Q4 2023 Quad/Graphics Inc Earnings Call

Operator: Good morning, and welcome to Quad's fourth quarter and full year 2023 conference call. During today's call, all participants will be in a listen-only mode.

Good morning, and welcome to Quad fourth quarter and full year 2023 conference call.

During today's call all participants will be in a listen only mode should you need assistance at any time. Please signal a conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance at any time, please signal a conference specialist by pressing the star key followed by zero. A slide presentation accompanies today's webcast, and participants are invited to follow along, advancing the slides themselves. To access the webcast, follow the instructions posted in the earnings release. Alternately, you can access the slide presentation in the investor section of Quad's website under the events and presentations link. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press the star, then 1.

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

Ultimately if you can access the slide presentation on the investors section of Quad website under the events and presentations link after today's presentation there'll be an opportunity to ask questions to ask a question. Please press Star then one.

Operator: To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the call over to Katie Krebsbach, Quad's Investor Relations Manager. Katie, please go ahead.

To withdraw your question. Please press Star then two.

Please note. This event is being recorded I would now like to turn the call over to Katy.

Bach Quads Investor Relations manager Katie. Please go ahead.

Katie Krebsbach: Thank you, operator, and good morning, everyone. With me today are Joel Quadracchi, Quad's Chairman, President, and Chief Executive Officer, and Tony Staniak, Quad's Chief Financial Officer. Joel will lead today's call with a business update, and Tony will follow with a summary of Quad's fourth quarter and full year 2023 financial results, followed by Q&A. I would like to remind everyone that this call is being webcast and forward-looking statements are subject to safe harbor provisions as outlined in our quarterly news release and in today's slide presentation on slide 2. 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 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 investor section of quad.com shortly after our call concludes today. I will now hand over the call to Joel. Thank you, Katie, and good morning, everyone.

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

Well Elyse will lead today's call with a business update and Tony will follow with a summary of quad fourth quarter and full year 2023 financial results followed by Q&A.

I'd like to remind everyone that this call is being webcast and forward 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 financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains.

non-GAAP financial measures, including adjusted EBITDA adjusted EBITA 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 please.

Patients 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.

Joel Quadracchi: Beginning on slide three, I am pleased to report we delivered solid 2023 results, meeting our guidance across all metrics. Our results included adjusted EBITDA above the midpoint of our guidance range and adjusted EBITDA margin consistent with 2022 despite an 8% decline in annual net sales caused by a significant postal rate increase that was well above the rate of inflation, ongoing economic uncertainty, especially in early 2023, and the impact of elevated interest rates on the financial services sector, leading to reduced direct mail budgets. I will share more detail on our Net Sales Breakdown shortly. We ended 2023 with strong free cash flow that was near the high end of our guidance range and used our cash generation to further strengthen our balance sheet, reducing our net debt leverage to two times our lowest leverage level since 2017. Since January 1, 2020, we have paid off $564 million in debt, a 55% reduction over 4 years through 2023. We also continue to return capital to shareholders through share repurchases. We will continue to be opportunistic in terms of our future share repurchases, and, as we announced last week, we have reinstated a quarterly dividend of five cents per share.

Beginning on slide three I am pleased to report we delivered solid 2023 results meeting our guidance across all metrics. Our results included adjusted EBITDA above the midpoint of our guidance range and adjusted EBITDA margin consistent with 2022, despite an 8% decline in annual net sales.

Created by a significant postal rate increase that was well above the rate of inflation.

Ongoing economic uncertainty, especially in early 2023.

And the impact of elevated interest rates on the financial services sector, leading to reduced direct mail budgets.

I will sure share more detail on our net sales breakdown shortly.

We ended 2023 with strong free cash flow that was near the high end up our guidance range and used our cash generation to further strengthen our balance sheet, reducing our net debt leverage to two times, our lowest leverage level since 2017 since.

Since January one 2020, we paid off $564 million and debt of 55% reduction over four years.

Through 2023, we also continued to return capital to shareholders through share repurchases.

We will continue to be opportunistic in terms of our future share repurchases and as we announced last week, we have reinstated a quarterly dividend of <unk> <unk> per share.

Joel Quadracchi: We remain confident in our ability to address business impacts, including long-term expected organic declines in large-scale print, due to our well-established and disciplined approach to managing all aspects of our business. This includes treating all costs as a variable, aligning our cost structure to revenue opportunities, and optimizing our print manufacturing platform by consolidating work into plants where we can achieve the greatest manufacturing efficiencies and subsequently selling assets no longer required for business operations. At the same time, we continue to aggressively push forward with our growth strategy as a marketing, experience, or MX company. The three pillars of our growth strategy are outlined on slide four and include delivering integrated service excellence, which we achieve by focusing on solving problems, removing pain points and sources of friction from the marketing process, and providing transparency on clients' marketing expenditures.

We remain confident in our ability to address business impacts, including long term expected or that organic declines in large scale print due to our well established and disciplined approach to managing all aspects of our business. This.

This includes treating all costs as variable a.

Aligning our cost structure to revenue opportunities and optimizing our manufacturing platform by consolidating work into plants, where we can achieve the greatest manufacturing efficiencies and subsequently selling assets no longer required for business operations.

At the same time, we continue to aggressively aggressively push forward on our growth strategy as a marketing experience or Amex company.

The three pillars of our growth strategy are outlined on slide four and include delivering integrated service excellence, which we achieved by focusing on solving problems removing pain points and sources of friction from the marketing process and providing transparency on clients' marketing expenditures.

Joel Quadracchi: Accelerating market penetration in key verticals and product lines with the greatest expansion opportunities and continuing to leverage our unique company culture, which is based on honesty and transparency, to grow as an Amex company. On slide 5, we show how we continue to make progress in our revenue diversification strategy into higher value, higher margin offers. Between 2018 and 2023, integrated solutions and targeted print increased as a portion of total net sales and now represent 63% of net sales, an increase from five years ago when they accounted for 54% of net sales. Our integrated solutions include agency solutions, while targeted print comprises catalogs, direct mail, packaging, and in-store signage and displays. Large-scale print, which includes retail inserts, magazines, and directories, continues to decrease as a percentage of total net sales due to organic decline.

Accelerating market penetration in key verticals and product lines with the greatest expansion opportunities and continuing to leverage our unique company culture, which is based on honesty and transparency to grow as an amex company.

On slide five we show how we continue to make progress on our revenue diversification strategy into higher value higher margin offerings.

Between 2018, and 2023 integrated solutions and targeted print increased as a portion of total net sales and now represents 63% of net sales an increase from five years ago, when they accounted for 54% of net sales.

Our integrated solutions include agency solutions, while targeted pretty comprises catalogs direct mail packaging and in store signage and displays.

Large scale print, which includes retail inserts magazines and directories and continues to decrease as a percentage of total net sales due to organic declines.

Joel Quadracchi: The increase in our international locations is primarily driven by stronger sales in Latin America, especially in Mexico, a strategic extension of our U.S. platform. Moving on to slide 6, we achieved client service excellence and a distinct competitive advantage through our suite of flexible, scalable, and connected MX solutions. These solutions span every facet of the marketing journey, from offline to online, across creative, production, and media, and are supported by data-driven intelligence and state-of

The increase in our international locations is primarily driven by stronger sales in Latin America, especially in Mexico, a strategic extension of our U S platform.

Moving on to slide six we achieved client service excellence and distinct competitive advantage through our suite of flexible scalable and conducted Amex solutions.

These solutions span every facet of the marketing journey from offline to online across creative production and media and supported by data driven intelligence and state of the art technology.

Joel Quadracchi: We tailor each of these solutions to client objectives, driving cost efficiencies, improving speed to market, strengthening market effectiveness, and delivering value on investment. Quad's data-driven intelligence solutions empower smarter decisions to maximize marketing effectiveness and generate quantifiable impact, while our client-facing, AI-driven technology solutions remove friction in the marketing process by helping clients connect marketing strategy, global content creation, analytics, and personalized communications across online and offline channels. We have long employed artificial intelligence and robotic process automation and cognitive insights and continue to explore new ways to apply generative AI across internal workflows and client-facing solutions. Our creative solutions help clients increase engagement with their brands to accelerate business growth and support all channels through every step of the creative process, including strategy, brand design, campaign ideation, pre-media, adaptive design, and content creation. As far as production is concerned, Quad offers a wide range of production solutions for deploying content to all channels, offline and online. This is a major point of differentiation among our competitive set. Traditional agencies or agency holding companies develop creative and then outsource production, while traditional consulting firms provide strategy and then outsource implementation.

We tailor each of these solutions to client objectives, driving cost efficiencies improving speed the market strengthening marketing effectiveness in delivering value on investments.

QUADRA data driven intelligence solutions, empower smarter decisions to maximize marketing effectiveness and generate quantifiable impact while our client facing AI driven technology solutions remove friction in the marketing process by helping clients connect marketing strategy global content creation analytics and personal.

<unk> communications across online and offline channels.

We have long employed artificial intelligence robotic process automation and cognitive insights and can do continue to explore new ways to apply generally across internal workflows and client facing solutions.

Our creative solutions help clients increase engagement with their brands to accelerate business growth support all channels through every step of the creative process, including strategy brand design campaign ideation pre media adaptive design and content creation.

As far as production.

<unk> offers a wide range of production solutions for deploying content to all channels offline and online.

This is a major point of differentiation among our competitive set traditional agencies or agency holding companies develop creative and then outsource production, while traditional consulting firms provide strategy and then outsource implementation.

