Q2 2024 Quad/Graphics Inc Earnings Call

Operator: Good morning, and welcome to Quad's second quarter 2024 conference call. During today's call, all participants will be in listen-only mode.

Good morning, and welcome to Quad second quarter 'twenty 'twenty four conference call. During today's call all participants will be in 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. Alternatively, you can access the slide presentation in the Investors 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. To withdraw your question, please press the star, then 2.

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. Alternatively, you can access the slide presentation on the investors section of Quad website.

Under the events and presentations link.

After todays presentation, there will be an opportunity to ask questions to ask a question. Please press Star then one to withdraw your question. Please press Star then two please note. This event is being recorded.

Operator: Please note this event is being recorded. I will now turn the conference over to Katie Krebsbach, Quad's Investor Relations Manager.

I will now turn the conference over to Katie Krebsbach quads.

Operator: Katie, please go ahead.

Katie Krebsbach: 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 second quarter and year-to-date 2024 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.

Thank you operator, and good morning, everyone with me today are Joel contract Qi, <unk>, Chairman, President and Chief Executive Officer, and Tony Daniel Hajj, Chief Financial Officer.

Speaker Change: So I'll leave today's call with a business update and Tony will follow with a summary of quiet second quarter and year to date 2024 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.

Tony: The release and in today's slide presentation on slide two.

Tony: <unk> financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-GAAP financial measures, including adjusted EBITDA adjusted EBITDA margin adjusted diluted earnings per share free cash flow net debt and debt leverage ratio. We have included in the slide presentation.

Tony: Reconciliations of these non-GAAP financial measures to GAAP financial measures. Finally, a replay of the call will be available on the investors section of Quad Com. Shortly after our call concludes today I will now hand over the call to Joe.

Katie Krebsbach: Quad's financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, free cash flow, net debt, and debt leverage ratio. We have included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures. Finally, a replay of the call 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.

Joel Quadracchi: Thank you, Katie, and good morning, everyone. Our second quarter results were in line with our expectations. Net sales declined versus the prior year due to lower paper, print, and agency solution sales. Print volumes continue to be negatively impacted by ongoing external headwinds, such as significant postal rate increases and elevated interest rates.

Joe: Thank you Katie and good morning, everyone. Our second quarter results were in line with our expectations.

Joe: Net sales declined versus prior year due to lower paper for them.

Joe: And agency solution sales print.

Joe: Print volumes continued to be negatively impacted by ongoing external headwinds such as significant postal rate increases and elevated interest rates. However, during the second quarter, we achieved improvements in both adjusted EBITDA and adjusted EBITDA margin with adjusted EBITDA margin, increasing by 100 basis points to eight two.

Joel Quadracchi: However, during the second quarter, we achieved improvements in both adjusted EBITDA and adjusted EBITDA margin, with adjusted EBITDA margin increasing by 100 basis points to 8.2%. We continue to manage all aspects of our business by treating all costs as 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.

Joe: Percent.

Joe: We continue to manage all aspects of our business by treating all costs as variable.

Joe: Turning to 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.

Joel Quadracchi: Turning to slide three, our MX Solution Suite spans every facet of the marketing journey, from offline to online, across creative, production, and media, supported by data-driven intelligence and state-of-the-art technology. Our focus as a marketing experience company includes delivering integrated service excellence, which we achieve by removing pain points and sources of friction from the marketing process and providing transparency on clients' marketing expenditure. Accelerating market penetration and 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 MX company.

Speaker Change: Turning to slide three our <unk> solution suite spans every facet of the marketing journey from offline to online across creative production and media supported by data driven intelligence and state of the art technology.

Speaker Change: Our focus as a marketing experience company includes delivering integrated service excellence, which we achieved by removing pain points and sources of friction from the marketing process and providing transparency on clients' marketing expenditures.

Speaker Change: 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.

Joel Quadracchi: On slide four, we continue to expand our presence in retail media networks, one of the fastest growing media channels today. As I shared on last quarter's call, eMarketer predicts ad spend in omni-channel retail media networks will grow to more than $100 billion by 2027.

Speaker Change: On slide four we continue to expand our presence in retail media networks, one of the fastest growing media channels today.

Speaker Change: As I shared on last quarter's call E marketer predicts AD spend and Omnichannel retail media networks will grow to more than $100 billion by 2027.

Joel Quadracchi: Our solution, called In-Store Connect by Quad, elevates the shopping experience by taking the best elements of digital commerce and bringing them into physical store environments where purchase intent is highest. Our ability to help CPG brands create engaging and inspiring messages right at the store shelf drives consumers beyond awareness and deep into the purchase funnel. InStore Connect is backed by a robust content management system featuring content developed by Quad. As previously announced, we are partnering with Savemar Companies, the largest private regional grocer on the West Coast, to launch In-Store Connect, which is happening now.

Speaker Change: Our solution called in store connect by Quad elevates the shopping experience by taking the best elements of digital commerce, and bringing them into physical store environments, where purchase intent is highest our ability to help CPG brands create engaging and inspiring messages right at the store shelf drives consumer.

Speaker Change: Beyond awareness and deep into the purchase funnel.

Speaker Change: In store connectors backed by a robust content management system featuring content developed by coop.

Speaker Change: As previously announced we are partnering with the CE Mark companies the largest private regional grocer on the west coast to launch in store connect which is happening now.

Joel Quadracchi: We also just announced our next partnership with Homeland Stores, a large Oklahoma-based grocery chain, which is scheduled to debut our solution in October. Additionally, we are in conversations with more than a dozen other supermarket chains and big box retailers and are already actively selling inventory to CPG companies.

Speaker Change: We also just announced her next partnership with Homeland stores, a large Oklahoma based grocery drain which is scheduled to debut our solution in October.

Speaker Change: Additionally, we are in conversations with more than a dozen other supermarket chains and big box retailers and are already actively selling inventory to CPG companies.

Joel Quadracchi: To enhance our in-store retail media network, we have also partnered with tech companies to further integrate online and in-store advertising, creating a richer, more engaging omni-channel shopping experience. For today's brands and brick-and-mortar retailers, this type of integrated experience is crucial to retaining a loyal customer base and attracting new shoppers. Retailers are enthusiastic about our in-store connect solution. Homeland told us this is a breakthrough for retailers like us because it allows us to stack up against the big e-commerce players while enhancing our in-store experience and providing our customers with relevant and engaging digital content. Moving on to slide five.

Speaker Change: To enhance our in store retail retail media network. We have also partnered with tech companies swiftly to further integrate online and in store advertising, creating a richer more engaging omni channel shopping experience.

Speaker Change: For today's brands and brick and mortar retailers. This type of integrated experience is crucial to retaining a loyal customer base and attracting new shoppers.

Homeland Stores: Retailers are enthusiastic about our in store connect solution homeland stores told US. This is a breakthrough for retailers like us because it allows us to staff up stack up against the Big E Commerce players, while enhancing our in store experience and providing our customers with relevant and engaging digital content.

Joel Quadracchi: During the quarter, we joined all of our creative business lines under a single agency, Betty. This answers the market need for fully integrated, flexible, creative solutions that put quality first regardless of project size, scope, timeline, or budget. Through Betty, we help marketers do more with less in today's ultra-competitive landscape with brand strategy and design, data-driven campaign ideation, pre-media, retail, and adaptive design powered by innovative AI technology to automate and scale with ease, content creation, including in-store and on-location services.

Speaker Change: Moving on to slide five during the quarter, we joined all of our accretive business lines under a single agency Betty.

Speaker Change: The answer is the market need for fully integrated flexible creative solutions that put quality first regardless of project size scope timeline or budget.

