Q3 2023 Quad/Graphics Inc Earnings Call

Good morning, and welcome our clubs third quarter conference call.

For today's call all participants will be in listen only mode.

She assistance at any time, please signal conference specialist by pressing the star key followed by zero.

Slide presentation accompanies today's webcast and participants are invited to follow along advancing the slides themselves to access the webcast follow instructions posted in the earnings release.

You can access the slide presentation on the raise that sure section of quads website under the events and presentations link.

After today's presentation there'll be opportunity to ask questions ask a question you May Press Star then one to withdraw your question Press Star then two.

Please note that this event is being recorded.

I'll like to turn the conference over to Katie Crab Shack large investor relation manager Katy. Please go ahead.

Thank you operator, and good morning, everyone with me today are Joel QUADRA, Archie Brown, Chairman, President and Chief Executive Officer, and Tony stand, yet quite Chief Financial Officer.

Joel will lead today's call with a business update and Tony will follow with a summary of quiet third quarter and year to date 2023 of the financial results followed by Q&A.

I would like to remind everyone that that's caused being webcast and forward looking statements are subject to safe Harbor provisions as outlined in our quarterly news release and today's slide presentation on slide two quad financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-GAAP.

Actual measures, including adjusted EBITDA adjusted EBITDA margin adjusted diluted earnings per share free cash flow net debt and debt leverage ratio. We have included in the slide presentation. Reconciliations of these non-GAAP financial measures to GAAP financial measures. Finally, a replay of the call and the slide presentation will be available.

On the investors section of Quad Dot com shortly after our call concludes today I will now hand over the call to Joel.

Thank you Katie and good morning, everyone beginning on slide three in the third quarter. We were pleased to deliver consistent year over your EBITDA margins and $27 million of free cash flow. Despite the challenging revenue environment.

Net sales declined compared to the same period in 2022, primarily due to lower print paper logistics sales as well as the 2020 to divestiture of our Argentinian print operations.

We continue to pay down debt strengthen our balance sheet and return capital to shareholders through additional share repurchases.

We are on track to achieve full year 2023 guidance for adjusted EBITDA free cash flow and debt leverage and by the end of the year, we will have reduced debt by over $560 million or 55% since January one 2020.

We are lowering our full year 2023, net sales guidance due to industry wide print volume reductions in response to ongoing economic uncertainty continued postal rate increases and the impact of rising interest rates on specific clients.

At Quad, we have seen the greatest impact of categories, most sensitive to rising interest rates, such as financial services direct mail, including credit cards insurance and loans.

Tony will share more detail on our year to date net sales breakdown and financial guidance shortly.

We are confident in our ability to manage for these near term volume challenges along with long term expected organic declines in certain product lines like retail inserts due to our long standing disciplined approach to managing all aspects of our business, including treating all costs as variable and aligning our cost structure to revenue opportunities.

At the same time, we continue to build momentum as a marketing experience company.

And quad is unparalleled.

We see them seamlessly bring together all of these central resources.

Brands and marketers needed for frictionless scalable marketing execution as shown on slide four.

As we continue to scale, our integrated marketing offering print remains a core component of our business and the largest portion of our revenue mix. We will continue to innovate and invest in parents at other channels to ensure we can fulfill our clients' ever expanding needs.

Turning to slide five I.

I'm pleased to share that we continue to evolve our strategic leadership at the governance level with the recent appointment of Melanie Hewitt two quads board of directors as an independent member.

Now let me he has a deep background in brand development management and transformation and understands firsthand the challenges facing our clients.

Currently she is president of brand management, and innovation and a member of the Executive Committee at Newell brands, a leading consumer products company.

Prior to joining Newell in February of this year, She was executive Vice President and Chief Congress Officer at Serta Simmons bedding there.

We delivered three quarters of market share growth transformed our sales organization and built a $1 5 billion innovation pipeline.

Now let me. He has also worked in consumer products marketing at Conagra Foods, Unilever, Kimberly Clark and Kraft times, we look forward to leveraging <unk> expertise on our board as we expand and strengthen our offerings and drive revenue growth.

I'm also pleased to share that Joshua low Cogs has joined our company as president of Quad media and will further energize our efforts to create a differentiated cohesive and market, leading audience targeting and media engagement offering.

Joshua joins us from you on worldwide part of agency holding company IPG, where he was global Chief Media Officer responsible for Omnichannel media strategy predictive analytics performance marketing content innovation and AD Tech.

He played a pivotal role in developing involving you on worldwide wide go to market strategy.

Previously Joshua worked at media Best where he led the Walmart digital team. He also served as head of commercial products and platforms at Newscorp, where he led the launch of the Companys customer data and analytics strategy.

Joshua is well known in the industry and publishes and speaks regularly on topics relating to a media intervention and transformation.

We will tap his considerable experience and expertise to elevate relationships with clients and fast track growth in areas that represent significant opportunity for us.

On slide six we show <unk> key growth drivers deliver.

Delivering integrated service excellence.

The accelerating market penetration in key verticals.

And evolving our culture as an Amex company.

Integrated service excellence is at the core of who we are and what we do.

Quad connects every facet of the marketing journey efficiently and at scale, providing innovative data driven offerings from strategy and consulting to data and analytics technology solutions media services, creative and content solutions and managed services.

As a result, we help companies reduce the complexity and the experience from working with multiple agency partners and vendors and increase their marketing process efficiency and maximize the effectiveness of their marketing efforts.

Turning to slide seven we show how we are growing our presence with well known brands in our target verticals of consumer packaged goods finance and insurance health direct to consumer retail and publisher. These.

These reputable well known brands include Amazon, Walmart Com favour American Express and Abbott Labs and are all admired for excellence and the loyalty thing is built with consumers.

We take great pride in knowing they trust us to deliver on their marketing vision.

Yes.

To accelerate market penetration, we are focused on growing awareness that better marketing is built on quad.

We're gaining visibility with new brands, including Blue chip companies through our participation in industry events. For example, we recently participated in the 2023 Forbes CMO summit in Miami and advertising week in New York City, where we conducted with brands and marketers about their marketing challenges and how quad can solve those challenges.

On Quad eight we show an example of how we're growing momentum with a premier brand title list the golf industry, leading performance equipment brand recently engaged us for our brand design and product launch expertise, we will be updating the packaging for its flagship probie, one golf ball. The most played ball and the PGA tour and the <unk>.

One golf ball brand in the World.

This opportunity represents significant positive exposure for quad as the title. This company produces more than 350 million golf balls every year.

Tiger list selected quad for several reasons, including our exceptional approach to brand design in which we focus on making brands a favorite through measured potential consumer action and reaction and connections are comprehensive creative services and expertise which include brand positioning designing strategy brand identity systems.

Depth of design packaging and retail environments.

Our ability to leverage our own in house consumer testing for brand package performance fire packaging in 2014.

And our proven product launch expertise, which consists of our strategy creative and connections planning to build in place attention grabbing campaigns that bolster awareness and drive sales.

We are excited to be under a multi year contract is titled this trusted partner for this high profile brand building work, which will be in market. In early 2025. We successfully competed against respected sports brand agencies with deep category experience for this win.

We look forward to expanding our partnership with title this parent company a cushion up for other top rated equipment for golfers.

On slide nine we show an example of how we're helping another driving consumer packaged goods company achieve brand growth.

