submit a request for access to financial information on the investor relations page on the Company’s website.
The preceding press release was provided by a company unaffiliated with Printing Impressions. The views expressed within do not directly reflect the thoughts or opinions of the staff of Printing Impressions.