Speaker Change: Through Betty we help marketers do more with less in today's ultra competitive landscape with brand strategy and design data driven campaign ideation pre media retail and adaptive design powered by innovative AI technology to automate and scale with ease.

Speaker Change: Content creation, including in store and on location services.

Joel Quadracchi: Our creative solutions are backed by our 24-7 global production platform to offer highly scalable breakthrough creative at elevated speeds without sacrificing brand consistency or quality. We are confident Betty will redefine creative excellence and drive growth for our company. I'm moved that our team chose to name the agency for my mother, the late Betty Quadracci.

Homeland Stores: Our creative solutions are backed by our twenty-four southern global production platform to offer a highly scalable breakthrough creative that elevated speeds without sacrificing brand consistency or quality.

Speaker Change: We are confident Betty will redefine creative excellence and drive growth for our company.

Speaker Change: I move that our team chose to name the agency for my mother delayed that equaled Ronchi. She was a fearless business Trailblazer, who helped my father established quad.

Joel Quadracchi: She was a fearless business trailblazer who helped my father establish Quad. She also started our first creative division, Quad Creative. The name Betty aligns with everything our creative services brands stand for, boldness, inclusiveness, creativity, and tenacity, and is an incredible way to honor her legacy. We continue to enhance Betty's ability to provide skill without sacrifice through our robust video and photography studio capabilities, as shown on slide 6. During the quarter, we introduced 3D Commerce by Quad, the first commercially available automated and scalable 3D scanning solution in the North America market.

Speaker Change: She also started our first creative division Quad creative the.

Speaker Change: The name Betty aligns with everything our creative services brand stand for bolt.

Speaker Change: This inclusiveness creativity, and tenacity and has an incredible wage honored or legacy.

Speaker Change: We continue to enhance <unk> ability to provide skill without sacrifice through our robust video and photography studio capabilities as shown on slide six.

Speaker Change: During the quarter, we introduced three D commerce like Quad.

Speaker Change: First commercially available automated and scalable three D scanning solution in North American market.

Joel Quadracchi: This solution creates photorealistic 3D assets, capturing a brand's product in 360 degrees with intricate surface detail. These assets are used for a range of photo and video applications, including virtual try-ons and augmented reality experiences for websites and mobile apps.

Speaker Change: This solution creates photo realistic three D assets capturing of brands product in 360 degrees with integrated surface level detail.

Speaker Change: Assets are used for a range of photo and video applications, including virtual try ons and augmented reality experiences for websites and mobile apps.

Joel Quadracchi: This solution is a key part of our MX Creative offering. It makes the marketer's job easier by efficiently creating high-quality assets at scale and enhances the consumer's shopping experience, ultimately driving higher sales activity for the retailer. We are pleased to bring this game-changing solution to market through our partnership with CoVision Media, a cutting-edge AI tech company specializing in high-performance 3D scanning. CoVision is well established in Europe, serving companies like Zara, Adidas, and Meta, and reports that its clients have experienced up to 200-300% increase in add-to-cart rates while significantly reducing return rates. The solution also generates significant time and cost savings for clients. Quad will continue to work to find ways to integrate it into other applications in the future.

Speaker Change: This solution is a key part of our M X grade of offering it makes the marketers job easier by efficiently, creating high quality assets at scale and enhances the consumer shopping experience ultimately driving higher sales activity for the retailer.

Speaker Change: We are pleased to bring this game changing solution to market through our partnership with KOL vision media, a cutting edge AI Tech company specializing in high performance three D scanning.

Speaker Change: Co vision is well established in Europe, sugared companies like Zara, Adidas and Meda and reports that its clients have experienced up to 200% to 300% increase in AD to current rates, while significantly returning reducing return rates.

Speaker Change: The solution also generated significant time and cost savings for our clients.

Speaker Change: Rod will continue to work to find ways to integrate it into other uses in the future.

Joel Quadracchi: We are already using the technology for client work, helping a global sportswear brand launch a new athletic apparel line. I'm confident that bringing this innovative offering to the U.S. will further position Betty as a market-leading content producer. Our leadership as an MX company continues to be validated through awards and recognitions, as shown on slide 7. For example, once again, we are featured on the AdAge World's Largest Agency Companies list. For the second time, Arise Media Agency received a SAMI award for Connex, our cutting-edge proprietary media optimization platform.

Speaker Change: We are already using the technology for client work, helping a global sportswear brands launching new athletic apparel line.

Speaker Change: I'm confident that bringing this innovative offering to the U S will further position buddies and market leading content producer.

Speaker Change: Our leadership is an Amex company continues to be validated through rewards and recognition nephew recognitions as showed on slide seven.

Speaker Change: Once again, we are featured on the AD age world's largest agency companies list.

Speaker Change: For the second time arise Media agency received of Zambia Award for connects our cutting edge proprietary media optimization platform.

Joel Quadracchi: Quad's expertise in health care marketing was recognized with our first ever listing on the MM&M Agency 100, an annual ranking of the industry's top health care marketing firms. And for its creative campaign work for Summit Brewing Company and Hekova, our Betty Agency was shortlisted for a Design Competition Award by Communication Arts, the largest creative magazine in the world. Turning to slide 8, in June, we return to the Cairns Lions International Festival of Creativity, the largest gathering of the global advertising and creative communications industry.

Speaker Change: QUADRA is expertise in health care marketing was recognized with our first ever listing on the M N and M Agency 100, an annual ranking of the industry's top health care marketing firms.

Speaker Change: And for its creative campaign worked for summit Brewing Company and Heckuva, Our Betty Agency was Shortlisted for a design competition of war like communication Arts, the largest creative magazine in the world.

Speaker Change: Turning to slide eight in June we returned to the Cannes Lions International Festival of creativity, the largest gathering of the global advertising and creative communications industry.

Joel Quadracchi: While there, we shared our innovation story and strengthened relationships with marketing decision makers from around the world who are looking for scalable solutions to help drive their brands' growth. We gained insights on marketers' most pressing challenges and shared how we can solve them through our MX Solutions Suite. Since re-launching our brand last year, many more attendees have come to recognize us, and our ability to deliver on our promise of better marketing is built on TWAD.

Speaker Change: There, we shared our innovate innovation story and strengthened relationships with marketing decision makers from around the world who are looking for scalable solutions to help drive their brands growth.

Speaker Change: We gained insights on markers most pressing challenges and shared how we can sell them through our <unk> solution suite.

Speaker Change: Since re launching our brand last year, many more attendees have come to recognize us and our ability to deliver on our promise of a better marketing is built on slot.

Joel Quadracchi: On slide 9, we show how our Emec Solutions suite has driven business results for two of our many clients. For example, our strategic rebranding and print packaging work for Summit Brewing Company increased sales of its Twin Pills beer by 3.5 times in the 12-month period after launch. The client told us Quad is a highly trusted partner from creative all the way to printing. We helped Stanley Steamer, a U.S. leader in floor cleaning, raise brand awareness through the power of engaging online videos.

Speaker Change: On slide nine we show how our <unk> solution suite is driven business results for two of our many clients.

Speaker Change: Our strategic rebranding and print packaging work for summit Brewing company increased sales of its twin pills beer by three five times and the 12 month period. After launch the client told US what is a highly trusted partner from creative all the way to printing.

Speaker Change: We hope Stanley steamer our U S leader in floor cleaning raise brand awareness through the power of engaging online videos, we created three targeted Youtube ads for a weeklong brand lift studies R.

Joel Quadracchi: We created three targeted YouTube ads for a week-long brand list study. Our efforts led to a 108% increase in searches, while lowering cost per thousand impressions by 28%. On slide 10, we share how Favorite Child, the brand design arm of our betting agency, uses the power of strategic design to help brands realize their fullest potential and become favorites in their category, launched in 2022. Favorite Child is growing rapidly.

