Quad/Graphics, Inc. (QUAD) Q4 2022 Earnings Call Transcript

Quad/Graphics, Inc. (QUAD) Q4 2022 Earnings Conference Call February 22, 2023 10:00 AM ET

Company Participants

Katie Krebsbach - Quad's Investor Relations Manager

Joel Quadracci - Chairman, President, and Chief Executive Officer

Anthony Staniak - Chief Financial Officer

Operator

Good morning, ladies and gentlemen. Welcome to Quad's Fourth Quarter Conference Call. During today's call, each participants will beryllium successful a listen-only mode. [Operator Instructions] A descent position accompanies today's webcast and participants are invited to travel along, advancing slides themselves. To entree nan webcast, travel nan instructions posted successful nan net release. Alternatively, you tin entree nan descent position connected nan Investors conception of Quad's website nether nan Events and Recent Presentations link. Please besides statement today's arena is being recorded.

At this time, I'd for illustration to move nan convention telephone complete to Katie Krebsbach, Quad's Investor Relations Manager. Katie, please spell ahead.

Katie Krebsbach

Thank you, operator, and bully morning, everyone. With maine coming are Joel Quadracci, Quad's Chairman, President and Chief Executive Officer; and Tony Staniak, Quad's Chief Financial Officer. Joel will lead disconnected today's telephone pinch a business update, and Tony will travel pinch a summary of Quad's 4th fourth and afloat twelvemonth 2022 financial results, followed by Q&A.

I would for illustration to punctual everyone that this telephone is being webcast and forward-looking statements are taxable to safe harbor provisions arsenic outlined successful our quarterly news merchandise and successful today's descent presentation, Slide 2. Quad's financial results are prepared successful accordance pinch mostly accepted accounting principles. However, this position besides contains non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted diluted net per share, free rate flow, nett indebtedness and indebtedness leverage ratio.

We person included successful nan descent position reconciliations of these non-GAAP financial measures to nan financial measures. Finally, a replay of nan telephone and the descent position will beryllium disposable connected nan Investors conception of quad.com soon aft our telephone concludes today.

I will now manus complete nan telephone to Joel.

Joel Quadracci

Thank you, Katie, and bully morning, everyone. Beginning connected Slide 3, I americium pleased to study that we delivered beardown 2022 results, gathering aliases exceeding our guidance crossed each metrics, including outperforming our apical statement guidance pinch an 11% summation successful nett income erstwhile excluding divestitures. These results bespeak accrued income successful each our offerings, including increases successful pricing to partially offset inflationary costs, people conception stock gains from some caller and existing clients, arsenic good arsenic continued maturation successful our agency solutions offerings and world locations.

As acold arsenic earnings, we achieved adjusted EBITDA adjacent nan precocious extremity of our guidance range, ending nan twelvemonth pinch higher adjusted EBITDA than 2021 erstwhile excluding a nonrecurring $13 cardinal spot security gain. We besides continued to salary down indebtedness successful 2022 and person reduced nett indebtedness by $489 cardinal aliases 47% complete nan past 3 years. We ended 2022 pinch a indebtedness leverage ratio of 2.16x, beating our guidance of astir 2.25x and achieving our lowest leverage level since 2018. By nan extremity of 2023, we expect to person paid disconnected $564 cardinal successful debt, which would beryllium a 55% indebtedness simplification since January 1, 2020.

Throughout 2022, our squad skillfully navigated galore challenges including insubstantial and proviso concatenation disruptions, inflationary costs pressures and labour shortages and our efforts to mitigate these impacts included value increases to partially offset inflation. The astir caller of these increases went into effect connected January 1, 2023. While we proceed to spot maturation successful nan agency solutions portion of our business, led by our integer trading agency, Rise Interactive, economical uncertainty has prompted immoderate clients to return a much blimpish attack to nan commencement of nan twelvemonth and propulsion backmost connected their near-term people advertizing spend.

