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Quad/Graphics Reports First Quarter 2017 Results

Press release from the issuing company

Results In-Line with Company Expectations

SUSSEX, Wis. -  Quad/Graphics, Inc. (NYSE: QUAD) ("Quad/Graphics" or the "Company") today reported first quarter 2017 results.

Financial Highlights

  • Increased net earnings to $25 million and diluted earnings per share to $0.49 on net sales of $1.0 billion.
  • Increased first quarter 2017 Non-GAAP Adjusted EBITDA by $2 million to $122 million and increased Non-GAAP Adjusted EBITDA margin by 70 basis points to 12.2%.
  • Increased Non-GAAP Adjusted Diluted Earnings Per Share by $0.26 to $0.52.
  • Achieved first quarter 2017 cash flow from operations of $63 million and generated $40 million of Non-GAAP Free Cash Flow in first quarter 2017, both in-line with expectations.
  • Reduced debt and capital leases by $28 million, and improved Debt Leverage Ratio to 2.29x, reduced from 2.36x, as of December 31, 2016.
  • Declares quarterly dividend of $0.30 per share.

“Our results for the first quarter of 2017 were in-line with our expectations and we are pleased with our performance,” said Joel Quadracci, Quad/Graphics Chairman, President & Chief Executive Officer. “We continued to drive EBITDA enhancement through our disciplined approach to sustainable cost reductions and productivity improvements while maintaining our focus on revenue. As we look forward to the remainder of 2017, we will continue to be the industry’s high-quality, low-cost producer to minimize the impact of industry pressures and economic uncertainty. Further, we expect to generate strong Free Cash Flow, which will support value-creating opportunities, including enhancing and expanding our services to provide a unique offering in the marketplace. We will also continue to redefine our company as a marketing services provider that helps brand owners market more efficiently and effectively using our strong print foundation in combination with other media channels. As always, we will continue to invest in our people and strengthen our core manufacturing platform to ensure it remains the strongest and most sustainable in the industry.”

Summary Results

Net sales for the first quarter ended March 31, 2017, were $1.0 billion, a 4.2% decrease. Organic sales declined 2.8% due to ongoing industry volume and pricing pressures after excluding pass-through paper sales (-1.2% impact) and foreign exchange (-0.2% impact). The organic sales decrease is consistent with the Company’s previous guidance. Net earnings improved to $25 million and diluted earnings per share improved to $0.49 during the three months ended March 31, 2017. First quarter 2017 Non-GAAP Adjusted EBITDA increased $2 million to $122 million compared to $120 million in 2016, and Adjusted EBITDA margin improved to 12.2% from 11.5% in 2016. Non-GAAP Adjusted Diluted Earnings Per Share improved by $0.26 during the first quarter 2017 to $0.52. The improvement in earnings, diluted earnings per share, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Diluted Earnings Per Share was primarily driven by lower selling, general and administrative expenses and a $5 million net benefit from non-recurring items primarily related to a reduced vacation accrual.

GAAP net cash provided by operating activities was $63 million for the quarter ended March 31, 2017, a decrease of $49 million from 2016. Free Cash Flow was $40 million compared with $86 million for the previous year. The decrease in cash provided by operating activities and Free Cash Flow was as expected. This decrease over prior year was due to reduced benefits from ongoing working capital improvements, partially offset by a reduction in capital expenditures.

“Our first quarter results were as expected and we remain on track to deliver our 2017 financial guidance,” said Dave Honan, Quad/Graphics Executive Vice President & Chief Financial Officer. “Looking ahead, we remain focused on generating sustainable strong Free Cash Flow to continue strengthening our balance sheet through debt reduction and improving our Debt Leverage Ratio, which is 2.29x as of the end of the first quarter and well within our long-term targeted range of 2.0x to 2.5x. In addition, significant Free Cash Flow allows the Company to continue to strategically invest in our business transformation and maintain an affordable and sustainable annual dividend of $1.20 per share, representing approximately 25% of Free Cash Flow.”

Quad/Graphics’ next quarterly dividend of $0.30 per share will be payable on June 2, 2017, shareholders of record as of May 22, 2017.



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