Good morning, ladies and gentlemen and welcome to Quad's Third Quarter 2020 Conference Call. During today’s call, all participants will be in a listen-only mode. [Operator Instructions] A slide presentation will accompany today's webcast and participants are invited to follow along, advancing the slides themselves. To access the webcast, follow the instructions posted in this morning's earnings release. Alternatively, you can access the slide presentation on the Investors section of Quad's website under Events and Recent Presentations link. Please also note, today’s call is being recorded. At this time, I'd like to turn the conference call over to Katie Krebsbach, Quad’s Investor Relations Lead. 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 Dave Honan, Quad's Executive Vice President and Chief Financial Officer. Joel will lead off today's call with a business update, and Dave will follow with a summary of Quad's third quarter 2020 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 2. 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, free cash flow 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. Despite significant volume declines due to the pandemic, our third quarter performance was strong. We continue to aggressively manage our cost structure treating almost all costs as variable. At the same time, we continue to drive productivity improvements and protect the health of our balance sheet. We also achieved higher profit margins for the quarter and on a year-to-date basis, generated positive cash flow and continued to pay down debt. We were also able to maintain our leading competitive position and grow segment share, providing stability for our clients while we continue to drive our transformation strategy at a time of significant industry and economic disruption. As outlined on Slide 3, during the quarter, we continue to proactively manage through the impacts of the pandemic with a focus on maintaining the health and wellbeing of our employees, providing high-quality on-time delivery for our clients and ensuring the long-term financial health and stability of the company. We remain committed to our Safe-at-Work Program, providing frequent employee communications and how to stay healthy both inside and outside of work. The number of confirmed cases at Quad remains relatively low even during this falls, significant increase in cases countrywide and is not negatively impacted operations. However, we continue to monitor the situation closely. We also continue to take actions to protect the company's long-term financial health. While client demand remained below last year's levels, volumes came in stronger than expected due to the economy reopening and some segment share gains. As we look to the future, we continue to accelerate our transformation as a marketing solutions partner to drive new revenue sources outside of traditional print and at higher margins. We are focused on the three key areas outlined on Slide 4. Optimize our product portfolio…

Thank you, Joel, and good morning, everyone. Slide 9 provides a snapshot of our third quarter financial results. Our third quarter operating and cash performance were strong due to our disciplined cost management during a time of continued headwinds from the COVID-19 pandemic, while advancing our Quad 3.0 transformation strategy. We are committed to ensuring the health and wellbeing of our employees, while protecting Quad’s financial health, providing great service to our clients and winning new work. We realigned our cost structure with current demand and reduced operating costs at a higher percentage than our net sales decline. This resilient performance resulted in increased free cash flow and combined with cash proceeds generated from recent asset sales help reduce net debt by $222 million over the past 12 months. Our strong balance sheet helps ensure we have the financial flexibility to navigate the pandemic and continue to advance our transformation as a marketing solutions partner. As Joel mentioned, we completed the sale of our two remaining book manufacturing facilities in Martinsburg, West Virginia and Fairfield, Pennsylvania. This transaction combined with the July 1, 2020 sale of our Versailles, Kentucky plant completes our previously announced strategy to divest our book platform. This strategy supports our goal of optimizing our product portfolio to focus on the greatest revenue producing opportunities in support of our Quad 3.0 transformation. Net sales were $679 million in the third quarter down 28% from 2019. And on a year-to-date basis, net sales were $2.1 billion down 27%. Both the quarter and year-to-date variances are primarily due to the economic impact from the pandemic, ongoing print industry volume and pricing pressures and a 2% impact related to the divestiture of our Omaha packaging facility in January of 2020. Since the pandemic began, we saw the largest decline in…

Thank you, Dave. We compiled questions in advance of today's call and therefore we will not ask for callers to enter the queue. Thank you to everyone who submitted questions in advance. We have three top questions that were submitted. The first question relates to client volumes. How did client demand impact Quad’s volume in Q3 as the quarter progressed? And what are you hearing from clients regarding demand levels as the holiday shopping season begins?

Well, thanks Katie. Clearly, it's a crazy year with what's going on, but as Dave said, May was probably represented our trough, the lowest point of sort of the impact from COVID. And since then, we've really seen sequential monthly improvement. And specifically, if you think about Q3, which Dave mentioned, improved about 10 basis points versus prior quarter. But if I turn to sort of starting with the higher volume legacy products, we have those retail inserts, publications and catalog, clearly retail inserts led the pack and deepest decline. So in the quarter it was off about 43%, which is several points better than the industry. And we think that, you'll start to see – continue to see some stabilization calling for something in the closer to the 30s in the next quarter. Publication would be sort of a next one that the industry was off about 16%. We’re off about 9%. And that's a good trend specifically because that was a result of segment share wins. And in the catalog area, we were off about 20%, which is fairly in line with what we saw in the industry. But again, expect to continue to see that stabilization. But the interesting thing is, is that as we've really kind of focused on pushing forward with the transformation regardless of pandemic and economic shutdown, we've seen in packaging, which is a fairly new product line for us, but one that really grabs hold of the rest of the 3.0 services to sell itself was up 19% in volume for the quarter. The industry from a CPG standpoint was up about 9%, so 19% was a great number. Direct mail, if you look at the industry was off about 25%, we were off only 12%, some of that aided by political…

Great. Thank you, Joel. Okay. Our next question relates to cost reduction. Could you give more detail on temporary versus permanent cost reduction and what types of cost reduction will be more permanent going into 2021?