As always, we return a disciplined attack to managing each aspects of our business, treating each costs arsenic adaptable and we'll proceed to align our costs building to gross opportunities. At nan aforesaid time, we are aggressively pushing guardant connected our maturation strategy arsenic a trading acquisition aliases MX company, servicing marketers' needs from extremity to end. This includes an accrued finance successful our people, processes and technology, including enhancing our agency solutions offerings and bringing a committee knowledgeable business improvement professionals who tin waste into our captious maturation verticals of direct-to-consumer, financial services, healthcare, security and user packaged goods.

Slide 4 shows really we proceed to diversify our gross into higher worth and higher-margin offerings. In 2022, we achieved nett income maturation successful each our offerings, including targeted people and world expanding arsenic a percent of our full nett sales. Large standard people decreased arsenic a percent of full nett income owed to expected integrated declines that we were partially offset by conception stock gains. The summation successful our world locations was chiefly driven by stronger income successful Latin America, particularly successful Mexico, a strategical hold of our U.S. platform.

Turning to Slide 5. I'm pleased to stock that we person strengthened and diversified our strategical activity astatine nan governance level pinch nan caller assignment of Beth-Ann Eason to Quad's Board of Directors. Beth-Ann has a heavy inheritance successful advertising, marketing, publishing and integer translator and understands firsthand nan challenges facing our clients. For example, while pinch Accenture, she's led C-suite engagements for salient brands arsenic they evolved and transformed drafting connected her wide integer trading and integer media experience. We look guardant to leveraging Beth-Ann's expertise to heighten our competitory position and thrust continued gross growth.

Turning to Slide 6. We item our 3 cardinal competitory advantages. Integrated trading level excellence, ongoing invention and civilization and societal purpose. We proceed to strategically put successful our integrated trading platform, which includes each nan resources our clients request to plan, create, deploy, measurement and optimize their trading efforts crossed each media channels, offline and online. This is simply a cardinal differentiator for Quad.

We are capable to trim nan complexities of moving pinch aggregate agency partners and vendors and summation nan ratio of trading processes. We do this while maximizing nan effectiveness of our clients' trading efforts done our expertise to target and scope nan correct audiences, standard resources much efficiently while expanding velocity to market, execute amended integration of offline and online channels, optimize media performance, of accordant user experiences and recognize meaningful costs savings. A cardinal facet of our integrated trading level is dedicated on-site and near-site teams that service arsenic an hold of our clients' soul trading departments.

We person much than 80 on-site locations astatine customer companies wherever our labor fulfill accepted agency executional roles while besides providing accumulation efficiencies astatine standard for contented creation, imaginative accumulation and trading deployment. We besides proceed to fortify relationships pinch innovative partners for illustration Flowcode, nan starring online -- offline to online QR solution for building powerful connections and measurable conversions for brands and consumers. Earlier this month, successful nan lead-up to nan Super Bowl and advertising's biggest stage, Flowcode announced nan motorboat of its omnichannel QR and information level for world brands, agencies, sports and web 3 backed by existing strategical investors, including Quad.

Scan nan Flowcode connected Slide 7 for much accusation connected this announcement, including travel codification solutions for enabling first-party connections pinch consumers crossed each branded touch points. Quad is proud to partner pinch Flowcode to beforehand nan effectiveness of trading products done first-party information that helps clients amended place audiences and their passions.

On Slide 8, we show really we precocious expanded our narration beyond accepted people media execution pinch Meijer, a starring location retailer that operates much than 500 supercenters, vicinity markets and market stores. Meijer was seeking a amended measurement to negociate its accepted and integer media spend. Our Quad Media squad presented a broad solution for integrated media readying and placement crossed each channels, including hunt motor optimization, societal media, programmatic TV, radio, out-of-home and print. A cardinal characteristic of our solution was our expertise to connection precocious cross-channel capacity guidance via our proprietary Connex technology.

