Good morning, and welcome to the Quad's Second Quarter 2021 Earnings Conference Call for Analysts and Investors. [Operator Instructions] I would now like to turn the conference over to the Quad management team. Please go ahead.

Thank you, operator, and good morning, everyone. With me today are Joel Quadracci, Quad's Chairman, President and Chief Executive Officer; and Dave Honan, Quad's Executive Vice President and Chief Financial Officer. Joel will lead off today's call with a business update, and Dave will follow with a summary of Quad's second quarter and year-to-date 2021 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. 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, free cash flow, 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 and the slide presentation will be available on the Investors section of quad.com shortly after our call concludes today. I will now hand over the call to Joel.

Thank you, Katie, and good morning. We are very pleased with our second quarter operating and financial performance, which exceeded our expectations. Net sales increased 19%, driven by higher print, logistics, and agency solution sales, which rebounded compared to the pandemic period in Q2 of 2020. Our services offerings alone were up 33% in the quarter and 15% year-to-date. These positive trends, which included organic growth as well as print segment share gains from new clients, reflect our employees' hard work and agility, the strength of our business strategy, and the success our integrated marketing offering is having in the marketplace. Thanks to the strong performance and higher cash flows, we were able to significantly reduce net debt by approximately 25% over the past 12 months. We will continue to focus on maintaining a healthy balance sheet, while simultaneously making strategic investments in talent, technology, products and services to accelerate our position as a marketing solutions partner. On Slide 3, we highlight key competitive advantages that distinguish Quad as a leading marketing solutions partner and create more value for our clients. These advantages reflect our commitment to innovation, integrated marketing platform excellence, and culture and social purpose. I will spend some time today discussing these advantages, starting with how we are driving innovation and growth through new talent we're bringing on board. Turning to Slide 4. In July, we welcome Josh Golden, Former President and Publisher of Ad Age as our Chief Marketing Officer. Josh has incredible insight into what is important and relevant to marketers and is an advocate for an uncomplicated approach to addressing those challenges. The energy and expertise he brings to Quad is key to highlighting our singular place in the market, where we offer through-the-line marketing solutions with the ease of engagement of a specialized…

Thanks, Joel, and good morning, everyone. Slide 9 provides a snapshot of our second quarter financial results. As Joel mentioned, we delivered strong operational and financial results that exceeded our expectations for the quarter. Our business is clearly building momentum and our clients are growing more confident in their own recoveries. And as a result, we are raising and expanding our financial outlook for 2021 net sales, adjusted EBITDA, and debt leverage. Net sales were $694 million in the second quarter, an increase of 19% from 2020, significantly better than our previous outlook for the quarter of 10% to 13% net sales growth. Net sales increased by $109 million year-over-year, which included gains across all of our businesses, print, logistics, and agency solutions, which rebounded compared to the pandemic impacted second quarter of 2020, as well as print segment share gains from new clients. As importantly, we converted the net sales growth into strong free cash flow. And in combination with proceeds from asset sales, we reduced net debt by $120 million in the first 6 months of 2021. Our focus on our balance sheet has resulted in approximately a 25% reduction in net debt over the past 12 months despite challenging business conditions. On a year-to-date basis, net sales were $1.4 billion, down 1% as compared to 2020, primarily due to the impact from the COVID-19 pandemic in the first quarter, which represented the final quarter of annualizing the pandemic impact on our net sales. The net sales growth in the second quarter of 2021 nearly offset the first quarter's net sales decline due to strong rebounding growth in print, logistics, and agency solutions sales, and new client wins. Adjusted EBITDA was $60 million in the second quarter, flat with 2020, primarily due to higher earnings from the 19%…

Thank you, Dave. Because we compile questions in advance of today's call, we will not ask for callers to enter the queue. Thank you to everyone who submitted a question. We have 3 top questions that were submitted. The first question is on Print segment revenue. It reads, you have been highlighting print segment share wins more often than you have in the past. What are you seeing from a competitive standpoint?

Well, Katie, I'll take that. There clearly has been a lot of disruption in the past year in pretty much every business, but specifically in the legacy print business, there's been a lot of challenges. But I'm very proud of how we've managed through this, as we've just shown you and actually continue to shore up our balance sheet in a very positive way. And so what we're seeing now is just a lot of people looking for stability. And so we've seen an uptick of whether it's current clients asking us to do more or new logos coming into the fold, looking for stability. And what's great about that as we've been able to bring on those clients is that they get exposed to all the other stuff we're doing, just like our current logos that have relationships with us. We show them that not only can we be efficient and reliable in putting their workout, but also that we can actually work with them to help them sell more product. And so we look forward to not only the work we're picking up as part of this sort of disruption from existing clients. But the new logos coming in, I'm very excited about, because we can prove to them, that we can be that partner and not only provide the stability of the legacy platform but actually help them grow their businesses. So we're very excited about what we're seeing. And again, I think we've always done a very good job of managing through tough times to be able to come out on the other side stronger than we were at the beginning.

Our second question is regarding QuadExpress, and asks, can you give more detail on why QuadExpress was sold and how does QuadExpress differ from the broader logistics business that Quad will continue to run?