Joel Quadracchi: Quad, however, is able to strategize, create, and execute all campaign elements across all channels using our own internal resources, providing a more efficient marketing experience for our clients and a better experience for the consumer. And lastly, for our media solutions, we provide strategic omni-channel media planning and placement, managing hundreds of millions of dollars in media billing annually. All our media solutions prioritize transparency and neutrality so our clients can feel confident that their media spend is supported by the best data, platform, and partners for their unique needs to generate measurable impact. As I shared with you on last quarter's call, Joshua Lowcock, a well-respected and experienced leader in global media and data, joined Quad as President of Media.

The quarter. However, he was able to strategize create and execute all campaign elements across all channels using our own internal resources, providing a more efficient marketing experience for our clients and a better experience for the consumer.

And lastly through our media solutions, we provide strategic Omnichannel media planning and placement managing hundreds of millions of dollars of media billings annually.

All our media solutions prioritize transparency and neutrality. So our clients can feel confident that their media spend it's supported by the best data platform and partners for their unique needs to generate measurable impact.

As I shared with you on last quarter's call Joshua low Cogs are well respected and experienced leader in global median data, Georgia Quad as president of media.

Joel Quadracchi: Since joining us a few short months ago, he has quickly gone about implementing the next evolution of our audience targeting and media engagement offering, which will improve our competitiveness and drive revenue growth. This next evolution aligns our data analytics offering with our media and planning offering, as shown on slide 7. By doing this, we are integrating audience identification abilities anchored on Quad's proprietary household data offering with planning and measurement across all forms of client media, online, offline, in-home, or in-store.

Since joining us a few short months ago. He is quickly set about implementing the next evolution of our audience targeting and media engagement offering which will improve our competitiveness and drive revenue growth.

This next evolution aligns our data and analytics offering with our media and planning offering as shown on slide seven.

By doing this we are integrating audience identification abilities anchored on quasi proprietary household data offering with planning of measurement across all forms of quiet media online offline in home or in store.

Joel Quadracchi: The value to our clients will be superior audience identification and fully integrated planning, placement, and measurement to optimize spend in almost real time. This integrated offering is the foundation of a new quad media offering grounded in our unique household insights and data capability that we will be bringing to market soon. Another area in which we're strategically investing is retail media networks. Earlier this month, we announced our acquisition of Dart Innovation, an in-store digital media solutions provider to further build on our retail expertise and offerings, as shown on slide 8. With DART's capabilities and technology, we aim to revolutionize the shopping experience for retailers, consumer packaged goods companies, and consumers by delivering targeted promotions on digital screens right at the store shelf, the most critical moment in the purchasing decision.

The value to our clients will be superior audience identification and fully integrated planning placement and measurement to optimize spend in almost real time.

This integrated offering is the foundation of a new quad media offering grounded in our unique household insights and data capability that we will be bringing to market soon.

Another area in which we are strategically investing as retail media networks.

Earlier this month, we announced our acquisition of Darden innovation and in store digital media solutions provider to further build on our retail expertise and offerings as shown on slide eight.

Dark capabilities and technology, we aim to revolutionize the shopping experience for retailers consumer passion package goods companies and consumers by delivering targeted promotions on digital screens, writing up the store shelf. The most critical moment in the purchasing decision.

Joel Quadracchi: This strategic investment expands and seamlessly integrates into our suite of MX solutions and enables an integrated consumer purchasing journey across home, online, and in-store. Retailers are highly interested in our offerings in this space, and we are already leveraging DART's capabilities to launch the first phase of our rollout with the SadeMart company, the largest private grocery retailer on the West Coast.

This strategic investment expands and seamlessly integrates into our suite of <unk> solutions and enables an integrated consumer purchasing journey across home online and in store.

Retailers are highly interested in our offerings in this space and we are already leveraging darts capabilities to launch the first phase of our rollout with the save Mart companies the largest private grocery retailer on the west coast.

Joel Quadracchi: Turning to slide 9, we also continue to innovate solutions in our core print business, especially postage optimization programs, to help offset ongoing significant postal rate increases. Hostage makes up the largest portion of cost for our print clients as compared to paper in manufacturing. The U.S.

Turning to slide nine we also continued to innovate solutions in our core print business, especially postage optimization programs to help offset ongoing significant postal rate increases.

<unk> makes up the largest portion of the cost for our print clients as compared to paper and manufacturer.

Joel Quadracchi: The Postal Service continues to pursue what we believe is a flawed strategy of implementing enormous postal hikes in an attempt to make up for billions of dollars in annual losses. This strategy is driving away the very volume that supports its existence. In the last year alone, mail volumes have plummeted by 11 billion pieces, according to USPS data.

The U S. Postal service continues to pursue what we believe is a flawed strategy of implementing enormous postal hikes and attempt to make up for billions of dollars in annual losses.

This strategy is driving away the very volume that supports its existence.

In the last year alone mail volumes plummeted by 11 billion pieces. According to the U S. P S data.

Joel Quadracchi: This is primarily due to the cumulative effect of postal rate hikes. We expect to see additional volume reductions if this unsound strategy is not fixed, as our clients cannot continue to absorb massive rate increases, some of which have totaled as much as 57% over the last three years, more than triple the rate of inflation. We are urging swift action to preserve the affordability of the printed mail channel before it potentially has to undergo a massive taxpayer bailout.

This is primarily due to the cumulative effect of postal rate hikes.

We expect to see additional volume reductions if this unsound strategic strategy is not fixed.

As our clients cannot continue to absorb massive massive rate increases some of which have totaled as much as 57% over the last three years more than triple the rate of inflation.

We are urging swift action to preserve the affordability of the printed mail channel before it potentially has to undergo a massive taxpayer like bear bailout.

Joel Quadracchi: We have been working with members of Congress, White House staff, and our client base to moderate these increases. This effort is important as the Postal Service is at the core of a $1.9 trillion dollar mailing industry that provides family-sustaining jobs for 7.9 million Americans and is the backbone for a large portion of the private sector. We will share updates on our efforts to address this crisis, including the launch of a new dynamic Postal Optimization Program at our 23rd Postal Conference next month. Turning to slide 10, we are pleased to show how we are growing our presence with well-known brands with a particular focus on commerce, which includes retail, consumer packaged goods, and direct-to-consumer. Financial Services, Health, and Publishing. These reputable, well-known brands include Amazon, Walmart, Red Bull, American Express, Abbott Labs, and more, and are all admired for their excellence and the loyalty they have built with consumers.

We have been working with members of Congress White House staff and our client base to moderate. These increases. This effort is important as the postal services at the core of a $1 nine trillion dollar mailing industry that provides family supporting jobs for $7 9 million Americans and is the backbone for a large portion of the private sector.

We will share updates on our efforts to address this crisis, including the launch of a new dynamic polls will often this optimization program at our 23rd Postal Conference next month.

Turning to slide 10.

We are pleased to show how we're growing our presence with well known brands with a particular focus on commerce, which includes retail consumer package goods and direct to consumer financial services health and publishing.

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These reputable well known brands include Amazon Walmart Red Bull American Express Abbott labs, and more and are all admired for their excellence in the loyalty. They have built with consumers we take great pride in knowing they trust us to help deliver in their marketing vision.

Joel Quadracchi: We take great pride in knowing they trust us to help deliver on their marketing vision. On slide 11, we show an example of how we're using our connected solutions to improve consumer response rates and revenue for leading brands and marketers. Wolverine Worldwide, one of the world's leading marketers and licensors of branded footwear and apparel, including Merrell, Saucony, and Wolverine, had used direct mail successfully for many years, but over time, they started seeing a decline in its effectiveness.

On Slide 11, we show an example of how we're using our connected solutions to improve consumer response rates and revenue for leading brands and marketers.

Wolverine worldwide, one of the world's leading marketers and license, there's a branded footwear and apparel, including Merrell Saucony and Wolverine had use direct mail successfully for many years, but overtime started seeing a decline in its effectiveness.

Joel Quadracchi: The company has considered reducing or altogether eliminating direct mail to focus exclusively on digital campaigns for growing and strengthening consumer connection. We partnered with Wolverine Worldwide to optimize its direct marketing performance, conducting pre-market testing and integrated campaign support. We used Accelerated Marketing Insights, our proprietary pre-market testing platform, to research different messages and creative treatments for consumer preference and to build an audience-influenced messaging hierarchy. Our testing included multiple variables and more than 1,400 different combinations to assemble the optimum content and design for a challenger direct mail piece to outperform existing content already in the market. We also leveraged Informed Delivery, a U.S. Postal Service solution that lets consumers preview upcoming mail deliveries in email, to send digital challenger ads to the same target audience online and via social media. The results were exceptional.

The company had considered reducing or altogether, eliminating direct mail to folks who focus exclusively on digital campaigns for growing and strengthening consumer connections.

We partnered with Wolverine worldwide to optimize its direct marketing performance conducting pre market testing and integrated campaign support.

We used accelerated marketing insights proprietary pre market testing platform to research different messages and creative treatments for consumer preference and to build an audience influenced messaging hierarchy.

Our testing included multiple variables and more than 1400 different combinations to assemble the optimum content and design for a challenge or a direct mail piece to outperform existing content already in market.

We also leveraged informed delivery of U S postal service solution.

Consumers preview upcoming mail deliveries and email to send digital challenge or adds to the same target audience online and via social media.

The results were exceptional year over year, we were able to help walburn achieved nearly double its response rate the.

