Good morning, ladies and gentlemen. Welcome to Quad's Second Quarter Conference Call. During today's call, all participants will be in a listen-only mode. [Operator Instructions] A slide presentation accompanies today's webcast and participants are invited to follow along advancing the slides themselves. To access the webcast, follow the instructions posted in the earnings release. Alternatively, you can access the slide presentation on the investors section of Quad's website under the Events and Recent Presentations link. Please note this event is being recorded. I’d now like to turn the conference call over to Katie Krebsbach, Quad's Investor Relations Manager. Katie, 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 Tony Staniak, Quad's Chief Financial Officer. Joel will lead off today's call with business update, and Tony will follow with a summary of Quad's second quarter 2022 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 two. 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, adjusted diluted earnings per share, free cash flow, net debt 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, everyone. Beginning on slide three, I am pleased to report our results were in line with our expectations, delivering a fifth consecutive quarter of sales growth, achieving a 14% increase in net sales when excluding divestitures. This strong growth included print segment share gains and net sales growth across all of our offerings. Throughout the quarter, we continued to face macroeconomic headwinds, such as an ongoing supply chain constraint that impacted productivity and cost inflation on waiver and other areas. We worked diligently to mitigate these impacts, including implementing an additional price increase in mid-May in response to inflationary cost pressures, while continuing to make investments to prepare for our seasonally busier second half of the year, including increasing inventory levels for paper and other key manufacturing materials and hiring and training employees for our manufacturing operations far earlier than usual. As a result, our net earnings and adjusted EBITDA during the quarter were negatively impacted. However, we are poised to grow sales and profitability in the second half of the year due to these proactive measures. High inflation, ongoing supply chain disruptions, geopolitical tensions and other factors are creating economic uncertainty. We remain nimble, ready to adjust our operations if necessary while continuing to serve our clients well. Slide four shows how we continue to diversify our revenue into higher-value and higher-margin offerings, while growing net sales 14%. For example, our integrated solutions and targeted print segments grew from the second quarter of last year to the second quarter of this year. At the same time, we continue to manage for expected organic decline in large scale print. Turning to slide five. We are proud of our company's transformation and continue to evolve how we operate and communicate our unique value as a…

Thanks, Joel, and good morning everyone. Slide 13 provides a snapshot of our second quarter 2022 financial results. As Joel mentioned, we achieved net sales growth of 14% excluding divestitures, representing a fifth consecutive quarter of net sales growth. We are anticipating continued sales growth and increased profitability in the second half of 2022. We are closely monitoring the economy and are prepared to adjust as necessary to continue acting on our financial objectives, including reducing debt and driving shareholder value. During the second quarter, these actions included paying off the remaining $209 million of our unsecured 7% senior notes and thereby lowering our blended interest rate by over 80 basis points to 3.8%. Additionally, we demonstrated Quad's value as an investment by repurchasing 1.7 million shares of Class A common stock for $5 million through August 1, 2022, which we believe represents strong value at today's prices. We were also pleased to be added to the small-cap Russell 2000 Index in June. We will remain disciplined with our capital allocation by focusing on debt reduction to continue enhancing our financial strength, while making investments to accelerate our growth as a marketing experience company. Net sales were $758 million in the second quarter, up 9% from 2021. Excluding the June 2021 divestiture of QuadExpress, a third-party logistics company that was a small part of our overall logistics business, net sales increased 14% from 2021. On a year-to-date basis, net sales were $1.5 billion, up 7% from 2021. And excluding the QuadExpress divestiture, net sales increased 12% compared to 2021. Net sales growth was achieved across all of our offerings due to increased pricing in response to inflationary pressures, print segment share gains and onboarding new clients in Agency Solutions. Adjusted EBITDA was $56 million in the second quarter of 2022…

Thank you, Tony. Because we compiled 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 four top questions that were submitted. Our first question relates to industry and segment trends. It asks, can you discuss what trends you're seeing across the business? And are there certain segments that might be seeing an impact from a slowdown in consumer spending due to the current macro environment?

