RRD Reports Net Sales and EBITDA Increases, But Also a Net Loss, for Q1 2022

R.R. Donnelley & Sons Company reported financial results for the first quarter of 2022.

Q1 Key Messages

• GAAP net sales, including the impact of foreign exchange, increased $139 million or 11.8%; Non-GAAP organic net sales increased 12% primarily from higher demand for most of the company’s products and services.
• GAAP net loss from continuing operations of $58 million includes merger related expenses of $64 million, higher restructuring, impairment and other charges compared to the prior year period, and expenses associated with the systems intrusion identified in December 2021.
• Non-GAAP adjusted EBITDA of $110 million increased 44% over the prior year period; related margin increased 190 bps to 8.4%.
• Non-GAAP adjusted net income of $33 million was up $27 million versus the prior year period.
• Cash used in operating activities during the three months ended March 31, 2022 was $213 million compared to $19 million in the prior year period; current year results reflect working capital investments due to increased volume and inflation in addition to $77 million of merger-related payments.
• Gross leverage ratio of 3.6x improved 0.3x from March 31, 2021; net leverage ratio of 3.0x improved 0.2x from same period.

Financial Highlights

The following tables provide an overview of RRD’s financial performance:

Net sales in the first quarter were $1.31 billion, up $138.8 million or 11.8% from the first quarter of 2021. While first quarter net sales decreased nearly $3 million due to changes in foreign exchange, the majority of the increase relates to higher client demand for most of the company’s products and services, and price increases to partially offset inflationary cost increases. The company experienced significant growth in supply chain management, commercial print and labels products. Organic net sales increased 12.0%.

Loss from operations was $25.5 million in the first quarter of 2022 compared to income from operations of $25.1 million in the first quarter of 2021. The first quarter of 2022 included $64 million of expenses related to the merger, and net restructuring, impairment and other charges of $18.9 million, which increased $13.1 million from the prior year period.

Net loss from continuing operations of $58.4 million in the first quarter of 2022 compared to $1.7 million reported in the first quarter of 2021. The 2022 net loss from continuing operations reflects the increased loss from operations, higher income taxes and loss on debt extinguishment, slightly offset by lower interest expense.

Non-GAAP adjusted EBITDA of $109.6 million increased $33.6 million from the prior year period. The increase was primarily due to the impact of higher net sales and ongoing cost control initiatives partially offset by continued inflation.

Non-GAAP adjusted net income from continuing operations of $32.7 in the first quarter of 2022 increased from $6.1 in the first quarter of 2021 primarily due to higher adjusted income from operations and lower interest expense, partially offset by unfavorable income taxes.

Other Highlights and Information

Cash used in operating activities during the three months ended March 31, 2022, was $213.3 million compared to $18.9 million in the prior year period. The increase in cash used is primarily driven by working capital investments due to increased volume and inflation and $77 million of merger related payments.

Capital expenditures in the first quarter of 2022 were $13.5 million versus $13.0 million in the prior year period.

As of March 31, 2022, cash on hand was $283.8 million, up $3.6 million from Dec. 31, 2021. Total debt outstanding at the end of the quarter was $1.6 billion, up $133.8 from the prior year end. Availability under the credit facility was $237.7 million at March 31, 2022. Total liquidity, including cash on hand, was $521.5 million, down from $830.9 million at Dec. 31, 2021.

Distribution of Future Earnings Releases

As part of its transition to a privately owned company, the company plans to publicly issue a press release related to its quarterly earnings releases and post the release to its website for each of the quarters in 2022. Beginning with the first quarter of 2023, the company expects to no longer issue its results publicly. Instead, creditors, investors, clients, suppliers and other approved parties may submit a request for access to financial information on the investor relations page on the company’s website.

Source: RRD

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