Joel Quadracchi: Year over year, we were able to help Wolverine achieve nearly double its response rate. The client also doubled conversion rates thanks to more effective digital creative and messaging, accomplishing twice the click-through rate and increasing sales by an incredible 261% per buyer. We look forward to continuing to work with Wolverine to increase engagement between its brands and consumers to accelerate business growth. On slide 12, we show an example of how our flexible, scalable, and connected solutions are helping Rural King, a farm and home retailer with 135 stores across 13 states, increase marketing efficiency and effectiveness. We have been steadily expanding our relationship with Rural Paint since 2016, when we started printing its retail ad inserts.

The client also doubled conversion rates, thanks to more effective digital creative and messaging accomplishing twice the click through rate and increasing sales an incredible 261% per buyer.

We look forward to continuing to work with Wolverine to increase engagement between brands and consumers to accelerate business growth.

On Slide 12, we show an example of how our flexible scalable and connected solutions are helping rural King.

And home retailer with 135 stores across 13th trades increased marketing efficiency and effectiveness.

We have been steadily expanding our relationship with rural King since 2016, when we started printing its retail ad inserts.

Joel Quadracchi: Soon thereafter, we added media planning and placement for inserts, eventually becoming the retailer's full media agency of record in 2020. Since then, we have expanded our relationship to include creative development and execution for all channels, including linear and connected TV, radio, display, YouTube, and social. robust data and analytics solutions, including the use of our proprietary tool for optimizing cross-channel marketing spend, a custom dashboard for tracking real-time channel performance, and media mix modeling services that transparently detail marketing return on investment, and our proprietary content management system that enables content at scale across marketing channels. Rural King also uses our data and analytics capabilities to conduct brand health measurement, tracking perception and reputation among consumers, along with performance in the marketplace.

Soon thereafter, we added media planning and placement for inserts eventually become the retailers full media agency of record in 2020.

Since then we've expanded our relationship to include creative development and execution for all channels, including linear and connected TV radio display Youtube and social.

Robust data and analytics solutions, including the use of our proprietary tool for optimizing cross channel marketing spend accustomed dashboard for tracking real time channel performance and media mix modeling services that transparently detailed marketing return on investment.

And our proprietary content management system that enables content at scale across marketing channels.

<unk> also uses our data and analytics capabilities to conduct brand health measurement tracking perception and reputation among consumers along with performance in the marketplace.

Joel Quadracchi: Our data and analytics expertise is important to Rural King, as is our integrated service approach, which includes a single point of contact for all Quad services. This offering removes the complexity of working with multiple vendors and partners, enabling Rural King to focus on delivering the best consumer experience. We value our relationship and look forward to continuing to partner on new initiatives, including brand positioning work this spring. Turning to slide 13, for more than 52 years, Quad has worked to create positive, sustainable impact at our company and in the communities where we live and work. Recently, our work earned two notable recognitions. Quad was a finalist in the Greater Good Awards, presented by DigiDay, Glossy, Modern Retail, and WorkLife, for our ongoing support of social causes, including staff empowerment, extracurricular programs, and community partnerships.

Our data and analytics expertise is important to rural King as our is our integrated service approach, which includes a single point of contact for all Quad services.

This offering removes the complexity of working with multiple vendors and partners, enabling rural King to focus on delivering the best consumer experience.

We value our relationship and look forward to continue to partner on new initiatives, including brand positioning work. This spring.

Turning to slide 13 for more than 52 years Quad has worked to create positive and sustainable impact at our company and in the communities, where we live and work.

Certainly our work on two notable recognitions.

Todd was a finalist in the greater good awards presented by digit day glossy modern retail and work life for our ongoing support of social causes including staff empowerment extra curricular programs and community partnerships.

Joel Quadracchi: And members of our corporate responsibility team were recently recognized by Milwaukee-based Uplifting Impact for their efforts to advance inclusive leadership at Quad. Before I turn the call over to Tony, I would like to thank our employees for their commitment to performing well for our clients while we proactively manage all aspects of our business for long-term strength and stability. I have great confidence in our team and continue to be enthusiastic about our growth opportunities as an MX company. I'll now turn the call over to Tony for a financial review. Thanks, Joel. And good morning, everyone, and the Microsoft Office Word Document.

And members of our corporate responsibility to them were recently recognized by Milwaukee based uplifting impact.

For their efforts to advance inclusive leadership at Quad.

Before I turn the call over to Tony I would like to thank our employees for their commitment to performing well for our clients. While we proactively manage all aspects of our business for long term strength and stability I have great confidence in our team and continue to be enthusiastic about our growth opportunities as Pemex company.

I'll now turn the call over to Tony for a financial review.

Thanks, Joel and good morning, everyone.

Quite snap.

Tony Staniak: Document.8 A snapshot of our fourth quarter and full year 2023 financial results. Net sales were $788 million in the fourth quarter of 2023, down 11% from 2022. For the full year, net sales were $3 billion, down 8% from 2022. The net sales decline was primarily due to lower print, paper, and logistics sales, as well as the 2022 divestiture of our Argentina print operator.

Snapshot of our fourth quarter and full year 2023 financial results net.

Net sales were $788 million in the fourth quarter of 2023 down 11% from 2022 for the full year net sales were $3 billion down 8% from 2022.

The net sales decline was primarily due to lower print paper and logistics sales as well as the 2022 divestiture of our Argentina print operations.

Tony Staniak: Print volumes were negatively impacted by ongoing external headwinds, including significant postal rate increases, economic uncertainty, and the effect of elevated interest rates on specific clients. Adjusted EBITDA was $66 million in the 4th quarter of 2023, as compared to $79 million in the 4th quarter of 2022. An adjusted EBITDA margin declined at 8.3% in the 4th quarter of 2023, compared to 8.9% in the 4th quarter of 2022. For the full year, Adjusted EBITDA was $234 million in 2023, compared to $252 million in 2022. However, Adjusted EBITDA margin improved from 7.8% to 7.9%. The decrease in full-year adjusted EBITDA was primarily due to $11 million of lower pension income as well as the impact of lower sales, partially offset by benefits from improved manufacturing productivity and savings from cost reduction initiatives. Adjusted diluted earnings per share was $0.23 in the fourth quarter of 2023 as compared to $0.41 in the fourth quarter of 2022. For the full year, adjusted diluted earnings per share was $0.52 in 2023 compared to $0.89 in 2022. The decline was primarily due to lower adjusted net earnings and was partially offset by the positive impact from share repurchase.

Trade volumes were negatively impacted by ongoing external headwinds, including significant postal rate increases economic uncertainty and the effect of elevated interest rates on specific clients.

Adjusted EBITDA was $66 million in the fourth quarter of 2023 as compared to $79 million in the fourth quarter of 2022, and adjusted EBITDA margin declined to eight 3% in the fourth quarter of 2023 compared to eight 9% in the fourth quarter of 2022 for the full year adjusted EBITDA was 234.

In 2023 compared to $252 million in 2022.

However, adjusted EBITDA margin improved from seven 8% to seven 9%.

The decrease in full year adjusted EBITDA was primarily due to $11 million of lower pension income as well as the impact of lower sales, partially offset by benefits from improved manufacturing productivity and savings from cost reduction initiatives.

Adjusted diluted earnings per share was 23 <unk> in the fourth quarter of 2023 as compared to <unk> 41 in the fourth quarter of 2022 for the full year adjusted diluted earnings per share was 52 in 2023 compared to 89 cents in 2022 the decline was.

Primarily due to lower adjusted net earnings and was partially offset by the positive impact from share repurchases in the fourth quarter. We continued to return capital to shareholders through share repurchases and since the second quarter of 2022, we have repurchased five 9 million shares or approximately 11% of our outstanding shares.

Tony Staniak: In the fourth quarter, we continued to return capital to shareholders through share repurchases. And since the second quarter of 2022, we have repurchased 5.9 million shares, or approximately 11% of our outstanding shares, for a total purchase price of $23 million. Free cash flow was $77 million in 2023, compared to $94 million in 2022. The decline in free cash flow was primarily due to an $11 million increase in capital expenditures as we continue to invest in innovation and automation initiatives. During 2023, we invested $71 million in capital expenditures to drive efficiency.

It is for a total purchase price of $23 million.

Free cash flow was $77 million in 2020 compared to $94 million in 2022, the decline in free cash flow was primarily due to an $11 million increase in capital expenditures as we continue to invest in innovation and automation initiatives. During 2023, we invested 70.

$1 million in capital expenditures to drive efficiencies.

Tony Staniak: In addition to free cash flow, we also continue to generate significant cash from asset sales, as shown on slide 15. During the five-year period from 2020 to 2024, we expect to generate over $700 million of free cash flow and proceeds from asset sales. These sales include divestitures of certain non-core portions of our business as well as sales of property, plant, and equipment from closed facilities, such as our Merced, California print building that we sold in 2023 for net proceeds of $19 million. Beginning in the fourth quarter of 2023 and into the first quarter of 2024, we have announced the closure of an additional four OMIN facilities, from which we will generate further proceeds from assets.

In addition to free cash flow. We also continue to generate significant cash from asset sales as shown on slide 15.

The five year period from 2020 to 2024, we expect them to generate over $700 million of free cash flow and proceeds from asset sales. These sales include divestitures of certain noncore portions of our business as well as sales of property plant and equipment from closed facilities, such as Arthur said, California.

Building that we sold in 2023 for net proceeds of $19 million.

Beginning in the fourth quarter of 2023 and into the first quarter of 2024, we have announced the closure of an additional four owned facilities from which we will generate further proceeds from asset sales.