Yes. Katie, I'll walk through our different segments, and I usually start with the most challenged segments of retail inserts and magazine. That's our large scale print portion of our business. And retail inserts, as we've said, we expect to continue to be under pressure and decline because of the carrier of the newspaper declining as well. However, I also remind people that the retailers are the ones who buy -- are heavy users and buy a significant amount of the rest of our product lines beyond the retail insert. So that was off about 9% for the quarter and about 18% trailing 12 months, which again was expected. On the magazine side, we are off the trailing 12 months about 8% and about 12% for the quarter. This was actually due to some -- partially due to some significant titles being closed as companies have been acquired and have reshuffled their decks, but also continued pressure on ad pages. However, if you look at the catalog side, for the quarter we're actually down 10%. But that's misleading, because we've had pressures from a shortage of paper supply. And so, some of this volume didn't go away, it just moved. And so if you actually look at the trailing 12-month of catalog, we're up 5%. On the direct mail side, we're up about 3%, in line with the industry. On packaging, we're up significantly, 22% for the quarter. Some of this is due to picking up some great work in producing the COVID packages that are all out there for the test kits. In-store, due to significant client wins, we're up over 46% for the quarter. And then our Agency Solutions group is up 4% based on new client wins. And so those are the different segments. And I'd just remind people that, yes, some of the pressures that we felt last year and everyone felt were due to paper shortages that the industry is dealing with. And we feel that we're managing that relatively well. I'll remind you that about 50% of the paper that goes through Quad is supplied by us, the other 50% is supplied by our customers. And so, we're doing a lot of work this year to make sure that part that we supply is available and doing well. And the other part that's been a challenge and a pressure is -- for us in getting these product lines up is labor. Last year, everybody -- just about everybody I talked to in the industry was struggling from shortage of labor both from the low unemployment environment, but also due to COVID. This year we're doing much better. And so that's really kind of a look at the different segments here and some of the pressures we've talked about.

Thanks, Joel. Our next question is regarding peak production in the second half of the year. It asks, are you doing anything differently to prepare for the second half of the year this year compared to previous years to maximize productivity given the current state of the economy and headwinds you've had to deal with?

Yes. I think I just touched that on the headwinds, which is -- was the paper shortage and labor, not to mention inflation which everyone is dealing with. And we dealt with that. We've had to pass on surcharges to our clients just to keep up with it and feel that we're managing as best we can. On the paper side, again, we've had to order paper earlier for the part we supply for a lot of our customers because the industry is just, quite frankly, out of capacity. And so it's had -- it caused us to kind of have to shift to buying, having more cash tied up in inventory earlier on before things are printed. But we feel very ready for the second half in terms of paper availability for the clients that we supply. And then on the -- again, on the labor side, we started hiring much, much sooner than ever. And so there was a lot of investment in paying people earlier coming onboard, because we're very second half busy. And not to mention, we had to invest a tremendous amount in training to make sure that they're up to speed by the time the busy season comes. And I'm very happy to report that we feel very, very good at the labor we've been able to hire through all the various programs we've done. So my hats off to everybody that we are ready for the busy season and ready for our customers even with the segment share gains that we've had. And then finally, we did -- we continue to invest in other things to kind of offset some of these challenges long term, especially labor, with more investment in automation.

Great. Thanks again, Joel. Our next question is on free cash flow. It asks, given that you've had negative $57 million in free cash flow in the first half of the year, what gives you the confidence that you will still be able to hit your guidance of $70 million to $100 million?

Thanks, Katie. I'll take that one. So we're a seasonal business. Our highest sales and most production are from August to November. So we have to ramp up inventory levels leading into that period to be able to meet the client demand. And so then, as the fourth quarter comes, we're reducing those inventory levels. We're also then collecting from the invoices we send to customers, and that ends up being strong free cash flow in the fourth quarter. And then Joel just talked about how we ramped up paper and inventory levels even more this year due to the supply chain disruption. So that means that the first half of our year is more negative, but then we're going to have stronger free cash flow at the end of the year when we realize the collections from all of that inventory. And that's how we'll meet the guidance range for free cash flow.

Great. Thanks, Tony. Our last question is regarding stock buybacks. It asks, this is the first quarter you executed against the buyback program that has been in place for many years. Can we take this as a new signal that you'll use this program more often to drive value moving forward?

Yes, you're right. We've had an outstanding buyback program that we haven't used as of late. But just now we looked at the value, and one of the efforts we're trying to do too is be able to buy back some of the dilution that we've incurred over the years by making sure we attract the best management team and using equity because we believe that's a great way to motivate people for the long term. So you'll see us over time -- when we see the right opportunity and feel it's a great use of capital, you'll see us do some of this.

Thanks, Joel. 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.

Thanks, Katie, and thank you all for joining us today. I want to close by reiterating my thanks to our employees for their continued hard work and ability to adapt and adjust to change. I'm confident in our team, in our strategy and in our future as a marketing experience company that helps brands reimagine their marketing to be more streamlined, impactful, flexible and frictionless. With that, thank you again, and have a good day. We look forward to speaking with you again next quarter.

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