Quad/Graphics, Inc. reported results for its third quarter ending Sept. 30, 2020.
Net sales were $679 million in 2020, down 28% from 2019. Sales declined 26% during the quarter, excluding the impact of the January 2020 sale of the Omaha packaging plant, primarily due to the economic impact from the COVID-19 pandemic, and ongoing print industry volume and pricing pressures.
Net earnings from continuing operations increased $50 million from the third quarter of 2019, from a net loss of $47 million in 2019 ($0.94 diluted loss per share from continuing operations) to net earnings of $3 million in 2020 ($0.05 diluted earnings per share from continuing operations).
Adjusted EBITDA was $61 million in 2020, as compared to $80 million in 2019, while Adjusted EBITDA margin improved to 8.9% in 2020, as compared to 8.4% in 2019. Quad increased year-to-date cash from operating activities by $103 million and free cash flow by $91 million compared to the first nine months of 2019.
The company reduced net debt by $95 million year-to-date and $222 million over the past 12 months, ending the quarter with a Debt Leverage Ratio of 3.22x, which was flat versus the comparable period in 2019.
“Building on our momentum from the first half of the year, we delivered a solid third quarter with strong operating and cash performance. We achieved net earnings gains through diligent cost management while continuing to focus on winning segment share and driving operational improvements. Our efforts resulted in higher adjusted EBITDA margin both for the quarter and year-to-date, as well as increased cash flow. This enabled us to continue to pay down debt and strengthen our balance sheet, despite a significant net sales impact from the COVID-19 pandemic,” said Joel Quadracci, chairman, president and CEO of Quad.
“Our team has been resilient in the face of significant challenges, and continues to demonstrate the ability to skillfully navigate the unprecedented headwinds created by the pandemic,” Quadracci added. “Throughout the quarter, we continued to prioritize the health and well-being of our employees and protect Quad’s long-term financial health, all while providing great service to our clients and securing new work. Our Quad 3.0 strategy provides us with the right tools, talent and platform to exit the pandemic from a position of strength, poised to generate the revenue and Free Cash Flow required to take advantage of value-creating opportunities that will further offset organic print decline through expansion into higher-margin products and services.”
Net sales were $2.1 billion for the nine months ended September 30, 2020 were down 27% in 2019. Sales declined 25% during the nine months ended September 30, 2020, after excluding the impact of the January 2020 sale of the Omaha packaging plant, primarily due to the economic impact from the COVID-19 pandemic, and ongoing print industry volume and pricing pressures.Net loss from continuing operations improved $42 million from the first nine months of 2019, from a net loss of $63 million in 2019 ($1.26 diluted loss per share from continuing operations) to a net loss of $21 million in 2020 ($0.41 diluted loss per share from continuing operations). Adjusted EBITDA was $196 million in 2020, as compared to $239 million in 2019, while adjusted EBITDA margin improved to 9.4% in 2020, as compared to 8.4% in 2019.
Net cash provided by operating activities was $107 million for the nine months ended September 30, 2020, an increase of $103 million from 2019, primarily due to higher cash earnings and improvements in working capital. Free cash flow was $57 million for the nine months ended Sept. 30, 2020, an increase of $91 million from 2019.
“We continue to generate significant cash from strong operational performance and disciplined cost management, despite the unprecedented economic impact the pandemic has had on demand,” Dave Honan, EVP and CFO, concluded. “We improved the health of our balance sheet by deploying the strong cash flow performance to reduce net debt by $95 million so far this year, and have reduced net debt by a total of $222 million over the past 12 months. We possess ample liquidity to invest in our Quad 3.0 strategy, with $93 million of cash at the end of the quarter as well as up to $465 million in unused capacity under Quad’s revolving credit agreement.”