Tony Staniak: This strong cash generation fuels our capital allocation strategy, as shown on slide 16. Our capital allocation priorities include using free cash flow and cash proceeds from asset sales to invest in scaling our offerings as a marketing experience company, such as the acquisition of DART, continued debt reduction, and return capital to shareholders. As announced last week on February 16th, the board of directors reinstated a quarterly dividend of $0.05 per share, or $0.20 per share, on an annualized basis.

This strong cash generation fuels, our capital allocation strategy as shown on slide 16.

Capital allocation priorities include using free cash flow and cash proceeds from asset sales to invest in scaling our offerings as a marketing experience company such as the acquisition of diet.

Two new debt reduction and return capital to shareholders.

Last week on February 16th our board of directors reinstated a quarterly dividend of <unk> <unk> per share or <unk> 20 per share on an annualized basis.

Tony Staniak: We are pleased to return capital to shareholders through the quarterly dividend, and we also expect to continue to be opportunistic in terms of our future share repurchases. We show our commitment to debt reduction on slide 17. As part of a multi-year debt reduction strategy, at the end of 2023, we reduced net debt by $564 million, a 55% reduction from the over $1 billion of debt we had on January 1, 2020. And we reached 2.0 times debt leverage, which was the low end of our previous long-term targeted leverage rate.

I am pleased to return capital to shareholders through the quarterly dividend and we also expect to continue to be opportunistic in terms of our future share repurchases.

And so our commitment to debt reduction on slide 17, as part of a multi year debt reduction strategy at the end of 2023, we reduced net debt by $564 million or 55% reduction from over $1 billion of debt. We had on January one 2020, and we reached two.

Oh times debt leverage which was the low end of our previous long term targeted leverage range, we intend to further reduce debt leverage to approximately one eight times by the end of 2024.

Tony Staniak: We intend to further reduce debt leverage to approximately 1.8 times by the end of 2024. We are also lowering our targeted debt leverage range by a quarter turn to now be 1.75 times to 2.25 times. Slide 18 includes a summary of our debt capital structure. At the end of 2023, our net debt will be $470 million, our blended interest rate will be 6.9%, and our debt is 44% floating and 56% fixed. In early 2024, we generated $53 million of cash by successfully increasing the commitment with one of our banks to add $25 million to our term loan and by entering into $28 million of leases for two large printing presses instead of purchasing those presses outright. We then used our revolving credit facility and cash on hand to repay an $88 million term loan immaturity. At the same time, the total capacity under our revolving credit facility decreased by $90 million to $343 million.

So we're lowering our targeted debt leverage range by a quarter turn to now be 175 times to 225 times.

Slide 18 includes a summary of our debt capital structure at the end of 2023, our net debt was $470 million a blended interest rate was six 9% and our debt was 44% floating and 56% fixed.

In early 2024, we generated $53 million of cash by successfully increasing the commitment with one of our banks to add $25 million to our term loan and by entering into $28 million of leases for two large printing presses instead of purchasing those presses outright.

Then used our revolving credit facility and cash on hand to repay and $88 million term loan a maturity and at the same time, the total capacity under our revolving credit facility decreased by $90 million to $343 million with the step down in that complete our next nearest significant debt maturity is now in November.

Tony Staniak: With the step down in debt complete, our next near-significant debt maturity is now November of 2026. On slide 19, we have included our 2024 financial guidance, with annual net sales expected to decline 5-9% compared to the prior year.

2026.

On Slide 19, we have included our 2024 financial guidance.

Annual net sales are expected to decline by 9% compared to the prior year.

Tony Staniak: The decline in net sales is primarily due to expected organic declines in certain product lines, heightened by significant postal rate increases. In addition, our net sales guidance would be impacted by the ending of a long-standing relationship with a large grocery client. Our relationship with this client concludes at the end of this month, and it represents approximately 3% of our 2023 net sales. While the loss of any client is disappointing, our revenue is highly diversified, with no single quad client representing more than 5% of our annual revenue. We have a large base of over 2,700 clients that provide sales growth opportunities as we continue to expand our offerings as a marketing experience company. For the year 2024, adjusted EBITDA is expected to be between $205 and $245 million, with $225 million at the midpoint of that range, representing a $9 million decline from 2023 adjusted EBITDA, but a 28 basis point improvement in adjusted EBITDA margin to 8.2% due to benefits from improved manufacturing These cost reduction initiatives include the closures of our Sacramento, California, Eppingham, and Bolingbrook, Illinois, and Saratoga Springs, New York facilities, as well as other labor reductions in production and SG&A. These decisions, while difficult, are expected to result in $60 million in annual costs.

Decline in net sales is primarily due to expected organic declines in certain product lines heightened by a significant postal rate increases in.

In addition, our net sales guidance would be impacted by the ending of our longstanding relationship with a large grocery call Irene.

Our relationship with this client concludes at the end of this month and represented approximately 3% of our 2023 net sales.

While the loss of any client is disappointing our revenue is highly diversified with no single quad client representing more than 5% of our annual revenue.

You have a large base of over 2007 hundred clients that provide sales growth opportunities as we continue to expand our offerings as a marketing experience company.

Full year 2024, adjusted EBITDA is expected to be between 200 and $245 million with $225 million at the midpoint of that range, representing a $9 million decline from 2023, adjusted EBITDA, but a 20 basis point improvement in adjusted EBITA margin.

Eight 2% due to benefits from improved manufacturing productivity and savings from cost reduction initiatives.

These cost reduction initiatives include the closures of our Sacramento, California, Ethingham in Bolingbrook, Illinois, and Saratoga Springs, New York facilities as well as other labor reductions in production and SG&A.

These decisions while difficult are expected to result in $16 million of annual cost savings.

Tony Staniak: From a quarterly perspective, we anticipate our lowest adjusted EBITDA to be in the first quarter of 2024, as the benefits from the cost reduction actions will reach their full annualized amount late in the second quarter of 2024. We then expect improved adjusted EBITDA in the second half of 2024 due to the full benefit of the restructuring actions combined with higher sales during our seasonal production peak. We expect 2024 free cash flow to be in the range of $50 to $70 million, with $60 million at the midpoint of that range, representing a $17 million decline compared to 2023. In 2024, free cash flow will be most impacted by higher restructuring payments, particularly in the first half of the year due to the recent plant closures and other labor actions. The higher restructuring payments and the reduction in cash flow from lower net sales will be partially offset by improvements in working capital, lower interest payments due to our debt reduction, and lower capital expenditures. Capital expenditures are expected to be in the range of 60 to $70 million, approximately $6 million lower than 2023 at the midpoint of our 2024 guidance.

From a quarterly perspective, we anticipate a loss adjusted EBITDA to be in the first quarter of 2024 as the benefits from the cost reduction actions will reach their full annualized amount late in the second quarter of 2024.

We then expect improved adjusted EBITDA in the second half of 2024 due to the full benefit of the restructuring actions combined with higher sales during our seasonal production peak.

We expect 2024 of free cash flow to be in the range of $50 million to $70 million with $60 million at the midpoint of that range, representing a $17 million decline compared to 2023.

In 2024 of free cash flow will be most impacted by higher restructuring payments, particularly in the first half of the year due to the recent plant closures and other labor actions, the higher restructuring payments and the reduction in cash flow from lower net sales will be partially offset by improvements in working capital lower interest payments due to our debt reduction.

<unk> and lower capital expenditures.

Capital expenditures are expected to be in the range of $60 million to $70 million approximately $6 million lower than 2023 at the midpoint of our 2024 guidance range.

We expect our free cash flow to be augmented by cash proceeds from asset sales the extent of which will be based on the timing of selling the buildings that were recently announced for closure.

Tony Staniak: We expect our free cash flow to be augmented by cash proceeds from asset sales, the extent of which will be based on the timing of selling the buildings that were recently announced for closure. With our strong cash generation, we will continue to prioritize debt reduction and expect to further reduce our net debt leverage ratio to be approximately 1.8 times by the end of 2024, near the low end of our new long-term targeted net debt leverage range of 1.75 to 2.25 times. Slide 20 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, made even more compelling with the recently announced quarterly dividend. And we remain focused on growing net sales and driving higher profitability through continued diversification of our revenue and clients.

With our strong cash generation, we will continue to prioritize debt reduction and expect to further reduce our net debt leverage ratio to be approximately one eight times by the end of 2024 near the low end of our new long term targeted net debt leverage range of $1 75 to $2 two five times.

Yes.

Slide 20 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 made even more compelling with the recently announced quarterly dividend and we remain focused on growing net sales and driving higher profitability through continued diversification of our revenue in clients.

Our expanded offerings as a marketing experience company, including investments in new offerings, such as new stores digital promotions with the Dod acquisition. There was a significant addressable revenue opportunity with both our large base of existing clients as well as new clients in.

Tony Staniak: With our expanded offerings as a marketing experience company, including investments in new offerings such as in-store digital promotions with the DART acquisition, there is a significant addressable revenue opportunity with both our large base of existing clients as well as new clients. In addition, our successful multi-year debt reduction strategy, including achieving 2.0 times debt leverage at the end of 2023, provides us increased flexibility in capital allocation. Our focus on debt reduction will not change as that is in the best interest of Quad and its shareholders as we reduce interest costs in this high interest rate environment and further strengthen what we believe is an industry-leading financial foundation. While continuing to reduce debt, we also now have the capital flexibility to add to the ways we provide returns to shareholders with the reinstatement of the quarterly dividend. With that, I'd like to turn the call back to our operator for questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing start.

