The publication and commercial printing market has been changing in recent years, through shifts in the way the public gets their information. As a result, there has been much consolidation among heatset and sheetfed printers, leaving two mega-printers – R.R. Donnelley & Sons (approximately $10 billion a year in sales) and Quad/Graphics (nearly $5 billion in annual sales) – at the top of the sales list.
With the second quarter and first half 2013 results now available, we can see how business is doing for these multi-billion dollar printers.
R.R. Donnelley & Sons
R.R. Donnelley’s net sales in the second quarter were $2.571.6 million, up $43 million, or 1.7%, from 2012’s second quarter sales. The company attributed the sales increase to its 2012 acquisitions and volume growth in the U.S. Print and Related Services segment.
Operating income was $173.2 million in the second quarter of 2013; the operating income in the second quarter of 2012 was $163.9 million. Non-GAAP adjusted EBITDA was $304.1 million, or 11.8% of net sales. Free cash flow was reported at $107.3 million.
For the first six months, R.R. Donnelley reported $5,110.1 million in sales, slightly down from 2012’s first half totals of $5,053.5 million. The operating income was $313 million in the first half of 2013; the operating income in the second quarter of 2012 was $285.3 million.
As for its full-year outlook, R.R. Donnelley maintained its previous guidance, anticipating revenue of $10.1 billion to $10.3 billion, non-GAAP adjusted EBITDA margin of 11.2% to 11.4% and free cash flow between $400 million and $500 million.
Quad/Graphics, Inc. reported net sales of $1.110.8 million for the second quarter of 2013, partially driven by sales from Vertis, which was acquired Jan.16, 2013. By comparison, Quad/Graphics had $934 million in net sales for the second quarter of 2012.
Adjusted EBITDA for the second quarter of 2013 was $111 million, virtually the same as the second quarter of 2012, which was $112 million. Quad/Graphics reported recurring free cash flow of $86 million in 2013, compared to $60 million for the second quarter of 2012.
For the first half of 2013, net sales were $2.2 billion, a 16% increase compared to $1.9 billion for 2012’s first half, driven primarily by the Vertis acquisition. Year-to-date Adjusted EBITDA was down slightly at $225 million, or 10%, compared to $238 million in 2012. Recurring Free Cash Flow rose to $206 million for the first half of 2013, up from $167 million for 2012.
The company reaffirmed its 2013 annual guidance roe revenue ($4.8 billion to $5.0 billion); Adjusted EBITDA ($580 million to $610 million) and Recurring Free Cash Flow (more than $360 million).
The leaders of both companies reported they were pleased by their respective companies’ growth, particularly with the free cash flow.
Comparing the numbers, both R.R. Donnelley and Quad/Graphics are seeing similar trends, with margins in low double-digits and free cash flow of nearly $100 million per quarter. Quad/Graphics is seeing larger sales growth due to the acquisition of Vertis. In particular, the EBIDTA is probably of interest to the ink industry as its shows these companies are profitable, although compared to pre-recession times, I suspect the present margins are much reduced.