Speaker Change: Our efforts led to a 108% increase in searches while lowering cost per thousand impressions by 28%.

Speaker Change: On slide 10, we share held favorite child brand design arm of our betting agency uses the power of strategic design talent brands realize our fullest potential and become favorites in their category.

Speaker Change: Washington, 2022 favorite child is growing rapidly.

Joel Quadracchi: Revenue in its client portfolio has more than doubled in the first four months of 2024, representing work for clients like Target, Walgreens, Dole, and Bernatello Foods. Recently, Faber Child won a multi-million dollar contract supporting one of America's fastest growing grocery retailers, whose platform includes over 2,000 U.S. stores. Our work includes helping launch a new flagship owned brand, which will be applied across a majority of its product lines, redesigning the existing organic private brand, and performing design execution and photography for all of the client's owned brand products.

Speaker Change: Revenue its client portfolio has more than doubled in the first four months of 2024, representing work for clients like target Walgreens dull and Burnett telephones.

Speaker Change: Recently favorite child won a multimillion dollar contract supporting one of America's fastest growing grocery retailers, whose platform includes over 2000 U S stores.

Speaker Change: Our work includes helping launch of new flagship owned brand, which will be applied across a majority of its product lines redesigns of existing organic private brand and performing design execution and photography for all of the clients own brand products.

Speaker Change: Turning to slide 11, we further demonstrated our expertise in the grocery vertical through our 15 year relationship with one of the nation's leading supermarket change.

Joel Quadracchi: Turning to slide 11, we further demonstrate our expertise in the grocery vertical through our 15-year relationship with one of the nation's leading supermarket chains. Our relationship began with traditional large-scale print, but has since grown into personalized direct marketing, tech, and media solutions focused on enhancing consumer connections, driving sales and revenue, and streamlining processes. For example, with our proprietary retail media content management solution, the retailer is able to dynamically create personalized ads for millions of loyalty members delivered in their preferred media channel. The process of creating the ads is frictionless.

Speaker Change: Our relationship began with traditional large scale print, but has since grown into personalized direct marketing tech and media solutions focused on enhancing consumer connections driving sales and revenue and streamlining processes.

Speaker Change: For example, with our proprietary retail media content management solution.

Speaker Change: The retailer is able to dynamically create personalized ads for millions of loyal team members delivered in their preferred media channel.

Speaker Change: The process of creating the ads it's frictionless.

Joel Quadracchi: The retailer's CPG partners enter their product information and offers into one central location. Then, using its robust loyalty member data, the retailer scores products and channels against consumer preferences to craft hand-picked offers. This solution drives incremental revenue for the grocer while providing first-party data insights to CPGs. Additionally, we are helping the retailer take a more data-driven approach to in-store circulars using the variable data printing capabilities of our digital press platform to create deals and savings by geography. We also support the retailer's in-store shopping experience by producing a large portion of its in-store signage, printing 750,000 pieces across 2,500 kits each week. These kits are highly complex and segmented by region.

Speaker Change: Our retailers CPG partners entered their product information offers into one central location.

Speaker Change: Then using it as a robust loyalty member data the retailers scores products and channels against consumer preferences to craft handpicked offers.

Speaker Change: This solution drives incremental revenue for the grocery while providing first party data insights to cpg's.

Speaker Change: Additionally, we're helping the retailer to take a more data driven approach to in store circulars using the variable data printing capabilities of our digital press platform to create deals and savings by geography.

Speaker Change: We also support the retailers' in store shopping experience by producing a large portion of its in store signage printing 750000 pieces across 2500 kids each week.

Speaker Change: These kids are highly complex and segmented by region.

Joel Quadracchi: Before I turn the call over to Tony, I would like to reiterate my confidence in our team, our strategy, and our future as a marketing experience company. Our pipeline for new business remains strong thanks to our MX Solutions suite. 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. With that, I would like to turn over the call to Tony for the financial review. Thanks, Joel, and good morning, everyone.

Speaker Change: Before I turn the call over to Tony I would like to reiterate my confidence in our team our strategy and our futures and marketing experience company.

Tony: Our pipeline for new business remains strong thanks to our <unk> solution suite, we will continue to prior towards 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.

Speaker Change: With that I would like to turn over the call to Tony for the financial review.

Tony: Thanks, Joel and good morning, everyone.

Anthony C. Staniak: On slide 12, we show our diverse revenue mix. Net sales were $634 million in the second quarter of 2024, a 10% decline compared to the second quarter of 2023, and net sales in the first half of 2024 were $1.3 billion, a 12% decline compared to the first half of 2023. Net sales declined in both periods due to lower paper, print, and agency solutions sales.

Tony: On slide 12, we show our diverse revenue mix net sales were $634 million in the second quarter of 2020 for a 10% decline compared to the second quarter of 2023 and net sales in the first half of 2020 forward $1 $3 billion, a 12% decline compared to the first half of 2012.

Tony: Three net sales decline in both periods due to lower paper print and you can see solution sales are printed volumes were negatively impacted by ongoing external headwinds, including significant pulsar rate increases and the impact of ongoing higher interest rates on our financial services clients as well as the loss of a large.

Anthony C. Staniak: Our print volumes were negatively impacted by ongoing external headwinds, including significant postal rate increases and the impact of ongoing higher interest rates on our financial services clients, as well as the loss of a large grocery client. On a year-to-date basis, magazines and catalogs increased as a portion of our net sales mix by 3% compared to the previous year due to recent segment share wins, such as AARP. These segment share wins also increased our mix of lower unit price gravure printing versus offset printing volumes. In addition, Latin American net sales decreased by 2% as part of our total sales mix, primarily from lower educational book volumes exported to the United States.

Tony: Grocery client.

Tony: On a year to date basis magazines and catalogs increased as a portion of our net sales mix by 3% compared to the previous year due to recent segment share wins such as AARP. These.

Tony: These segments share wins also increased our mix of lower unit price career printing versus offset printing volume.

Tony: In addition, Latin American net sales decreased by 2% as part of our total sales mix, primarily from lower educational book volume exported see the United States.

Anthony C. Staniak: Slide 13 provides a snapshot of our second quarter 2024 financial results. Adjusted EBITDA was $52 million in the second quarter of 2024 as compared to $50 million in the second quarter of 2023, and the adjusted EBITDA margin increased 100 basis points from 7.2% to 8.2%. On a year-to-date basis, adjusted EBITDA was $102 million in 2024, compared to $111 million in 2023. The adjusted EBITDA margin increased 41 basis points, from 7.5% in the first half of 2023 to 7.9% in the first half of 2024.

Tony: Slide 13 provides a snapshot of our second quarter 2024 financial results.

Tony: Adjusted EBITDA was $52 million in the second quarter of 2024 as compared to $50 million in the second quarter of 2023, and adjusted EBITDA margin increased 100 basis points from seven 2% to eight 2%.

Tony: On a year to date basis, adjusted EBITDA was $102 million in 2024 compared to $111 million in 2023, and adjusted EBITDA margin increased 41 basis points from seven 5% in the first half in China and three to seven 9% in the first half of 2020 for the margin.

Anthony C. Staniak: The margin increase in both periods was primarily due to benefits from improved manufacturing productivity, savings from cost reduction initiatives, and a $4 million gain on the sale of our minority investment in Manipal Technologies, a leading print services and end-to-end business solutions provider headquartered in India. In the first half of 2024, we completed previously announced restructuring actions, including plant closures and labor reduction initiatives that we expect will generate $60 million of cost savings during 2024.

Tony: Increase in both periods was primarily due to benefits from improved manufacturing productivity savings from cost reduction initiatives and a $4 million gain on the sale of our minority investment in Nepal technologies, a leading print services and end to end business solutions provider headquartered in India.