In addition, our successful multi year debt reduction strategy, including achieving two plain old times debt leverage at the end of 2023 provides us increased flexibility in capital allocation.

Our focus on debt reduction will not change is that is in the best interest of quad and its shareholders as we reduce interest cost in this high interest rate environment and further strengthen what we believe is an industry, leading financial foundation, while continuing to reduce debt. We also now have the capital flexibility to add to the ways, we provide returns to shareholders.

With the reinstatement of the quarterly dividend.

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

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

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

Withdraw your question. Please press Star then two.

The first question comes from Kevin Stankey of Barrington Research Associates. Please go ahead.

Good morning, Kevin Good morning, Alan Good morning.

Good morning, Thanks for taking the questions and nice job on the fourth quarter results and.

Operator: To withdraw your question, please press the star then. The first question comes from Kevin Steinke of Barrington Research Associates. Please go ahead.

Getting to.

You know that the low end of your prior leverage.

Ratio range and also it was good to see you reduce tar.

Kevin Mark Steinke: Morning, Kevin. Hi, good morning. Good morning. Good morning.

<unk> targeted range going forward, but.

I.

Kevin Mark Steinke: Well, thanks for taking the questions. Nice job on the fourth quarter results and getting to, you know, the low end of your prior leverage. www.quad.com www.quadgraphicsinc.com I wanted to start out by asking about just the sales outlook as you think about 2024. You mentioned expected organic declines in certain product categories. Maybe just touch on which categories you're expecting the decline and the factors behind that.

Wanted to start out by asking about.

The the the sales outlook as you think about 2024 you mentioned.

The organic declines in certain product categories, maybe just a touch on which categories you are expecting a decline in the factors behind that.

Talking about interest rates economic uncertainty as well as a.

Postage rate increases and then.

As well can you just kind of touch on what you saw in the various categories in the fourth quarter as well as a full year of 2023.

Joel Quadracchi: You know, you talked about interest rates, economic uncertainty, as well as postage rate increases. And then, as well, can you just kind of touch on what you saw in the various categories and fourth quarter as well as full year 2023? Yeah, I think probably the best way for me to kind of walk through that is to start with 2023.

Yeah, I think probably Kevin This is Joe all the best way for me to kind of walk through that it would start with 2023 and will kind of roll forward with what we can say.

And you know, we always talk about large scale branches, where we continue to expect organic decline, especially in retail inserts and it's you know it's been a double digit clip for many years and that's just one of those lines that we just manage and we manage it we manage it down and get great free cash flow from that so it's it's it's a manageable.

Joel Quadracchi: And we'll, we'll kind of roll forward with what we can say. And, you know, we always talk about large-scale print being where we continue to expect organic decline, especially in retail inserts. And it's, you know, it's been a double-digit clip for many years. And that's just one of those lines that we just manage and we manage it, we manage it down, and we get great free cash flow from that. So it's, it's a manageable process. The thing that happened at 23, at the beginning of the year, I'd say two themes.

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The thing that happened in 23 at the beginning of the year I'd say two themes one would be economic uncertainty. We are hearing that from our clients I think everyone was hearing it around the world.

And that definitely sort of muted a little bit how they were sharing with us. Their 2023 plans you could see it being built in the other part was significant interest rate increases like as you know and where that really impacted us hard was on direct mail, because we had a pretty big exposure to the financial says.

Joel Quadracchi: One would be economic uncertainty; we were hearing that from our clients; I think everyone was hearing it around the world. And that definitely sort of muted a little bit how they were sharing with us their 2023 plans; you could see it being built in. The other part was significant interest rate increases, like, as you know, and where that really impacted us hard was on direct mail, because we had a pretty big exposure to the financial segment, including one major player exiting the consumer banking business. And so, you know, with high interest rates, you saw a very big pullback on direct mail, and especially amongst consumer lending. Services. So that's what impacted the second theme that I would say is really important is that the post office decided they were going to they did an early increase in the first part of the year but decided to go for a significant increase in the middle of the year with a combined 10 to 14% increase in our client's biggest cost. Clients did not expect the second one, and so they had already locked in their budgets for the year.

Men, including Onemain mean player exiting the consumer.

Banking business and so with with large interest rates you saw.

A very big pullback of direct mail.

And especially amongst consumer lending services. So that's what impacted that the second thing that I would say is really important.

Is that the.

The post office decided they were going to do the early increase in the first part of the year.

But decided to go forward with a significant increase in the middle of the year with a combined 10% to 14% increase in our clients' biggest cost.

Clients did not expect the second one and so they had already locked in their budgets for the year and so whenever this happens again, it's the biggest cost the we saw the second half.

Joel Quadracchi: And so whenever this happens again, it's the biggest cost. We saw the second half significantly decline, specifically in catalog and direct mail, as a result of the postage increase. This was not digital disruption; this was a significant above-inflation increase by the post office. And so what happens is they reduce their prospecting mailing pretty significantly right away to make up for it. You know, you have your catalogs you sell off to your existing customers, then you have names you rent to try and get customers. Whenever there's a big out-of-whack increase like this, there's typically a pullback from that. And we saw that in the second quarter.

We decline specifically in catalog and direct mail as a result of the postage increase this was not digital disruption. This was a a.

Significant above inflation increase or the post office and so what happens is they reduce their prospecting mailing pretty significantly right away to make up for it you know you have your catalog you sold out your existing customers. Then you have named you rent to try and get customers whenever there's a big out of whack.

<unk> like this it's typically a pullback in that and that we saw that in the second quarter.

Joel Quadracchi: You know, I think that when we looked at catalogs for the year, sales were off about 6% year-to-date, but that would be very heavily back-end loaded where we saw the decline. As I roll forward and think about, you know, 2024, the post office has announced another significant increase. They just passed along about a 4.5% increase a couple weeks ago, but they're planning on going forward with a 10% increase in July.

That when we looked at catalogs for the year sales was off about 6% year to date, but that would be very heavily backend loaded where we saw the decline.

As I roll forward and think about.

2020 for the post office has announced another significant increase they just passed along about a 445% a couple of weeks back, but theyre planning on going forward with a 10% in July.

Joel Quadracchi: This is absolutely, in our belief, not a sound strategy because Marketing Mail is one of the backbones for making the rest of the post office work. And, as everyone knows, no one's going to let the post office go away. So I'm not concerned about losing the ability to deliver mail to the post office, but everyone should be concerned. And that's where we're working with Congress, the White House, etc. Everyone should be concerned that they're heading towards a major taxpayer bailout or takeover because right now, postage is what funds the post office on its own. And so it doesn't make sense.

This is absolutely in.

In our belief not a sound strategy because marketing mail is one of the backbones for making the rest of the post office work and as everyone knows no one's going to let the post office go away. So I'm not concerned about losing the ability to distribute through the post office.

But everyone should be concerned and that's where we're working with Congress. The white house et cetera, everyone should be concern that theres going out there, they're heading towards a major taxpayer bailout or takeover because right now posted use what funds the post office by its own and so it doesn't make sense I mean, it's literally triple b.

Joel Quadracchi: I mean, it's literally triple the inflation rate of what they're trying to do. Over 57% increase in the largest cost of the last three years. It makes no economic sense for anybody.

Right of what they're trying to do over 57% increase in the largest cost over the last three years. It makes no economic sense for anybody we have that built into our guidance.

Joel Quadracchi: We have that built into our guidance. We also put in more expected organic decline due to postage. We hope that it changes, but we're managing as if it goes through. Also, as I hinted, we are about to roll out a major product. We've innovated around doing a lot of work for the post office. Years back, the post office incented our customers to skip most of the post office to get big discounts. We do that in the form of what we call co-mailing, skipping a lot of the infrastructure and doing the work for the post office.

We put in more expected organic decline due the postage into our guidance, we hope that it changes, but we're managing as if it goes through also I hinted towards we are about to rollout of a major product.

For many years innovated around doing a lot of work for the post office and years back. The post office is centered our customers to get most of the post office to get big discount and so we do that in the form of what we call co mailing and skipping a lot of the infrastructure and doing the work for the post office, we've got a new product coming.

Joel Quadracchi: We've got a new product coming out that potentially could help save people 10% to 20% of their postage costs. While not offsetting this inexplicable increase that the post office is doing, but at least helping to make it manageable. I'll reiterate that it's built back in.

That potentially could help save people, 10% to 20% of their postage costs, so that while not offsetting this inexplicable increase that the post office is doing but at least helping to make it manageable and but I'll reiterate that that's built back in from an interest rate standpoint on the direct mail side I'd say we are.

Kevin Mark Steinke: From an interest rate standpoint on the direct mail side, I'd say we're starting to see some of the core financial segment coming back. Maybe not in personal lending, but I'm also seeing people who may have pulled away from direct mail starting to come back in. We've got several conversations that are very promising because of the strength of direct mail; it works. You've also got a decrease in the effectiveness of digital going on with the deprecation of cookies, etc. Everyone's looking at the full media mix to try and optimize it, and they're not going to be ignoring print. Does that make sense, Kevin? Absolutely. That was a great color.

Starting to see some of the core financial segment coming back maybe not in personal lending.

I'm also seeing people, who may have pulled away from.

Direct mail starting to come back in and we've got several conversations that are very promising.

Because the strength of direct mail it works and you've got also a decrease in the effectiveness of digital going on with the deprecation of cookies et cetera, and so everyone's looking at the full media mix to try and optimize it and they're not gonna be ignoring print.

Does that makes sense Kevin <unk>.

Absolutely Yeah that was that was great color.

