Kevin Steinke: Okay. Thank you. I will turn it back over.
Anthony Staniak: Thanks Kevin.
Operator: The next question comes from Barton Crockett with Rosenblatt Securities. Please go ahead.
Anthony Staniak: Hi, Barton. Good morning.
Barton Crockett: Good morning. Thanks for taking the question. Yes, I guess one of the things on the asset sales, I was kind of curious about, you guys have announced some closures of some facilities here, right? So you’ve got the Saratoga Springs, I think, over one million, I think, square feet closing in January. You did Ethingham, Illinois in October, which I think was another 564,000 kind of square feet. So you’re looking at a good 1.5 million-plus kind of square feet reduction, which seems kind of comparable to square feet reduction you guys had prior, like 2020 until like early 2023, you closes a couple of facilities which were comparable. Those seem to — those earlier closures, I think, played a role in your ability to generate, I think, about $170 million or so of property sales.
And I’m just wondering if, in fact, that $170 million was correlated to those closures and if there’s a possibility that what you’ve got on deck here could be at some level kind of comparable in terms of its ability to generate property sales for you guys?
Anthony Staniak: Hi, Barton. This is Tony. So the $170 million that you’re referencing, I know we had one year, 2021, that was high in particular. And that was made up of a few items that were in there. The sales of buildings were part of that. That year, we also sold a small part of our logistics business called Quad Express for $40 million. That was part of that. We did a couple of sale leasebacks of plants in that year with West Allis and Chalfont, also part of that number. When we look back historically, just to maybe give you kind of a little bit of a rule of thumb, when we’ve got these one million square foot plants, they do go for pretty good value, right? Like it’s a noticeable component of that $166 million. Hard to tell case-by-case where it will be for each one, but it does have the potential to move the needle towards them putting that to pay down debt, which is historically what we’ve done and continues to be our top capital allocation priority.
Joel Quadracci: And let me just add too, some of the background on this. So like, when you look at Saratoga, a large plant in the Northeast, we had Merced, out in California. Part of this is the changing need from the clients where some of the stuff like, originally Saratoga was for weekly magazines when they were a big deal. We augmented that with catalog work. But now, as we look at the rollout of our Fusion Mail product, it’s hard to have those regional — a plant like that. So we really wanted to concentrate that work back into a central location to feed the ability to gets as much together as possible. So that’s why we were able to do that. And some of the investments like those two big presses we talked about was making that possible in the core of it. So there’s some methodology behind it besides just some of the decline that we’ve seen.
Barton Crockett: Okay. And the more recent — or the late October or the October 23 kind of closure in Illinois, Ethingham, have you reaped meaningful kind of proceeds from that in the figures already reported for all of 2023 or would that be largely to come in 2024 and beyond?
Joel Quadracci: Yes, the Ethingham facility is for sale still at this point, Barton. So not yet in previous proceeds. Same would go for Saratoga and our Sacramento location. The question is just when, right?
Barton Crockett: Okay. All right, that’s helpful. Now, I wanted to switch gears a little bit. The economic environment, interest rates seem to be staying higher for longer. You guys touched on this a little bit before, but I wanted to drill on it in a little bit more detail. Is this having a meaningful impact, this kind of higher interest rate environment on your financial services, which I think had been a point of some difficulty earlier. And with mortgages, auto loans, I would think would be impacted and affect you guys potentially, but you seem to indicate some optimism there. So I was wondering if you could talk about what you’re seeing there.
Joel Quadracci: Yes. And I think I was hitting on this before. But also keep in mind, in that was a big loss of a piece of work because of a large bank exiting, going into consumer banking. And so that one was a little bit different in that — but it was meaningful to us because we did a lot of work for them. And so that was just a change. But I’d say that, yes, like the Lending Quad type of work, the car loan stuff is probably lagging a bit, whereas just marketing for other parts of financial services. And another place of interest is, I think, the insurance industries, where there’s a fair amount of activity for us as we think forward on the direct mail side.
Anthony Staniak: Yes. I was going — on the direct mail at the end, I was going to say the same, that’s, Barton, if you look at our revenue pie chart, direct mail is 12% of our revenue mix, and that’s — to give you some scale, that’s primarily where this pressure is concentrated.
Barton Crockett: Okay, that’s helpful. And then taking a look at your guidance for the year. So you guys are reiterating the guidance for net sales down 5% to 9% adjusted EBITDA, at the low end kind of, I think, down 12%; at the high end, up 5%. That would obviously suggest what you said, which is the first quarter is the worst quarter and things will improve over the balance of the year. But I wanted to get a little bit more kind of finer point on the improvement that you’re seeing. Do you see positivity in your kind of outlook throughout the balance of the year in any of these quarters to come in revenue or EBITDA? Do we see growth in this outlook that you’re giving for the year?
Anthony Staniak: Yes. I’ll say Barton that implicit in our guidance, where the midpoint of the guidance is $225 million of adjusted EBITDA, it’s down $9 million from 2023. Our first quarter was down $9 million EBITDA from 2023, right? So what we’re inherently saying there is that the rest of the year will have flat adjusted EBITDA in some of those quarters. I think you could see year-over-year increases. But when you look across the remaining nine months, you’re going to see — we think you’re going to see stable adjusted EBITDA.
