Good morning, and welcome to Quad's First Quarter 2024 Conference Call. A slide presentation accompanies today's webcast, and participants are invited to follow along by advancing the slides themselves. To access the webcast, follow the instructions in the earnings release. You can also find the slide presentation in the Investors section of Quad's website under the Events and Presentations link. Please note this event is being recorded. I would now like to turn the conference over to Katie Krebsbach, Quad's Investor Relations Manager. 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 Tony Staniak, Quad's Chief Financial Officer. Joel will lead today's call with a business update and Tony will follow with a summary of Quad's first quarter 2024 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, adjusted diluted earnings per share, free cash flow, net debt 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. Our first quarter results were in line with our expectations, and we remain on track to achieve our full year 2024 financial guidance. As we communicated on our last earnings call, we anticipated the first quarter would have the most significant year-over-year decrease in net sales and adjusted EBITDA of any quarter in 2024. External factors impacting sales included significant postal rate increases and ongoing economic uncertainty like elevated interest rates, which led to a decrease in financial services direct mailings. Sales were also negatively impacted by the recent loss of a large grocery client. Free cash flow improved in the first quarter, and we will continue to use our strong free cash flow generation and cash from asset sales to fuel our diverse capital allocation strategy. This strategy includes investing and scaling our offerings, further reducing debt and returning capital to shareholders, such as through our next quarterly dividend of $0.05 per share, payable on June 7 to shareholders of record as of May 22. Despite revenue headwinds, we remain confident in our ability to manage all aspects of our business by treating all costs as variable, aligning our cost structure to revenue opportunities, and optimizing print manufacturing platform by consolidating work into plants where we can achieve the greatest manufacturing efficiencies and subsequently selling assets no longer required for business operations. Turning to Slide 3, we continue to execute on our mission to deliver a better marketing experience so our clients can focus on delivering the best customer service. Our MX solutions are flexible, scalable and connected and span every facet of the marketing journey from online to offline, across creative, production and media, and supported by data-driven intelligence and state-of-the-art technology including AI-driven solutions. We tailor each of these solutions to client objectives, to strengthen marketing effectiveness, improve speed to market and drive cost efficiencies, and deliver value on investments. Moving on to Slide 4. At Quad, we are continually innovating new solutions for our clients and in new spaces. During the quarter, we announced our entry into Retail Media Networks or RMNs, which are the next big advertising channel. eMarketer predicts ad spend in omnichannel RMNs will grow to over $100 billion by 2027. Quad's focus is on advancing the in-store shopping experience by taking the best elements of digital commerce and bringing it into physical store environments. Our In-Store Connect solutions builds on our deep expertise with retailers and consumer packaged goods companies and is fortified by our recent acquisition of DART Innovation, an in-store digital media solutions provider. Through In-Store Connect, we help brands deliver engaging messages and promotions right at the store shelf, the most critical moment in the purchasing decision. Earlier this week, we announced a new partnership with Save Mart Companies, the largest private regional grocer on the West Coast to launch its In-Store RMN. We are also in active talks with several other retailers and look forward to demonstrating how In-Store Connect could generate value for our clients as we strive to become the industry standard for in-store media networks. Given ongoing postal rate increases, we remain focused on advocating for postal reform and developing solutions to help our print clients save money and differentiate Quad as a market innovator. Our two-pronged approach to postal optimization maximizes savings based on individual mail type, volume in region, while also increasing response through creative, data-driven formats across all media channels. During the quarter, we launched our latest postal optimization solution, Household Fusion. Turning to Slide 5, this innovation combines various marketing mail from different brands or separately various magazines from different publishers into a single package delivered to one address, creating significant postal savings for participating clients. Our clients are enthusiastic about Household Fusion, including PWX Solutions, a direct marketing and production partnership formed between Hearst and Conde Nast. PWX praised our pioneering innovation saying, "Quad is always looking out for everyone's best interests. And the Household Fusion program is really paying off. We will continue to evolve this MX production solution to drive value for our clients." During the quarter, we also introduced the next evolution of our media agency, Rise, which brings together our full range of media and owned data services under one brand, so we're even better equipped to solve client pain points. Our offering, shown on Slide 6, is truly differentiated. Our modern integrated data stack has privacy at its core, and it is resilient to industry challenges like the deprecation of third-party cookies. Another key differentiator is radical transparency, something deeply ingrained in our culture and way of thinking at Quad, but still quite uncommon across the media industry. Radical transparency