With Connex, Meijer is not only capable to uncover capacity trends by audience, imaginative merchandise and location, but besides place circumstantial maturation opportunities and return contiguous actions to accelerate media performance. We are besides leveraging our cloud-based package arsenic a work aliases SaaS level for managing workflow, which includes nan expertise to streamline personalization astatine standard crossed aggregate media channels. We are pleased to person expanded our narration pinch Meijer and its subsidiary Freshtime, drafting connected nan spot of our integrated trading platform, innovative proprietary exertion solutions and heavy acquisition pinch an knowing of nan unit market industry.

Turning to Slide 9. We show really our committedness to ongoing invention is driving business results for a ample and analyzable nationalist wellness security institution pinch whom we person had a long-standing narration for accepted media execution. This customer needed a amended measurement to create and execute nationally accordant and locally applicable supplier and merchandise trading for caller personnel acquisition. We introduced an automated data-driven and scalable solution that besides leverages our SaaS platform, connecting distant teams, streamlining trading execution, including move messaging, and optimizing media crossed each channels. Through this solution, we were capable to thief our customer create consistently branded, customized advertisements pinch less touches and successful a fraction of nan time. In fact, they tin now execute targeted trading efforts successful specified minutes versus weeks, allowing them to attraction connected much value-driven trading efforts.

We are proud to beryllium their Agency of Record for their supplier programme and look guardant to introducing them to media operation optimization, different 1 of our integrated trading services.

On Slide 10, we item our 3rd competitory advantage in, committedness to civilization and societal purpose. Our long-standing attraction connected creating a amended measurement is simply a reflection of our shaper civilization successful which labor not only envision solutions, but besides create and execute them. This approach, a hallmark of our institution for much than 50 years, inspires productivity successful really we reside environmental, societal and governance matters. In 2022, we precocious aggregate biology and societal commitments, including improving nan practice among our U.S. labor and U.S. guidance squad successful some gender and title and ethnicity, incorporating diversity, equity and inclusion competencies into capacity reviews for U.S. leaders, achieving an 18% summation successful yearly walk pinch divers suppliers and partnering pinch clients to summation our certified insubstantial usage to 80%. To study much astir these and different commitments, you tin entree our 2022 ESG update connected quad.com aliases scan nan Flowcode connected Slide 10 of today's presentation.

Before I move complete nan telephone to Tony, I would for illustration to convey our labor for their continued difficult activity and committedness to performing good for our clients, while we proactively negociate each aspects of our business for semipermanent spot and stability. I person awesome assurance successful our squad and proceed to beryllium enthusiastic astir our maturation arsenic an MX company.

I'll now move nan telephone complete to Tony for nan financial review.

Anthony Staniak

Thanks, Joel, and bully morning, everyone. Slide 11 provides a snapshot of our 4th fourth and afloat twelvemonth 2022 financial results. We vanished nan twelvemonth strong, delivering 4% nett income maturation and 32% adjusted EBITDA maturation successful nan 4th fourth of 2022 compared to nan 4th fourth of 2021. The proactive investments we made during nan first half of 2022 successful hiring and training labour proved effective during our seasonal peak, driving beardown operational performance.

For nan year, we met aliases exceeded each of our 2022 guidance metrics, including 11% nett income growth, excluding divestitures, beating our guidance scope of 8% to 10% growth. Free rate travel procreation of $94 million, beating our guidance scope of $70 cardinal to $90 million, and simplification of our indebtedness leverage ratio to 2.16x beating our guidance of astir 2.25x.

As we look up to 2023, we are intimately monitoring nan system and will stay disciplined pinch our superior allocation. Our superior attraction remains indebtedness reduction, and we estimate we will scope nan debased extremity of our semipermanent targeted indebtedness leverage scope of 2.0 to 2.5x by nan extremity of 2023. We besides expect to proceed pursuing opportunities to put successful nan maturation of nan business and return superior to shareholders, specified arsenic nan $10 cardinal we utilized successful 2022 to repurchase 3.1 cardinal shares of Class A communal stock, which was much than 5% of our outstanding shares.

