Ghost of Vertis Haunts Us

The leaves are falling, the weather is chilling, and the season is turning here in Chicago. Among other things the seasonal change brings is the much-celebrated return of Charles Dickens’ A Christmas Carol…this time for its 36th year at the Goodman Theatre. It’s the timeless story of hope and redemption featuring the ghosts of Christmas Past, Present, and Future.

Well, another ghost reared its ugly head this week—the ghost of Vertis present. And the little appearance it made in Quad’s third quarter earnings leads us to believe that it might be around as long as a Christmas Carol has been at The Goodman. It just won’t die.

In fact, it seems to be acting like a cancer, eroding the adjusted EBITDA of a once great company from 14.9 percent to 12.8 percent in just one year. That may not sound like much to you, but to the green eyeshades crowd (another Dickensian reference) that’s huge. This shot across the bow lets us know that the ghost of Vertis Future isn’t going anywhere anytime soon. It’s the kind of shot that reminds us of the pursuit of the Holy Grail in Indiana Jones and the Last Crusade. It’s the kind of shot that sends aftershocks into the halls of RRD headquarters, reminding them to avoid their own Vertis, the subject of my last blog.

The Quad margin depression plunged its stock value by 19.4 percent on the day of earnings and another 10 percent the next day. Unfortunately, we’re all susceptible to contagion, and a company like Quad can start the contagion that extended to RRD’s valuation. Quad’s deep dive was so substantial that RRD lost 4 percent of its value one day after its own reasonable earnings report. And it’s not just RRD that lost some of its value yesterday. The expected returns and subsequent valuation of our entire industry—including each and every privately-owned, ma and pa printer out there—was affected.

A third-generation printer, Dustin LeFebvre delivers his vision for Specialty Print Communications as EVP, Marketing through strategy, planning and new product development. With a rich background ranging from sales and marketing to operations, quality control and procurement, Dustin takes a wide-angle approach to SPC

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Comments
  • Kevin Nielsen

    Dustin,
    You have a wonderful way with words. Sound observations about Vertis. Speaking of margin compression and value destruction, with Innerworkings’ shares off some 40% this week, perhaps your next column can also kick INWK while they are down.

  • A Webcrafter

    There are so many people to thank for what happened to-Webcraft-Big Flower-Vertis. This company was at one time the leader in the in-line web print industry but as often happens greed, mis-management and more greed moves in and takes over. There are plenty of ghosts now occupying several of their one-time busy and productive manufacturing facilities. Many started their careers with this innovative company and have either moved up and out or were pushed out by the revolving door of “here today gone tomorrow” middle and upper management. The real story behind the beginning of Webcraft, the explosive growth this company experienced and what lead them to Beatrice Foods, Big Flower, Vertis and beyond is one businesses schools should study. The name Vertis( by the way the name was selected because it is the center of the word—adVERTISing) will always be hunted by its ghosts and mis-management. Hopefully many will remember its early days and what it showed us, but few will be able to forget the greed that harmed way too many people and finally took the company down.

  • Fred Gomberg

    There are so many people to thank for what happened to-Webcraft-Big Flower-Vertis. This company was at one time the leader in the in-line web print industry but as often occurs greed, mismanagement and more greed moves in and takes over. There are plenty of ghosts now occupying several of those one-time busy and productive manufacturing facilities. Many started their careers with this innovative company and either moved on because of, or were pushed out by the revolving door of “here today gone tomorrow” middle and upper management that was unable or unwilling to understand the business they were in. The real story behind the beginning of Webcraft, the explosive growth this company experienced and what lead them to Beatrice Foods, Big Flower, Vertis and beyond is one businesses schools should study. The name Vertis will always be hunted by its ghosts and mismanagement. Hopefully some will remember its early days filled with excitement and promise but few will be able to forget the greed that harmed way too many people and finally took the company down. The name change from the well branded and perfectly positioned Webcraft, to Vertis was selected because it is the center of the word—adVERTISing, now that name stands for bankruptcy, margin compression, mismanagement and value destruction.

  • Perry Muir

    Mr. Neilsen is absolutely correct about INWK. Inner Workings was one of many who took advantage of the failed Vertis business model by inserting themselves into the middle, taking margin from an already margin deficient industry and putting it into their pockets while providing ZERO value to the equation. Looking forward to the point in time (which isn’t far off) where that can’t happen any longer. In my opinion, they can go right down the same path as Vertis and we will all be better off for it.