C J the number one producer of authentic Mexican style cheeses meets sauces and other products in the U S is experiencing rapid growth as demand for Hispanic foods SOR.

Because CK chose to partner with quad due to our reputation for delivering breakthrough creative and brand growth in CPG categories.

Company came to us via word of mouth recommended by another client for whom we are providing brand strategy creative and campaign development and more.

It's because he case, new creative agency of record, we're focused on building awareness and loyalty among consumers seeking authentic ingredients and high quality products in this category and.

In addition to brand strategy and creative and campaign development. We are also leveraging our data driven connections planning expertise and support because ck's aggressive business goals to reach new market segments.

Our work with Sika is just underway and will be in the market in 2024.

Because CK is an impressive brand new to our CPG portfolio and one with tremendous revenue growth opportunity already we're in discussions with this client for more opportunities to refresh its brand and packaging and provide printing services.

Turning to slide 10.

For more than 50 years, our commitment to creating a better way has inspired create utility and how we address environmental social and governance matters for Quad ESG is a business imperative as it underpins our growth strategy. We have made progress on our ESG commitments published in our inaugural 2021 report these.

Include maintaining our focus on diversity equity and inclusion prioritizing sustainable resource consumption and investing in employee safety health and wellness.

To learn more about our commitments and how we continue to create positive sustainable change at our company and the communities, where we live and work. Please access our newly released 2023 ESG update on Quad Dot com or scan the flow code on slide 10 of today's presentation.

Before I turn the call over to Tony I would like to thank our employees during our seasonally busiest time of the year for their continued hard work and daily commitment to providing the highest levels of service for our clients as.

As we move forward with our growth strategy I have great confidence in our team and continue to be enthusiastic about our growth opportunities as a marketing experienced company with that I will now turn the call over to Tony for the financial review.

Thanks, Joel and good morning, everyone on Slide 11, we show our diverse revenue mix net sales were $700 million in the third quarter of 2023% to 16% decline compared to the third quarter of 2022 on a year to date basis net sales were $2 $2 billion in 2023, a declining seven.

Per cent compared to 2022.

Net sales were impacted by industry wide print volume reductions in response to continued economic uncertainty postal rate increases and the impact of rising interest rates on specific clients. For example on a year to date basis direct mail is temporarily decrease from 14% of our total revenues to 11%.

We expect direct mail growth in future years.

Despite these headwinds we have seen year to date increases in our net sales mix from segment share gains in magazines and catalogs.

In Mexico is due to increased education work volumes exported to the United States and in our in store signage product offering continuing a multiyear trend of high revenue growth for our in store team.

Slide 12 provides a snapshot of our third quarter 2023 financial results.

Adjusted EBITDA was $57 million in the third quarter of 2023 as compared to $69 million in the third quarter of 2022, and adjusted EBITDA margin declined slightly to eight 2% in the third quarter of 2023 compared to eight 3% in the third quarter of 2022.

The decline was due to lower sales and lower pension income, partially offset by benefits from improved.

Factoring productivity and savings from cost reduction initiatives.

On a year to date basis, adjusted EBITDA was $168 million in 2023 compared to $173 million in 2022, while adjusted EBITDA margin improved from seven 4% to seven 7%.

Adjusted diluted earnings per share was <unk> 11 cents in the third quarter of 2023 as compared to 32 cents in the third quarter of 2022 on.

On a year to date basis adjusted diluted earnings per share was 28 2023 compared to <unk> 49 in 2022.

The decline was primarily due to lower adjusted net earnings and is partially offset by the positive impact from share repurchases. We are active in the market yet again this quarter repurchasing our class a shares.

Meaning in the second quarter of 2022, we have repurchased five 5 million shares or approximately 10% of our outstanding shares for a total purchase price of $20 million.

Free cash flow was negative $18 million in the first nine months of 2023, a $61 million improvement compared to the first nine months of 2022 and included $27 million of free cash flow generation in the third quarter of 2023, we.

We have now generated positive free cash flow during both the second and third quarters of 2023, which are typically negative free cash flow quarters due to seasonality.

The increase in free cash flow was primarily attributable to lower inventory needs as supply chain challenges in Peru, and we experienced strong receivables collections.

This improvement was achieved despite a $10 million increase in capital expenditures as we continue to invest in our automation initiatives. As a reminder, the company historically generates the majority of its free cash flow in the fourth quarter of the year.

Slide 13 includes a summary of our debt capital structure.

We are pleased to have reduced debt by $132 million over the last 12 months with strong free cash flow. However.

However, due to the working capital build during our peak production season on a year to date basis net debt increased by $39 million to $584 million at September 30 of 2023, and the debt leverage ratio increased 20 basis points to 236 times at the end of the third quarter 2023.

The increase in net debt and the debt leverage ratio was primarily due to the negative $18 million of free cash flow.

$10 million of Quad share buybacks in the first nine months of 2023.

We expect debt to decrease to under $470 million in the fourth quarter with seasonal reduction of inventory and collections of receivables and we remain on track to achieve the low end of our long term targeted debt leverage range of two to two five times by the end of this year.

As of September 30, our blended interest rate was seven 1%, which is up from five 7% a year ago to mitigate the impact of a rising interest rate environment. We entered into two interest rate collar agreements effective February one 2023.

Including interest rate swaps, our debt is 50% floating and 50% fixed.

Our liquidity includes up to $331 million of availability under our revolving credit agreement as well as $11 million of cash on hand.

Our nearest significant debt maturity is $88 million occurring in January 2020 for which we will fund with a revolving credit agreement and cash on hand.

The majority of the debt maturities are not due until November 2026.

We have updated our 2023 guidance as shown on slide 14.

Annual net sales are now expected to decline, 7% to 9% compared to previous guidance of annual net sales remained flat to declining 5%.

Although we plan for organic print decline in our original guidance print volumes fell further than our projections due to continued economic uncertainty and higher postage rates. In addition to the impact on specific clients of rising interest rates as we previously discussed.

Despite the net sales decline, our flexible model and focus on disciplined cost management and labor productivity is enabling us to increase our expected adjusted EBITDA margin by 50 basis points at the midpoint of our updated guidance ranges that profitability performance combined with reduced working capital requirements from improved supply chain.

<unk> is driving strong free cash flow and we reaffirm the midpoint of our free cash flow guidance to be $70 million in 2023, which includes at least $70 million of investment in capital expenditures to further automate our unparalleled integrated marketing platform.

Operator: Good morning, and welcome to Quad's third quarter conference call. More today's call, all participants will be in listen only mode. She may assistance at any time, placing more conference specialists by pressing the star key followed by zero. Slide presentation companies today's webcast and participants are invited to follow along advancing the slides themselves. Taxes as the webcast follow instructions posted in the earnings release. Thirdly, you can access the slide presentation on the survey section of Quad's website under the events and presentations link. After today's presentation or may operate, do indeed ask questions. Ask a question may press star than one. To withdraw your question, press star than two. Please note that this event is being recorded.

And finally, we continue to expect that leverage to be approximately two times by the end of 2023.

Slide 15 includes our key investment highlights as we continue to build on our momentum as a marketing experience company.

We believe that quad is a compelling long term investment and we remain focused on growing net sales and driving higher profitability through continued diversification of our revenue in clients with our expanded offerings. There is a significant addressable revenue opportunity with both our large base of existing clients as well as new clients.

