R. R. Donnelley & Sons Company
Q1 2017 Earnings Call Transcript

Published: 3 May 2017

[Operator:]

Welcome to the R.R. Donnelley First Quarter 2017 Results Conference Call. My name is Nicole and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. After remarks from the company representatives, we will conduct a question-and-answer session. Please note that this call is being recorded. I will now turn the call over to Brian Feeney, Senior Vice President, Investor Relations. Mr. Feeney, you may begin.

[Brian Feeney:]

Thank you, Nicole and thank you everyone for joining R.R. Donnelley’s first quarter 2017 results conference call. Joining me on today’s call are Dan Knotts, R.R. Donnelley’s President and Chief Executive Officer; and Terry Peterson, our Chief Financial Officer. At the conclusion of today’s prepared remarks, Dan, Terry and I will take questions. The information that we’ll review during this call is addressed in more detail in our first quarter press release, a copy of which is posted on the Investor section of our website at rrdonnelley.com. This information is also furnished to the SEC on the Form 8-K we filed today. Throughout this call, we will refer to forward-looking statements including comments on our financial outlook and strategy, all of which involve risk and uncertainties. Therefore, our actual results can differ materially from our current expectations. For a complete discussion of the factors that could cause our actual results to differ materially, please refer to the cautionary statement included in our earnings release and further detail in our annual report on Form 10-K, our quarterly reports on Form 10-Q and our filings with the SEC. Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP results provides investors with useful supplementary information concerning the company’s ongoing operations and is an appropriate way to evaluate the company’s performance. They are, however, provided for informational purposes only. Any references to non-GAAP financial measures are reconciled to the comparable GAAP financial measures in our press release in the Investor section of our website under the Presentation tab. I now will turn the call over to Dan.

[Dan Knotts:]