Joel Quadracchi: So... Yeah, as I think about 2024, it really... From your comments, it feels like... You know, it's more. The expected decline is more weighted toward the postal rate increase and then, you know, perhaps economic uncertainty. Is that fair to say?

So.

Yeah, as I think about 2024 it really.

From your comments it feels like you know it's more the expected decline is more weighted towards the postal rate increases than you know, perhaps economic uncertainty.

Is that fair to say.

Joel Quadracchi: That that's the way we're looking at it. And I'll remind you, though, that, you know, in large-scale print, we continue to expect, you know, double-digit decline. And that's what we've been saying for years.

That's the way we're looking at it now.

Remind you, though that you know a large scale print we continue to expect double digit decline and that's what we've been saying for years, but in the areas of like catalogs direct mail that that would be accurate.

Joel Quadracchi: But in the areas of like catalogs, direct mail, that that would be accurate. Okay, and you mentioned working with the government on perhaps trying to reverse or slow this trend of increasing rates. You know, I don't know, obviously, as one of the largest mailers in the U.S., you probably have their ear a bit.

Okay, and you mentioned.

Working with the government on.

Perhaps trying to reverse or slow this trend of increasing rates.

You know I don't know obviously is one of the largest mailers and the U S. You probably have their ear a bit I mean, I don't know.

Joel Quadracchi: I mean, I don't know if they're getting a lot of pushback, I would suppose, from other large mailers, and you know, just wondering what your level of influence is or the industry's level of influence, and do you have any sense as to whether they were surprised by these volume declines or, you know what I mean, what they're thinking after seeing these volume declines, I guess. Yeah, what we've been told is they don't believe in something called elasticity, that volume declines are because of digital disruption. And if you talk to a lot of mailers out there, they say they went through a lot of digital disruption, but they still use catalogs and direct mail in their mix.

They're getting a lot of pushback I would suppose from other large mailers.

And just wondering what you think your level of influences or the industry's level of influence and.

Do you have any sense as to whether they were they were surprised by these volume declines or are they you know what I mean, what what their thinking is you know after seeing these volume declines I guess.

Yeah, what we've been told us they don't believe in something called elasticity that that volume declines are because of digital.

Digital disruption and if you talk to a lot of a lot of mailers out there. They say we went through a lot of the digital disruption, but we still use catalog and direct mail and our mix.

Joel Quadracchi: And that this particular era is about this huge increase in cost. I mean, it would be like telling me that my biggest cost later is going to go up, you know, 57%. And I have no ability to pass it on to my customers, because most of the world is stuck at raising prices, you know, somewhere in the CPI range. It's just the math doesn't work.

And at this particular era is about this huge increase in in cost I mean, it would be like telling me that my biggest cost of labor is going to go up 57% and I have no ability to pass it onto my customers because most of the world is stuck at raising prices somewhere in the seat.

The high range.

Just the math doesn't work now no one single person can influence this but we speak on behalf of a lot of different mailers. We work in conjunction with the C 21, which is made up a whole lot of different groups I've testified in front of Congress multiple times as we got the post office huge relief just a couple of years ago. After working on a bill for.

Joel Quadracchi: Now, no single person can influence this, but we speak on behalf of a lot of different mailers. We work in conjunction with the C21, which is made up of a lot of different groups. I've testified in front of Congress multiple times as we got the post office huge relief just a couple of years ago after working on a bill for 10 years. They saved billions of dollars by not having to pre-fund retirement health care and things like that. But the downside was that they got released from having to cap their postal rates at the same rate that everybody else in the world was capped at, at about CPI. And no one thought they would go to extreme levels like this, and it just logically doesn't make sense.

10 years, they say billions of dollars by not having to pre from retirement health care and things like that and then but the but the downside was as they got released from having to cap there there.

Postal rates.

At the same rate that everybody else in the world is capped at it about CPI and no one thought they would go to extreme levels like this.

And it just logically doesn't make sense you don't run our business. This way so we're hitting it but I'll also tell you theres a lot of big players out there in the nonprofit world nonprofits are getting killed by this and you think about the Arpus of this world, but there's a lot of other players who do a lot of their own lobbying that you will see a lot of it right now.

Joel Quadracchi: You don't run a business this way. So we're hitting it, but I will also tell you there are a lot of big players out there in the nonprofit world. Nonprofits are getting killed by this.

Joel Quadracchi: And you think about the AARPs of this world, there are a lot of other players who do a lot of their own lobbying that you will see a lot of. Right now, there are a lot of people screaming, and ultimately, it's getting Congress' attention and, hopefully, the Board of Governors who oversee it to bring some rational behavior to bear. And again, it's not going to go away, but I think that they should be worried about a massive taxpayer takeover, which no one wants because there's too much of that going on. All right, that's helpful. Thank you. I just also wanted to touch on, you mentioned there the loss of a longtime grocery client, maybe just what happened there, you know, if you how you'd expect to maybe kind of backfill that over. Yeah, we will work to backfill it. I hate losing clients.

There's a lot of people screening and ultimately its getting congress's attention and hopefully the board of governors, who oversee it to bring some some rational behavior to suit to bear and again, it's not going to go away, but I think that they should be worried about a massive taxpayer takeover, which no.

One wants because there's too much of that going on.

Alright.

That's helpful. Thank you.

I just also wanted to touch on you mentioned there the loss of a longtime grocery client maybe.

Yeah, just what happened there.

Yeah and.

If you how you would expect it maybe you can kind of backfill that overtime.

Yeah, we will work to backfill it I hate losing clients. This client we did a lot of complex things for across multiple services and the two things I'll just say on it.

Joel Quadracchi: This client, we did a lot of complex things for across multiple services. And the two things I'll just say about that are that, you know, we need to get paid for what we do. We're not, you know, asking for the world, but we have to get paid for what we do with all these complex services we do.

Is that we need to get paid for what we do.

We're not asking.

Half the world, but we have to get paid for what we do with all of these complex services we do.

Joel Quadracchi: And I'll also say that this customer is also managing through some very significant complexities of their own. So, you know, I'll leave it at that. Understood. I mean, yeah, that's, You know, that's kind of what I was, thinking maybe you touch on is, you know, perhaps the profitability wasn't there. So, you know, maybe it's not as https://www.youtube.com or www.youtube.com Yeah, I just think it's just so important for my employees and my shareholders that as we invest in all these things.., that we get paid a fair price. That's that's all we ask, you know, get paid for for a huge benefit we're giving people by providing all this integration, postal savings, all the different things that we do. And so, you know, sometimes sometimes that that that that results in answers you don't like, but they're the best answers for the long term of my company. Understood. Great.

I'll also say that there is customers also managing through some very significant complexities of their own so.

I'll leave it at that.

Understood I mean, yes.

Yeah, that's kind of what I was.

Thinking maybe you could touch on is you know, perhaps the profitability wasn't there. So you know maybe it's not as significant or.

Large of an impact here to your profitability as perhaps you know your revenue.

Yeah, I I guess tickets is so important for my employees my shareholders that as we invest in all of these things.

That we get paid a fair price. That's that's all we ask get paid for a huge benefit we're giving people by providing all this integration postal savings all the different things that we do and so you know.

Sometimes sometimes like that that that results in answers you don't like.

But they're the best answers for the long term of my company.

Understood great.

Joel Quadracchi: So I also wanted to talk about agency solutions, your end-to-end bargaining solutions, and the demands you're seeing there. I think you mentioned www.quad-graphics-inc.com. Yeah, I'd say that the pipeline is actually heating up nicely. Because remember, we just relaunched our brand a year ago, and a lot of this is about opening up the aperture to clients we never had access to before. And so we really weren't directly directed to CPG and things like that.

I also wanted to talk about E Agency solutions, you render and bargaining of solutions and the demand you're seeing there I think you mentioned the.

A strong business pipeline.

So maybe what you're seeing on that front and if there continues to be.

Resilient in and kind of these uncertain economic times.

Yeah, I'd say that the pipeline they actually it's heating up nicely because remember, we just relaunched our brand a year ago.

And a lot of this is about opening up the aperture to clients, we never had access before and so we really werent direct to CPG and things like that you Werent always in the agency space are viewed as it of providing media solutions and so we really.

Joel Quadracchi: We weren't always in the agency space or viewed as it for providing media solutions. And so we really ramped that up this past year. I mean, you know, a couple years ago, I'd never tell you, I didn't think I'd be telling you that we were redesigning the brand look for Titleist Pro V1. When you look at what we shared about Wolverine today, you know, think of this as a flywheel. It's not just an agency solution I want to win. It's I want to win the relationship.

Ramped that up this past year I mean, you know couple of years ago I would never tell you I've never thought I'd be telling you that we're redesigning the brand look for title is pro V. One.

When you look at what we shared about Wolverine today.

Think of this as a flywheel, it's not just an agency solution I want to win I want to win the relationship and any entry point is a great entry point, So Wolverine we entered in.

Joel Quadracchi: And any entry point is a great entry point. So Wolverine, you know, we entered and were able to suddenly, you know, offer them quite a few different products and services to solve their problem. You know, I'd like to see if we enter into a creative space with someone where suddenly, we're talking about how packaging, for instance, how does that package appear in store? Let's talk to our in-store people, by the way, with our retail media network, we're launching, as we start to help manage your media spend, we'd love to take the data that comes out of the retail media network to sell CPGs And you know, it's creating a lot of revenue and will create revenue across, you know, a lot of the print channels as well, especially in targeted print. And I think Wolverine is a great example of that.

We're able to suddenly you know offered them quite a few different products and services to solve their problem.