Anthony C. Staniak: Adjusted diluted earnings per share was $0.12 in the second quarter of 2024, as compared to $0.02 in the second quarter of 2023. Year-to-date adjusted diluted earnings per share was $0.22 in 2024, compared to $0.17 in 2023. The increase in both periods was primarily due to higher adjusted net earnings and the beneficial impact of a lower share count due to stock buybacks.

Anthony C. Staniak: Since the second quarter of 2022, we have repurchased approximately 11% of our total outstanding common stock. Pre-cash flow was negative $82 million in the first half of 2024 as compared to negative $45 million in the first half of 2023. In the first half of 2023, we realized non-recurring cash flow benefits from reducing inventories enabled by an improved supply chain environment. As a reminder, the company historically generates the majority of its free cash flow in the fourth quarter of the year.

Tony: Free cash flow in the fourth quarter of the year.

Anthony C. Staniak: As we have previously shared, we will continue to generate strong free cash flow in addition to proceeds from asset sales, as shown on slide 14. For the five-year period from 2020 to 2024, we expect to generate over $740 million of free cash flow and proceeds from asset sales. And with this cash generation, we expect to reduce net debt by over $600 million, or 60%, during that same five-year period. Asset sales include divestitures of certain non-core portions of our business, as well as sales of property, plant, and equipment from closed facilities. In April, we sold our minority investment in Manipal Technologies and received total proceeds of $22 million in the second quarter.

Tony: As we have previously shared we will continue to generate strong free cash flow. In addition to proceeds from asset sales as shown on slide 14.

Tony: During the five year period from 2020 to 2024, we expect to generate over $740 million of free cash flow and proceeds from asset sales and with this cash generation, we expect to reduce net debt by over $600 million or 60% during that same five year period.

Tony: Asset sales include divestitures of certain noncore portions of our business as well as sales of property plant and equipment from closed facilities in April we sold our minority investment in <unk> technologies and received total proceeds of $22 million during the second quarter.

Anthony C. Staniak: We also continue to make progress on the sale of four owned facilities previously announced for closure, from which we will generate further proceeds. Slide 15 includes a summary of our debt capital structure. At the end of the second quarter of 2024, our net debt was $532 million compared to $470 million as of December 31, 2023, and the debt leverage ratio increased 35 basis points to 2.36 times. Net debt increased from 2023 year-end, primarily due to business seasonality, with negative $82 million of free cash flow in the first half of 2024, partially offset by $22 million of proceeds from the sale of our minority investment in manifold technologies

Speaker Change: We also continue to make progress on the sale of four owned facilities previously announced for closure from which we will generate further proceeds.

Speaker Change: Slide 15 includes a summary of our debt capital structure.

Speaker Change: At the end of the second quarter of 2024, our net debt was $532 million compared to $470 million as of December 31, 2023, and the debt leverage ratio increased 35 basis points to 236 times net debt increased from 2023 year end <unk>.

Speaker Change: Merely due to business seasonality with negative $82 million of free cash flow in the first half of 2024, partially offset by $22 million of proceeds from the sale of our minority investment in <unk> technologies.

Anthony C. Staniak: Removing the impact of seasonality, we have reduced net debt by $72 million over the past 12 months. Including interest rate derivatives, our debt at the end of the second quarter was 59% floating and 41% fixed at a blended interest rate of 7.6%.

Speaker Change: Removing the impact of seasonality, we have reduced net debt by $72 million over the past 12 months.

Speaker Change: Including interest rate derivatives, our debt at the end of the second quarter was 59% floating and 41% fixed at a blended interest rate of seven 6%.

Anthony C. Staniak: Our total available liquidity, including cash on hand, was $222 million, and our nearest significant debt maturity is in November 2026. We show the seasonality of our free cash flow and debt leverage, as well as our long-term commitment to debt reduction, on slide 16. Due to the seasonality of our business, we will operate, at certain times of the year, above our targeted debt leverage range of 1.75 times to 2.25 times. Our seasonal production peak occurs in the late third quarter and early fourth quarter of the year due to the timing of holiday-related advertising and promotion.

Speaker Change: Our total available liquidity, including cash on hand was $222 million and our nearest significant debt maturity is in November 2026.

Speaker Change: We show the seasonality of our free cash flow and debt leverage as well as our long term commitment to debt reduction on slide 16.

Speaker Change: Due to the seasonality of our business, we will operate at certain times of the year above our targeted debt leverage range of 175 times to 225 times.

Speaker Change: Our seasonal production peak occurs in the late third quarter and early fourth quarter of the year due to the timing of holiday related advertising and promotions. This leads to inventory build prior to that time, and then results in higher collections from clients in the fourth quarter.

Anthony C. Staniak: This leads to inventory build-up prior to that time and then results in higher collections from clients in the fourth quarter. In 2024, we continue to anticipate a similar seasonal pattern, and we believe we are on track to further reduce debt leverage to approximately 1.8 times at the end of this year, near the low end of our targeted long-term debt leverage range. We reaffirm our full-year guidance ranges, as shown on slide 17.

Speaker Change: In 2024, we continue to anticipate a similar seasonal pattern and we believe we are on track to further reduce debt leverage to approximately one eight times at the end of this year near the low end of our targeted long term debt leverage range.

Speaker Change: We reaffirm our full year guidance ranges as shown on slide 17.

Anthony C. Staniak: For full year 2024, our annual net sales guidance is a decline of 5 to 9% compared to the prior year. We now expect full-year net sales to be near the higher end of the decline in our guidance range due to ongoing macroeconomic headwinds, including postal rate increases and elevated interest rates. We will continue to closely monitor these specific headwinds for our company and on behalf of our clients.

Speaker Change: For full year 2024 annual net sales guidance is a decline of 5% to 9% compared to the prior year.

Speaker Change: We now expect full year net sales to be near the higher end of the decline in our guidance range due to ongoing macroeconomic headwinds, including postal rate increases and elevated interest rates.

Speaker Change: We'll continue to closely monitor these specific headwinds for our company and on behalf of our clients.

Anthony C. Staniak: Full-year 2024 adjusted EBITDA is expected to be between $205 and $245 million, with $225 million at the midpoint of that range. As we shared last quarter, we expect sequentially higher adjusted EBITDA in the second half of 2024 compared to the first half of 2024 due to the full benefit of the restructuring actions completed in the first half of the year, combined with increased 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. Pre-cash flow will be most impacted by higher restructuring payments in the first half of the year, partially offset by reduced capital expenditures, with capital expenditures expected to be in the range of $60 to $70 million.

Speaker Change: Full year 2024, adjusted EBITDA is expected to be between 205 and $245 million with $225 million at the midpoint of that range as we shared last quarter, we expect sequentially higher adjusted EBITDA in the second half of 2024 compared to the first half of 2000.

Anthony C. Staniak: The primary use of free cash flow and cash proceeds from asset sales will continue to be debt reduction, and we reaffirm our debt leverage ratio to be approximately 1.8 times at the end of 2024. Slide 18 includes our key investment highlights as we continue to build on our momentum as a marketing experience company. We believe that Quad is a compelling long-term investment, and we remain focused on growing net sales and driving higher profitability through continued diversification of our revenue and clients.

Anthony C. Staniak: With our expanded offerings, such as In-Store Connect and 3D Commerce by Quad, discussed earlier, there is a significant addressable revenue opportunity with both our large base of existing clients and new clients. In addition, our strong cash generation will continue to fuel our capital allocation priorities. These include investing in the scaling of our offerings, further reducing debt, and returning capital to shareholders through our next quarterly dividend of $0.05 payable on September 6th. We also expect to continue to be opportunistic in terms of our future share repurchase. With that, I'd like to turn the call back to our operator for questions.