Thank you, Brian. Good morning, everyone and thank you for joining us on today’s call. 2017 is off to a solid start for RRD. Our operational performance delivered top-line growth at the upper end of expectations driven by the ongoing execution of our go to market strategies. Both our net sales and earnings grew versus the same quarter last year which marks our third consecutive quarter of improved net sales and non-GAAP income from operations versus prior year. With the spin behind us, we continue to make good progress in advancing our strategic growth priorities namely, optimizing our core businesses, accelerating our strategic growth businesses, expanding our existing client relationships and scaling our multi-channel marketing and business communications solutions, while also aggressively managing our cost structure and maintaining our disciplined approach to capital allocation. In the quarter, we saw the positive impact of this focused execution through our sales and earnings growth, our reduced SG&A cost and the progress we made in lowering our long-term debt. I’m also pleased to reaffirm our previous full year 2017 net sales and income from operations guidance and confirm that we are raising our full year non-GAAP diluted earnings per share and our full year operating cash flow guidance due to the lower expected taxes. On our Q3 of 2016 earnings call which was our first call together, I shared with you our vision for the new RRD as the leading provider of multi-channel marketing and business communications. In addition, I outlined our opportunity and our strategic priorities which drive long-term growth for the new RRD. Our ongoing performance improvement trend which began in the second half of 2016 is a direct result of our increased focus on that vision and the sustained execution of those strategic priorities. Against the backdrop of economic headwinds that are impacting overall industry demand, particularly for a certain number of our businesses, our diversified forum of products and services continue to provide us with a differentiated ability to win new business in the markets we serve. Consistent with our strategy, we’re successfully leveraging go-to-market sales channels to win new clients, expand our relationships with our existing clients and provide multi-channel solutions for marketing and business communications across all three of our operating segments. Let’s start with a few examples of significant wins with new clients. For our labels business, our healthcare team won a new three year agreement to print medical labels for Vizient, the nation’s largest group purchasing organization. This agreement covers 4,000 branded items including stock and custom medical labels used across healthcare organizations worldwide. In our direct mail business, we won a new three year contract with [indiscernible] to product 14 million packages monthly that include acquisition mailings, letter packages and hybrid packages. We will also utilize the new capabilities we have in place as a result of our Precision Dialogue acquisition last year for this new work. Within our statement printing business, we won a new contract by business communications for a large insurance annuity company. Under this new five year agreement, we will be lifting and loading all of their business critical transactional print communications from their facilities into our existing production network as we manage their business statements, letters, cheques, welcome kits, policies and investment summaries. Shifting now to a few examples of significant new wins with our existing clients. In our labels business, we secured a contract that expands our relationship with a prominent worldwide transportation and logistics company. This three year agreement leverages our ability to further support this client’s chain requirements by producing critical documents and labels used to ship products around the world. As another example of our clients’ confidence in our ability to assist them was their business communications. We won a five year contract with Exelon, the largest utility in the U.S. Under this new agreement, we will design, compose, program and deliver all their critical business documents for their customers. These business documents will include bills, letters, notices, cheques and welcome kits and we will also provide digital archiving services for their critical documents. For a leading global manufacturer, we won a new contract that utilize a combination of our production platforms to meet this client’s communications requirements. Under this new agreement, we will be providing packaging, supply chain management solutions, including the design, manufacturing, fulfillment and reporting for their packaging, in-box materials and labels. From an international perspective, we successfully executed a contract with Alibaba [indiscernible] to provide production, fulfillment and country level logistics for as many as 20,000 stores throughout China. RRD China will produce and deliver promotional materials, including posters, fliers and marketing materials for Alibaba [indiscernible] to those 20,000 stores within eight days, highlighting RRD China’s scalability to manage high volume, time sensitive communications within very short timeframes. Our clients also continue to turn to us to provide integrated solutions for their increasingly complex multichannel communication needs. For example, Monster Energy, an international beverage CPG client was seeking a print production and technology partner to manage their end-to-end visual merchandising supply chain including an e-commerce technology solution with direct integration into their systems, applications and products platform. We implemented our proprietary ISM workforce system in the U.S. and designed and implemented a customized website for the China market with additional deployments also underway in other APAC regions, Latin America, Europe, the Middle East and Africa. As part of our global hub and spoke solution, we are providing creative brand adaptation, global brand management, translations, display design and structural engineering, print production and procurement of point-of-sale and marketing items, regional and local warehousing and fulfillment services. Our integrated solution allows our client to focus on their business while we simplify complexities of global execution. We also entered into a new three year agreement with Santander Consumer USA Holdings, a full service, technology driven consumer finance and lending company to manage a multi-channel response marketing solution for automotive dealer franchises, utilizing a combination of RRD’s capabilities including our data management, list processing and website development services, our variable imaging systems and flexible production platforms, we are providing an end-to-end multi-channel trigger program with real-time web portal reporting, designed to increase consumer response rates while lowering overall postage and product cost. Lastly, we recently signed a contract with a large global company to manage their marketing execution and print supply chain including creative service, print production, warehousing, fulfillment and supplier management for their direct mail, digital print on-demand, commercial print and point of purchase materials. Under this three year agreement, we will be utilizing our cloud based sourcing management application as well as our comprehensive e-commerce document management system to create, manage and execute this client’s marketing communications. While we continue to win meaningful new business, we are also maintaining a significant pipeline of new sales opportunities due to the aggressive deployment of our go-to-market strategies. Each of the examples I just shared represent multi-million dollars sales opportunities that begin at various times throughout 2017. More importantly, they represent expressions of client confidence in our comprehensive capabilities and provide us with even greater opportunities to extend our services as our clients’ communication needs continue to evolve. Before turning the call over to Terry, I’d also like to share that RRD was the recent recipient of a couple of impressive awards. First, we were named the recipient of the 2017 CIO 100 Awards which recognizes organizations around the world that exemplify operational and strategic excellence in information technology. Congratulations to our IT teams for their hard work in these areas. Our RRD logistics team was also awarded the 2017 Summit Award from the Chainalytics’ Freight Market Intelligence Consortium. This win was based on the predictive modeling algorithm that RRD created for freight estimating as we continue to develop innovative technologies and expand the capabilities of our logistics business. Finally, RRD was named the finalist for the 2017 InformationWeek IT Excellence Award. This award is given annually to companies that illustrate the most innovative uses of business technology in one of five core technology areas. RRD is the finalist in the category of data and analytics and the winner will be announced later this month. Thank you, and I would now turn the call over to Terry.

