Quad Q4 and Full-Year 2021 Financial Results Include Net Sales Gain, Debt Reduction
Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”), reported results for the fourth quarter and full year ended December 31, 2021.
Recent Highlights
- Increased Net Sales 1% (3% excluding divestitures) in 2021, driven by higher print volumes, including print segment share gains from new clients, growth in Agency Solutions Net Sales, and increased pricing in response to inflationary cost pressures.
- Delivered $38 million of Net Earnings From Continuing Operations in 2021 and Adjusted Diluted Earnings Per Share From Continuing Operations of $0.60 per share in 2021 compared to $0.29 per share in 2020.
- Generated $137 million of Net Cash From Operating Activities and Free Cash Flow of $87 million in 2021.
- Divested non-core assets, generating $166 million of cash proceeds in 2021.
- Reduced Net Debt by $410 million or 40% over the past two years, reaching Debt Leverage of 2.5x.
- Provides 2022 guidance with continued Net Sales growth of 3-7%.
“Our sales growth and strong execution helped us drive strong full-year results, including a 3% increase in Net Sales excluding divestitures. Those results were supported by higher print volumes, including print segment share gains from new clients, continued growth in Agency Solutions, and increased pricing in response to inflationary cost pressures. These results validate our business strategy as a marketing solutions partner with a complete through-the-line offering – from innovation to execution – that delivers more value to clients,” said Joel Quadracci, Chairman, President & CEO of Quad.
“We were able to grow and diversify sales despite a challenging operating and economic environment that included significant supply chain disruptions, inflationary cost pressures and labor shortages,” Quadracci continued. “We worked thoughtfully and diligently to mitigate these impacts on our business while prioritizing the health and well-being of our employees, proactively managing our clients’ service expectations, providing innovative solutions, and enhancing the financial health of the Company. Notably, we have reduced Net Debt by 40% over the past two years, and, with our strong balance sheet, we continue to invest strategically in talent, technology, products and services to accelerate our position as a marketing solutions partner.”
Quadracci concluded: “Looking ahead to 2022, we will build on the strength of our unique offering as we continue to scale our platform and innovatively address our clients’ ever-changing needs. We will expand our relationships with existing clients, providing them with more products and services, while also adding new clients who are looking for a partner with a complete through-the-line marketing offering. We also expect to expand in growth market verticals, driven by our integrated marketing platform that removes friction throughout the marketing process. Our focus remains clear: helping brands and marketers reduce complexity, increase efficiency and enhance marketing spend effectiveness.”
Click to enlarge Net sales breakdown from slide deck for Quad's Feb. 23 investor presentation.
Summary Results
Results for the fourth quarter ended December 31, 2021, include:
- Net Sales — Net Sales were $855 million in the fourth quarter of 2021, up 1% from the same period in 2020. Excluding the divestiture of QuadExpress, a third-party logistics (3PL) business, Net Sales increased 5% from the fourth quarter of 2020. The Net Sales increase during the fourth quarter was due to a 4% increase in year-over-year print Net Sales and a 4% increase in year-over-year Agency Solutions Net Sales. The Net Sales increase in print and Agency Solutions was driven by Net Sales growth from existing clients as well as print segment share gains from new clients.
- Net Loss From Continuing Operations — Net Loss From Continuing Operations was $21 million or $0.41 Diluted Loss Per Share in the fourth quarter of 2021, an improvement of $65 million compared to the fourth quarter of 2020, which recorded a Net Loss of $86 million or $1.69 Diluted Loss Per Share. This improvement was due to lower restructuring, impairment and transaction-related charges, and lower income tax expense.
- Adjusted EBITDA — Adjusted EBITDA was $56 million in the fourth quarter of 2021, as compared to $64 million in the same period in 2020. The higher profit from increased Net Sales was more than offset by cost inflation and the negative impact on labor productivity and sales from supply chain disruptions.