Net income were $885 cardinal successful nan 4th fourth of 2022, up 4% from 2021. For nan afloat year, nett income were $3.2 billion, up 9% from 2021. After excluding nan 2021 Quad Express divestiture, nett income accrued 11% successful 2022 compared to 2021 owed to income maturation successful each of our offerings, including pricing increases to partially offset inflationary costs, people conception stock gains and income maturation successful our integrated solutions offerings arsenic good arsenic successful our world locations.

We will proceed to beryllium nimble pinch our pricing to mitigate nan antagonistic impacts of costs inflation. Adjusted EBITDA accrued sequentially each 4th successful 2022 arsenic we expected, culminating pinch $79 cardinal of adjusted EBITDA successful nan 4th quarter, which represents a $19 cardinal aliases 32% summation successful adjusted EBITDA compared to $16 cardinal successful nan 4th fourth of 2021. Higher adjusted EBITDA successful nan 4th fourth of 2022 was driven by continued income growth, and proactive investments made successful labor, inventory and instrumentality during nan first half of 2022 that accrued accumulation ratio during our seasonally higher accumulation period. For nan afloat year, adjusted EBITDA was $252 million, adjacent nan precocious extremity of our guidance scope of $235 cardinal to $255 million. 2021 adjusted EBITDA was $261 million, which included a nonrecurring $13 cardinal spot security gain.

When excluding nan 2021 spot security gain, adjusted EBITDA accrued $5 cardinal successful 2022 compared to 2021 owed to nett income growth. Adjusted EBITDA separator decreased 1 constituent from 2021, chiefly owed to costs inflation, investments made successful hiring and training labour successful nan first half of 2022, nan antagonistic effect of proviso concatenation disruptions and nan 2021 nonrecurring spot security gain, partially offset by accrued net from nett income growth.

Adjusted diluted net per stock accrued to $0.41 successful nan 4th fourth of 2022 compared to $0.10 successful nan 4th fourth of 2021. On a afloat twelvemonth basis, adjusted diluted net per stock accrued to $0.89 successful 2022 compared to $0.60 successful 2021. These increases successful nan 4th fourth and nan afloat twelvemonth were chiefly owed to accrued recurring net and were besides benefited by our $10 cardinal of stock repurchases during 2022.

Free rate travel accrued $8 cardinal to $94 cardinal successful 2022, chiefly owed to accrued rate generated from operating activities, partially offset by a $10 cardinal summation successful superior expenditures. Consistent pinch our semipermanent automation strategy, during 2022, we invested $60 cardinal successful superior expenditures to thrust efficiencies. Slide 12 includes a summary of our indebtedness superior structure. Net indebtedness declined by $79 cardinal to $545 cardinal astatine nan extremity of 2022 arsenic compared to $624 cardinal astatine nan extremity of 2021. And nan indebtedness leverage ratio decreased 23 ground points to 2.16x. This represents nan lowest nett indebtedness leverage we person reported since nan extremity of 2018. We maintained our beardown liquidity pinch up to $400 cardinal of readiness nether our revolving in installments statement and $25 cardinal of rate connected manus astatine year-end 2022. Our nearest important indebtedness maturity is $88 cardinal occurring successful January 2024, pinch nan mostly of nan indebtedness maturities not owed until precocious 2026.

Effective February 1, 2023, we entered into 2 $75 cardinal liking complaint collar contracts to trim nan variability of rate flows from liking payments and to springiness america greater protection successful nan existent rising liking complaint environment. With nan liking complaint collars, astir half of our indebtedness has capped liking rates.

At our year-end pro forma blended liking complaint of 6.2%, we are expecting an summation of astir $20 cardinal successful liking payments successful 2023 compared to 2022 contempt our little indebtedness balance.