[Terry Peterson:]

Thank you, Dan. The primary focus of my comments will be on certain non-GAAP results and measures. Please refer to the supporting schedules in our press release and under the presentation tab in Investor section of our website for a reconciliation of GAAP to non-GAAP results. References and comparisons of income statement amounts to prior periods will be on a continuing operations basis after giving effect to the spin-offs of LSC and Donnelly Financial effective October 1, 2016. Overall, we have the year off to a good start. Operationally, we delivered net sales and income from operations at the upper end of our expectations while our operating cash flow was favorable for the quarter as we achieved benefits from working capital initiatives sooner than expected. Plus, we had a favorable development in our tax rate which allowed us to raise our earnings per share and operating cash flow guidance for the year. I’ll talk more about this shortly, but let me get into the details of our financial performance for the quarter. First quarter 2017 net sales of $1.68 billion grew $30.7 million or 1.9% as compared to the first quarter of 2016. The increase was primarily due to $38.7 million of net sales previously recognized by reporting units that are now part of LSC and Donnelley Financial and the 2016 acquisition of Precision Dialogue, which contributed $13.8 million of net sales in the quarter. Partially offsetting these increases were changes in foreign exchange rates which unfavorably impacted first quarter net sales by $9.3 million and a $2.3 million reduction from few dispositions last year. Adjusted for these factors, consolidated net organic sales declined 27% as net volume growth in the Strategic Services and International segments and favorable changes in fuel surcharges of $9.1 million were more than offset by lower postage pass through sales $25 million in the Strategic Services segment, modest price erosion across all segments and net volume declines in the Variable Print segment. Gross profit for the first quarter of 2017 was $327.8 million down $4.7 million versus $332.5 million in the first quarter of 2016. Continued cost reductions from productivity improvements were more than offset by price pressure in most reporting units and unfavorable mix. As a percentage of net sales, gross profit was 19.6% in the first quarter, down 0.6 percentage points from 20.2% reported in 2016. First quarter 2017 non-GAAP SG&A of $220.6 million, decreased $8.l million from $228.7 million reported in last year’s quarter. The current period included benefits from cost reduction initiatives while the prior year period included higher legal expenses and allocated costs from the pre-spin entity. Partially offsetting these items were higher variable compensation expense in all segments and lower pension and other postretirement benefits income in the current year. First quarter non-GAAP SG&A as a percentage of net sales was 13.2%, an improvement of 0.7 percentage points from 13.9% reported in the first quarter of 2016. First quarter 2017 non-GAAP income from operations was $58.6 million, up $7.4 million or 14.5% from last year as lower SG&A and depreciation and amortization expense more than offset the lower gross profit. As a percentage of net sales, non-GAAP income from operations of 3.5% increased from 3.1% reported last year. On a GAAP basis, we reported a loss per diluted share for the first quarter of $0.71 concluded in net loss on investments primarily related to the sale of our equity in LSC and charges for restructuring and other items. Diluted earnings per share of $0.05 from 2016 included a gain on sale of two businesses in our International segment for restructuring and other items. Excluding these items, our first quarter non-GAAP diluted earnings per share was $0.14 compared to a loss of $0.02 per share in the first quarter of 2016. The 2017 improvement was due to higher income from operations in a lower effective tax rate primarily due to the favorable tax rate change obtained in Asia. During the first quarter of 2017, we received a favorable tax ruling that lowers our tax rate for a significant location in Asia. The new rate is effective retroactively for 2016 and accordingly, the tax benefit reported in the first quarter of 2017 reflects the benefits on applying the new rate to all of 2016 profits plus first quarter 2017 profit. This rate change is effective through at least 2018. Next, I’ll discuss first quarter 2017 net sales and non-GAAP income from operations for each of our segments in more detail. As a reminder, the prior period cost structure was derived impart by allocating many cost from the pre-spin entity while the current period cost structure represents our actual cost on a post-spin basis. The magnitude of these differences varies by segment and has both positive and negative impacts to the comparisons depending on the segment but on a consolidated basis, the net difference has a positive impact to our margins in 2017. First quarter 2017 net sales in our Variable Print segment were $777.1 million which is down $3 million or 0.4% for the first quarter of the prior year. Net sales from the digital print and inserting operations of Precision Dialogue and volume increases in our Commercial and Digital