Quad/Graphics(US:QUAD)2021-11-03 19:53Financial Data and Key Metrics Changes - The company reported net sales of $706 million in Q3 2021, a 4% increase from 2020, with organic net sales up 7% excluding divested businesses [32] - Year-to-date net sales reached $2.1 billion, up 1% from the same period in 2020, with organic growth of 2% [33] - Adjusted EBITDA for Q3 was $64 million, a 6% increase, with an adjusted EBITDA margin of 9.1%, up from 8.9% in 2020 [35] - Year-to-date adjusted EBITDA was $190 million, a 3% decrease from 2020, with a margin of 9.0% compared to 9.4% in 2020 [37] - Free cash flow was negative $20 million for the first nine months of 2021, a decrease of $76 million compared to the same period in 2020 [38] Business Line Data and Key Metrics Changes - Print product sales grew by 10% in Q3, while Agency Solutions sales increased by 8% [32] - Year-to-date logistics business saw a 13% growth, and Agency Solutions sales increased by 9% [33] - Direct mail experienced single-digit growth year-to-date, while catalog saw a 14% increase in the number of books and a 19% increase in pages per book [55] Market Data and Key Metrics Changes - The company faced significant supply chain challenges, particularly with paper shortages impacting sales growth [58] - Labor market conditions remained tight, necessitating increased investments in wages and hiring incentives [65] Company Strategy and Development Direction - The company is focused on debt reduction, having reduced net debt by approximately 15% or $140 million over the past 12 months [12] - A price increase for select materials and a manufacturing surcharge were introduced to offset rising costs [10] - The company continues to invest in data and analytics to enhance marketing solutions for clients [14] Management's Comments on Operating Environment and Future Outlook - Management expects supply chain issues and inflationary pressures to persist, but remains proactive in adapting to changes [10] - The company reaffirmed its 2021 outlook, anticipating organic growth of 1% to 3% and adjusted EBITDA guidance of $240 million to $260 million [44] - Management emphasized the importance of maintaining a sustainable operating environment before reinstating dividends [69] Other Important Information - The company extended its $1 billion bank debt agreement to November 2026, enhancing financial flexibility [31] - A comprehensive ESG report is set to be released, detailing the company's sustainability initiatives [24] Q&A Session Summary Question: What trends are you seeing from marketers as it relates to the holiday season? - Management noted a chaotic year with visibility challenges due to pandemic impacts and supply chain issues, with retail inserts continuing to decline [51][52] - Catalogs have seen reinvestment and growth, outperforming industry trends [55] Question: Can you elaborate on supply chain challenges and labor shortages? - The biggest challenges have been paper shortages and a tight labor market, with significant inflation across cost inputs [57] - The company is addressing these issues as if they are not transitory, ensuring operational readiness [58] Question: What are your latest thoughts on reinstituting a dividend? - Management expressed a desire to return to dividends but emphasized the need for a stable operating environment and reduced debt leverage [69][70]