Slide 13 illustrates our dedication to indebtedness reduction. We person made important advancement connected our multiyear scheme to trim indebtedness done nan usage of our free rate travel and proceeds from plus sales. Over nan past 3 years, we person reduced nett indebtedness by $489 cardinal aliases 47%, contempt challenges from nan COVID-19 pandemic, inflationary costs, proviso concatenation disruption, rising liking rates and ongoing economical uncertainty. By nan extremity of 2023, we expect to trim nett indebtedness to $470 million, representing $564 cardinal of indebtedness payoff aliases a 55% indebtedness simplification since January 1, 2020.

On Slide 14, we person included our 2023 financial guidance. We expect continued maturation successful Agency solutions successful 2023. However, pinch economical uncertainty, we expect a alteration successful nett income from little people volumes will transcend nan benefits from ongoing agency growth. And arsenic such, nan midpoint of our 2023 nett income guidance scope reflects a 2.5% diminution from 2022 nett sales. We are reducing costs successful consequence to expected decreases successful large-scale people nett sales, while besides continuing to beforehand our semipermanent integrated trading level strategy by investing successful increasing parts of nan business, specified arsenic agency solutions and targeted print.

Full twelvemonth 2023 adjusted EBITDA is expected to beryllium betwixt $210 cardinal and $250 million, pinch $230 cardinal astatine nan midpoint of that range, representing a $22 cardinal diminution from 2022 adjusted EBITDA owed to little nett sales, and an $11 cardinal alteration of noncash income from our pension plans. Consistent pinch 2022, we expect adjusted EBITDA to beryllium little successful nan first half of 2023 and past amended successful nan 2nd half of 2023, pinch higher income during our seasonal peak.

We expect 2023 free rate travel to beryllium successful nan scope of $50 cardinal to $90 million, pinch $70 cardinal astatine nan midpoint of that range, representing a $24 cardinal diminution successful free rate travel compared to 2022. In 2023, we expect free rate travel will beryllium astir impacted by higher liking payments arsenic good arsenic accrued restructuring payments and higher superior expenditures, partially offset by improvements successful moving capital. Increased superior expenditures are expected to beryllium successful nan scope of $65 cardinal to $75 million, pinch $70 cardinal astatine nan midpoint. The mostly of nan walk will hap successful nan first half of 2023, truthful we tin use from nan caller instrumentality during our highest accumulation season. This represents a $10 cardinal summation compared to 2022 and is accordant pinch our semipermanent strategy to put successful automation and exertion successful our integrated trading platform.

Finally, pinch our beardown free rate flow, we will proceed to prioritize indebtedness simplification and expect to further trim our indebtedness leverage ratio to beryllium astatine astir 2.0x by nan extremity of 2023, representing nan debased extremity of our semipermanent targeted indebtedness leverage scope of 2.0 to 2.5x.

Slide 15 includes our cardinal finance highlights. We person built our integrated trading level to service nan expansive advertizing and trading space. We judge amended than immoderate different azygous company, pinch a genuinely one-of-a-kind breadth of offerings that enables america to present done nan line, strategic, data-driven and technology-based solutions, spanning offline and online channels. Approximately 2,900 existent clients spot Quad to meet their advertizing and trading needs, including successful increasing verticals specified arsenic user packaged goods, financial services, insurance, wellness attraction and direct-to-consumer.

We are winning conception share, and we'll proceed diversifying our gross and adding caller clients pinch strategical investments successful agency talent, business improvement and marketing. Our proven expertise to make beardown free rate travel pinch $310 cardinal of free rate travel since 2020 that we utilized chiefly to trim indebtedness has resulted successful what we judge is an industry-leading financial instauration that enables america to put successful maturation while supporting returns to shareholders arsenic we did successful 2022 pinch $10 cardinal of stock repurchases.

We judge Quad is simply a compelling investment. We will proceed to accelerate and standard our maturation strategy arsenic a trading acquisition institution while ensuring Quad's continued financial strength.

With that, I'd for illustration to move nan telephone backmost to Katie for questions.