Print reporting unit primarily driven by growth with a large existing client were more than offset by volume declines in the segment’s other reporting units and modest price erosion throughout the segment. While we had many successes expanding relationships and forming new ones with clients in the first quarter, many of our clients started the year with a bit of caution. Variable Print generated non-GAAP income from operations of $44.8 million down from $55.1 million reported in the first quarter of 2016, due to modest price declines, higher actual costs in the current period versus allocated costs from the pre-spin entity in the prior year period and unfavorable mix. Strategic Services generated first quarter 2017 net sales of $424.6 million which is an increase of $40.1 million or 10.4% as compared to last year’s first quarter. Net sales in the quarter benefited from $35.9 million of net sales previously recognized by reporting units that are now part of LSC and Donnelley Financial. In addition, volume increases in our Sourcing and Logistics reporting units, an increase of $9.1 million in fuel surcharges and net sales from Precision Dialogue’s data analytics services offering were positive to the current quarter. Partially offsetting these increases were lower postage pass through sales of $25 million, volume declines within Digital and Creative Solutions and modest price declines in the segment. Non-GAAP income from operations in Strategic Services of $5.8 million was up $2.3 million in the quarter primarily due to the impact of higher net sales and productivity improvements which more than offset modest price declines. First quarter 2017 net sales in our International segment declined were $474.6 million which is a decrease of $6.4 million or 1.3% from $481 million reported in the first quarter of 2016. The 2017 amount included an unfavorable impact from foreign exchange rates $9.5 million. Significant volume increases in our packaging business within the Asia reporting unit were more than offset by volume declines in the Global Turnkey Solutions, Canada and Business Process Outsourcing reporting units, and modest price pressure in the segment. Non-GAAP income from operations in International was $21.4 million which is a decrease of $5.2 million versus $26.6 million reported in the first quarter of the prior year. The decrease was driven by unfavorable mix and higher actual costs in the current period versus allocated costs from the pre-spin entity in the prior year period which more than offset lower depreciation and amortization expense. First quarter 2017 non-GAAP unallocated corporate expenses were $13.4 million which is an improvement of $20.6 million from first quarter of 2016. The prior year period included higher allocated costs from the pre-spin entity and an $8 million charge for a legal settlement. Benefits in the current year from cost reduction initiatives were partially offset by lower pension and other postretirement benefits income. Net cash used in operating activities during the first quarter of 2017 was $18.6 million down significantly from $192.8 million used in the prior year period. As a reminder, the prior period includes cash used by LSC and Donnelley Financial operations and have not been restated. Similar to past years, our operating cash flow is expected to be seasonally stronger in the second half of the year. However, results in the quarter were slightly favorable to our expectations as we benefitted from working capital improvements sooner than originally expected in the year. 2017 quarter also included spin-off related cash payments of approximately $8 million. Capital expenditures were $26.1 million during the quarter versus $48.1 million in the prior year quarter which included $17.7 million related to discontinued operations. Turning now to the balance sheet. As of March 31, 2017, we had total cash on hand of $244.3 million and total debt outstanding of $2.25 billion, including $40 million drawn against our credit facility. Remaining availability on the credit facility was $458.2 million as of March 31. During the first quarter of 2017, we sold our 19.25% equity interest in LSC and generated net proceeds of $121.4 million which were used to pay down borrowings under our credit facility. Our gross leverage improved during the quarter and at March 31, was 4.57 times which is higher than our targeted gross leverage range of 2.25 to 2.75 times. We do expect our leverage to be further reduced in 2017 by reducing our long-term debt with proceeds from the disposition of our 19.25% equity interest in Donnelley Financial and cash provided by operating activities. For full year 2017, we continue to expect net sales to range from $6.8 billion to $7.0 billion. Non-GAAP income from operations is expected to range from $275 million to $300 million and fully diluted non-GAAP earnings per share is now expected to range from $1 to $1.30 which is up $0.10 on both the low and high end of our original guidance issued last quarter due to a lower effective tax rate. There are several key factors that impact our outlook for the year including the following

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. And our first question comes from Charles Strauzer from CJS Securities. Your line is open sir.