It's Dave, I'll take that one. QuadExpress and just as a reminder was a non-asset-based third-party broker of logistics services for customers that we acquired as part of the world color acquisition back in 2010. So over time, we've really grown this business nicely with a combination of expanded services they can offer and innovative technology, including the development of our SilverExpress transportation management system. So technology was a key part of growth for this business. However, QuadExpress is a much smaller part of our overall logistics offering. We're not selling our logistics business. We're just selling the brokered freight portion of it. As part of our established strategy to optimize our product and service portfolio, as we position ourselves as a marketing solutions partner and create more value for our clients and shareholders. So we're going to continue to operate a much larger and broader in-house global logistics business, which includes Quad transportation services and our trucking group, Duplainville transport, to provide logistics services directly to our clients as compared to the more brokered model of what QuadExpress was. And I think the final thing I would say is, we really were pleased by the outcome of the sale process. We realized a really attractive sales price of $40 million. As I said before, that represents over an 8x multiple of adjusted EBITDA. And I think as importantly, we found a buyer who can strategically grow and nurture the business like we had in the past and take it to different levels. So that's really good for the business and for our employees who are part of QuadExpress. So we really thank those employees for over their past decade in service to Quad, they've really been successful for us. I think it's a great outcome for QuadExpress. I think it's a great outcome for those employees and for Quad. And we can better now allocate that capital to accelerate growth in our marketing solutions group and further decrease debt.

Our final question relates to the 2021 outlook. It reads, can you speak more to client trends and what you are seeing going into the second half of the year that gives you confidence in raising your target?

Yeah. I think confidence is the keyword here. I think what we saw building throughout the last few quarters that we've been exiting out of the peak impact of the pandemic. Its growing confidence, growing improvement, rebound, and demand for advertising and marketing products and services of our business. And as our clients have been improving, so have we. So we have a lot of confidence coming out of the second quarter where we were significantly above our net sales at 19% growth versus what we thought of 10% to 13% heading into the quarter. So, really that strength gives us a lot of confidence in how we've put out increased guidance for the rest of the year. And again, a reminder, the guidance for the back half of the year, in the full-year guidance excludes the impact of the QuadExpress divestiture I just walked through. And so increasing organic net sales growth from slight down to flat to increasing it now to 1% to 3% growth in 2021. It's really good, really important for the momentum of our business. Adjusted EBITDA in the range of $240 million to $260 million, so that's new guidance for us. And that also takes in consideration the EBITDA in the back half of the year that we lose from the sale of QuadExpress. So I think and also in particular, what we're really pleased about is the tremendous progress we've made on the debt side. We've essentially, in the first half of this year, accomplished what we thought we could accomplish at the end of the year. So getting to 3.0x leverage was a big deal for us and was earlier than we thought we could do because we previously guided, we thought we could get there by the end of the year. And so we're happy year early on it and what's great is the momentum of the business is carrying us forward aided by some additional asset sales, where we think we'll get to 2x and 3x quarter leverage by the end of the year at the $250 million midpoints of our adjusted EBITDA guidance. So really positive developments on the balance sheet and for our business, where it puts us in excellent position to continue to strengthen that balance sheet, which we believe is one of the healthiest in the industries and the product segments in which we compete, many of those, and provide further capital for accelerating our transformation.

Yeah, and let me add some commentary because we do like to walk through the various categories we're in just to give you some color. But using sort of 6.5% GDP growth in the second quarter is sort of the context in the backdrop. Retail inserts were actually flat for us. That will -- that has been and will continue to be the more challenged part of the portfolio, primarily due to the carrier of newspapers, etcetera. But if you look at the rest of the categories, we really exceeded our market segment metrics in every category of what those specific categories we're doing as a whole. So if I look at publications, periodical volume for the USPS in the quarter was down like 5%, we were actually up 7% in press pages for the publication market. And so that's a combination of, I'd say, the quality of the clients that we have, but also continued segment share wins as people look for stability. On the catalog side, the industry as a whole had a nice bounce-back of about 19% in the quarter, a Quad was up over 26%, and again, what we're seeing there is segment wins that we've been accumulating. But also, there's quite a few clients who have been increasing counts and even several of them to above pre-pandemic volumes as the health of their business and the health of print as a part of the overall marketing mix proves itself. Direct mail, the industry had a nice rebound of about 39%, we were up 41%. And then packaging, which saw a pretty healthy growth through the pandemic because of the change in a lot of the habits that how people were purchasing. The industry was up between 5% and 10%, our packaging sales were up 11%…

Well, this concludes the Q&A portion of today’s call. And now I would like to turn the call back to Joel for closing remarks.

Thank you, everyone, for joining today’s call. I again want to congratulate our employees on our company’s milestone 50th anniversary and our legacy of creating a better way every day. I’m confident in our team and our strategy and in our future as a marketing solutions partner that helps brands and marketers solve their marketing and process challenges. As the ad market and broader economy continue to recover and return to growth, our innovative team remains committed to creating new revenue from our expanded marketing services offering. Thank you, and we’ll talk to you next quarter.

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