I'd like to see if we enter into a creative space and someone that suddenly then we're talking about outlook for packaging for instance, auto spend that package of pure on in store, let's talk to our in store people by the way with our retail media network. We're launching as we start to help manage your media spend we'd love to take the data that comes.

Out of the retail media network to sell Cpg's.

Advertising within the store.

With eyeballs, but then using the data that we get out of that experience to further go after new audience and so think of this all of the big flywheel that speeding up.

It's creating a lot of revenue and will create revenue across a lot of the print channels as well, especially in targeted print and I think we'll arrange a great example of that.

Yeah.

Kevin Mark Steinke: Okay, great. So when I think about, www.kenhub.com, you know, the sales guidance and adjusted EBITDA guidance ranges for 2024. As you map those out, what are some of the factors that, maybe you know, give you the high end or the low end of those ranges as you think about how the year might play out?

Okay great.

So when I think about.

Uh huh.

The sales guidance and adjusted EBITDA guidance.

<unk> for 2024.

As you as you map those out what are some of the factors that may.

Maybe.

You know getting to the high end or the low end of those ranges.

As you think about how the year might play out.

Tony Staniak: I think on the revenue perspective, from the economic standpoint, we've assumed that a similar economic environment to how it is today can last throughout 2024. To the extent that the economic environment substantially improves, and marketing spend thus would improve along with it, we could benefit from that on the sales side. On the EBITDA side, I'd say we're going to continue to look at how we can improve productivity. We did a lot of that in 2023, but we're still continuing to work on that in 2024. And the benefits of automation that we just put in with a couple of large wide web presses that we put into the United States, we're putting one into Mexico this month, and those can all provide profitability improvements for us.

I didn't have any this is Tony Kevin I think on the revenue perspective.

From the economy standpoint, we've assumed Canada, the similar economic environment to how it is today can alas throughout 2024, two to the extent that the economic environment and substantially improved and the marketing spend thus would improve along with that we could benefit from that on the sales side.

On the EBIT decide.

I'd say, we're going to continue to look at how we can improve productivity. We did a lot of that in 2023, but we're still continuing to work on that in 2024 and the benefits of automation that we just put it in with a couple of large wide web presses that we put into the United States, we're putting one into Mexico.

This month.

And those can all provide <unk>.

<unk> ability improvement for US and then I think it comes back to what Joel said about the flywheel and how that can just continuing to generate sales from print leading the agency are respectively agency to print and then the one last point on the revenue side is what I've been talking about the you know the wildcard is a bit of how does this postal thing play out do they.

Tony Staniak: And then I think it comes back to what Joel said about the flywheel and how that can just continue to generate sales from print, leading the agency or respective agency to print. And then the one last point on the revenue side is what I've been talking about; the wild card is a bit of how does this postal thing play out. Do they hold steady on their strategy, or do other thoughts come into play that change that?

Hold steady on their strategy or do.

Uh huh.

Other thoughts come into play that that correct that and Kevin I would just say on the guidance.

Tony Staniak: And Kevin, I would just say on the guidance, we're happy with the fact that we're maintaining profitability despite these revenue pressures that you're hearing from us with the postal rates, and so, resulting in a slightly improved adjusted EBITDA margin as we improve profitability on the margin. So, we're very happy about that.

We're happy.

Happy with the fact that we're maintaining profitability. Despite these revenue pressures that youre hearing from us with the pulsar range, so even resulting in a slightly improved adjusted EBITDA margin as we are improving the profitability on the margin so happy about that.

Tony Staniak: Absolutely. Yeah, as I looked at the guidance, that clearly stood out to me, you know, essentially Flattish profitability, kind of within that range at the midpoint despite the projected sales decline, so Maybe just a couple more here, Just on any more commentary on Dart innovation, just... In terms of size or purchase price, quantitatively or qualitatively, and any other color commentary on what that brings to you.

No absolutely.

As I looked at the guidance that clearly stood out to me.

You know.

Essentially.

Flattish profitability.

Kind of it within that range.

At the midpoint, despite the projected sales decline so.

Maybe just a couple more here.

Just any more commentary on dirt innovation, just you know in terms of size or purchase phrase quantitatively or qualitatively and any other color.

Color commentary on what that brings to you.

Kevin Mark Steinke: Yeah, you know, it was because of the size of the deal. It's not a large deal, but it's an important one. That team has been around for several years, working with a very large retailer currently that they've deployed it at for several years now.

Yeah, you know it was.

The size of a deal it's not a large deal, but it's an important one that team has been around for several years working with a very large retailer currently that they've deployed in for several years now the exciting thing is is that we brought to the table. This opportunity in the save Mart, whose leadership our debts.

Joel Quadracchi: The exciting thing is that, you know, we brought to the table this opportunity to save Mark, whose leadership is veterans in the grocery business. They know the business, they know it well, they know us, they trust us. And the fact is, we're already launching a rollout with them to test in their stores, for hopefully, a bigger rollout as well as with other retailers. So this is a very important step because, if you follow the world of media, retail media networks are a huge conversation right now, to the point where you just saw Walmart buy Vizio to try and leapfrog into this space in their own stores. And so for us, it's a real opportunity to help the people who aren't of the girth and size of Walmart to actually be able to play in the same space as they are and get control of that all important data about what happens within the store.

In the grocery business.

They know the business they know when all they know us They trust us and the fact is is we're already launching on our rollout with them.

Test in their stores.

For hopefully a bigger rollout as well as with other retailers. So this is a very important step because if you follow the world of media retail media networks is a huge conversation right now to the point, where you just saw.

Walmart by Vizio.

To try and leapfrog into the space.

In their own stores and so for us it's a real opportunity to help the people who are of the curve and size of Walmart.

To actually be able to play in the same space as they are and get control of that all important data of what happens within the store.

Joel Quadracchi: Yeah, I think it's kind of exciting that, you know, take Quad's relationships, which go up to the very highest level of retailers, combine that with Dart's offering of what they've assembled, and we think there's a significant possibility for scale. And it ties in, quite frankly, with the discussions we're already having with physical in-store signage, and now digital in-store signage rounding out our offerings to that group of Great. And then lastly, I'd just like to ask about reinstating the dividend. Certainly, that was a...

Yeah.

Yes, I think Kevin exciting that take quads relationships, which go up to the very highest level of retailers combine that with darts offering of what they are assembled and we think theres significant possibility to scale and it ties in quite frankly with the discussions we're already having with physical in store signage and now digital and sorry.

Signage rounding out our offerings to that to that group of retailers.

Great and then lastly, I'd just like to ask you about reinstating the dividend.

Certainly that was.

You're welcome I think and just maybe the thought process that.

Kevin Mark Steinke: Welcome, I think, and just maybe the thought process that went into your decision to reinstate the dividend. I think first and foremost is the sustainability of it. As we've wanted to come back to that point, you know, we're very careful about the balance sheet. I think we've proven to ourselves that we've really done a great job of focusing on paying down debt to very low levels, and we'll continue to do that. But we feel that launching a dividend at this size is very sustainable for us. You know, would we love to revisit it in the future?

Went into your.

Your decision to reinstate the dividend.

Well I think first and foremost the sustainability of it as.

As we wanted to come back to that point you know, we're very careful about the balance sheet I think we've proven to ourselves that we've really done a great job of focusing on paying down debt to very low levels and will continue to do that but we feel like launching a dividend at this size is very sustainable for US you know would we love to have.

Visited in the future of course, and we will.

Joel Quadracchi: Of course, we will see if we can do more. But at this point, we like this as a great sustainable starting point. Tony?

To see if we could do more but at this point we like this is a great to say that sustainable starting point Tony Yeah.

Tony Staniak: Yeah, I add, you know, Kevin, we, Quad, were a longtime dividend payer. It was important to us to reward our shareholders. And so at the beginning of COVID, we stopped the dividend. It was the right prudent decision at the time.

Kevin We acquired it was a long time dividend payer and that was important to us to reward our shareholders.

And so at the beginning of Covid, we stopped the dividend. It was the right prudent decision at the time, we focused on that got down to the low end of that range. Our previous range of two point out and now to Joel's point can revisit turning this back on and providing that return to shareholders.

Tony Staniak: We focused on debt, got down to the low end of that range, our previous range of 2.0. And now, to Joel's point, we can revisit, you know, turning this back on and providing that return to shareholders. So, you know, happy to be able to do that. Okay, great. Thanks for all the commentary. I'll turn it back over. Thanks, Kevin. Operator?

I'm happy to be able to do that.

Okay, great. Thanks for all the commentary I'll I'll turn it back over.

Thanks, Kevin.

Operator.

Operator: As a reminder, if you have a question, please press star 1. The next question comes from Barton Crockett of Rosenblatt. Please go ahead.

As a reminder, if you have a question. Please press star one. The next question comes from Barton Crockett of Rosenblatt. Please go ahead.

Barton Crockett: Good morning, thanks for taking my question here. You guys have covered a lot in the presentation and the Q&A. Just stepping back, I mean, one thing I would appreciate kind of your perspective on, Joel, is... I think the real opportunity for your shares is to get back to a place of revenue growth, and what would it take to get there? I mean, do you need, as kind of a prerequisite for that, the Postal Service?

Okay, I think Barton. Thanks, Bart good morning. Good morning, Thanks for taking my question here.

And you guys have covered a lot from the presentation and the Q&A, but.

Just stepping back I mean, one thing I would appreciate kind of your perspective onshore is.

I think the real opportunity for your shares is to get back to a place of revenue growth.