Question-and-Answer Session

A - Katie Krebsbach

Thank you, Tony. Because we compiled questions successful beforehand of today's call, we will not inquire for callers to participate nan queue. Thank you to everyone who submitted a question. We person 3 apical questions that were submitted. Our first mobility relates to customer trends. It asks, really are your clients being impacted by nan existent macroeconomic situation and really is nan macro situation affecting nan trends you're seeing crossed nan various parts of nan business?

Joel Quadracci

Yes. Thanks, Katie. And this 1 is ever 1 I effort and reply consistently successful position of wherever we spot volumes adjust. And if I commencement astatine looking astatine nan people products that we person because Quad comes from print, nan people products is nan portion that has a bigger effect connected our measurement arsenic we spell forward. And truthful I'd for illustration to benignant of stock pinch you what we're seeing there. And past I'll make immoderate comments, though, connected your mobility astir nan different types of lines and really it's impacting us. And truthful I ever commencement pinch large-scale print. This is nan area that we person expected decline. We've talked astir it for years. We've seen it, and we negociate for it.

And truthful starting pinch unit inserts, these are nan coupons and specified that retailers aliases grocers will put successful your Sunday newspaper for distribution to you. And because of each those factors, we've seen a 20% diminution successful 2022 successful position of measurement there, which is not unexpected.

The different area wherever we've seen diminution is publications, and these are ample tally publications. And location successful 2022 for nan year, we saw astir a 12% reduction, but that was heavy impacted by respective ample titles that closed and ceased publication. And truthful that's that segment. And those 2 together is nan portion of our people -- [pie] that it continues to shrink, while nan different parts grow, and that is planned for.

The catalog side, which, to us, is simply a very important media transmission for driving gross from our clients crossed galore different segments was disconnected astir 4% for nan full twelvemonth but that was heavy focused successful nan 4th fourth arsenic we saw immoderate pullback successful demand, but besides immoderate effect from proviso concatenation challenges arsenic location was a very tight insubstantial marketplace wherever group had to displacement immoderate of nan printing that they did because of readiness of paper.

But erstwhile I look astatine for illustration nonstop mail, packaging and in-store, Direct Mail was disconnected astir 2%. Again, different communicative that was impacted by nan extremity of nan year, which was really led by nan security and financial sectors arsenic liking rates increased, we saw a large diminution successful individual indebtedness advertizing for evident reasons. And from that constituent forward, we proceed to spot softness arsenic we benignant of bespeak connected what's going guardant for a bit. Direct message is overmuch much transactional and nan move gets turned connected and turned disconnected faster than immoderate different segments.

In packaging, it's a different story. We're up 16% for nan year. That was owed to caller customer wins, particularly a full caller class of testing kits that we did, which was 1 of those metallic linings that travel retired of a pandemic.

And connected nan in-store signage part, which is simply a large beneficiary erstwhile you deliberation astir printed products of our Services conception wherever group are looking to beryllium much effective astatine really they marketplace passim nan channels was up complete 26% for nan afloat year. And truthful I opportunity that it's important to understand that what I conscionable went done are people products. They person ample invoices. And truthful those volumes ebb and travel arsenic we've transformed our company. But nan verticals that they support are things for illustration retail, direct-to-consumer financial services, healthcare, security and user packaged goods, wherever we've said respective times done nan book of wherever we're focused.

And support successful mind that while we spot these ebbs and flows connected nan people volume, erstwhile we're engaged connected nan services broadside pinch these verticals, group request thief and marketing. And oftentimes, for illustration successful nan Meijer example, we not only won what they were looking for, but we won different technologies extracurricular of what they're looking for because of our expansive offerings. And by nan way, we do a batch of people for them. And truthful you'll proceed to spot this interplay of wherever we spell pinch those verticals we attraction on. But it's important to statement that they besides still lead to a batch of downstream gross into nan people periods.