means our clients see what we see, no hidden charges. Our approach minimizes the tech tax typically paid to data onboarding platforms that connect, control and activate data, enabling us to maximize our clients' dollars in working media. We are confident that our enhanced media offering will drive revenue growth. Today's marketers compete in an ultra-competitive landscape and are required to do more with less to resonate with their target audiences. When it comes to creative services, marketers are often faced with having to choose between high-quality creative and consent or speed and scale. We are answering the market need for smart, scalable creative with an integrated and flexible new solution launching this month. Our solution integrates all our creative business lines from brand strategy and design to campaign ideation, premedia and adaptive design and content creation, and backs them with our 24/7 global production capabilities. We believe this combination will redefine creative excellence, putting quality first, regardless of project size, scope, timeline or budget. On Slide 7, we are proud to provide an update on campaign results for two clients, Nielsen-Massey Vanillas and CLR brands, with whom we announced new partnerships on a previous earnings call. During the 2023 holiday baking season, our "Taste Vanilla as Vanilla Should Be" campaign for Nielsen-Massey Vanillas propelled it to be the fastest-growing extract in the market outperforming consumer packaged goods benchmarks by generating a 13% increase in loyalty and 1.8 million website visits, according to our client. Since our "Been There. Outdone That" campaign for CLR brands entered the market last October, the cleaning products leader reports it's realized a 124% increase in store locator visits and an 18% increase in sales. In both of these examples, we connected a high-impact creative with expert media and data analytics to ensure the right message was delivered to the right audience at the right place and time. Turning to Slide 8. We share an example of how Quad is helping a lifestyle and personal care brand increase its marketing effectiveness through our integrated offering. Raw Sugar Living, a disruptor in the clean beauty and personal care space was seeking a partner to help facilitate the next phase of its brand growth, following a rapid expansion into retail stores. They chose to partner with Quad due to our great reputation for delivering breakthrough creative and brand growth in CPG categories, coupled with our robust data insights and media capabilities. As Raw Sugar's first creative agency of record, we are now providing brand strategy, integrated campaign development and content production. We are also providing media strategy, including connections planning as well as omnichannel media execution and optimization. Our first direct-to-consumer campaign for Raw Sugar launched this summer, but already our team has been hard at work helping promote the brand. In April, we helped the client launch product in Costco stores for the first time ever. We also supported its 2024 product rollout by hosting a pop-up market for 60 social media influencers and media representatives at our New York City office and event space as shown on Slide 9. The client is thrilled with our partnership so much so it recommended us to a large health and wellness company for which we are now providing creative and media work. On Slide 10, we show another example of how the services within our MX solutions suite work together to provide a better marketing experience for our clients. SpinLife, the nation's largest direct-to-consumer retailer of durable medical equipment recently engaged us to help it strengthen consumer connections to drive increased response rates and revenue. Our work as SpinLife's new marketing agency of record includes high-impact creative delivered at speed and scale across online and offline channels, including print, web and digital; fast, flexible catalog printing and distribution; and data-backed media solutions to activate campaigns with ease, including an expanded digital presence through paid search, paid social, marketplace and affiliate media and SEO support. SpinLife praised our integrated approach to account management, which enabled us to stand up the account within three short months. They shared it with the smoothest and fastest onboarding they have ever experienced and said, "We are excited to see the work coming together and the team is finding the efficient and effective way to drive our business." Already, we have activated two digital campaigns and catalog work will enter the market next month. Now we are in the process of establishing a client-dedicated team, integrated with SpinLife's marketing operations to provide further support and through which we can introduce additional value-added Quad solutions. SpinLife is extremely pleased with our ability to address its creative production and media needs, all in one place, decreasing the complexity of working with multiple agency partners and vendors and streamlining processes for greater efficiencies. We look forward to continuing to partner with SpinLife on new initiatives to further ignite its brand and drive demand. Before I turn the call over to Tony, I want to acknowledge that May is Mental Health Awareness month. And in keeping with our long-standing commitment to taking better care of our employees, we are launching a new mental health liaison program in partnership with the National Council for Mental Wellbeing. This program, part of our existing robust wellness benefits for employees, will help educate employee volunteers to act as advocates for mental health, removing the stigma and connecting coworkers in need to Quad's emotional support resources. This type of program reflects our strategy as an employer of choice and the workplace for the marketing industry's best talent, a key driver for growth. With that, I'd like to turn the call over to Tony for the financial review.