As part of a multiyear debt reduction strategy by the end of this year, we expect to reduce debt by over $560 million from over $1 billion on January one 2020, representing the low end of our current long term target leverage range of two point all times we.

Katie Krebsbach: I'd like to turn to conference over the Katie Krebschite, Quad's investor election manager. Katie, please go ahead. Thank you, operator, and good morning, everyone. With me today are Joel Quadrochi, Quad's chairman, president, and chief executive officer, and Tony Staniak, Quad's chief financial officer. Joel will lead today's call with the business update, and Tony will follow with a summary of Quad's third quarter and dear to date, 2023 financial results followed by Q&A.

We intend to further reduce debt in 2024 with our strong free cash flow generation augmented with proceeds from selling non core assets.

And with the significant debt reduction we will further strengthen what we believe is an industry leading financial foundation that provides us the flexibility to strategically deploy capital, including scaling the growing parts of our business and further automating our print offerings for greater production efficiencies, while returning capital to shareholders.

Katie Krebsbach: I would like to remind everyone that this call is being webcast, and four looking statements are subject to safe harbor provisions as outlined in our quarterly news release. And in today's slide presentation on slide two, Quad's financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, free cash flow, net debt, and debt leverage ratio. We have included in the slide presentation recommendations of these non-GAAP financial measures to GAAP financial measures.

With that I'd like to turn the call back to our operator for questions.

Okay.

Operator, Thank you I'll begin the question and answer session I ask a question you May Press Star then one on your Touchtone phone using.

Using a speakerphone please pick up your handset before pressing the keys.

Your question. Please press Star then two.

This time, we'll pause momentarily to assemble the roster.

Katie Krebsbach: Finally, a replay of the call and the slide presentation will be available on the investor section of Quad.com shortly after our call concludes today.

First question is.

From Kevin Steinke.

We've done research Associates. Please go ahead.

Joel Quadrochi: I will now hand over the call to Joel. Thank you, Katie, and good morning, everyone. Beginning on slide three, in the third quarter, we are pleased to deliver consistent year-over-year EBITDA margins, and $27 million of free cash flow, despite the challenging revenue environment. Net sales declined compared to the same period in 2022, primarily due to lower print paper logistics sales, as well as the 2022 divestiture of our Argentinian print operations. We continue to pay down debt, strengthen our balance sheet, and return capital to shareholders through additional share repurchases.

Good morning, Kevin.

Good morning, good morning, everyone.

Yeah.

To start off with something that.

You know really really stood out to me here.

Here is the flexibility of your business model as you noted.

The mid point of the.

Uh huh.

Sales guidance as I calculated it for 2023 came down by about 6%, but you were able to maintain the midpoint of your adjusted EBITDA guidance. So.

Joel Quadrochi: We are on track to achieve full year 2023 guidance for adjusted EBITDA, free cash flow, and debt leverage. And by the end of the year, we will have reduced debt by over $560 million, or 55% since January 1, 2020.

When you talked about cost management and.

Labor productivity and things like that but maybe just talk a little bit about what you're able to do to adjust so quickly just to maintain the profitability outlook.

Despite the lower sales outlook and maybe any actions that you took in the quarter.

Joel Quadrochi: We are lowering our full year 2023 net sales guidance due to industry-wide print volume reductions and response to ongoing economic uncertainty, continued postal rate increases, and the impact of rising interest rates on specific clients. At Quad, we've seen the greatest impact to categories most sensitive to rising interest rates, such as financial services direct mail, including credit cards, insurance, and loans. We are confident in our ability to manage for these near term print volume challenges along with long-term expected organic declines in certain product lines like retail inserts due to our long-standing discipline approach to managing all aspects of our business, including treating all costs as variable and aligning our cost structure to revenue opportunities.

The cost side.

Yeah, Kevin I'll take this is Joe I'll take a stab at that until he can fill in.

But yes, I mean, I like to say that quad has to be very ambidextrous.

We come from a disrupted industry on the print side and at the same time, we are building a case that could actually be a disruptor on the on the marketing side and so being blessed with being in the printing industry, where we've had to be very good at adjusting to things that get thrown at us and so we do try and keep it to have a mentality that all costs are very.

Well.

And so over time as we've seen some of the expected decline in some of the areas like retail inserts publications, we've been able to scale down on the platform, but unfortunately closing plants to adjust work, but then realizing the value of those plants by selling the real estate to help pay down debt.

Joel Quadrochi: At the same time, we continue to build momentum as a marketing experience company and Quad is unparalleled in that we seamlessly bring together all these central resources, brands and marketers needed for frictionless, scalable marketing execution as shown on slide 4. As we continue to scale our integrated marketing offering, print remains a core component of our business and the largest portion of our revenue mix. We will continue to innovate and invest in prints and other channels to ensure we can fulfill our clients ever-expanding working needs.

Furthermore, I'd say one of the big significant drivers to was the great work done by the people on the floor because Tony mentioned productivity is quite a bit up this year and when you think about where the world was only a year or so ago with really tough environment for getting labor.

We ended up putting a holistic approach on that it really accelerating a lot of our training.

And so as we saw softness come into this market. This year due to a lot of what's going on in the economy.

The core part of the full time equivalents were much more trained up as a group than before and so that's another way that we've done it and you'll look I guess where are we.

Joel Quadrochi: Starting to slide 5, I'm pleased to share that we continue to evolve our strategic leadership at the governance level with a recent appointment of Melanie Hewitt to Quad's Board of Directors as its independent member. Melanie has a deep background in brand development, management and transformation and understands firsthand the challenges facing our clients. Currently, she is president of brand management and innovation and a member of the executive committee at Newell Brands, a leading consumer products company.

Lean Enterprise group and we always have been and we're able to adjust very quickly and I think that we always have been focused on being able to weather storms and take advantage of those which is why we moved so quickly and pulling cost out I mean, when the pandemic hit we got out of panic mode within weeks when that happened that.

Joel Quadrochi: Prior to joining Newell in February of this year, she was executive vice president and chief commerce officer at service Simmons betting. There she delivered three quarters of marketered growth, transformed the sales organization and built the $1.5 billion innovation pipeline. Melanie has also worked in consumer products marketing at Con-Abra Foods, Unilever, Kimberly Clark and Kraft Times. We look forward to leveraging Melanie's expertise on our board as we expand its strength in our offerings and drive revenue growth.

Spring so that we could continue running the business and that was by making really tough decisions very quick and squeezing down and so it's kind of built in our DNA.

Partially because of where we come from but also because I think we've got a very disciplined group when it comes to making sure we adjust for these times Tony in mind missing.

One thing I would just add when we think about EBITDA, Kevin as we've been focused on our pricing and making sure that we get the value that we provide to customers. So you're seeing a <unk>.

Joel Quadrochi: I'm also pleased to share that Joshua Lowcock has joined our company as president of Quad Media and will further energize our efforts to create a differentiated, cohesive and market-leading audience targeting and media engagement offering. Joshua joins us from UN Worldwide, part of agency holding company IPG, where he was global chief media officer, responsible for omnichannel media, strategy, predictive analytics, performance marketing, content, innovation, and ad tech. He played a pivotal role in developing and evolving UN world-wide life's go-to market strategy.

Benefit come through the bottom line coming from the inflationary times, we've been able to focus on some some price.