Absolutely, Katie. As Joel mentioned, we've historically tried to treat all of our costs as variable over the long-term, and really try to match those cost to that with the changes in customer volume demand. So in our prepared remarks, we discussed our approach to that cost control, that approach has been crucial in reducing costs at a higher percentage rate than our net sales decline. And as we referenced the height of our pandemic and that impact on the volume, at that point we had taken temporarily $325 million of cost out of an annualized basis. So since that point we've adjusted our cost to match our net sales and we've really worked on converting a lot of those temporary savings into permanent savings, which takes a bit of time. But at this point, we were – just under 40% of our temporary savings have been converted into permanent. And what that really represents is permanent cost reduction for us is really looking at our headcount and being able to right-size our headcount, and our headcount is down by a 1,100 employees as of the end of September. And during that process, we've closed over four – we've closed four for our facilities – manufacturing facilities in 2020. And so that helps us kind of over the longer-term to right-size our costs to match volumes. But also we'll continue to use temporary savings as a way to continue to also match in a very short period of time of what's happening with volume changes. And so going forward into 2021, we're going to continue to display that discipline and manage our cost accordingly with what happens with print volume demand, but yet not starving the business for the investment that our clients are looking for in other channels with us as we do more and more for our clients as a marketing solutions partner.

Hey, Dave, I might add to that. When you think about temporary versus permanent, with a company like ours in this industry, you got this huge infrastructure of capital base of equipment and plants. We actually – and I think Dave mentioned it, but we actually furloughed entire plants and one of them was well over 1 million square feet. That's easier said than done because you're taking this huge thing down, but then bringing it back up again, which we've since done to the busy season. And so I think without the process focus we have, and the technology investments that we've made over the years in terms of our scheduling systems and how all the data flows to manage the platform that would have been very hard to execute on. So it's an important point when we think about continuing to manage through the crazy times right now.

Right. Thank you, both. That was great detail. And our final question is as you look to next year and start to think about the eventual economic recovery, how do you think the pandemic has impacted prints long-term role in the marketplace?

Well, I'm sure like everybody trying to answer that question. The crystal ball is very, very cloudy. A lot of people are still – a lot of markets are still trying to navigate this year. As I mentioned before, much less trying to look at, okay, what are they doing next year when you're not sure the course of the pandemic. We're clearly in a big spike going on throughout the country and the world. And so the question is, is what dampening will that have on economic recovery? Obviously, there's other things playing out. But I will say that the world has left forward pretty good with use of technology, use of digital, the digital space and our investment and our sort of acceleration that we're doing now in the transformation is very well timed. Because I think it's really forcing people to streamline their processes between channels really understand the data. And analytics is a hugely important part right now. We're seeing a lot of people scrambled to do a lot better than before because when you have year-over-year patterns that are the same for the consumer, you can kind of just look at year-over-year what's going on. When all the patterns are changing, you really got to rely on understanding how they're changing and in what sort of mix. And so part of our 3.0 strategy has been to aggressively grow our analytics capabilities, not just to tell people what can happen in print, but to tell them what is the impact of everything on all the different channels. And so you'll see us in the coming quarters start sharing some examples of how that is playing out in one business and in ways we're helping our clients sell more stuff. So I think the bottom line is, is to stay nimble, be on your game, we have to manage cost. It's almost like A Tale of Two Cities, manage the cost side on print, deal with the ebb and flow of how people are going to decide on volumes. But at the same time, just put the foot to the pedal on our transformation and continue to bring in the really good talent we've found to really push and further design our offerings. We've done some acquisitions in the past around the South. We feel we have most of the big pieces in place. And so the next focus has really been on, let's get some great talent that's available and the talent out there that's available understands the marketing disruption that's taking place today and understands why Quad’s offering is perfectly timed for another disruption in the marketing world. And so with that, clearly, we'll talk to you next quarter and give you an update to it. But again, I think anybody right now who's going to win, it's going to be about really being nimble and also opportunistic at the same time.

Great. 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 again, Katie, and thank you all for joining us today. I want to close by reiterating my thanks to our employees for their hard work and sacrifices during our seasonally busiest time of the year, while continuing to manage through the ongoing COVID-19 pandemic. The way the people on the floor have managed through the drop in volume was just a stellar performance on productivity and really managing cost has been second to none. All the employees have been resilient in the face of recent challenges and my sincere appreciation for the work they do each and everyday as we create a better way for our clients and ourselves. So thank you all. Have a good day. We look forward to speaking with you again next quarter. Take care.

Ladies and gentlemen, with that we will conclude today's presentation. We do thank you for joining. You may now disconnect your lines.