Thomas Morabito - Director, IR Mary Laschinger - Chairman and CEO Stephen Smith - CFO and SVP

John Babcock - Bank of America Merrill Lynch Gabrial Hajde - Wells Fargo Securities Ryan Merkel - William Blair & Company

Welcome to Veritiv Corporation's First Quarter 2017 Financial Results Conference Call. As a reminder, today's call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the call over to Tom Morabito, Director of Investor Relations. Mr. Morabito, you may begin.

Thank you, Michelle and good morning, everyone. Thank you all for joining us. Today, you'll hear prepared remarks from Mary Laschinger, our Chairman and Chief Executive Officer; and Steve Smith, our Chief Financial Officer. Afterwards, we will take your questions. Before we begin, please note that some of the statements made in today's presentation regarding the intentions, beliefs, expectations and/or predictions of the future by the company and/or management are forward-looking. Actual results could differ in a material manner. Additional information that could cause results to differ from those in the forward-looking statements is contained in the company's SEC filings. This includes, but is not limited to, risk factors contained in our 2016 annual report on Form 10-K and in the news release issued this morning which is posted in the Investors section at veritivcorp.com. Non-GAAP financial measures are included in our comments today and in the presentation slides. The reconciliation of these non-GAAP measures to the applicable GAAP measures are included at the end of the presentation slides and can also be found in the Investors section of our website. At this time, I'd like to turn the call over to Mary.

Thanks, Tom. Good morning, everyone and thank you for joining us today as we review our first quarter financial results and provide an update on some important drivers of our full year outlook. Overall, our first quarter results were mixed. Our revenue trend continued to improve as reported net sales in the first quarter were $2 billion, down just over 1% when compared to prior year period. We reported a consolidated adjusted EBITDA of $30 million for the quarter which was below the prior year period. This decrease was primarily due to the combination of continuing industry pressures in the Print and Publishing segment, a planned slowdown of synergy capture and investments made to grow the business. We reported a net sales decline of 1.2% in the quarter. Excluding the slightly positive effect of foreign currency, our core net sales declined 1.3% from the prior year. We should note that this is our best quarter-over quarter revenue comparison since becoming a public company. Our first quarter revenue performance is principally driven by the strength in both our Packaging and Facility Solutions segment, offset by the continued structural decline in the print and paper industry. Now I'd like to review some highlights from the first quarter and provide an update on our thoughts for 2017. First, the Packaging business performed well in the first quarter. Core revenues increased 7.7% year-over-year, largely driven by strength in our corrugated, films and bags categories. The vast majority of this growth was due to increased volumes with modest improvements in market price. As we mentioned in our year-end call, we continued to invest in our sales and marketing efforts in Packaging -- in the Packaging segment to drive organic growth and our strategy team continues to evaluate additional inorganic opportunities. Second, Facility Solutions continued its solid top line performance in the first quarter with core revenues up 1.3% year-over-year. We have been pleased with the improving revenue trends for this segment. However, we did see pressure on margins which Steve will speak to later. Overall, we remain optimistic about the segment's future. Third, industry pressures continue to impact the Print and Publishing segments. Print revenues declined 8% in the first quarter, driven by secular declines in both market pricing and volume. Publishing revenues declined nearly 11% in the first quarter, also driven by secular declines in both market prices and volumes. For the remainder of 2017, we expect that structural industry declines continue to impacting revenues in the Print and Publishing segments. And finally, our integration work and synergy capture remain on plan. Taking all these factors into account as well as our first quarter performance, we continue to expect our 2017 adjusted EBITDA to be in the range of $190 million to $200 million. Before turning the call over to Steve, I would like to review our long term strategy which I shared with you on March 14 and have summarized on Slide 8. Over the next several years, we plan to transform Veritiv into a higher growth and higher-margin business. There are 3 elements to our strategy, invest, protect and optimize. By executing on this strategy, we believe we can create significant value from now through 2021. As in any company, we need to make choices because there are limited resources. We're making a choice to focus our investments on our Packaging and Services businesses. First, in our Packaging business, we're investing organically in people, products and processes. Overall, we have a tremendous value proposition for our customers and we have a total solution for our customers in Packaging from concept to deliver. Today, we do extensive work developing concept and designing Packaging for our customers. We have in-house capabilities around structural and graphic design to meet branding, marketing and product needs. One of our great value propositions is that we support all materials and provide a total solution for our customers and often include multiple materials in any given solution. We have extensive relationships with the markets' largest suppliers across most categories and we're of the size and scale that we have -- we offer our own private label brand as part of our standard packaging lineup. You can see the impact of these investments in our first quarter results. Additionally, we continue to evaluate inorganic investment opportunities. Our second area of increased investment is in expanding our services capability. We announced that we currently plan to create a services segment sometime in 2018 to expand on existing services and explore adjacent services. Today, we offer a number of services to support our customers and we have seen growth that is better than our company average. Our opportunity is to focus on these services to scale them nationally and better monetize them. Specific services may include packaging design services, kitting and fulfillment, logistic services and equipment services and parts. The second element of our strategy is to protect. Today, we have a leadership position in our Facility Solutions, Print and Publishing businesses. We have the size, scale and service platform to win in these segments and they continue to generate adjusted EBITDA and cash flow for the company. Lastly, post-integration, we have significant opportunity to optimize our supply chain, SG&A, pricing and procurement. We also committed to an improvement in working capital. All these actions will help drive improved revenue and margin growth, improved adjusted EBITDA and cash flow as well as better return on invested capital. Now I'll turn it over to Steve, so he can take you through the details of our first quarter financial performance.