Increases well and also I think that as we provide multiple services and products to people, we're getting paid for the value of that because anytime we can do more than one thing for a client we can actually help them pull cost out through workflow analysis and really the more they kind of exposed to us the more we can kind of look at content and figure out.

There are a lot of the waste is and people are willing to pay for that because there are savings is much greater than the value that they're paying us.

Joel Quadrochi: Previously, Joshua worked at MediaVest, where he led the Walmart digital team. He also served as head of commercial products and platforms at News Corp, where he led the launch of the company's customer data and analytic strategy. Joshua is well-known in the industry and publishes and speaks regularly on topics relating to media, innovation, and transformation. We will tap his considerable experience and expertise to elevate relationships with clients in fast-track growth in areas that represent significant opportunity for us.

Okay. That's that's great commentary thank you.

So when I think about.

The change in the the sales outlook.

Maybe just walk us through you know what what's changed there was it.

Primarily as a direct mail piece that you highlighted or is it more broad based than that and maybe as you have in previous calls maybe just touch on the.

Joel Quadrochi: On slide six, we show Quad's key growth drivers, delivering integrated service excellence, accelerating market penetration in key verticals, and evolving our culture as an MX company. Inc. Integrated Service Excellence is at the core of who we are and what we do. Quad connects every facet of the marketing journey efficiently and at scale, providing innovative data-driven offerings from strategy and consulting to data and analytics technology solutions, media services, creative and content solutions, and managed services. As a result, we help companies reduce the complexity they experience from working with multiple agency partners and vendors and increase their marketing process efficiency and maximize the effectiveness of their marketing efforts.

The sales trends youre seeing across the various product categories.

Sure and I'd say that there is an overarching.

Sitting on top which is really economic softness we started seeing that from our clients as we got towards the summer as people are looking at fall.

Even though retail numbers came out recently.

When adjusted for inflation. So if you look at absolute units sort of in CPG world in retail, it's actually down so that's an overriding factor, but we try and break out with large scale targeted print and integrated solutions.

We do that to kind of show the expected decline is and that's in large scale print and so that declined as expected I would say.

Joel Quadrochi: Turning to slide 7, we show how we are growing our presence with well-known brands in our target verticals of consumer-packed goods, finance and insurance, health, direct to consumer, retail and publishing. These reputable well-known brands include Amazon, Walmart, ConAver, America Express, and Addit Labs and are all admired for the excellence in the loyalty they have built with consumers. We take great pride in knowing they trust us to deliver on their marketing vision.

Retail inserts, maybe a little bit faster pull back just because of the economic side, but we expect that to keep declining and targeted print. This is the area that you mentioned, where catalogs direct mail packaging in store these tend to really benefit from our.

Nx strategy marketing experience company, because when we're solving some of the brand problem with the upstream they tend to want to then also engage us for engaging their consumers through these different channels and the tough one here has been direct mail and it's important to point that out because we don't look at this as one that's going to keep declining we really.

Joel Quadrochi: To accelerate market penetration, we are focused on growing awareness that better marketing is built on Quad. We are gaining visibility with new brands including blue chip companies through our participation in industry events. For example, we recently participated in the 2023 Forbes CMO Summit Miami and advertising in New York City where we connected with brand and marketers about their marketing challenges and how Quad can sell those challenges.

Focus on the highly personalized data driven direct mail, but we were down double digit percent sales in that this year and we saw that starting to materialize at the end of last year. When interest rates went crazy so things like personal lending we are deep in financial we have one big one big old.

Joel Quadrochi: On Quad 8, we show an example of how we are growing momentum with a premier brand. Titleist, the both industry's leading performance equipment brand recently engaged us for our brand design and product launch expertise. We will be updating the packaging for its flagship Probe 1 Golf Ball, the most played ball in the PGA tour and the number one golf ball brand in the world. This opportunity represents significant positive exposure for Quad as the titleist company produces more than 350 million golf balls every year.

Fit that was exiting consumer banking, which was a significant player.

So I see that the blip here in sales, we certainly have some economic overhang, but direct mail. That's all reversible as we continue to sell the value add that direct mail brings.

And in in store was up 12%.

Because that is one of our fast growing places in packaging hung in there relatively flat.

The one other place that is hitting us on on revenue would be what the post office is doing and when I look at targeted print catalogues is the one that's most affected by this.

Joel Quadrochi: Titleist selected Quad for several reasons, including our exceptional approach to brand design and which we focus on making brands a favorite through measure potential, consumer reaction and reaction and connections, our comprehensive creative services and expertise, which include brand positioning, design strategy, brand identity systems, adaptive design, packaging, and retail environments. Our ability to leverage our own in-house consumer testing for brand package performance, fire packaging and site team and our proven product launch expertise, which consists of our strategy, creative and connections planning to build and place attention grabbing campaigns that bolster awareness and drag sales.

We have a post office, who thinks that they can fix their problem by just increasing prices as opposed to pulling cost out.

And they've accelerated that a bit this year with our customers getting to increases in one year and so in catalogs. They get affected quickly because they can pull back on their prospecting of catalogs and so we saw some pullback there, but I'd say that.

There is an overall economic pullback that we've seen in marketing tends to see it first.

And the direct mail pieces, the one that I would point to for people to understand that we see that as a manageable.

Joel Quadrochi: We are excited to be under a multi-year contract as Titleist trusted partner for this high-profile brand building work, which will be in market in early 2025. We successfully competed against respected sports brand agencies with deep category experience for this win. We look forward to expanding our partnership with Titleist parent company of Kushnet for other top-rated equipment for golfers.

Category, that's not about.

Continuing to decline.

Okay. Thank you that's helpful.

And so when I look at.

The updated sales guidance.

You know you're still.

It would still imply a nice season.

Joel Quadrochi: On slide nine, we show an example of how we're helping another thriving consumer package with its company achieved brand growth. Cache, the number one producer of authentic Mexican style cheeses, meats, solsos, and other products in the U.S, is experiencing rapid growth as demand for Hispanic foods The CK chose to partner with Quad due to our reputation for delivering breakthrough creative and grand growth in CPG categories. The company came to us by award a mouth recommended by another client for whom we are providing grant strategy, creative and campaign development and more.

Seasonable seasonal ramp in the fourth quarter in sales so.

I guess are you expecting or seeing a fairly normal.

Sequential ramp up related to holidays.

But just I guess off of a lower base.

Yeah, I mean at this point in the year a lot of that stuff that our customers are pretty locked and loaded there is some ebb and flow in it.

Specifically maybe between months, sometimes but December is one that kind of sort of materializes later in the game, but we feel very good about where things are at for the rest of the year.

Joel Quadrochi: As CCK's new creative agency of record, we are focused on building awareness and loyalty among consumers seeking authentic ingredients and high quality products in this category. In addition to brand strategy and creative and campaign development, we are also leveraging our data-driven connections, planning expertise and support of CCK's aggressive business goals to reach new market segments. Our work with CCK is just underway and will be in the market in 2024. CCK is an impressive brand new to our CPG portfolio and one with tremendous revenue growth opportunities. Already, we are in discussions with this client for more opportunities to refresh its brand and packaging and provide printing services.

Okay.

You know any thoughts.

And I know you haven't given guidance for next year, but beyond.

At the end of this year.

I think I guess, it's dependent on the economy, but.

