Quad/Graphics Reports Fourth Quarter and Full-Year 2017 Results

Financial Highlights

  • Net sales of $1.2 billion for the fourth quarter 2017 and $4.1 billion for full-year 2017 resulted in a 47% increase in net earnings to $55 million in the quarter and a 139% increase to $107 million for the year.
  • Achieved Non-GAAP Adjusted EBITDA and Margin of $125 million and 10.7%, respectively, for the fourth quarter 2017 and $459 million and 11.1%, respectively, for full-year 2017.
  • Generated cash flow from operations of $344 million and increased Free Cash Flow to $258 million for full-year 2017.
  • Reduced debt by $166 million, or 15%, during 2017 and improved Debt Leverage Ratio to 1.99x, net of excess cash.
  • Announces acquisition of Ivie & Associates (“Ivie”), a leading marketing services provider.
  • Provides 2018 outlook.
  • Declares quarterly dividend of $0.30 per share.

“We are pleased with our fourth quarter and full-year 2017 results, which were in-line with our expectations and demonstrate continued execution of our strategic priorities to generate consistent earnings and strong, sustainable Free Cash Flow that further strengthen our balance sheet, provide long-term shareholder value and accelerate our Quad 3.0 transformation,” said Joel Quadracci, Quad/Graphics Chairman, President & Chief Executive Officer. “We have made great progress with our transformation and will continue to leverage our strong print foundation as part of a much larger and more robust integrated marketing platform. We are proactively addressing our clients’ increasing needs to reduce complexity, and improve process efficiency and marketing spend effectiveness to offset ongoing marketplace disruption. Our acquisition of Ivie, a leading marketing services provider, accelerates our Quad 3.0 transformation. Our companies have complementary offerings that we can quickly scale as we create a powerful marketing solution focused on multichannel content creation and marketing execution.”

Quadracci added: “As we move forward in 2018, we remain steadfast in our goal to aggressively manage costs and productivity to hold the line on Adjusted EBITDA margins. This will allow us to maintain our position as the industry’s high-quality, low-cost producer, and continue generating consistent earnings and strong Free Cash Flow to support future value-creating opportunities for all our stakeholders.”

Summary Results

Net earnings improved during the fourth quarter of 2017 to $55 million, an $18 million year-over-year increase, despite a 2.8% decrease in net sales to $1.2 billion. Organic sales decreased 2.8% due to ongoing industry volume and pricing pressures, after excluding pass-through paper sales (-0.3% impact) and favorable foreign exchange (0.3% impact). Diluted earnings per share for the fourth quarter of 2017 improved to $1.06 compared to $0.73 in 2016 primarily due to lower income tax expense related to tax reform. Fourth quarter 2017 Non-GAAP Adjusted EBITDA decreased to $125 million compared to $140 million in 2017, and Non-GAAP Adjusted EBITDA margin decreased to 10.7%.

Net earnings improved for the year ended December 31, 2017 to $107 million, a $62 million increase from 2016, despite a 4.6% decrease in net sales to $4.1 billion. Organic sales decreased 3.5% due to ongoing industry volume and pricing pressures after excluding pass-through paper sales (-1.1% impact), and is consistent with the Company’s previous guidance. Diluted earnings per share increased 130% to $2.07 for the year ended December 31, 2017, compared to $0.90 in 2016 due to operating income improvements and lower income tax expense related to tax reform. As expected, full-year 2017 Non-GAAP Adjusted EBITDA decreased to $459 million compared to $480 million in 2016; however, due to ongoing productivity improvements and sustainable cost reductions, Non-GAAP Adjusted EBITDA margin remained flat year-over-year at 11.1%.

Net cash provided by operating activities was $344 million for the year ended December 31, 2017. Free Cash Flow was $258 million, compared with $246 million for 2016, and was at the top end of the Company’s guidance range. The $12 million, or 5%, increase over 2016 was due to higher net earnings, lower capital expenditures and sustainable ongoing improvements in controllable working capital levels.

“Quad/Graphics continues to generate significant Free Cash Flow, which is important to maintaining a strong and flexible balance sheet that supports our disciplined capital deployment strategy,” said Dave Honan, Quad/Graphics Executive Vice President & Chief Financial Officer. “We reduced debt by $166 million in 2017 and improved our Debt Leverage Ratio to 1.99x, when excluding excess cash, which is below our long-term targeted leverage range of 2.0x to 2.5x. Our significant Free Cash Flow also allows us to strategically invest in our business to accelerate our Quad 3.0 transformation, as evidenced by today’s acquisition of Ivie. In addition, it allows us to maintain an affordable and sustainable annual dividend of $1.20 per share and opportunistic share repurchases.”

Quad/Graphics’ next quarterly dividend of $0.30 per share will be payable on March 30, 2018, to shareholders of record as of March 19, 2018.


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