Thank you, Mary and good morning, everyone. Let's first look at the overall results for the first quarter ended March of 2017. As Mary walked you through earlier, when we speak to core net sales, we're referencing the reported net sales performance, excluding the impact of foreign exchange and adjusting for any day count differences. There were no day count differences this quarter as we had the same number of shipping days in the first quarter of 2017 as in the first quarter of 2016. For the first quarter of 2017, net sales of $2 billion were down 1.2% from the prior year period. Removing the impact of foreign currency changes, core net sales declined 1.3%. This decline of 1.3% in our core net sales gives us 5 sequential quarters of trend line improvement in core sales. Our cost of products sold for the quarter was approximately $1.6 billion. Net sales less the cost of products sold was $365 million. Net sales less cost of products sold as a percentage of net sales was 18.3%, up 20 basis points from the prior year period. Adjusted EBITDA for the first quarter was $29.8 million, a decrease of 14.6% from the prior year period. Adjusted EBITDA as a percentage of net sales for the first quarter was 1.5%, down 20 basis points from the prior year period. Despite the 1.3% decline in core revenues, ongoing improvements in segment and product mix and continued improvement in our cost structure helped us maintain fairly consistent adjusted EBITDA margins. Let us now move into the segment results for the quarter ended March 31, 2017. The Packaging segment grew its net sales 7.5% and core net sales were up 7.7% which we believe is better than the market performance. This growth in net sales was largely driven by increases in our corrugated, films and bag categories. Packaging contributed $50.5 million in adjusted EBITDA, up 8.1% year-over-year. Adjusted EBITDA as a percentage of net sales was 7.0% consistent with the prior year period. The adjusted EBITDA improvement in this segment was primarily attributable to higher net sales, partially offset by investments in the business. Facility Solutions net sales increased 1.9%, while core net sales increased 1.3% which we believe is more in line with market performance. We believe we're outperforming the market in some categories and underperforming in others. For instance, we have seen sales growth in the Canadian market. Facility Solutions contributed $5 million in adjusted EBITDA, down 32.4% year-over-year. Adjusted EBITDA as a percentage of net sales decreased 90 basis points from the prior year period. This adjusted EBITDA decline was due to an increase in selling and administrative expense, primarily from increased headcount to support the company's growth strategy and several nonrecurring items, some of which we expect would cover over the balance of the year. The Print segment had an 8% decline in net sales, while core sales were up 8.1%. Secular declines in both market pricing and volumes continued to impact this segment. Print contributed $14.1 million in adjusted EBITDA, down 11.9% year-over-year. Adjusted EBITDA as a percentage of net sales declined 10 basis points from the prior year period. Favorable price mix performance, coupled with a reduction in selling expense partially offset the earnings impact of the net sales decline. The Publishing segment had a 10.8% decline in both net sales and core sales. The soft revenue performance was affected by secular declines in both market prices and market volumes. The volume reductions were particularly pronounced in the magazine, catalog and educational book end markets, as customers adjusted their promotional mix and spending pattern. Publishing contributed $6.1 million in adjusted EBITDA, up 52% year-over-year. The increase in earnings can be attributable to improved paper margins and improved cash collections from a high-risk account. Switching from our segment analysis, let's take a look at our synergy time line, our balance sheet, cash flow and expectations for the allocation of our capital. As a