Thanks, Joel, and good morning, everyone. On Slide 11, we show our diverse revenue mix. During the first quarter of 2024, our net sales were $655 million, a 15% decline compared to the first quarter of 2023 due to lower paper, print and agency solution sales. Our print volumes were negatively impacted by ongoing external headwinds, including significant postal rate increases and economic uncertainty as well as the loss of a large grocery client. Additional trends that impacted our revenue mix in the first quarter included a 2% increase in magazines due to segment share wins such as AARP as well as a 2% decrease in Latin America, primarily from lower educational book volume exported to the United States. Slide 12 provides a snapshot of our first quarter 2024 financial results. Adjusted EBITDA was $51 million in the first quarter of 2024 as compared to $60 million in the first quarter of 2023, and adjusted EBITDA margin declined from 7.9% to 7.7%. The decrease was primarily due to lower sales, partially offset by benefits from improved manufacturing productivity and savings from cost reduction initiatives. This is consistent with what we had communicated on last quarter's earnings call, during which we anticipated the largest year-over-year adjusted EBITDA decrease to be during the first quarter, while the full cost savings of our recent restructuring actions were ramping up. In response to lower sales, beginning last year and ending in the first quarter with the announcements of the Saratoga Springs, New York and Bolingbrook, Illinois plant closures, we completed restructuring actions that we expect will generate $60 million of cost savings in 2024. Adjusted diluted earnings per share was $0.10 in the first quarter of 2024 as compared to $0.15 in the first quarter of 2023, primarily due to lower adjusted net earnings, partially offset by the impact of a lower share count due to stock buybacks. Since the second quarter of 2022, we have repurchased approximately 11% of our total outstanding common stock. Free cash flow was negative $70 million in the first quarter of 2024, a $9 million improvement compared to 2023, primarily due to reduced capital expenditures. We continue to target annual capital expenditures of approximately 2% of our net sales. As we shared last quarter, we will continue to generate strong free cash flow in addition to proceeds from asset sales as shown on Slide 13. During the 5-year period from 2020 to 2024, we expect to generate over $740 million of free cash flow and proceeds from asset sales. These sales include divestitures of certain non-core portions of our business as well as sales of property, plant and equipment from closed facilities. In April, we sold our minority investment in Manipal Technologies, a leading print services and end-to-end business solutions provider headquartered in India, for total proceeds of $22 million, of which we have already received $17 million in April 2024, with the balance due by the end of the third quarter. We also continue to make progress on the previously announced sales of four owned facilities from which we will generate further proceeds. Slide 14 includes a summary of our debt capital structure. At the end of the first quarter, our net debt was $544 million. Effective April 30, we entered into an interest rate swap, converting $50 million of our variable rate debt to fixed rate. With that interest rate swap, in addition to our interest rate collar instruments, our pro forma debt at the end of the first quarter was 59% floating and 41% fixed at a reduced blended interest rate of 7.6% compared to 7.8% if we had not executed the swap. As a reminder, during the first quarter, we generated $53 million by successfully increasing the commitment with one of our banks to add $25 million to our term loan and also by entering into $28 million of financing arrangements for two large printing presses. We then used our revolving credit facility and cash on hand to repay an $88 million term-loan A maturity. And at the same time, the total capacity under our revolving credit facility decreased by $90 million to $343 million. Our next near significant debt maturity is now November 2026. We show the seasonality of our free cash flow and debt leverage as well as our long-term commitment to debt reduction on Slide 15. Our seasonal production peak, which occurs in the late third quarter and early fourth quarter of the year due to the timing of holiday related advertising and promotions, leads to inventory build prior to that time and results in higher collections from clients in the fourth quarter. For example, in the fourth quarter of 2023, we generated $95 million of free cash flow and used it to reduce 2.0x debt leverage. In 2024, we anticipate a similar seasonal pattern and intend to further reduce debt leverage to approximately 1.8x at the end of this year, near the low end of our targeted debt leverage range of 1.75x to 2.25x. From 2020 to 2024, we expect to reduce net debt by over $600 million or more than 60%, and we are pleased that our strong balance sheet and commitment to debt reduction was recognized by Fitch Ratings, who recently revised our corporate credit rating outlook to positive from stable, indicating a potential future upgrade from our current B+ rating. We reaffirm our full year guidance, as shown on Slide 16. Annual net sales are expected to decline 5% to 9% compared to the prior year due to ongoing headwinds, as previously mentioned. Full year 2024 adjusted EBITDA is expected to be between $205 million and $245 million, with $225 million at the midpoint of that range, representing a 28 basis point improvement in adjusted EBITDA margin to 8.2%. As we shared last quarter, adjusted EBITDA will be lower in the first half of the year as benefits from cost reduction actions will reach their full annualized amount late in the second quarter of 2024. We then expect sequentially higher adjusted EBITDA in the second half of 2024 compared to the first half of the year due to the full benefit of the restructuring actions, combined with increased sales during our seasonal production peak. We expect 2024 free cash flow to be in the range of $50 million to $70 million, with $60 million at the midpoint of that range. This year, free cash flow will be most impacted by higher restructuring payments in the first half of the year, partially offset by reduced capital expenditures, with capital expenditures expected to be in the range of $60 million to $70 million. The primary use of free cash flow and cash proceeds from asset sales will continue to be debt reduction and we reaffirm our net debt leverage ratio to be approximately 1.8x at the end of 2024. Slide 17 includes our key investment highlights as we continue to build our momentum as a marketing experience company. We believe that Quad is a compelling long-term investment and we remain focused on growing net sales and driving higher profitability through continued diversification of our revenue and clients. Our expanded offerings include the recent additions of In-Store Connect and Household Fusion, and there is a significant addressable revenue opportunity with both our large base of existing clients as well as new clients. In addition, our strong cash generation will continue to fuel our capital allocation priorities. These include investing in scaling our offerings, further reducing debt and returning capital to shareholders, such as our next quarterly dividend of $0.05 payable on June 7. And we also expect to continue to be opportunistic in terms of our future share repurchases. With that, I'd like to turn the call back to our operator for questions.