Speaker Change: Yes.

Speaker Change: Yeah.

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

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Our first question comes from Kevin Steinke with Barrington Research Associates. Please go ahead. Thank you. Good morning. I wanted to start out by asking about the pipeline for your Retail Media Networks or RMN offering. It looks like that continues to build nicely, maybe just speak to. You know, how quickly those opportunities can move through the pipeline, and then just larger opportunities, even beyond what you currently have in the pipeline.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star and then two.

Joel Quadracchi: Yeah, you know, I think that this has been a story that's been developing very quickly this year, not just at Quad but also in the industry. And so, CAN is always a good place to kind of get a feel for what people are talking about. And last year this time, they were talking about retail media networks because it's, you know, it's a big growing area. But it really accelerated when we were there this year.

Speaker Change: Our first question.

Speaker Change: Comes from Kevin Spanky with Barrington Research Associates. Please go ahead.

Joel Quadracchi: So the whole industry is trying to capitalize on this because, you know, when you look at a digital retail media network like Amazon where they're selling significant ad dollars to CPGs, you know a lot of the retailers can't compete with that, and they're trying. And so especially if you're a mid-size to even larger retailer, people are trying to figure it out. And when you go into a store, that's where your intent to purchase is strongest. And brick and mortar is here to stay. I think it's stronger than people thought it would be.

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

Speaker Change: Morning.

Joel Quadracchi: And so there's really an opportunity here where you're putting the digital screens right in front of people and being able to serve up content very specifically that you've sold as EPGs to populate the space. And so what we've seen is, you know, with Save Mart, we started those conversations early on. You know, they see where this is going, and they were very intent on getting going with testing. So that's where we're actually right now going live and rolling out stores.

Kevin Mark Steinke: I wanted to start out by asking about the <unk>.

Speaker Change: Pipeline or your.

Speaker Change: Retail media networks, or our RM and offering it looks like that.

Speaker Change: It continues to build nicely.

Speaker Change: Maybe just speak to.

Speaker Change: You know how quickly those opportunities can move through the pipeline and then just the larger opportunity even beyond what you currently have in the pipeline.

Speaker Change: Yeah, I think that this has been a story that's been developing very quickly. This year are doctors that quad, but also in the industry.

Ken: Ken is always a good place to kind of get a feel for what people are talking about in last year. This time, they were talking about retail media networks, because it's it's a big it's a big growing area, but it really accelerated where there. This year. So the whole industry is trying to capitalize on this because when you look at a digital retail.

Speaker Change: Media network like in Amazon, where they're selling significant AD dollars to CPG is a lot of the retailers can't compete with that and they're trying.

Speaker Change: And so, especially if you're a mid sized to even larger ones. It's if people are trying to figure it out and when you go into the store, that's where your intent to purchase is the most in brick and mortar is here to stay I think it's stronger than people thought it would be and so there is there's really an opportunity here what are you putting the digital screens right in front of people and being able to see.

Speaker Change: <unk> content very specifically that you can solve the cpg's.

Speaker Change: To populate the space and so what we've seen is we would save Mart, we started those conversations early on.

Speaker Change: See where this is going and they were very intent on getting going with testing. So that's where we're actually right now going live in rolling out stores and then you saw it.

Joel Quadracchi: And then you saw, you know, our new announcement in this conference call about the next one. And we are talking to quite a few because I think it's one of these things where people want to see the proof in the pudding. Like, what happens when you actually do it? What is the result?

Speaker Change: New announcement, just just in this conference call about the next one and we are talking to quite a few because I think it's one of these things where people want to see the proof in the pudding like what happens when you actually do it.

Speaker Change: What is the result, what are the metrics around it and that's why save Mart started with 15 stores to get up right away.

Joel Quadracchi: What are the metrics around it? And that's why Save Mart started with 15 stores to get up right away. But if you think about where this is going, like if you could get up to, call it, you know, 6, 7, 800 stores live on a retail media network like this. Every week, that's more than the audience of a Super Bowl.

Speaker Change: But if you think about where this is going like if you could get up to call. It 678 hundred stores.

Speaker Change: Alive on our retail media network like this.

Speaker Change: Every week, that's more than the audience of the Super Bowl.

Joel Quadracchi: And so that's meaningful. And so I think the race is on for us to try and build those eyeballs quickly, and retailers see the opportunity, and some will kind of probably wait to see, and others are very anxious to kind of get in on it so they can start building their own test data as we go. So I'd say that the time to convert, depending on the customer's willingness to kind of go out there, can be pretty quick.

Speaker Change: And so that's meaningful and so I think the race is on for us to try and build those eyeballs quickly and our retailers see the opportunity and some will kind of probably wait to see and others are very anxious to kind of get in on it. So they can start building their own test data as we go so I would say that the.

Joel Quadracchi: And like I said, we're rolling them out right now, and we only launched them not long ago, so this is a big deal. And we're also trying to make it very easy for them to say yes because we bring a full offering. It's one thing to put the digital screens in. It's another to pay for them, so we've been incurring that CapEx up front to help them make that decision. But once you have the screen space in your inventory, you've got to be able to serve up the content.

Speaker Change: Time to convert depending on the customer's willingness to kind of go out there.

Speaker Change: Can be pretty quick.

Speaker Change: And like I said, we're rolling them out right now and we only launched it not long ago. So this is a big deal and we're also trying to make it very easy for them to say, yes, because we bring a full offering it's one thing to put the digital screens in its another to pay for them. So we've been.

Speaker Change: Incurring that capex upfront to help them make that decision, but once you have the screen space on the inventory you got to be able to serve up the content and so now a lot of the live adds that we're doing for some major brands are actually created by quad to serve it up and can be specifically routed to whatever store if people want to buy.

Joel Quadracchi: And so now a lot of the live ads that we're doing for some major brands are actually created by Quad to serve them up, and they can be specifically routed to whatever stores people want to buy. And so we've been assembling that for a while. The Dart acquisition was sort of the last thing we needed to really provide that hardware platform, and so we're very excited about this. We believe a lot in it, as you can tell.

Speaker Change: And so that's the key to this it's not just about putting digital screens and it's about putting digital screens that are designed to look like this that it's not just lapping something on the wall.

Speaker Change: But also creating the content and the whole wraparound services to make it painless for the retailer to do this and so we've been assembling that for a while the Dart acquisition was sort of the last thing we needed to really provide that hardware platform and so.

Speaker Change: We're very excited about this we believe a lot in it as you can tell.

Speaker Change: And.

Speaker Change: The pipeline is building pretty quickly.

Joel Quadracchi: Okay, that sounds great. And, you know, it sounds like you feel like you have a... Pretty unique offering there, what you said, you talked about the ability to create content as well as deploy the, you know, the digital streams, and I'm just wondering, given the emerging nature of this opportunity, if you're seeing a fair amount of competition in the marketplace, and where do you feel like you're positioned competitively in this RMN landscape? Yeah, I think.

Speaker Change: Okay that sounds great.

Speaker Change: And it sounds like.

Speaker Change: Feel like you have a.

Speaker Change: Pretty unique offering there you said you talked about the ability to create content as well as.

Speaker Change: Deploying that.

Speaker Change: The digital screens in.

Speaker Change: I'm just wondering.

Speaker Change: Given the emerging nature of this opportunity if you are seeing.

Speaker Change: A fair amount of competition in the marketplace.

Speaker Change: Where do you feel like you're positioned competitively in this Oh, and then went R. M.

Speaker Change: And landscape.