reminder, our synergy percentages are calculated using the cumulative effect of synergy benefits already achieved in the 2014 through 2017 period. Said differently, we're quoting the cumulative effect, not the incremental effect and comparing our performance to the high end of the multiyear synergy range. We have already surpassed the low end of the original synergy target, largely due to strong execution of our sourcing strategy. As I mentioned on last quarter's call, we do not anticipate this accelerated pace of synergy capture to carryover into 2017. As we continue with the next phase of the integration, our focus is on both the process enhancements and information systems which require significant investment and time as well as on the continuing consolidation of our distribution center footprint. By making these investments and completing these major workstreams, we expect to capture further efficiencies in future years. Our current expectations for net synergy capture for 2017 remains in the range of approximately 80% to 90% of the ultimate goal of $225 million over the 5 years post-merger. Shifting now to our balance sheet and cash flow. At the end of March, we've drawn approximately $797 million of the asset-based loan facility and had available borrowing capacity of approximately $365 million. As a reminder, the ABL facility is backed by the inventory and receivables of the business. At the end of March, our net debt-to-adjusted EBITDA leverage ratio was 4.0x. At the time of the merger, our net leverage ratio was 5.5x and our strategic goal is a net leverage ratio of around 3x. For the quarter ended March 31, 2017, our cash flow from operations was a negative $41 million. Subtracting capital expenditures from cash flow from operations for the first quarter, we generated negative free cash flow of approximately $52 million. Adding back the $21 million of cash from the impact of restructuring and integration and other related adjustment items, adjusted free cash flow for the first quarter of 2017 would have been approximately negative $31 million. As anticipated, in the first quarter, we have free cash flow that was lower than last year's first quarter. Free cash flow was impacted by our increased investment in accounts receivable and inventory to support sales growth in our Packaging segment as well as the extending of accounts payable in the fourth quarter of 2016 which impacted our first quarter 2017 results. As a reminder, our working capital pattern can be seasonal. For 2017, we continue to anticipate at least $60 million of free cash flow, once again defined as cash flow from operations less capital expenditures. The positive cumulative cash flow from the merger -- since the merger in 2014 has allowed us to accomplish 2 objectives. First, we've invested in the company. That investment has had 2 elements, onetime integration costs and capital expenditures. We've also had 2 types of integration and restructuring costs. They were those costs that run through the income statement directly and those that are within the capital expenditures. Onetime integration and restructuring costs expected to run through the income statement in 2017 will be between $40 million and $50 million. We expect capital expenditures related to the integration and restructuring projects to be in the range of $10 million to $20 million which will help enable the synergy capture in 2018 and beyond. Similar to prior years, this incremental capital spending is principally for information systems integration. For 2017, our ordinary course capital expenditures are expected to be approximately $20 million to $30 million. For comparison purposes, capital expenditures totaled $11 million in the first quarter. Of that spending, there was about $5 million related to integration projects. As a reminder, our second major use for excess cash has been to pay down debt. Overall, we've been pleased with our deleveraging initiatives since the merger. So that concludes our prepared remarks. Michelle, we're now ready to take questions.