The first question comes from Kevin Steinke with Barrington Research.

It's great to see the ongoing innovation in terms of your service offerings, both In-Store Connect as well as Household Fusion. I wanted to start out by delving into the In-Store Connect offering a little bit more, maybe how that Save Mart relationship came about and then just the overall market opportunity you see there with that new offering?

Yes. This is a significant new offering because it is currently a hot topic in the retail space. While the concept itself isn’t new, it hasn’t gained traction until now. When you consider typical retail media networks, like Amazon, they focus on digital ads that show up during product searches, generating revenue from those ads. However, an essential element that is often lacking is the integration of the in-store experience with digital elements. That's where we come in. We are currently rolling out well-designed high-end screens, not just ordinary screens stuck to walls, but strategically located throughout stores. This allows us to collaborate with consumer packaged goods clients to display ads for their products at crucial moments when shopper intent is at its peak as they navigate the retail environment. The objective is to establish a large network across numerous stores, creating substantial visibility for advertisers. Additionally, our capability to manage content is crucial, as it enables us to utilize localized data from specific regions or stores to tailor ads for distinct audiences. As we enhance our data usage—an important factor in contemporary marketing—we will adapt to changing conditions by integrating mobile technology. This is a scenario where the more participants we have, the better it is, and Quad has been developing this concept for a while, with DART providing the final infrastructure needed. Regarding our partnership with Save Mart, we have a strong relationship with them, and their experienced executive team, which has worked at various companies, has helped us outline our vision successfully. They expressed immediate interest in collaborating, and we are currently in the rollout phase. Moreover, given the popularity of this topic, we are in discussions with several other retailers, which will likely lead to an increase in the number of stores involved. We are excited about the extensive groundwork we've laid, as it positions us to act quickly and efficiently for our clients when the time is right.

Yes, absolutely. That's helpful. I wanted to follow up again on In-Store Connect. Could you provide any details on how you generate revenue from this offering? Is it based on deployment, or does it include a performance-based or subscription-based element? I'm trying to understand the revenue model.

Yes, it's largely dependent on various CPMs. We receive a significant portion of the revenue generated as customer traffic increases in the store. There are numerous methods to effectively measure this traffic using beacons and similar technologies. Therefore, it’s a fairly simple model regarding our payment structure, which involves a revenue sharing agreement among the different parties involved. We have several deployment models in place and will continue to do so, and we're assisting with the installation from a capital expenditure perspective. This approach makes a lot of sense for us, as we can recoup that capital expenditure over time while enabling quick deployment for our clients, simplifying the budgeting process for them.