Results for the year ended December 31, 2021, include:
- Net Sales — Net Sales were $3.0 billion in 2021, up 1% from 2020. Excluding divestitures, Net Sales increased 3% compared to 2020. The Net Sales increase in 2021 was due to a 1% increase in year-over-year print Net Sales, a 12% increase in year-over-year logistics Net Sales and a 7% increase in year-over-year Agency Solutions Net Sales.
- Net Earnings (Loss) From Continuing Operations — Net Earnings From Continuing Operations were $38 million or $0.71 Diluted Earnings Per Share in 2021, compared to a Net Loss of $107 million or $2.10 Diluted Loss Per Share From Continuing Operations in 2020. Net Earnings From Continuing Operations increased due to higher profit from increased net sales, a $105 million decrease in restructuring, impairment, and transaction-related charges (including a $24 million net gain from the sale of businesses and a $23 million net gain from the sale of facilities), and a $25 million gain from the sale and leaseback of the Chalfont, Penn., and West Allis, Wis., facilities. These increases were partially offset by $39 million of non-recurring temporary cost savings in 2020 (primarily related to salary reductions and furloughs due to the COVID-19 pandemic), a $12 million benefit in 2020 from a change in vacation policy, and the negative impact of cost inflation and supply chain disruptions.
- Adjusted EBITDA — Adjusted EBITDA was $246 million in 2021, as compared to $260 million in 2020. The decrease was due to the non-recurrence of $39 million of temporary COVID-19 pandemic-related cost savings in 2020, a $12 million benefit in 2020 from a change in vacation policy, and the negative impact of cost inflation and supply chain disruptions, partially offset by higher profit from increased Net Sales and a $9 million net gain from property insurance claims.
- Adjusted Diluted Earnings Per Share From Continuing Operations — Adjusted Diluted Earnings Per Share From Continuing Operations more than doubled from $0.29 per share in 2020 to $0.60 per share in 2021 primarily due to lower depreciation and amortization, lower interest expense and lower selling, general and administrative expenses.
- Net Cash Provided by Operating Activities — Net Cash Provided by Operating Activities decreased by $54 million to $137 million in 2021, as compared to 2020, primarily due to $40 million of income tax refunds received during the third quarter of 2020 due to the CARES Tax Act, as well as higher working capital to support Net Sales growth and strategically increasing paper and materials inventory levels to serve our clients.
- Free Cash Flow — Free Cash Flow decreased by $43 million to $87 million in 2021, as compared to 2020, primarily due to the $40 million CARES Tax Act refunds received in 2020 and higher working capital needs in 2021, partially offset by an $11 million decrease in capital expenditures.
- Net Debt — Debt less cash and cash equivalents decreased by $249 million to $624 million at December 31, 2021, as compared to $873 million at December 31, 2020. The reduction was primarily achieved with the application of cash generated from asset sales and cash provided by operating activities. Over the past two years during the pandemic, Net Debt decreased $410 million or 40%. The Debt Leverage Ratio improved 81 basis points to 2.54x at December 31, 2021, from 3.35x at December 31, 2020.
2022 Guidance
The Company provides the following 2022 financial guidance:
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Tony Staniak, CFO of Quad, concluded: “New client wins and disciplined operational performance, despite significant supply chain challenges, a tight labor and freight market, and inflationary cost pressures, drove strong results in 2021 evidenced by achieving or exceeding our 2021 guidance. We grew Net Sales excluding divestitures by 3% in 2021 while increasing sales diversification into our growth and higher-profitability offerings, and at the mid-point of our 2022 guidance we expect an additional 5% sales growth in 2022. We also continue to be a strong Free Cash Flow generator, and we used that cash along with proceeds from asset sales to return to our long-term targeted leverage range of 2.0x to 2.5x.”
The preceding press release was provided by a company unaffiliated with Printing Impressions. The views expressed within do not directly reflect the thoughts or opinions of Printing Impressions.