Yes.

Why what would it take to get there I mean do you need.

A prerequisite for that the postal service to.

Barton Crockett: To go to a normalized kind of price, CPI price growth versus the outsized growth, does that have to happen? Or is there a world where you can grow revenues again even if the postal service continues down the road that it's laid out? Yeah, I mean, we're going to continue to grow revenue through all the other services. I mean, in store, you know, year to date, you know, was up 12% at the end

To go to normalized kind of price CPI price growth versus the outsize growth does that have to happen.

Or is there a world where you can grow revenues again.

Even if the postal service continues down.

I wrote that it played out.

Yeah, I mean, we're going to continue to grow revenue through all the other services in store you know year to date was up 12% at the end. So that's an example of how we're doing that and that comes from some of that multi.

Joel Quadracchi: So, that's an example of how we're doing that. And that comes from some of that multi-feature relationship that we have with people. Certainly, more rational thinking about a post office would significantly help.

Featured a relationship that we do with people certainly more rational thinking of a post office would significantly help and in fact, if you didn't have that type of increase last year. We were feeling really good about sort of that flip point of having to deal with organic decline versus new revenue coming in and.

Joel Quadracchi: And in fact, if we didn't have that type of increase last year, we were feeling really good about sort of that flip point of having to deal with organic decline versus new revenue coming in. And so, you know, were we there yet? No, but we were edging that direction. And then, with this surprise where people got caught, you know, like I said, in the second half, we saw that significant reaction to it.

So where are we there yet no, but we are hedging that direction and then with this surprise where people got caught.

Like I said in the second half we saw that significant reaction to it.

Joel Quadracchi: I think the question is, if the post office keeps their, their, their trajectory, customers will have to be very smart about how they manage through it with other cost initiatives and trying to pass on to customers. And so how that plays out, you know, will be seen, but I feel good about our ability to manage through it. I mean, when I saw the postal increase happen last year, we closed a significant 40-year plant of ours that I had a very close relationship with for many years.

The question if the post office keeps there there.

Jeffery.

Customers will have to be very smart about how they manage through it with other cost initiatives and trying to pass on.

To our customers and so how that plays out.

We'll be seen but I feel good about our ability to manage through it I mean, when I saw the postal increase happened.

Last year, we closed a significant 40 year plant of ours that I had a very close relationship with for many years I pulled forward closing that because of the postal increase just to make sure. We can manage ahead of it.

Joel Quadracchi: I pulled forward closing that because of the postal increase, just to make sure we can manage ahead of it and consolidate. And so that's what we mean when we say we treat all costs as a variable. If we see something happen with volume in core traditional lines, we know how to react to it. But at the same time, we'll continue to grow all the other offerings, which will impact things like catalog, direct mail, packaging in store, and agency. So, but when you get that one-time surprise, you know, there's a big reaction that typically happens.

And consolidate and so that's what we mean when we say we treat all costs are variable if we see something happen on volume in core traditional lines, we know how to react to it but at the same time, we will continue to grow all the other offerings, which will impact things like catalog direct mail packaging in store in agency <unk>.

But when you get that one time surprise, you know theres a big reaction that typically happens in I hope even as they go forward I would hope to see that moderate but it certainly put somebody on is a lot of bonus on the customer base to be able to figure that out of the bottom line is its catalog works direct mail works.

Barton Crockett: And I hope even as they go forward, I'd hope to see that moderate, but it certainly puts some of the onus, a lot of onus, on the customer base to be able to figure that out. But the bottom line is, the catalog works, and direct mail works. So it's an important part of the go-forward media mix for people because the media mix landscape is a challenging one; you still have to sell your product. Okay, all right.

So it's an important part of the go forward medium mix for people because that media mix landscape is a challenging one.

You still have to sell your product.

Okay Alright.

Barton Crockett: Um, you know, I appreciate that. Now, I guess though, if you look at kind of the question marks around the longer-term revenue trajectory, I understand your guidance for this year, but even after this year, there's some unknowns. To what degree should we expect you guys to continue to reduce debt? I know your next maturity is 2026.

You know I appreciate that now I guess, so if you look at kind of.

That's some of the question marks around the longer term revenue trajectory I understand your guidance for this year, but even after this year.

There are some unknowns.

To what degree should we expect you guys to continue to reduce debt I know your next maturity is 2026.

Joel Quadracchi: But, you know, there could be an argument if revenue pressures continue for some time to keep reducing debt. How do you guys kind of feel about that? Yeah, I think you have to look at debt levels of leverage in conjunction with the business you're in and your ability to manage, you know, challenges. You know, in a growth business, people would say we're under leveraged. But in a business like this, I think we're being very prudent because of those unknowns.

But.

You know there could be an argument if revenue pressures continue for some time.

To keep producing that you know how do you guys kind of feel about that.

Yeah, you know I think you'd have to look at debt levels of leverage in conjunction with the business you're in and your ability to manage challenges.

In a growth business people would say we're under leveraged in a business like this I think we're being very prudent because of those nodes and I will tell.

Tony Staniak: And I will tell you, we will continue to pay down debt until I see something different. And that's why I like the balance of a sustainable dividend we're doing, you know, being able to still opportunistically look at share repurchases. But I want to see that same question answered.

Tell you we will continue to pay down debt until I see something different and that's why I like the balance of our sustainable dividend. We're doing you know.

Being able to still Opportunistically look at share repurchases, but I want to see that same question answered and therefore, we want to continue to keep keep paying debt down which is why we changed our guidance on the leverage range Yeah Tony.

Joel Quadracchi: And therefore, you know, we want to continue to keep paying debt down, which is why we changed our guidance on the leverage range. And, Martin, I mean, we have, you heard this when we went through the slides, roughly speaking, 50% of our debt is fixed, 50% of it is floating interest rate. And so with the rates where they are right now, in addition to just being prudent on debt leverage, to Joel's point, it saves real money, you know, as we can pay down debt and then use that lower interest spend, and use the cash from that to put it into growth of You know, we still dedicate 2% of our revenue to capital expenditures, and yeah, some of that's maintenance, but there's also a lot of money that we're putting in in automation to continue to make things more efficient and more technology spend as we continue to innovate.

I mean.

We have you know you've heard this one we went through the slides, but roughly speaking 50% of our debt is fixed 50% of it is floating interest rate and so with the rates where they are right. Now in addition to just being prudent on that leverage to Joel's point it saves real money as we can pay down debt and they use that lower interest spend.

Use the cash from that to put it into growth of the company, we still dedicated 2% of our revenue to capital expenditures some of that's maintenance, but theres also a.

Large prices that we're putting in automation to continue to make things more efficient and more technology spend as we continue to innovate so you'll see us move money in that direction lowering that helps in that regard and happy to do the dividend.

Tony Staniak: So you'll see us, you know, move money in that direction, lowering debt helps in that regard, and we are happy to pay the dividend. And another thing, Martin, if you look back at where we came from in our strategy, when we started playing a consolidator in the core business when the product lines were shrinking, it was about managing, you know, good, strong, free cash flow by making sure you put the work in the most efficient plants and then squeezing down the platform as volume went down. So it's not just the cash, it isn't just on a regular basis, and it isn't just from yearly free cash flow. It's from expected sales of those assets that you close and sell as the, you know, organic decline happens. And so the two of them have resulted in that huge ability to pay down debt. I mean, you know, we went through a pandemic, and we're still paying down debt. That's because we, you know, treated all costs as variable and closed plants as the volume dictated it.

Another thing Barton, if you look back at where we come from and our strategy. When we started playing a consolidator in the core business that we're the product lines were shrinking.

It was about managing good strong free cash flow by making sure you put it.

Work in the most efficient plants and then squeezing down the platform isn't the volume went down so it's not just the cash isn't just on a regular basis isn't just from yearly free cash flow is from expected sales of those assets that you close himself as the as the organic decline happened.

And so the two of them have resulted in that huge ability to pay down debt. I mean, we went through a pandemic and we're still paying down debt that's because we.

Treated all costs as variable with closed plants as the volume dictated it and so that ability is there to manage what goes to us but Meanwhile, this flywheel of all the other services and driving other large invoices and print will continue to grow.

Joel Quadracchi: And so, you know, that ability is there to manage what goes to us. But meanwhile, this flywheel of all the other services and driving other large invoices in print will continue to go. Okay, that's very helpful. Thank you guys. You're welcome. Thank you, Mark. Thanks, Pardon. Operator.

Okay. That's very helpful. Thank you guys.

Youre welcome. Thank you bark pardon.

Operator. This concludes our question and answer session I would like to turn the conference back over to Joel quite quite geraci for closing remarks.

Joel Quadracchi: This concludes our question and answer session. I would like to turn the conference back over to Jewel Quadracchi for closing remarks. Okay, thank you everyone for joining today's call. I just want to close by reiterating my confidence in our team, in our strategy, and in our future as a marketing experience company. Our pipeline for new business remains strong thanks to our unique offering, and we will continue to prioritize growth in verticals and product lines with the greatest expansion opportunities while managing all aspects of our business for long-term strength and stability and shareholder value creation.

Okay. Thank you everyone for joining today's call I, just want to close by reiterating my confidence in our team and our strategy and in our future as a marketing experienced company our pipeline for new business remains strong thanks to our unique offering and we will continue to prioritize growth in verticals and product lines with the greatest expansion opportunities or managing all.

Aspects of our business for long term strength and stability and shareholder value creation. So with that we look forward to speaking to you next quarter.

Operator: So with that, we look forward to speaking to you next quarter. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.