How do you think volumes might trend in the industry as opposed to interest rates will continue to be a headwind in the financial services area, but.

You know or do you think there was some pent up.

Marketing spend that certainly come back or.

It's just going to continue to follow.

What the consumer is doing or just I mean any thoughts on.

Joel Quadrochi: Turning to slide 10, for more than 50 years, our commitment to creating a better way has inspired creativity in how we address environmental, social and governance matters. For Quad, ESG is a business imperative as it underpins our growth strategy. We have made progress on our ESG commitments, published in our inaugural 2021 report. These include maintaining our focus on diversity equity inclusion, prioritizing sustainable resource consumption, and investing in employee safety, health and wellness.

From your industry experience, how you might expect volumes to the.

To trend or react in this environment.

Well I think if he could be as glimpses your economic crystal ball that I could answer it better, but yes, I think it has a lot to do with how this plays out I mean, even like in the financial.

Community you have that shock of interest rates, but ultimately they still got a market to their customers right. So they freeze up really quickly, but ultimately you have to get back to doing it. So.

Joel Quadrochi: To learn more about our commitments and how we continue to create positive, sustainable change in our company and at the communities where we live and work, please access our newly released 2023 ESG update. Quad.com or scan the flow code on slide 10 of today's presentation.

Probably some relative return to being out there in terms of always hard to predict at this point just given the economic headwinds, but were not kind of waiting around like hope isn't that operating strategy even in direct mail.

Have a lot of strategy of how we're going to grow that in the future and unfortunately, one of the best.

Joel Quadrochi: Before I turn the call over to Tony, I would like to thank our employees during our seasonally busiest time of the year for their continued hard work and daily commitment to providing the highest levels of service for our clients. As we move forward with our growth strategy, I have great confidence in our team and continue to be enthusiastic about our growth opportunities as a marketing experience company.

We just closed a plant which helps with the.

The volume shortfall now, but strategically allows us to.

Really shore up and create more opportunity for the type of direct mail, we sell in the future. So I think we always look at all of these categories when theres a softness like that.

Anthony Staniak: With that, I will now turn the call over to Tony for the financial review. Thanks, Joel. Good morning, everyone. On slide 11, we show our diverse revenue mix. Net sales were $700 million in the third quarter of 2023, a 16% decline compared to the third quarter of 2022. On a year-to-date basis, net sales were $2.2 billion in 2023, a decline of 7% compared to 2022. Our net sales were impacted by industry-wide, print volume reductions in response to continued economic uncertainty, poll accelerate increases, and the impact of rising interest rates on specific clients.

We don't wait to make sure that we can manage through it but on the sales side, we've got a ramp up of a lot of stuff that's happening on the marketing experienced the category and Thats why we keep trying to show. These case studies because these are not.

Blend brands I mean title is a major major brand here and we feel really good about those Williams because a lot of those things. We show you our wins that are yes, it's maybe agency of record, but ultimately we believe will create a lot more downstream revenue and is normally proven out that way and remember.

The time, you get down into targeted print from integrated solutions youre dealing with much bigger invoices. So we've been very good at bringing in a lot of really good talent I talked about Josh Lowcock who's helping on the media side and that and the.

Anthony Staniak: For example, on a year-to-date basis, direct mail has temporarily decreased from 14% of our total revenues to 11%. We expect direct mail growth in future years. Despite these headlines, we have seen year-to-date increases in our net sales mix from segment year gains in magazines and catalogs. In Mexico, due to increased education work of volumes exported to the United States, and in our in-store signage product offering, continuing a multi-year trend of high-revenue growth for our in-store.

Data science and analytics, but we're going to gear up very quickly to go after a lot of new brands, we never knew quad. So despite what our normal customers are seeing economically in 2024, we expect to keep feeding it with new seats and Kevin.

Now participated in a few of our calls you know that during uncertain economic times, we're going to continue to focus on strength of the balance sheet debt reduction we talked about going further decreases on debt reduction getting below two point of leverage as we look out into 2024, so yes.

Anthony Staniak: I-12 provides a snapshot of our third quarter 2023 financial results. Adjusted EBITO was $57 million in the third quarter of 2023 as compared to $69 million in the third quarter of 2022. Adjusted EBITO margin declined slightly to 8.2% in the third quarter of 2023 compared to 8.3% in the third quarter of 2023, partially offset by benefits from improved manufacturing productivity and savings from cost reduction initiatives. On a year-to-date basis, adjusted EBITO was $168 million in 2023 compared to $173 million in 2022, while adjusted EBITO margin improved from 7.4% to 7.7%.

We'll continue to invest in growth as John has said, we're going to continue to support shareholders. We can do all of that because of the strong free cash flow that we provided.

Yeah, absolutely that's that's a great point Tony.

So you did mention there and I wanted to I was planning to ask you about this but the.

You highlighted a couple of nice new wins.

In your slide deck.

But maybe just talk about the overall pipeline.

Your agency solutions and how.

The messaging around your unique end to end integrated marketing solutions is.

Anthony Staniak: Adjusted deluded earnings per share was 11 cents in the third quarter of 2023 as compared to $32 cents in the third quarter of 2022. On a year-to-date basis, adjusted deluded earnings per share was $20 cents in 2023 compared to $49 cents in 2022. The decline was primarily due to lower adjusted net earnings and as partially offset by the positive impact from share repurchases. We are active in the market yet again in this quarter repurchasing our class A shares.

Being received in the in the current economic environment.

Yes, it's actually being received well I think that it goes to the ecosystem that's out there for brands and how they market.

Is it fairly broken like we always say, it's not very integrated and in one of my answers before I mentioned the more our client allows us to look at their process their content how they go to market. The more we can help integrate those processes not just in how they interact with us and producing it versus a big holding company.

Anthony Staniak: Beginning in the second quarter of 2022, we have repurchased $5.5 million shares for approximately 10% of our outstanding shares for a total purchase price of $20 million. ReCashflow was negative $18 million in the first nine months of 2023, a $61 million improvement compared to the first nine months of 2022, and included $27 million of pre-Cashflow generation in the third quarter of 2023. We have now generated positive pre-Cashflow during both the second and third quarters of 2023, which are typically negative pre-Cashflow quarters due to seasonality.

But also within their own four walls, we're very good at helping them squeeze the cost out that that can happen because of of cost take out. So it's been received very well and I would say that I always believe that never waste a soft environment because that's when a lot of our marketers are under more pressure, it's under more pressure to try and.

Find audience.

Convert them to customers, but also under more pressure to find cost take out and so they tend to want to listen a lot quicker in a downturn, but our marketing team has done an outstanding job over the past two years of making us known to a whole group of clients, who never newest before.

Anthony Staniak: The increase in pre-Cashflow was primarily attributable to lower inventory needs as supply chain challenges improved and we experienced strong receivables collections. This improvement was achieved despite a $10 million increase in capital expenditures as we continue to invest in our automation initiatives.

And so we feel very good about the growth of the pipeline and.

The types of services, we're being asked to do and the fact that the integration part.

Anthony Staniak: As a reminder, the company historically generates the majority of its pre-Cashflow in the fourth quarter of the year.

Is playing out and so again, sometimes it takes a little while for someone to start with being an AOR, but then.