Yes, Kevin, this is Tony. I'd add to that. So the deployment that you asked about and Joel talked about, there is revenue involved as we're putting up these screens and stars, and then there can be the CPM market or CPM charging or even package costs, depending on the number of screens and kind of the level of service provided. So we're really excited about the space. And Joel talked about our relationships with retailers for many years of printing are at the very top of the house on large dollar invoices, and that gives us opportunity to bring new technologies like this to those same interested parties.

All right, that's great. Sounds exciting. I wanted to move on to the new Household Fusion offering, which you talked about saving clients 10% to 20% on postage costs. Maybe just what's been the reception of your client base to that offering? And do you think this is something that can spur more advertising, mailings and some of the areas that have been cut back to higher postal rates? I know it's not going to completely offset the rate increases that have gone into place, but do you think it's something that can kind of jump start, perhaps some of the spending from your clients coming back?

Yes, it has been very well received. When our customers face cost pressures, they are willing to explore various options to find effective and manageable solutions. The significant rate increases imposed by the post office present a real challenge. The post office is currently under pressure due to its mail performance and rising rates. The Postmaster General was recently called before Congress to address these issues without providing satisfactory answers, indicating the extent of the pressure. One strategy we have implemented is postal fusion, which utilizes the same equipment we use for Co-mailing, allowing us to ramp up quickly given our large existing installed base. Instead of delivering individual bundles of mail, we can now wrap multiple titles together, which has been very well received and initially rolled out with publications, with plans to expand to catalogs in the future. We are also working with the post office to combine catalogs and publications, potentially including direct mail, which could lead to even more savings. While we start with savings of around 10 to 20%, offsetting postal increases is crucial. Furthermore, I wanted to showcase examples of accounts we've won, as our approach focuses not just on content production but also on enhancing its responsiveness. Increasing response rates can effectively counterbalance rising costs. We’re leveraging our data and analytics to collaborate with clients on boosting their response rates. A slight increase in response rates can significantly offset postal rate hikes. Thus, we will continue to share data and successful examples as allowed by our clients. Our overarching strategy at Quad is to efficiently produce and distribute content across all channels while helping our clients succeed by placing data at the core of our efforts to enhance the responsiveness of their media assets.

Okay, great. That's helpful. You mentioned the pressure being applied to the Postmaster General from various sources. At this point, I remember you discussing earlier that the postal service was planning another rate increase for July. Is that still an option, or do you have any updates on that?

Yes, it's still planned, and we expect it to happen. There are many questions about whether it's appropriate or if it should be postponed. However, for now, they have the authority to proceed, and we are preparing for that. The rollout of our Household Fusion is well-timed. This year is notably different because last year's first quarter revenue decline was partly due to the fact that we hadn't accounted for the second price increase in July at that time. Consequently, we experienced a pullback in postal volume, as it wasn't in anyone's budget. When it's not included, companies have to reduce their mailing volumes temporarily. This year, though, people are more informed and have been considering it during budget planning. We are maintaining close contact with our clients to gauge their plans, and I would say we are cautiously optimistic about their ability to manage through this. As we approach the increase, several factors influence our customers' mailing decisions, including the economy and consumer behavior. This is the main difference between this postal increase and the previous one.

Okay, great. Understood. I believe last quarter, the fourth quarter conference call, you had mentioned perhaps some signs of increased demand coming back from your financial services clients. I know there's been an impact there from the higher interest rates, but maybe any update on spending trends you're seeing there from your clients in the financial services space?

Yes, I think the situation is a bit mixed. If you are involved in personal lending, it’s probably still somewhat slow, but we are starting to see others cautiously re-engaging because ultimately, marketing is essential and you can't pause indefinitely. Realistically, as the markets change, I believe people will begin to re-enter. We are noticing some activity from that perspective, which is encouraging.

I also wanted to ask about Rise and explore what differentiates that agency offering and what you expect to gain from it in the marketplace.