Joel Quadracchi: Yeah, I think there's definitely competition, and there are screens out there doing things, but ours is a little bit more unique in that it's the full service, the full line of stuff. And you know, think about it, if you can create that coast-to-coast sort of set of a lot of stores that matter enough to a CPG, we can actually, they can decide in what order, where they want to serve it up. So it's a very dynamic offering.

Speaker Change: Yeah, I think there's definitely competition and there are screens out there doing things, but but ours is a little bit more unique in that it is.

Joel Quadracchi: The big guys, you know, like Amazon, obviously will do it themselves. You know, you've got other people like Walmart, who made a big acquisition for this. They'll try and do it themselves, but most retailers aren't really set up to do it. So I think the fact that we're already rolling this out live gives us more of an aggressive, I think, full service, first mover opportunity here relative to the competitors, but certainly, there'll be competitors.

Joel Quadracchi: I mean, this is a huge space, growing rapidly, and the retail media network for brick and mortar is just in its fledgling stage. I think, Kevin, I'd add to that: I think we're better capitalized than our competition for this. You know, with the work that we've done on debt reduction, we've got the dry powder to take advantage of this opportunity.

Anthony C. Staniak: Okay, that's great. And you mentioned the Dart Innovation Acquisition to help build out the offering. Then, can you also talk about the partnership with Swiftly and just try to understand a little bit better what that partnership brings to you in terms of the in-store connect offering?

Joel Quadracchi: Yeah, so SWIFTly really brings us another sales channel to sell the inventory. They're already out there doing that for different format stores and retail media networks in general.

Speaker Change: Doing that for a different format stores and.

Speaker Change: And in retail media networks in general so the opportunity is to we want to fill that inventory. Once you have those screens up you've got to sell the ads and I think in the early days you know you've got to go fast because to a lot of big CPG is theyre not going to necessarily want to buy inventory to tell us meaningful.

Joel Quadracchi: So the opportunity is to, you know, we want to fill that inventory. Once you have those screens up, you've got to sell the ads. And I think in the early days, you know, you've got to go fast because for a lot of big CPGs, they're not going to necessarily want to buy inventory until it's meaningful. And so we're out there selling wherever we can get people to do it because there are a lot of people who also want to learn as the learning curve happens when placing that inventory.

Speaker Change: So we're out there selling wherever we can get people to do it because there are a lot of people also want to learn.

Speaker Change: The learning curve happens in placing that inventory. So there are another sales channel, but then they also healthcare.

Joel Quadracchi: So they're another sales channel, but they also help care for, you know, help manage sort of the back end of the transactions on the inventory. So it's another sales channel for us, but also a great partnership. They're a great company.

Speaker Change: Help vantage sort of the backend of the transactions on the inventory. So it's another sales channel for us, but also a great partnership they're a great company.

Speaker Change: Okay.

Joel Quadracchi: Great, that's helpful. Switching gears here, talking about some of the sales headwinds you're encountering in terms of postal rates. Have you seen any..., you know, in terms of your clients becoming a little more used to operating in that environment? I know you recently launched Household Fusion, or, you know, any further discussions? with the relevant government parties about the future direction of rates. Maybe just an overall update on the... rate landscape and how you're addressing that.

Speaker Change: Great that's helpful.

Speaker Change: And to.

Speaker Change: Switching gears here.

Speaker Change: You're talking about some of the sales headwinds you're encountering.

Speaker Change:

Speaker Change: In terms of postal rates.

Speaker Change: Have you seen any.

Speaker Change: Using their you know in terms of your clients, becoming a little more used to operating in an environment. I know you recently loss launched household fusion or any further discussions.

Speaker Change: With the relevant.

Speaker Change: Our government parties about the future direction of rates, maybe just an overall update on the.

Speaker Change: Postal rate landscape.

Speaker Change: How your your.

Speaker Change: Addressing that.

Joel Quadracchi: Yeah, to remind everybody, last year we saw a pretty significant reset of volume in the second half because the post office surprised our clients with a significant increase last July that wasn't built into their, you know, annual budget cycle. And so that's where we saw a big pullback. So if you think about the first half of this year, you know, that carried through because you didn't see, you know, a spring forward after the first of the year.

Speaker Change: Yeah.

Speaker Change: To remind everybody last year, we saw it's pretty.

Speaker Change: A significant reset of volume in the second half because the post offices have surprised our clients with a significant increase last July.

Speaker Change: That wasn't built into their annual budget cycle, and so that's where we saw a big pullback. So if you think about the first half of this year, that's carrying through because you didn't see a.

Speaker Change: Spring forward after the first of the year.

Speaker Change: I also have talked about in previous calls my concern about the postal rate increase that was happening. This July just happened about a week ago at 10% to remember this is the largest cost for people using print to get to the household.

Joel Quadracchi: I also have talked about in previous calls my concern about the postal rate increase that was happening this July, just happened about a week ago, at 10%. Remember, this is the largest cost for people using print to get to the household.

Joel Quadracchi: My hope was that people weren't surprised this time and that they were able to sort of manage it into their budget. And I'd say, so far, so good. We haven't seen the same significant pullback which we would typically have seen by now for the second half. But it doesn't mean there won't be some ebbing and flowing on that because people are still also very concerned about the consumer. And, you know, that's another reason why we are at the low end of our sales guidance because of the continued economic sort of uncertainty. I mean, and I'll come back to that, but, you know, to further answer your question, we certainly have all sorts of efforts.

Speaker Change: My Hope was is that people werent surprised this time and that they were able to sort of manage it into their budget.

Speaker Change: And I'd say, so far so good.

Speaker Change: We haven't seen the same significant pullback, which we would typically have seen by now for the second half. It doesn't mean, there won't be some ebbing and flowing on that because people are still also very concerned about the consumer and.

Speaker Change: That's another reason why we are at the low end of our our sales guidance is because of the continued economic sort of uncertainty I mean, and I'll come back to that but two to further answer your question.

Speaker Change: We are certainly.

Speaker Change: Have all sorts of efforts we've submitted comments postal rate Commission is doing on total review of the structure and what's going on.

Joel Quadracchi: We've submitted comments, and both the rate commission is doing a total review of the structure and what's going on. You know, Congress is very upset with the post office because they've launched a major restructuring that's supposed to fix things, but performance has been horrible. So they're hearing from their constituents and, you know, they're counting on a whole bunch of parcel volume to kind of be their future. But unfortunately, the nurses have already left the barn on that. If you read the Wall Street Journal yesterday about Amazon starting to get more aggressive in rural areas for delivery, that typically is handled by the post office.

Speaker Change: Congress is very upset with the post office, because they've launched a major restructuring that as opposed to fix things, but performance has been a horrible so they're hearing from their constituents and they are counting on a whole bunch of parcel volume to kind of be their future, but unfortunately that the vs have already left the barn on that if you've read the wall Street Journal yesterday about Amazon.

Speaker Change: Starting to get more aggressive in the rural areas for delivery that typically is handled by the post office. So I think you know all efforts are on to continue to.

Joel Quadracchi: So I think, you know, all efforts are on to continue to try and get the service to moderate their increases because it's self-defeating, and we'll continue to do that. Let me just touch on the economic part of it. We said last year when interest rates went crazy, that impacted us in certain sectors of our business, you know, obviously the financial segment and the use of print. You know, we're seeing a slow recovery there, but hopefully, it will recover.

Speaker Change: Try and get the service to moderate the increases because it's self defeating and we'll continue to do that.

Speaker Change: Let me just touch on the economic.

Speaker Change: Part of it is.

Speaker Change: We said last year when interest rates went crazy that impacted us certain sectors of our business, obviously financial segment.

Speaker Change: And the use of print.

Speaker Change: A slow recovery, there, but hopefully it will recover.