Anthony Staniak: By 13, it includes a summary of our debt capital structure. We are pleased to have reduced debt by $132 million over the last 12 months with strong pre-Cashflow. However, due to the working capital builds during our peak production season, on a year-to-date basis net debt increased by $39 million to $584 million at September 30, 2023, and the debt leverage ratio increased 20 basis points to 2.36 times at the end of the third quarter of 2023.

Cascade down into us doing install or packaging for them, but when they do that that's when you start to see the revenue pop from each of the accounts so like I said.

We're very ambidextrous Oh, yes.

Well disappointed that on the print side, we have to manage for some pullback, but I'm super excited on the marketing experience side, because it's really it's really ringing.

True to what people are looking for.

Anthony Staniak: The increase in net debt and the debt leverage ratio was primarily due to the negative $18 million of pre-Cashflow and $10 million of quad share buybacks in the first nine months of 2023. We expect that to decrease to under $479 million in the fourth quarter with seasonal reduction of inventory and collections of receivables. And we remain on track to achieve the low end of our long-term targeted debt leverage of 2 to 2.5 times by the end of this here.

Okay, great. Thank you I'll just ask maybe a couple more here.

You know what when you talk about the increases in postage rates and how your clients are.

Reacted to that you specifically called out the catalog piece.

Do you think that's something they they eventually adjust to ore.

You you work with them to help them out on that side I know you already do that in terms of trying to lower their.

Anthony Staniak: As of September 30th, our blended interest rate was 7.1%, which is bought from 5.7% a year ago. To mitigate the impact of the rising interest rate environment, we entered in the two interest rate collar agreements, effective February 1st, 2023, including interest rate slops, our debt is 50% floating and 50% fixed. Our liquidity includes up to $331 million of availability under our revolving credit agreement as well as $11 million of cash on hand.

Posted your expenses, but how do you think that situation ultimately.

Plays out are resolved.

Yeah, I think it's twofold when you get a rapid increase in your biggest cost you get a quick reaction until you can adjust for it. So historically when you see the post office to increases that are outsized, you'll see a quick pullback and then ultimately though people still have to market right. So they adjust they get smarter about who their mailing too.

Anthony Staniak: Our nearest significant debt maturity is $88 million occurring in January 2024, which we will fund with our revolving credit agreement and cash on hand. The majority of the debt maturities are not due until November 20th, 20th, 26.

They really start to focus more on what's your response per piece and how can we make that better that all lens to understanding your data better of audience and who you are going to and what you are sending to them and then which.

Anthony Staniak: We have updated our 2023 guidance as shown on slide 14. Annual net sales are now expected to decline 79%, compared to previous guidance of annual net sales remaining flat to declining 5%. Although we plan for organic print decline in our original guidance, print volumes fell further than our projections due to continued economic uncertainty and higher postage rates in addition to the impact on specific clients of rising interest rates as we previously discussed.

Plays into all the things, we're doing about helping people with analytically figuring out what's the best use of their dollar.

But on the operational side, we do a lot of stuff to offset the post office over a lot of time, we significantly offset current postal costs through all the co mailing that we do and we're really excited because we were rolling out a whole new product right now that might not.

Mike will help our clients.

Significantly offset more of this postal increase thats going on.

Anthony Staniak: Despite the net sales decline, our flexible model and focus on discipline cost management and labor productivity is enabling us to increase our expected adjusted EBITDA margin by 50 basis points at the midpoint of our updated guidance ranges. That profitability performance combined with reduced working capital requirements from improved supply chain is driving strong free cash flow and we reaffirm the midpoint of our free cash flow guidance to be $70 million in 2023, which includes at least $70 million of investment in capital expenditures to further automate our unparalleled integrated marketing platform. And finally, we continue to expect that leverage to be approximately 2.0 times by the end of 2023.

Takes time to ramp up because some people need to test into it but we're rolling it out with publications right now and we expect to.

As fast as possible to get the catalogers task.

Task as well so we it really pushes us to be innovative because I think the key point as people have to remember we do most of the post office's work.

We do all the sortation, we combined the customers and we drop it to the almost to the closest male post office pure house, and that's where the post office picks up and so that's where we really push process innovation to help them all set at so yeah, it's a little bit of both.

Of your question, yes, the majority of cost that someone pays the prim is postal right. So this is a big items, all the solutions and Joel talked about and the scale that we bring.

Anthony Staniak: Slide 15 includes our key investment highlights as we continue to build on momentum as a marketing experience company. We believe that Quad is a compelling long-term investment and we remain focused on growing net sales and driving higher profitability to continue diversification of our revenue and clients. With our expanded offerings, there is a significant addressable revenue opportunity with both our large base of existing clients as well as new clients.

That gives us an advantage in helping businesses be the most efficient they can be in getting things delivered to them and and destinations.

Alright, yeah understood.

So just.

Two more here.

Anthony Staniak: As part of a multi-year debt reduction strategy, by the end of this year, we expect to reduce debt by over $560 million from over $1 billion on January 1, 2020, representing the low end of our current long-term target debt leverage range of 2.0 times. We intend to further reduce debt in 2024 with our strong free cash flow generation augmented with proceeds from selling non-core assets. And with significant debt reduction, we will further strengthen what we believe is an industry-leading financial foundation that provides us the flexibility to strategically deploy capital, including scaling the growing parts of our business and further automating our print offerings for greater production efficiencies while returning capital to shareholders.

What anything to highlight in your international markets and what's going on there.

<unk> saw.

The decline year over year.

But is that seeing the same kind of headwinds as you're experiencing.

Experiencing in the U S I guess.

Quite frankly, where we see the softness would be in Europe, because Europe is obviously big challenges now and ahead of it but if you look at Mexico.

That has been tremendously successful for us and we.

We're continuing to actually grow that organically and so we've got into some new product lines. When we signed up a lot of new customers, we're adding a new very large press in Mexico.

It has to be up and running by February or our clients will be upset.

Operator: With that, I would like to turn the call back to our operator for questions. Operator, thank you.

It's on schedule.

But that's actually a great story, so Mexico is a very good highlight offset by some of the softness was in Europe.

Operator: I will begin the question answers. As a question, may press star the one in your touchtone phone. Using a speaker phone, please pick up your handset before pressing the keys.

Okay. Thank you and then lastly, it's Tony.

As we think about.

Operator: To withdraw your question, please press stars in two. This time will pause momentarily to assemble the roster.

The restructuring and impairment.

Kevin Steinke: First question is from Kevin Steinke, parent and research associates. Please go ahead.

Charge line, they were up a bit sequentially in the third quarter from the second quarter.

Have you taken additional actions that would lead to a bit.

Joel Quadrochi: Good morning, Kevin. Good morning, good morning everyone. I wanted to start off with something that really stood out to me. Okay, here is the flexibility of your business model as you noted. The midpoint of the sales guidance as I calculated for 2023 came down by about 6%, but you were able to maintain the midpoint of your adjusted EBITDA guidance. So you talked about cost management and labor productivity and things like that, but maybe just talk a little bit about what you're able to do to adjust so quickly to maintain the profitability outlook, you know, despite the lower sales outlook and maybe any actions that you took in the quarter on the cost side.

Higher charges than you had been previously expecting here.

Or just how should we think about that trending in the fourth quarter.

Sure. So if I start with the third quarter on that.

<unk> of the expense that you saw come through that line was impairment related about about half of that impairment related noncash in nature. So third quarter was actually from a cash perspective, the lowest restructuring quarter, thus far.