[Operator Instructions]. Your first question comes from John Babcock from Bank of America Merrill Lynch.

Just wanted to quickly follow-up on kind of the last point, particularly on the leveraging. It seemed like leverage picked up a little bit from last quarter. Just wanted to get a sense, I mean, was that related to the working capital usage? What was generally given on there? And also, how does this impact your capital allocation plans going forward?

Okay. So I'll take the second part of the question first. It doesn't impact our capital allocation strategic view at all. What's going on in the quarter as well as the look at both the balance sheet and cash flow is the following, The investments we're making in our Packaging segment both in accounts receivable and inventory were the major contributors of the delta of free cash flow and working capital quarter-over quarter. In addition, as you probably note, John, we looked at the impact of the timing of our accounts payable stretch from the fourth quarter to the first quarter. And if you take into account that difference, meaning roughly about a $20 million swing between the quarters and you adjust the net leverage ratio for that which is about 10 basis points per quarter, the entire amount of the 40 basis point improvement in leverage ratio -- or increase in leverage ratio over time is due to that investment in inventory and accounts receivable. So we're comfortable with our free cash flow guidance for the year and we're not changing our approach to capital allocation.

Okay. Sounds good. And then, with regards to the guidance, it looks like a lot of the earnings are going to be kind of back-half weighted. If you could just kind of talk about your confidence in that given the 1Q results? I mean -- that would be helpful. And also, if you could talk about some of the segment trends, that would be great?

Sure. So let us speak first to the overall confidence in the annual view given the seasonality of our business. And then Mary may wish to weigh in on the particular segments' performance. So if you take a look at the last 3 years, being '14, '15 and '16 and you look at our seasonality by quarter, you would note that in '14, '15 the average percentage contribution to the full year adjusted EBITDA in the first quarter is right at 15.5% for those 2 years. Last year was a bit of an anomaly, meaning '16 was. If we use that 15.5% and we apply that math to the balance of this year, I mean, the last 3 quarters, you'll see that we end up with an adjusted EBITDA in the range of $190 million to $200 million given the first quarter's performance. So our view of the year given the seasonality of the business remains $190 million to $200 million of adjusted EBITDA.

Yes, John, as it relates to the segment trends, let me go through these by each segment. First of all, we're very pleased with our Packaging growth as you can imagine with these kinds of numbers, because it was significantly better than industry performance across-the-board. In terms of -- and in light of that, we also maintained our margins, in spite of many price changes, some up and down that are sometimes difficult to manage and sometimes there is lags and so forth. But we feel very good about where we're. In terms of the outlook for Packaging for the balance of the year, I would characterize the first quarter was particularly strong. It was strong across many of our verticals. Manufacturing, in particular, was strong. Fulfillment in particular. But I -- this is normally a GDP-type growth business. And as I've shared in the past, that we would expect this to continue to be a GDP-type growth plus, because we think our value proposition is stronger. So I wouldn't suggest that we're going to continue in a pace that we did in the first quarter, but more like a GDP-plus type of growth with fairly stable margins. And on the Facility side, we're really pleased at the progress that we're making on the revenue fronts and would expect that, that will be continued to get closer and closer to GDP-type growth. And in essence, we're there here in the first quarter and have been inching up and improving every quarter. We were disappointed with the margins for the quarter, but anticipate, as Steve commented, that some of that's come back. And so we don't see that as a long term trend. And again, going forward more like a GDP-type growth business for us. Print and Publishing, that market dynamic is, pretty frankly, negative for the industry overall. We feel like we're performing at least very close to the market performance, but there has been tremendous price pressure in that industry overall which is putting a drag both on revenues and margins. And we would expect that to continue. Whether it's at the same pace as our first quarter numbers, it's very hard to say. And we're going to follow what the market does in essence.

And just on the Print and Publishing, was the majority of the impact on results primarily driven by fundamentals? Or were there any other kind of factors related to operations or elsewhere that also came into account?

Yes, I would say the majority was fundamentals. The industry -- if you look at the Print business, in particular, it was down almost 7% and the Print and Publishing industry was almost down 10%. And within that, there's always customer fluctuation just because of your choice of customers and those customers make choices sometimes, especially in the publishing area, for example, where they may decide to print something or not for any given quarter. But I would say, the majority of what we saw was a direct results of the industry dynamics and the pricing and volume pressures in the industry.

Okay. That's all I have for now -- well, actually, one last question, actually, just on shipping days. Did you mention how many shipping days you have in 2Q relative to last year?

We haven't. I believe, they're similar. We'll look it up right now, John, with some colleagues there.

[Operator Instructions]. Your next question comes from Gabe Hajde from Wells Fargo Securities.