Yes. Rise Interactive was formerly our digital agency that collaborated with clients on digital media placements. However, at Quad, we also engage in traditional media, purchasing significant amounts of media on behalf of our clients in that area. Additionally, Rise Interactive heavily utilizes analytics and data to enhance its digital offerings, and we have extensive data analytics capabilities across other parts of the company as well. Ultimately, we are an integrated company, and as we have developed these elements, each has matured. The next step is to place data at the center of all media strategies to ensure that we deliver the right message to the right person with the right product at the right time and in the appropriate sequence across the media landscape. We have brought all these components together, with Rise now serving as the umbrella for our offerings, with data at the core driving our media services to maximize client investment and enhance media effectiveness.

Okay, that makes sense. Lastly, I wanted to ask about the asset sales. You mentioned $23.9 million for 2024 on the slide, which reflects what has happened so far, and you would anticipate more sales this year. Is that the correct interpretation?

That's correct, Kevin. We're going to update that as we go along, the timing of asset sales, such as selling a building, is sometimes hard to predict. So we'll just update that as we go along. It includes the $22 million from the sale of Manipal that number. And then in the first quarter, we sold about $2 million of equipment. So that's what that number is made up of.

Okay. I will turn it back over.

The next question comes from Barton Crockett with Rosenblatt Securities.

I was curious about your recent asset sales and the closures of several facilities. You announced the closure of Saratoga Springs, which has over 1 million square feet, scheduled for January. Additionally, you closed Ethingham, Illinois, in October, which was another 564,000 square feet. This results in a total reduction of more than 1.5 million square feet. This seems comparable to the square footage reductions you experienced from 2020 to early 2023 when you closed a few facilities. Those earlier closures appear to have contributed to approximately $170 million in property sales. I wonder if that $170 million was linked to those closures and whether the current closures could similarly generate property sales for your company.

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 1 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.

Additionally, I want to provide some context. For instance, regarding Saratoga, a significant facility in the Northeast, and Merced in California, we are responding to the evolving needs of our clients. Originally, Saratoga served the weekly magazine market, which was quite prominent at the time. We supplemented that with catalog work. However, as we introduce our Fusion Mail product, maintaining those regional plants becomes less viable. Therefore, we intend to consolidate that work in a central location to maximize efficiency. This is why we could implement those changes. Some of the investments, particularly in the two major processes we discussed, facilitate this transition. There is a strategic approach behind these actions beyond simply addressing the decline we have observed.

Have you seen significant proceeds from the closure in Ethingham, Illinois, reported for all of 2023, or will those proceeds mainly come in 2024 and later?

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?

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.

Yes, I mentioned this earlier, but it's important to note that we experienced a significant loss of work due to a major bank shifting its focus to consumer banking. This was a notable change for us because we were heavily involved with them. Overall, I would say that while the Lending Quad and car loan projects may be experiencing some delays, our marketing efforts in other areas of financial services are progressing well. Additionally, there’s considerable activity in the insurance sector, particularly regarding direct mail.

Yes. Regarding direct mail, if you look at our revenue pie chart, direct mail accounts for 12% of our revenue mix, and that's primarily where this pressure is concentrated.

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?

Yes, Barton. Our guidance suggests that the midpoint is $225 million of adjusted EBITDA, which is a $9 million decrease from 2023. Our first quarter also showed a $9 million drop in EBITDA compared to 2023. This indicates that we expect the rest of the year to have stable adjusted EBITDA in some quarters. While you might see year-over-year increases, we anticipate stable adjusted EBITDA over the next nine months.

Okay, all right. That's helpful. And then just, I guess, one final thing, you guys were talking about the in-store network opportunity. Is that a CapEx? Do you guys put those screens in and fund that through your CapEx? Or are your partners paying for that essentially, and this is maybe a pass-through cost? And who actually owns those screens? Does the store own them or do you own them? Just trying to understand a little bit better the type of out-of-home network you're looking to create here.

Yes. There will likely be a couple of models involved. We will be investing some of the capital expenditures and owning the screens for certain models, but we will receive compensation for that. The revenue generated helps to offset the costs. In some situations, clients prefer to manage the screens themselves. We have a current customer who has been covering the capital expenses for some time since we acquired DART. However, this is not as significant as some of the capital expenditures we make in other areas.

Okay. All right. Glad to hear that on the screens. And great, thank you very much. I appreciate it.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Well, thank you, everyone, for joining today's call. We look forward to seeing you in future quarters. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.