As we look out in the fourth quarter, we are anticipating some restructuring expenses, we continue to address capacity needs in our production platform that will lead to cost there.

Okay. Thanks for taking all the questions.

Appreciate it.

Thank you Kevin.

Operator, thank you.

This concludes our question and answer session.

To turn the conference back over to Mr. Joel.

Joel Quadrochi: Yeah, Kevin, I'll take this as you all take a stab at that and then Tony can fill in. But yeah, I mean, I like to say that quad has to be very ambidextrous. You know, we come from a disrupted industry on the print side and at the same time we're building a case that could actually be a disruptor on the marketing side. And so, you know, being blessed with being in the printing industry, we've had to be very good at adjusting to things that get thrown at us.

For closing remarks.

Thank you operator, and thank you everyone for joining today's call I want to close by reiterating my confidence in our strategy and our role as a marketing experience company.

Our integrated marketing offering continues to be a competitive differentiator and a key driver behind our companys overall momentum going forward at the same time, we remain focused on proactively managing all aspects of our business for long term strength and stability and shareholder value creation with that thank you again and have a good day, we look forward to speaking with you again next.

Joel Quadrochi: And so we do try and keep up, have a mentality that all costs are variable. And so over time, as we've seen, some of the expected decline in some of the areas like retail inserts or publications, you know, we've been able to scale down the platform by we've unfortunately closing plants to adjust for. But then realizing the value of those plants by selling the real estate to help pay down debt. Furthermore, one of the big significant drivers too was the great work done by the people on the floor because Tony mentioned productivity is quite a bit up this year.

Quarter.

Conference is now concluded.

And in today's presentation, you may now disconnect.

Joel Quadrochi: And when you think about where the world was only a year or so ago with really tough environment for getting labor. We ended up putting a holistic approach on that and really accelerating a lot of our training. And so as we saw softness come into this market this year due to a lot of what's going on in the economy. The core part of the full-time equivalence were much more trained up as a group than before.

Joel Quadrochi: And so that's another way that we've done it. And you'll look, I guess we're a lean enterprise group and we always have them and we're able to adjust very quickly. And I think that we always have been focused on being able to weather storms and take advantage of those, which is why we move so quickly in polly cost out. I mean, when the pandemic hit, we got out of panic mode within weeks when that happened that spring so that we could continue running the business.

Joel Quadrochi: And that was by making really tough decisions very quick and squeezing down. And so, you know, it's kind of built in our DNA maybe partially because of where we come from, but also because I think we've got a very disciplined group when it comes to making sure we adjust for these times. Tell me in mind that this... One thing I would just add when we think about either Doug Kevin is we've been focused on our pricing and making sure that we get the value that we provide to customers.

Joel Quadrochi: So you're seeing a benefit come through the bottom line coming from the inflationary times. We've been able to focus on some price increases. Well, and also I think that as we provide multiple services or products to people, we're getting paid for the value of that because any time we can do more than one thing for a client, we can actually help them pull costs out through workflow analysis and really the more they kind of exposed to us, the more we can kind of look at content and figure out where a lot of the waste is and people are willing to pay for that because their savings is much greater than the value that they're paying us.

Joel Quadrochi: Okay, that's great commentary, thank you. So when I think about the change in the sales outlook, maybe just walk us through what's changed there. Was it primarily the direct mail piece that you highlighted or is it more broad based than that? Maybe as you have in previous calls, maybe just touch on the sales trends you're seeing across the various product categories. Sure, and I'd say that there's an overarching thing on top, which is really economic softness.

Joel Quadrochi: We started seeing that from our clients as we got towards the summer as people are looking at fall, even though retail numbers came out recently, those weren't adjusted for inflation. So if you look at absolute units sort of in CPG world and retail, it's actually down. So that's an overriding factor. But we try and break out with large scale print, targeted print and integrated solutions. We do that to kind of show where the expected decline is and that's in large scale print.

Joel Quadrochi: And so that declined as expected. I'd say retail inserts may be a little bit faster pulled back just because of the economic side, but we expect that to keep declining. In targeted print, this is the area that you mentioned where catalogs, direct mail, packaging in store. These tend to really benefit from our MX strategy of the marketing experience company, because when we're solving some of the brand problems upstream, they tend to want to then also engage us for engaging their consumers through these different channels.

Joel Quadrochi: And the tough one here has been direct mail. And it's important to point that out because we don't look at this as one that's going to keep declining. We really focus on a highly personalized data driven direct mail. But we were down double digit percent sales in that this year. And we saw that starting to materialize at the end of last year, when interest rates went crazy. So things like personal lending, we were deep in financial.

Joel Quadrochi: We had one big outfit that was exiting consumer banking, which was a significant player. And so I see that the blip here in sales, we certainly have some, the economic overhang, but direct mail, that's all reversible as we continue to sell the value add that direct mail brains. You know, in store was a 12 percent, you know, because that is one of our fast growing places and packaging hung in there relatively flat.

Joel Quadrochi: The one other place that is hitting us on revenue would be what the post office is doing. And when I look at targeted print catalogs is the one that's most affected by this. We have a post office who thinks that they can fix their problem by just increasing prices as opposed to polling cost out. And they've accelerated that a bit this year with our customers getting two increases in one year. And so in catalogs that they get affected quickly because they can pull back on their prospecting of catalogs.

Joel Quadrochi: And so we saw some pull back there, but I'd say that, you know, there is an overall economic pull back that we've seen and marketing tends to see it first, and the direct mail piece is the one that I would point to for people to understand that we see that as a manageable category that's not about or continues to find.

Joel Quadrochi: Okay, thank you, that's helpful. And so when I look at the updated sales guidance, you know, you're still would still imply a nice seasonal ramp in the fourth quarter and sales. So I guess are you expecting or seeing a fairly normal sequential ramp up related to holidays, but just I guess off of a lower base. Yeah, I mean at this point in the year, a lot of that stuff, you know, our customers are pretty locked and loaded.

Joel Quadrochi: There's some evidence low in it is specifically maybe between months, sometimes, but December is one that kind of, you know, sort of materializes later in the game, but we feel very good about where things are at for the rest of the year. Okay, you know, any thoughts, you know, you haven't given guidance for next year, but just beyond, you know, the end of this year, you think, I guess it's dependent on the economy, but how do you think volumes might trend in the industry, I suppose interest rate will continue to be a headwind in the financial services area.

Joel Quadrochi: But, you know, you think there's some pent up marketing spend that starts to come back or, you know, it's just going to continue to follow like what the consumer is doing or just, I mean, any thoughts on, you know, from your industry experience, how you might expect volumes to to trend or react in this environment. Well, I think if you give me as glimpse of your economic crystal ball that, you know, I could answer it better, but yeah, I think it has a lot to do with how this plays out.

Joel Quadrochi: I mean, even like in the financial, you know, community, you have that shock of interest rates, but ultimately they still got a market to their customers. Right, so they freeze up really quickly, but ultimately you have to get back to doing it. So, you know, I'd see, you know, probably some relative return to, you know, being out there. And in terms of volumes hard to predict at this point, just given the economic headwinds, but we're not kind of weighing around like hope is in the operating strategy, even in direct mail.