Steve, maybe the first question could be to try to drill down a little bit further into the working capital question. I appreciate there's probably some seasonality and you commented on what's happening with AP. But can you give us a sense for what your expectations might be for the full year. And really what, I guess, I'm trying to understand is, there's some moving pieces with respect to investing in working capital in the Packaging business. But yet as -- I mean, if you're seeing high single-digit declines in Print Publishing, presumably that could be a source of cash for the full year and again appreciating there could be some seasonality, just maybe help us tie those 2 things together?

Absolutely. So let's focus particularly on net working capital which we define as AR, inventory, AP only. And in those 3 categories, we would say that for the year, if you squeeze the last 3 quarters, that we don't anticipate the AP being substantially different from the 2016 performance. So our view of AP will be similar to 2016 plus or minus a bit. As it relates to AR and inventory, we did mention that we will continue to invest and probably invest ahead of the growth rates in our growing areas, particularly in Packaging and that could consume some working capital year-over-year for comparison purposes. Interestingly enough, if we don't achieve the rate of growth that we currently anticipate in Packaging or other areas, we'll throw off more working capital, as I think you're hinting at. So for our year 2017, we currently anticipate some additional investment in AR and inventory, principally in Packaging, but even having that, we expect our free cash flow, absorbing those working capital impacts, to be over $60 million.

Okay. So maybe just to be clear is that, it's possible that there could be a use of cash for the full year in terms of working capital?

It's possible, yes.

Okay. All right, understood. And then, I don't know if Mary or Steve, how you want to address this. But with respect to sort of volume progressions and price increases, particularly as it relates to corrugated in your Packaging business, do you have a sense for if there was any prebuy activity ahead of what was the April announcement? And/or if you can give us even some insight into monthly progressions with respect to volumes and order patterns? And then maybe even what you're seeing here in early Q2?

Well, so first of all, as it relates to our business, pricing in the corrugated space had a very nominal impact on our revenue for the quarter. Even though the pricing did go into effect in December, the first price increase, the corrugated is less than 30% of our total portfolio, actually closer to 25%. So there is some impact, but not -- it's not significant against the whole. As it relates to our customers' prebuying, it's very difficult to tell. But what was interesting for us is that, it was broad-based. And that to us wouldn't suggest that there's a lot of prebuying, because it was so broad-based across industries and different customer segments. And they're always trying to manage working capital as well. So we don't -- it's hard for us to judge that, but we didn't think it was a significant driver, because the industry overall box shipments were not anywhere near as high as ours were. And so -- and part of that's because we've been working at developing greater share of current customers as well as achieving new customers as well with the investments that we're making in this segment. Pricing, as you know, there was another price increase announced in -- to come into effect in May. We would expect that, that will flow -- possibly the majority of that will flow through and will have again some impact on our business. In terms of monthly -- and that's going to hit us -- I'm sorry, the pricing will hit us sometime in the second quarter. We would expect, again, some modest benefit to that. In terms of monthly fluctuations, it was fairly consistent throughout the first quarter. We did see the second half of March tail off a little bit and that continued into April, but it was still stronger than last year. And we would expect that somewhat to continue.

Okay. I guess, that kind of dovetails into the next question, even kind of piggybacking off of what John had asked with respect to -- I mean, is that what gives you confidence when you're seeing -- you got some internal initiatives to execute on but as well as overall business trends that give you confidence in maintaining your full year outlook on both the EBITDA and free cash flow lines?

Yes, yes. I think as were now almost 3 years into this as a company which isn't very old, but we do now have 3 years behind us. We have better and better understanding of the dynamics in this business. We understand where -- what our opportunities are and the levers in the business. And that -- we feel confident in our ability to deliver on those commitments.

Okay. Two last questions. Steve, you mentioned that there was a nonrecurring in the Facility Solutions that you might make up over the remainder of the year. Can you help us understand maybe just order of magnitude and what portion might be recuperated? And then, to be quite honest, in terms of this quarter's performance, segment EBITDA was pretty much in line with what we're expecting and -- but it was really the corporate piece that missed. And I don't know you mentioned some investments that you're making at, presumably in salespeople, et cetera, to capture some of the growth you anticipate. Can you give us a sense for what may be the corporate line might look like for the full year? And maybe the progression or the cadence of that? That would be helpful.