[Charles Strauzer:]

Hi, good morning.

[Don Knotts:]

Good morning, Charlie.

[Charles Strauzer:]

Hi, Terry maybe this is for you but could you maybe go through the breakdown by segment, kind of the organic revenue growth decline by each segment line?

[Terry Peterson:]

Yeah, hold on one second, Charlie. So in our Variable Print, the organic decline is 1.4%; in Strategic Services it’s 0.7% and that does reflect the $25 million reduction in our paper pass through reductions, so that would actually be quite positive if that $25 million were pulled out of there but it does reflect that. And the last one, International segment is up 0.6%.

[Charles Strauzer:]

Got it. And then if you look at the kind of internationally talking about how Global Turnkey and Outsourcing were kind of more of a headwind this quarter. What are your thoughts there in terms of kind of the trends and expectations as the year progresses?

[Dan Knotts:]

Hey, Charlie, it’s Dan. I think what we’re seeing -- what we saw in the first quarter for Global Turnkey, there’s really two parts that make that up from the Global Turnkey, the supply chain management, kitting, fulfillment, and there’s also the packaging piece of that. What we saw in the first quarter is a slower start in the latter on the packaging component of GTS that we believe is related to timing. So it’s a -- we don’t think it’s a fundamental shift in the business model.

[Charles Strauzer:]

Got it. I assume that’s related to kind of more of the consumer electronics segment that you’re playing to?

[Dan Knotts:]

That’s correct.

[Charles Strauzer:]

Excellent. And then talking about the sale of the DFS stock that you still own just in terms of timing there’s still kind of be a more [indiscernible] have the S-1 filed out there, I assume that you got comments back from the SEC, just give us an update on the timing there?

[Dan Knotts:]

Yeah, the S-1 you’re right, it was filed several weeks ago and that is not yet effective yet, so that will need to be declared effective before we launch the selling of that. I guess our official comments on timing at this point, - said otherwise is that we continue to plan to complete that sale before the effective September 30 deadline that is required for tax purposes.

[Charles Strauzer:]

Got it. I assume you would much rather do it sooner than that obviously you don’t want to get too close to that date obviously.

[Dan Knotts:]

We would agree with that.

[Charles Strauzer:]

Okay. And then thank you for the information on Q2, just a thought on top-line, you gave some operating profits guidance there, but just your thoughts on kind of Q2 revenue trends.

[Terry Peterson:]

Yeah, if you were to - in December, we provided all the quarterly statements for revenue profits. I think if you really just go back and look at last year and look at some of the trending there, you can really see some of the seasonality coming through in each of the three business segments and we’re really expecting some of those same patterns to come through in the second quarter of 2017. So, second quarter is seasonally lower in our Variable Print side of the shop and then we’d expect the other two slightly up.

[Charles Strauzer:]

Great. And then just lastly, looking at cash flows and the balance sheet and kind of post the sale of DFS -- cash flow you expect to generate this year, are there other things that you’re exploring other ways to expand your cash flow as you’re progressing into the next year, to help – that factor?

[Terry Peterson:]

Yeah, absolutely, I mean we are looking at everything, our cost reductions play into that to help with cash flow. We certainly look to maximize working capital initiatives to help drive cash flow but absolutely we are looking at different opportunities to augment that cash flow. The other thing too is, as a reminder, our first quarter, the $18 million has dramatically improved as that was and still did include $8 million spin related payments. So those are going to shut down here very quickly.

[Charles Strauzer:]

Great. Thank you very much.

[Dan Knotts:]

Thanks, Charlie.

[Operator:]

[Operator Instructions]. Our next question comes from Michael McCafferty from Shenkman Capital Management. Your line is open sir.

[Michael McCafferty:]

Thanks. Can I just clarify your last comment, the $8 million in restructuring, is that part of EBITDA, that was reported?