Joel Quadrochi: You know, we've had a lot of strategy of how we're going to grow that in the future. And unfortunately, one of the men that we just closed the plan, which helps with the, you know, with the volume of shortfall now, but strategically allows us to really shore up and create more opportunity for the type of direct mail we sell in the future. So, I think, you know, we always look at all these categories when there's a softness like that.

Joel Quadrochi: And we don't wait to make sure that we can manage through it. But on the sales side, we've got a ramp up of a lot of stuff that's happening on the marketing experience category. And that's why we keep trying to show these case studies, because these are not, you know, bland brands. I mean, Titleistism is a major, major brand here. And we feel really good about those wins, because a lot of those things we show you are wins that are yes, it's maybe agency of record, but ultimately we believe will create a lot more downstream revenue and is normally proven out that way.

Joel Quadrochi: And remember anytime you get down into targeted print from integrated solutions, you're doing much with much bigger invoices. So, we've been very good at bringing in a lot of really good talent. I talked about Josh Lowcock who's helping on the media side and the data side to analytics. But we're going to gear up very quickly to go after a lot of new brands who never knew quad. So despite what our normal customers are seeing economically in 2024, we expect to keep feeding it with new seeds.

Joel Quadrochi: And Kevin, you've now participated in a few of our calls. You know that during on certain economic times, we're going to continue to focus on strength of the balance sheet, debt reduction. We talked about going further, decreases on debt reduction, getting below 2.0 leverage as we look out in 2024. So yeah, we'll continue to invest in growth as Joel has said. We're going to continue to support shareholders. We can do all that because of the strong free cash flow that we... Yeah, absolutely.

Joel Quadrochi: That's a great point, Tony. And so you did mention there. I was planning to ask about this, but the highlighted a couple of nice new wins in your slide deck, but maybe just talk about the overall pipeline for your agency solutions and how the messaging around your unique and integrated marketing solutions is being received in the current and economic environment. Yeah, it's actually being received well. I think that it goes to the ecosystem that's out there for brands and how they market.

Joel Quadrochi: You know, it's fairly broken. You know, like we always say, it's not very integrated. And in one of my answers before I mentioned the more a client allows us to look at their process, their content, how they go to market, the more we can help integrate those processes, not just in how they would interact with us and producing it versus a big holding company. But also within their own four walls, we're very good at helping them squeeze the cost out that can happen because of cost takeout.

Joel Quadrochi: So it's been received very well. And I'd say that I always believe that never waste a soft environment, because that's when a lot of our marketers are under more pressure. It's under more pressure to try and find audience, convert them to customers, but also under more pressure to find cost takeout. And so they tend to want to listen a lot quicker in a downturn, but our marketing team has done an outstanding job over the past two years of making us known to a whole group of clients who never knew us before.

Joel Quadrochi: And so we feel very good about the growth of the pipeline and the types of services we're being asked to do and the fact that the integration part is playing out. And so again, sometimes it takes a little while for someone to start with being an AOR, but then cascade down into us doing install or packaging for them. But when they do that, that's when you start to see the revenue pop from each of the accounts.

Joel Quadrochi: So like I said, we're very ambidextrous. So yeah, I'm like, we'll disappointed that on the print side. We have to manage for some pullback, but I'm super excited on the marketing experience side, because it's really it's really bringing true to what people are looking for.

Joel Quadrochi: Okay, great. Thank you. I just asked maybe a couple more here, but you know, when you talk about the increases in postage rates and how your clients have reacted to that, specifically called out the catalog piece. Do you think that's something they eventually adjust to or you work with them to help them out on that side? I know he already do that in terms of trying to lower their postage expenses, but how do you think that situation ultimately plays out or resolves?

Joel Quadrochi: Yeah, I think it's twofold. When you get a rapid increase in your biggest cost, you know, you get a quick reaction until you can adjust for it. So historically, when you see the post office do increases that are outsized, you see a quick pullback. And then ultimately, those people still have to market, right? So they adjust, they get smarter about who they're mailing to. They really start to focus more on what's your response per piece and how can we make that better that all lens to understanding your data better of audience and who you're going to and what what you're sending to them.

Joel Quadrochi: And then which plays into all the things we're doing about helping people with analytically figuring out what's the best use of their dollar. But on the operational side, you know, we do a lot of stuff to offset the post office over a lot of time. You know, we significantly offset current postal costs through all the coal mailing that we do. And we're really excited because we're rolling out a whole new product right now that might, you know, not might will help our clients significantly offset more of this postal increase that's going on.

Joel Quadrochi: It takes time to ramp up because some people need to test into it, but we're rolling it out with publications right now. And we expect to as fast as possible to get the catalogers on task as well. So we really push us to be innovative because I think the key point is people have to remember, we do most of the post office's work. Yeah, we do all this rotation. We combine the customers and we drop it to the almost to the closest mail box post office to your house.

Joel Quadrochi: And that's where the post office picks up. And so that's where we really push process innovation to help them offset it. So, yeah, it's a little bit of both in terms of your question. Yeah, the majority of costs that someone pays the print is postal. Right. So this is a big items, all the solutions that Joel talked about and the scale that we bring that gives us an advantage in helping businesses be the most efficient. They can be in getting things delivered to and destination.

Joel Quadrochi: All right, yeah, understood. So just two more here. Anything to highlight in your international markets and what's going on there, you know, saw the client year over year, but does that seem the same kind of headwinds is your experiencing in the US, I guess? Well, quite frankly, where we see this office would be in Europe because Europe has, you know, obviously, big challenges now and ahead of it. But if you look at Mexico, that is been tremendously successful for us.

Joel Quadrochi: And we're continuing to actually grow that organically. And so we've got into some new product lines. We've signed up a lot of new customers. We're adding a new, very large press in Mexico has to be up and running by February or our clients will be upset, but it's on schedule. But that's actually a great story. So Mexico is a very good highlight off set by some of the softness in Europe.

Anthony Staniak: Okay, thank you. And then lastly, Tony, as we think about the restructuring and impairment charge line, they were up a bit quenchedly in the third quarter from the second quarter. Have you taken additional actions that would lead to a bit higher charges than you had been previously expecting here? Or just how should we think about that trending in the fourth quarter? Sure. So if I start with the third quarter on that, you know, a portion of the expense that you saw come through that line was impairment related about half of it, you know, impairment related non-cash in nature.

Anthony Staniak: So third quarter was actually from a cash perspective, the lowest restructuring quarter thus far. As we look out in the fourth quarter, we are anticipating some restructuring expenses. We continue to address, you know, capacity needs in our production platform that will lead to it to cost there.

Kevin Steinke: Okay, thanks for taking all the questions. Appreciate it. No, thank you, Kevin. Operator. Thank you.

Operator: This concludes our question in an answer session.

Joel Quadrochi: I'd like to turn to conference back over to Mr. Chol, Dracking Farmer.

Joel Quadrochi: I'll close your remarks. Thank you, Operator. And thank you everyone for joining today's call. I want to close by reordering my confidence in our strategy and our role as a marketing experience company. Our integrated marketing offering continues to be a competitive differentiator and a key driver behind our company's overall momentum going forward. At the same time, we remain focused on proactively managing all aspects of our business for long-term strength and stability and share and hold their value creation.

Joel Quadrochi: With that, thank you again and have a good day. We look forward to speaking with you again next quarter.

Operator: Conference is now concluded. Thank you for attending today's presentation.

Operator: You may now.