Joel Quadracchi: And then, you know, the first half, I mean, even the number of units in the CPG world were negative. So people were switching from, you know, nice to have to need to have because of inflation. You know, much of America has been hit by inflation. And now only recently did the CPG world talk about flat numbers of units.

Speaker Change: And the first half I mean, you look at even the number of units in the CPG World were negative. So people were switching from a nice to have to need to have because of inflation.

Speaker Change: Much of America has been hit by inflation.

Speaker Change: And now only recently that the CPG World talk about flattened number of units and so you kind of combine that all and that's where you see the headwind on the top line sales I will say that we've had some segment share gains in publications and catalogs. So volume was actually.

Joel Quadracchi: And so you kind of combine that all, and that's where you see that headwind on the top line sales. But I will say that we've had some segment share gains in publications and catalogs. So volume was actually, you know, quite nice with segment shares coming in, but there was a mixed change that happened with some of those segment shares. So we have two types of printing, offset printing and gravure printing. Gravure is typically more efficient for longer runs, and some of that segment share came in that space. So while more profitable, the per unit price because of the efficiency is typically lower, which would impact top line sales as well.

Speaker Change: Quite nice with say matures coming in but there's a mix change that happened with some of those segment share. So we have two types of printing offset printing in gravure printing careers typically more efficient for longer run and some of that segment share came in that space. So while more profitable the per unit price because of the efficiencies typically.

Speaker Change: Lower which would impact our top line sales as well.

Joel Quadracchi: Okay, that's a helpful commentary. As you have on past calls, maybe just go through some of the sales trends and some of your key, You know, the key product categories, what you've seen maybe in the quarter and year to date. And then, you know, related to that, just even though you expect sales to be towards the lower end of the guidance range, it still implies a pretty healthy seasonal ramp in the second half in terms of sales, you know, seeing some of your typical seasonal ramp up or, you know, benefit from recent Business Wins, or maybe if you'd speak to that as well. Yeah, that's...

Speaker Change: Okay. That's helpful commentary.

Speaker Change: And.

Speaker Change: As you have on past calls maybe just run through it.

Speaker Change: Some of the sales trends in some of your key.

Speaker Change: You know the key product categories, what you have seen maybe in the quarter and year to date.

Speaker Change:

Speaker Change: And then.

Speaker Change: Related to that just yet.

Speaker Change: Even with your.

Speaker Change: The expectation that maybe.

Speaker Change: The sales will be towards the lower end of the guidance range It still implies.

Speaker Change: Pretty healthy seasonal ramp in the second half in terms of sales how are you.

Speaker Change: Seeing some your typical seasonal ramp up or benefit from recent.

Speaker Change: Business wins, or maybe if you could speak to that as well.

Joel Quadracchi: Yeah that's that's actually that is correct that again with the postal rate when it hit you know we saw you know kind of across across the board negative you know high single to low double-digit decline in the different categories that use postal and then some of the stuff in like packaging in-store were down because of the economic thing but it does imply a ramp up in the second half because then the you get the annualization of the impact of the postal rate increase but also some of the save and share comes in I mean if you look at publication catalogs volume wise those were up not down volume wise but still down sales wise because that makes change and so I guess I characterize you know in general a lot of the stuff in the first half was down because of the things I just talked about but you should see a nice ramp up in the second half which is the busier time of the year. Yeah well you know we'll have closer results to our comparables of the prior year in the second half of the year than the first. Our revenue decline will not be as much.

Speaker Change: Yes, that's actually that is correct that again with the postal rate when it hit.

Speaker Change: We saw.

Speaker Change: Kind of across the across the board negative.

Speaker Change: High single to low double digit decline in the different categories.

Speaker Change: Let us postal and then some of the stuff in like packaging in store, where we are.

Speaker Change: Were down because of the economic thing, but it does imply a ramp up in the second half because then.

Speaker Change: You get the annualized nation of the impact of the postal rate increase.

Speaker Change: But also some of the savings sure Tom said I mean, if you look at publication catalogs volume wise those were up not down volume wise, but still down.

Speaker Change: Sales why because of that mix change and so I guess I'd characterize in general a lot of the stuff in the first half was down because of the things I just talked about but you should see a nice ramp up in the second half, which is the busier time of the year.

Speaker Change: What will have closer.

Speaker Change: Resolved to our comparable as the prior year in the second half of the year than the first.

Speaker Change: Our revenue declines will not be as much.

Operator: Okay, yeah, understood. And we'll turn it back over for now. Thanks for taking the questions.

Speaker Change: Okay, Yeah understood.

Speaker Change: I will turn it back over for now thanks for taking the questions.

Kevin Mark Steinke: Alright, Thank you Kevin.

Operator: Operator, next question.

Speaker Change: And the next question and the next question comes from Barton Crockett with Rosenblatt. Please go ahead.

Operator: And the next question comes from Barton Crockett with Rosenblatt.

Operator: Okay, thanks for taking me...

Speaker Change: Okay.

Joel Quadracchi: We wanted to thank you for picking up coverage in May. Welcome officially to the team here.

Barton Evans Crockett: I was wondering too I wanted to thank you for picking up coverage and main welcome officially too.

Speaker Change: So the team here.

Anthony C. Staniak: Okay, happy to be covering you guys, and thanks for taking the questions. I guess one of the things I was curious about is, you know, just circling back to your guidance, so you're saying, you know, the high end of the revenue decline. [inaudible] So what can you say about the EBITDA and Pre-Cash Flow Guidance range?

Barton Evans Crockett: Okay happy happy to be covering you guys and.

Speaker Change: Thanks for taking the question so.

Speaker Change: I guess one of the things I was curious about is.

Speaker Change: Just from getting circling back to your guidance, so you're saying the high end of the revenue decline.

Speaker Change: But youre not seeing anything about the EBITDA and free cash flow.

Speaker Change: One might presume that it could follow that you'd be at.

Speaker Change: Worse end of the range for those different revenues at the more sand, but maybe not with your cost cutting.

Speaker Change: So what can you say about the EBITDA and free cash flow guidance ranges.

Anthony C. Staniak: I appreciate the question, Barton. I think you've caught on a major theme for us, which is, while smaller, as Joel discussed with revenue pressures, a more profitable business when you look at our margins, with a lot of focus on cost reduction and labor and manufacturing productivity improvements that will keep our EBITDA and free cash flow higher, such that we do not feel the need to guide to the lower end of those respective ranges.

Speaker Change: I appreciate the question Barton.

Speaker Change: I think you've caught on a major theme for us, which as you know while smaller as Joel discussed with the revenue pressures a more profitable business. When you look at our margins with a lot of focus on cost reduction and labor and.

Speaker Change: And manufacturing productivity improvements.

Speaker Change: That will keep our EBITDA and free cash flow higher such that we did not feel the need to guide to the lower end of those respective ranges I think one of the things that we're proud of with like the 100 basis point improvement in <unk>.

Anthony C. Staniak: I think one of the things that we're proud of with the 100 basis point improvement in the adjusting EBITDA margin is that we've got a knack for doing cost reduction and productivity improvement in a sustainable way, as opposed to sort of one-time shots. And so that's why we feel good about where we are.

Speaker Change: Adjusted EBITDA margin.

Speaker Change: As we've got a knack for doing cost reduction and productivity improvement in a sustainable way as opposed to answered sort of onetime shots.

Speaker Change: So that's why we feel good about where we're at.

Anthony C. Staniak: Okay. Now, I was also curious about the progress on asset sales. So I think you mentioned four. You know, I know that you guys have some larger facilities, Saratoga, I think, and around Effingham, Illinois. Those two facilities. Can you update us on where you are in the sales process there? And what do you think the timeline might be for wrapping those up, and what the four properties are specifically that you're talking about?