[Terry Peterson:]

The restructuring charges are not in our P&L from a non-GAAP perspective, they are backed out, but from a cash flow perspective, the comment I was just making with Charlie was that there are spin related costs, separate from restructuring, they are in our GAAP numbers only, they are backed out for non-GAAP purposes, but cash flow, they flow through along with all of the regular operating items. So they negatively impacted operating cash flow but the non-GAAP profits, they do not impact.

[Michael McCafferty:]

Okay. And then just one additional housekeeping, as far as logistics and global turnkey, what is that as a percent of your overall revenue, - a year ago on a pro forma basis?

[Terry Peterson:]

Hold on one second, we’ll have that for you. It’s usually in one of the first pages of our Investor Relations deck. So logistics is 18% off of 2016 actual, global turnkey is another 7%.

[Michael McCafferty:]

Okay. Then I guess, two additional questions, one bigger picture, you started off the call with fairly bullish commentary about the new wins from the expanded client, when during the quarter and then commentary was a bit more tempered as far as you mentioned trepidation start of the year from start of the year from certain clients. So I guess, can you expand upon that a little bit for me? Is it a function of having to take down rate in order to rate either keep existing clients or expand business with new clients? It sounded very positive at start and then it sounded like there were some additional headwinds that were tempering due to the --

[Dan Knotts:]

Yeah, so this is Dan. I think the best way to think about that is – in terms of the “tempering” piece there, we are seeing cautious approach for I call our base clients within our existing base cautious approach to the start of the year and that was in different dynamics based on what each individual customer, so what segment they’re in etcetera relative to their communications spend. So there’s that ongoing base business dynamic that we manage every day, every quarter, every year. The second part of that in terms of the, your reference to the bullish comments of the wins, I mean truly that is where we are aggressively focused on deploying our go-to-market strategies to win new business with new customers to expand our relationships with existing customers and then purely to explore and capture those opportunities where we integrate our offerings into and become integrated part of our customers’ business model. The new wins that we mentioned there is a direct result of our increased focus there. It is not relative to the comment or the reference to having the lower base or anything on those lines to do that. It clearly is leveraging what we believe is the most comprehensive platform in the industry to meet the changing dynamics of our client base and attacking that from every angle, our sales force is very focused on that and those wins are a direct result of the efforts of that sales team.

[Terry Peterson:]

And I would add to that too that the price erosion that I referred to in each of the three segments, that’s pretty modest in each of the segment and it is very normal activity year after year in the spaces that we play and our clients generally put pressure on us to reduce our cost that we can provide some of that pasture to them. So that is normal price change that we’ve seen for quite some time, so nothing unusual there.

[Michael McCafferty:]

And I guess to follow up on that, have you seen any detrimental impact from the separation with the other two companies? Have you lost any material business as a result of the spin and/or just had certain clients pull back? You mentioned new business wins but were there material business losses…

[Terry Peterson:]

Yeah, there is nothing notable out there that certainly has attributable to the spin. Nothing like that. Lot of communications we have with clients in advance to that spin going through and I think those efforts really help to manage expectations and to protect the business across all three companies to be honest.

[Michael McCafferty:]

Great. And just one final question as it relates to the debt repayment that you referenced on the call, and the additional cash proceeds to come and generate cash organically from the business. Given that all your debt with the exception of the remaining $40 million on the credit facility is not callable, are you anticipating any premiums for short dated paper or are you more likely to go after the longer dated paper which is still at a discount?

[Terry Peterson:]

We will liquidate our equity interest in DFS, there will be a tender to exchange some of the debt that we have not announced which maturities we’re going after yet. And then likewise too with the proceed that we did collect in the first quarter related to the LSC, we will kind of start strategically target maturities where we can get more debt off the balance sheet for those and that – just be done through open market purchases over the next couple of quarters here.

[Michael McCafferty:]

Okay. Thank you very much.

[Operator:]

And our next question comes from Michael Meek from Atlantic Investments. Your line is open.

[Michael Meek:]

Hi. Good morning.

[Terry Peterson:]

Good morning.

[Michael Meek:]

Yeah, I was just wondering how the quarter tracks versus your guys - internal expectations? And if there were any variations where they popped up?