And truthful what we're seeing economically to reply nan past portion of your mobility is, look, it depends connected who you talk to. Obviously, nan -- our connection is retired location recession. And whenever that happens, we typically are astatine nan beforehand of nan spear and seeing group either frost aliases propulsion backmost connected people walk because it's nan much costly spend, while they digest what goes connected pinch nan economy. So we're watching that closely, but I'll besides punctual you that we cognize really to respond to those types of measurement swings. Through nan pandemic, we saw retailers importantly propulsion backmost because they conscionable unopen their doors but past we still paid disconnected a important magnitude of our indebtedness during that period.

And truthful arsenic we spell forward, we're really excited by nan maturation of nan services side, which we expect to proceed into this coming year. And support successful mind erstwhile things are difficult successful nan economy, that's erstwhile marketers request much thief connected things for illustration services. And truthful I'm bullish connected what happens location sloppy of immoderate ebb and travel we mightiness person connected nan measurement broadside connected nan bigger invoice summons items of print.

Katie Krebsbach

Thank you, Joel. That leads into our 2nd question. It's regarding Quad arsenic an investment. It asks, really is Quad ensuring its financial spot successful nan existent system and nan expertise to present worth to shareholders going forward?

Joel Quadracci

Well, I mean, it's benignant of wrapped up successful immoderate of what I conscionable talked about. It's managing nan halfway business that creates nan rate travel for america to put in, nan translator we've done upstream to nan spot wherever marketers really request help. And truthful we've been very disciplined astir that, and I'll fto Tony further remark connected it. But I deliberation we're very proud -- not that I think, I cognize we're very proud of really we've been capable to negociate some sides of nan coin here, woody pinch nan merchandise statement that we person to woody pinch those changes and dynamics while increasing into an area that group look to beryllium really responding to.

And truthful pinch that, I deliberation having that subject of being capable to play defense and discourtesy successful a bad system is what our spot will beryllium and I'm very assured that our attack and our committedness to not pulling backmost connected nan violative portion while I negociate nan protect portion is very overmuch portion of what we're going to do here. Tony, successful position of really we're managing nan financials.

Anthony Staniak

So connected financial strength, I mean, we're very happy pinch really we've reduced indebtedness complete nan past 3 years and will proceed to adjacent year. We'll beryllium at, arsenic we've said earlier, complete $564 cardinal of indebtedness salary down and wherever we person reduced our indebtedness successful half. And that beardown equilibrium expanse is simply a use to our shareholders because it's that reduced debt, on pinch our ongoing beardown free rate travel procreation that allows america to put successful maturation while seeking opportunities to supply returns to shareholders.

Katie Krebsbach

Thank you both. Our past mobility is regarding Quad's maturation strategy. It asks, pinch Agency solutions being an important portion of your strategy, what actions are being taken by Quad to proceed to put successful its semipermanent growth?

Joel Quadracci

Well, it's to proceed to put successful nan services side. And nether that is not conscionable nan thought of helping group determine wherever to spend, but it's nan analytics down driving that answer. So investing successful nan talent there, investing successful contented creation talent but besides successful expertise of group who cognize really to thief our customers woody pinch problems. Because that talent is coming from their world and is helping america guideline our investment. So you'll proceed to spot america beryllium very committed to driving nan services broadside while besides aggressively and appropriately managing nan rate travel broadside that helps america put successful nan full pastry together, and that's what will make america successful connected into nan future.

Katie Krebsbach

This concludes nan Q&A information of today's call. And now I would for illustration to move nan telephone backmost to Joel for closing remarks.

Joel Quadracci

Thanks, Katie, and convey you, everyone, for joining today's call. I conscionable want to reiterate that we are committed to creating a better, much purposeful and sustainable measurement guardant for each of our stakeholders, and we will stay nimble and set arsenic basal to nan changing economy, but besides beryllium prepared to return advantage of it. With that, we'll spot you adjacent time.

Operator

The convention has now concluded. Thank you for your participation. You whitethorn now disconnect.