Absolutely. So on the Facility Solutions margin in the quarter, the first quarter, what was happening, there were several nonrecurring items that we expect to recover during 2017. And what does that mean, what it means we had a few specific internal process issues with some specific customer accounts that we anticipate will be fixed and reversed during the course of the year. And so in dollars, to your question about how we calibrate that, we had about a 90 basis point deterioration quarter-over quarter in FS in their margins on an adjusted EBITDA basis. We expect to recover 2/3 of that during the course of the year, roughly 60 of those 90 basis points. Now our seasonal pattern in FS makes a little bit harder. It will come in during the period of the year, but that's our expectation now. And so that the ongoing impact of deterioration, saying differently -- saying it differently, is roughly around 30 basis points. So 25, 30 basis points, due to a mix to larger customer accounts. As it relates to corporate and other, couple of things. First, let's talk about what happened in the first quarter and then how we expect that to play out the following 3 quarters. As it relates to the first quarter, the operating expense increase is occurring as we invested in growth, as Mary mentioned, both in our VLS business segment or unit and it's roughly related to mostly salespeople and also in our strategy team that Mary mentioned and a small amount of foreign currency in the period as well. So mostly investment in sales folks for VLS business unit and strategy. And then as you look at the balance of the year for corporate and other, I would have us reflect on last year's last 3 quarters, as we generally don't like to forecast specific line items, but it will be indicative of what's going to happen. And if you take the last 3 quarters of the adjusted EBITDA drag for corporate and other last year, you'll see that, that was just about $46 million per quarter on average. If you were to take that and add about 3% inflation, because it's mostly individuals in that group, you get a reasonable figure for that segment and its likely performance for the balance of 2017. And we expect it to be smoother in its performance in '17 than in '16 because of some changes in the way we're handling our health and welfare given a new program. I hope that's what you are seeking.

That's very helpful.

And also, Gabe, I'll just reinforce, this investment we're making that falls into corporate and other and sales professionals for VLF. That's part of the strategy of breaking this out, because it does change the dynamics a little bit on how you look at that. And so we recognize that as an opportunity for greater transparency down the road.

Your next question comes from John Babcock from Bank of America Merrill Lynch.

Just want to follow-up on that quickly. The services segment, is that positive EBITDA generating at this point in time? And how is that progression going to look kind of over the next year or so?

So we haven't quantified the services segment that may eventually be broken out during 2018 or later. What we have said is that, it's a group that's growing at a rate faster than the corporate average and that its margins will be leveraged as we scale it up. We haven't given a view of the services group. What we have said is as it relates to the VLS business unit that, that group which is running at about $125 million or $150 million of annualized revenue, is EBITDA positive even with the investments we're making.

And is that reliant on your other segments at all?

No. In fact, the other segments can enhance our opportunities in it. But it's not reliant on other segments. And we're speaking to -- there's a number of things that are falling into services. And on average -- in total, services is positive EBITDA for us on average -- in total with some opportunities for improvement in some of the subsets of what's in services today.

And John, this is Tom. Just getting back to your earlier question about the amount of shipping days in the second quarter, it will be the same amount at 64 days. So just trying to get that out there before you move on to next question.

Okay. And what about for the rest of the year by the way? Are there any differences there too or no?

There is 1 day less in the second half of the year and I believe it's in the fourth quarter. We'll check that as well as we're speaking.

That should be 2 days less in the third quarter, 1 day more in the fourth quarter. So for the year, we should have 1 less day.

Your next question comes from Ryan Merkel from William Blair.

So first question for me. Why is adjusted EBITDA $30 million in the quarter, was that in line with internal expectations?

So Ryan, as we set out the guidance for the year, we understood some of the dynamics that were going to be occurring in the business. And I would say that it was in line with expectations. And it's hard to predict 6 months out when we set our plan in place, but it wasn't -- but if you look at our total year guidance and we're still confident in executing on that, I'd said, yes, it was more or less in line with expectations. Frankly, the only thing that was a little bit of a surprise was the cash flow, just because we grew so much in Packaging more than what we expected and it was a bigger drain on the investment there.