[Terry Peterson:]

Yeah, I would say that overall if you think about the range that we gave on a full year basis, and as we looked at the first quarter component of that, we feel like we delivered against the upper end both on revenue as well as the profits and the tax benefit was bonus for us there. But even setting that aside, we feel like we delivered against the upper end of our range. So we feel very good about that. A lot of positive things happened in the quarter, I think I mentioned in my prepared remarks too that we saw a little bit of softness to our earlier expectations, it was really in some of the commercial print spaces where we saw a little hesitation with the existing customer base under-spend as they – up the year.

[Michael Meek:]

Got you. And then, just to clarify your comments on seasonality, that seasonality comment, 2Q versus 1Q that applies to the total company?

[Terry Peterson:]

Applies to the total company but yeah, I think if you look at those trends from each of three individual segments, you can see the dynamics are happening within that full consolidated amount.

[Michael Meek:]

Great. Thank you for your time.

[Terry Peterson:]

Thank you.

[Operator:]

[Operator Instructions]. Our next question comes from Charles Strauzer from CJS Securities. Your line is open sir.

[Charles Strauzer:]

Thank you. Just a quick follow up, with kind of - it before with post-spin, and we’re kind of 7-8 months into kind of standalone R.R. Donnelly now. What has been kind of the customer reaction to the spins now that you kind of separate unit for a decent period of time here?

[Dan Knotts:]

I think in general, Charlie, it’s Dan, I think in general, the customer reaction continues to be okay. We went through a very thorough process of evaluating which customers will go with which businesses and what commercial agreements we’d have to put in place between the two companies to make sure that we gave ourselves the best opportunity for continuity of services for those customers and – from our standpoint, each of the three companies who are continuing to move forward with that. And I think the client expectations will continue to evolve over time as relationships evolve over time, but I think it’s going according to our expectations according to the plan that we set forth.

[Charles Strauzer:]

And Dan, if you look at kind of your company today now that you’re kind of separated from the other two pieces, are the things that you can do today that you thought that you maybe couldn’t have done before that you just kind of now figuring out six months in or seven months post-spin kind of provided some additional maybe future growth avenues or things like that, that maybe weren’t available to you yet before?

[Dan Knotts:]

Yeah, I think there’s two parts to the answer I’ll give you Charlie. The first one is the spin was a direct result of the strategic, or one of the direct results of the strategic evaluation we did of the company and the opportunities that existed in each of the end markets and obviously what would be required for each of those businesses to serve those end markets. So the spin was part of a longer term evaluation and strategy for the company versus we spun and then had to determine what the new strategy was going to be. So relative to anything dramatically different, pre-spin versus post-spin I’d say the answer to that is no. What I would tell you post-spin, the opportunity for us is really that narrowed focus of the organization truly on the marketing and business communications requirements of our clients and truly have any opportunity to focus all of our energy in those two areas as we have those conversations with our clients. So, we’re very excited about that, about the level of the approach some of the new wins, some of the traction that we’re gaining there as a result of that narrowed focus and our ability to execute in a more disciplined manner because we do have a narrow focus is probably the biggest thing that we’re pushing on, we’ll continue to push on a going forward basis.

[Charles Strauzer:]

Great. Thank you very much.

[Dan Knotts:]

Thanks, Charlie.

[Operator:]

We have no further questions at this time. I’d like to turn the call back over to Dan Knotts.

[Dan Knotts:]

Great. Thank you again for everybody for spending the time with us on the call today. In closing, I’d like to congratulate all the employees of RRD on our first quarter that was in line with our expectations. We’re pleased with our start to the year and I believe we’re solidly on track to deliver against our financial commitments as outlined in our 2017 guidance. With that, I’m going to turn it over to Brian for final housekeeping item.

[Brian Feeney:]

Thanks, Dan. As a reminder, a replay of R.R. Donnelley’s first quarter 2017 results call will be posted on the Investor’s section of our website at rrdonnelley.com. In addition, Dan, Terry and I will be presenting at the Macquarie Business Services conference tomorrow, May 4, in Boston Massachusetts. Thank you for joining the call with us today and this concludes the R.R. Donnelley first quarter 2017 earnings call.

[Operator:]

Thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.