Speaker Change: Okay. Now I was also curious about the progress on asset sales. So I think you mentioned four.

Speaker Change: I know that you guys have.

Speaker Change: Some larger facilities Saratoga thinking around Effingham, Illinois.

Speaker Change:

Speaker Change: Those two facilities can you update us on where you are in the sales process there and.

Speaker Change: What do you think the timeline might be for.

Speaker Change: Wrapping those up into four kind of and what the four properties are specifically that you were talking about.

Anthony C. Staniak: Yes, we have four properties for sale, two buildings located in Eppingham, Illinois; one in Sacramento, California; and one, the largest one, in Saratoga Springs, New York. Those sales are all in process. It's always hard to guess on the timing, right, about when this will come through. A lot of things have to come together. I feel pretty certain that some of these are going to go into 2025, Barton. But I'll also add that to achieve our debt leverage range of 1.8, we wouldn't need any of these properties to sell for us to believe we can achieve that approximately 1.8 debt leverage ratio. So if something does, it serves as a benefit.

Speaker Change: Yes. So we have again, we have four properties for sale two buildings located in Effingham, Illinois, one in Sacramento, California and won the largest one in CRH over Springs, New York.

Speaker Change: Those sales are all in process, it's always hard to guess on the timing right above when this will come through a lot of things have to come together.

Speaker Change: I feel pretty certain that some of these are going to go into 2025 Barton.

Speaker Change: But I'll also add that to achieve our debt leverage range of one <unk>.

Speaker Change: We wouldn't need any of these properties to sell for us to believe we can achieve that approximately one eight debt leverage ratio. So if something does it serves and its benefit.

Anthony C. Staniak: Okay, I understand that that could be a benefit. But, what you know, there are obviously some questions I think about the just the broader real estate market given interest rates. How would you describe the activity and the level of interest around these properties at this point?

Speaker Change: Okay, I understand that that could be a benefit but the.

Speaker Change: But there is obviously some questions I think about just the broader real estate market given interest rates.

Speaker Change: How would you describe kind of the activity and the level of interest around these properties at this point.

Anthony C. Staniak: It can differ based on the respective geographies, which is what we're seeing at this point. So we have an interest in some and in others not, you know, less interest.

Speaker Change: It can differ based on the respective geographies as what we're seeing at this point.

Speaker Change: So we have interest in some than in others not.

Speaker Change: David.

David: Yes interest.

Anthony C. Staniak: Okay, but do you still have confidence that there will be resolution for all four of these? You know, sometime in the next several months by 2025, or is it possible that, you know, maybe one of them doesn't get sold, and you pull it back?

David: Okay, but do you are you still have confidence that there is resolution for all therapies.

Speaker Change:

Speaker Change #107: Sometime in the next several months by 2025 or is it possible that you know maybe one of them doesn't gets all you're pulling back.

Anthony C. Staniak: I don't know, but we would expect to eventually sell these properties.

Speaker Change: No we would expect to eventually sell these properties.

Speaker Change: Okay Alright.

Joel Quadracchi: All right. And, you know, in terms of the competitive environment, I know that there's, you know, you guys are facing pressures, your competitors in printing are facing pressures. How would you describe the competitive environment right now in terms of price competitiveness or even just staying in the game or potentially some pullback? What are you seeing at this point? What do you expect to play out?

Speaker Change: And in terms of the.

Speaker Change:

Speaker Change #105: The competitive environment I know that there is you know you guys are facing pressures your competitors and printing are facing pressures.

Speaker Change #100: How would you describe the competitive environment right now.

Speaker Change #103: In terms of price competitiveness or even just staying in the game or potentially.

Speaker Change: Some pullback.

Speaker Change: What are you seeing at this point, what do you expect to play out.

Joel Quadracchi: Well, we referenced some segment share gains that were pretty significant. I think that kind of speaks for itself. I'm part of it.

Speaker Change: Well, we've referenced some segment share gains that were pretty significant I think that kind of speak for itself.

Joel Quadracchi: But I'd also say that as these postal rates continue to do what they do, it's harder and harder to have; if you don't have the scale, it's very hard to help your clients offset it. And on our side, you know, close to 10% of the post office's marketing volume comes from our clients, which is significant, which has helped us be able to go to the next level with fusion mail, where it's another cost-saving way for our clients to get in the mail, and not insignificant. I mean, the offsetting to the recent increases is somewhere between 10 and, you know, 25%, depending on the client. And that's the biggest cost.

Speaker Change: Part of it but I'd also say with as these postal rates continue to do what they do it's harder and harder to have if you don't have the scale, it's very hard to help your clients offset it.

Speaker Change: And our side you know close to 10% of the post office's marketing volume comes out of our plants, which is significant which has helped us be able to go to the next level with fusion mail, where it's at.

Speaker Change: Another cost saving way for our clients to get in the mail and not insignificant I mean, the offsetting to the recent increases is somewhere between 10 and 25% depending on the client and that's the biggest cost. So I would say that we feel very comfortable with where.

Joel Quadracchi: So I'd say that we feel very comfortable with where we are competitively against much of the industry. And I would say that, you know, that also shows up in how we're able to get paid for what we do. Yeah, and I mean, you know, on the agency side of the house, but we feel good about our momentum and how we're building a solution that targets the needs of the marketer. Wrapped with data analytics and client tech, we're able to bring print as one media channel but also multiple other media channels to serve the client's needs.

Speaker Change: Where we are competitively against.

Speaker Change #106: Much of the industry and <unk>.

Speaker Change #109: Say that.

Speaker Change: That also shows up in how we're able to get paid for what we do yes.

Speaker Change: Yes.

Speaker Change: On the agency side of the house, but we feel good about our momentum and how we're building a solution that targets the needs of the marketer.

Speaker Change #102: Wrapped with data analytics and client attack, we're able to bring print as one media channel, but also multiple other media channels to serve the clients need and that's a good point, Tony because that that it speaks to the new competitive set that we have which is really kind of the big holding company agencies and other agencies in and again.

Joel Quadracchi: And that's a good point, Tony, because that then speaks to the new competitive set that we have, which is really kind of the big holding company agencies and other agencies. And again, we have a unique value proposition where we can pull execution together with the advisory services and content creation and media placement that we do.

Tony: We have a unique value proposition, where we can pull execution together with the advisory services and content creation and media placement that we do.

Anthony C. Staniak: Okay. All right. Thank you, guys. I'll leave it there. I appreciate it.

Tony: Okay, Alright, Thank you guys I'll leave it there I appreciate it.

Operator: Thank you, Barton.

Speaker Change: Okay. Thank you better environment.

Joel Quadracchi: This concludes our question and answer session. I would like to turn the conference back over to Joel Quattrocci for any closing remarks.

Speaker Change #108: This concludes our question and answer session I would like to turn the conference back over to Joel quarter Archie for any closing remarks.

Joel Quadracchi: Well, thank you everyone for joining today's call. I want to close by reiterating that our integrated marketing offering continues to be a competitive differentiator and a key driver behind our ongoing evolution as a marketing experience company. By providing a better marketing experience, our clients can focus on delivering the best customer experience. At the same time, we remain focused on enhancing our financial strength and creating shareholder value. With that, thank you again and have a good day. We look forward to speaking with you again next quarter.

Speaker Change #101: Well. Thank you everyone for joining today's call I want to close by reiterating that our integrated marketing offering continues to be a competitive differentiator and a key driver behind our ongoing evolution as a marketing experience company.

Speaker Change: By providing a better marketing experience our clients could focus on delivering the best customer experience at the same time, we remain focused on enhancing our financial strength and creating shareholder value with that thank you again and have a good day, we look forward to speaking with you again next quarter.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change #104: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.