Got it. Okay. So because it was a pretty big mix versus street expectation, so it sounds to me like there was a mismodeling by the street. So I'm just trying to reconcile that. So maybe what was investment up year-over-year in the quarter? How much has that impacted?

So two parts to your question. One, about expectations and, two, about investments. First, the expectations are tough for the outside parties, because the business model is shifting as we work through the quarters. Last year had some choppiness to it, particularly the first quarter. So the prior 2 years were more indicative of '17 than '16 will have been, more likely than not. As it relates to investment, we haven't called out the exact dollar amount, Ryan, but we did say that the vast majority of the change in the corporate segment is due to investment. So you can do the math there. And also with both Packaging growing and FS growing, but their margins remaining the same or going down, you can see we're having investment in both of those segments. So it's greater than $5 million in investment, but we haven't given the exact figure in the period.

Okay. And then what about synergy capture? What was that this quarter and what was it last year?

So we can give you last year. We haven't historically commented on intrayear synergy capture just because of the potential concerns that might create for employee base. For last year, we generated, hold on 1 second, I'll give you the figure. Let's see. In the year itself, $37 million of synergy capture in the year and that took us to a cumulative total of about 77% of the $225 million that we've targeted multiyear. And we said this year will be in the 80% to 90% range against that same $225 million.

Yes, I was hoping for the number, just in the first quarter of last year.

Yes. I'm sorry, we haven't given the--

The first quarter of last year. But let me just say, Ryan, it was much less this quarter versus last year by design.

Sorry go ahead, Mary.

No, I just said we anticipated that synergies captured this year would be significantly less than prior years and we're ahead of our internal plan even in the first quarter of what we're committed to in 2017.

Okay. So that's what I'm trying to reconcile to here. So the EBITDA down year-over-year is mainly investment up and synergy capture slowing. Is that fair?

Yes.

That's correct.

That is correct.

And you're on track to hit your guidance for the year. And, like I said, it seems to me that the street might have mismodeled the quarter, because the stock is down significantly and I'm not sure that that's justified, but [indiscernible] nonetheless. Okay.

Right. That's right, yes.

So then my other question was, you mentioned in the Publishing segment, margins benefited from improved cash collections from a high-risk account. How much did that help margins in the quarter? Is that something you can quantify?

We could quantify it. It relates to a very specific customer account. The way it works is, they -- it's -- some of our accounts, if you go back and look in '15 were put on the cash basis of accounting from accrual basis because of the high-risk nature of those accounts. In the quarter when we get collections from a larger account that's at high risk, we then recognize both the revenue and the profits to go along with it. So tends to be a bit choppier quarter-to quarter on larger accounts when they pay us. So they paid us in the first quarter. We can't give you a specific figure, but it was helpful to that segment, just in this particular quarter.

And it was not the majority of the improvement. The majority of the improvement came from just the dynamics in the industry around capacity utilization and pricing in the marketplace.

Your next question comes again from Gabe Hajde from Wells Fargo Securities.

I wanted to follow-up just real quick, Steve, on this -- the publishing benefit. If I heard you correctly, this is something that could persist, I don't know, in -- at least in 2017, but will be choppy. in a way to think about it or model it, is that fair?

That's correct. It -- as some customers go through different challenges they have, their payment pattern isn't as smooth as other customers. And so, yes, it would be choppy when it occurs.

At this time, I have no further questions in queue. I turn the call back over to Mary Laschinger for closing remarks.

Well, thank you, everyone, for your questions. Overall, while our adjusted EBITDA came in lower than last year, we remain encouraged by our recent revenue trends, particularly in our Packaging and Facility Solutions business. Our integration is on schedule as we continue to execute our multiyear plan and this should continue to positively contribute to earnings over time. And so we appreciate, first and foremost, I want to thank the entire Veritiv team, because we do remain on track to deliver on our 2017 commitment. I mean, we feel quite confident in that. And so again, thank you, again, for joining us today. And we look forward to talking to you in August as we share our second quarter 2017 results. Thank you and have a good day.

Thank you, everyone. This concludes today's conference call. You may now disconnect.