RRD Reports Third Quarter 2021 Results

Q3 Key messages
*GAAP net sales, including the impact of foreign exchange, increased 6.4%; Non-GAAP organic net sales increased 5.5%; largely driven by strengthening demand for many of the Company’s products and services
*GAAP and Non-GAAP income from operations exceeded prior year; both benefitted from higher sales and strong cost management despite supply chain challenges and inflation
*GAAP operating margin improved 450 bps while Non-GAAP improved by 20 bps
*GAAP earnings per share from continuing operations of $0.38 and Non-GAAP adjusted earnings per share from continuing operations of $0.57, both improved significantly from prior year
*Cash used in operating activities during the nine months ended September 30, 2021 was $29 million compared to cash provided by operating activities of $25 million in the prior year period; current year results reflect working capital investments due to increased volume and inflation in addition to $33 million paid earlier this year to settle LSC bankruptcy-related claims and terminate certain interest rate swap agreements
*Gross leverage ratio of 3.7x improved 1.0x from September 30, 2020; net leverage ratio of 3.2x improved 0.5x from the same period last year

“RRD delivered a very strong quarter through the continued execution of our well-defined strategic initiatives,” said Dan Knotts, RRD President and Chief Executive Officer. “We reported our second consecutive quarter of organic sales growth driven by strengthening client demand and higher volumes in our strategic product categories. Our Q3 adjusted income from operations was higher than our 2019 pre-pandemic earnings for the second consecutive quarter. Through the combination of organic sales growth and the ongoing successful management of our cost structure, we also delivered improved operating margins despite supply chain challenges and inflation. We further enhanced our financial flexibility with our debt level at the end of the quarter being down significantly from the prior year and representing the lowest debt level for any third quarter reported since the spin. Looking forward, the RRD team remains highly focused on driving sales growth, aggressively managing our cost structure to combat the challenges created by the global pandemic, inflationary pressures and supply chain disruptions, and further improving our financial flexibility.”

Net sales in the third quarter were $1.27 billion, up $76.5 million or 6.4% from the same period in 2020. Third quarter net sales benefitted $10.8 million due to changes in foreign exchange rates. The increase also includes higher volume reflecting strengthening demand for many of the Company’s products and services due to the continued recovery from the COVID-19 pandemic. Notably, net sales of Commercial Print products were up significantly due to strong demand for domestic trading cards as well as other printed products produced in China. In addition, higher demand for e-commerce sales have contributed to five consecutive quarters of net sales growth in the Company’s Labels and Packaging products.

Organic net sales increased 5.5%. The Business Services segment was up 7.1% on a GAAP basis and 5.9% on a non-GAAP organic basis while the Marketing Solutions segment was up 3.8% both on a GAAP and non-GAAP organic basis from the third quarter of 2020. The Business Services segment experienced continued growth in our strategic growth focus areas of Labels and Packaging in addition to continued growth from the pandemic recovery, which was partially offset by large one-time COVID-related projects in Supply Chain Management in the 2020 quarter. Net sales in Marketing Solutions experienced growth, led by higher volumes in Direct Marketing and Digital Print and Fulfillment.

Income from operations was $73.1 million in the third quarter of 2021 compared to income from operations of $15.9 million in the third quarter of 2020. The third quarter of 2021 included net restructuring, impairment and other charges of $4.0 million, a decrease from $54.2 million in the prior year period which included charges for LSC’s MEPP withdrawal obligations and higher employee termination costs.
further detail at: https://investor.rrd.com/news/news-details/2021/RRD-Reports-Third-Quarter-2021-Results/default.aspx

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