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Executives

Robert A. Mason - Chief Executive Officer, President and Director

Robert L. Recchia - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer, Director and Member of Executive Committee

Analysts

William G. Bird - Lazard Capital Markets LLC, Research Division

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

Daniel Salmon - BMO Capital Markets U.S.

Bethany Caster

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Unknown Analyst

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Valassis Communications (VCI) Q1 2012 Earnings Call April 26, 2012 11:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Valassis First Quarter 2012 Earnings Conference Call. [Operator Instructions] I would like to remind you that the discussions during this conference call will include forward-looking statements and that Valassis' actual results could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to be materially different from those expressed or implied by such forward-looking statements are discussed in the risk factors and other sections of the 2011 annual report on Form 10-K and the reports on Form 10-Q and Form 8-K filed or furnished with the SEC.

Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the press release furnished with the current report on Form 8-K dated today, which is also available on Valassis' website at www.valassis.com in the Investors section.

At this time, I would like to turn the conference over to Rob Mason, President and CEO. Please go ahead, sir

Robert A. Mason

Thanks, Tadeo, and good morning, everyone. I'd like to thank you for joining us for our first quarter 2012 earnings call. Bob Recchia, our Chief Financial Officer, is with me. After I provide some insights into our overall results and segment highlights, Bob will share some additional financial metrics and update on our use of capital and discuss our plans to proactively manage the cost side of our business. After our prepared remarks, both Bob and I look forward to answer any questions.

As I look at our overall Q1 results, while I am disappointed in our revenue and adjusted EBITDA performance, I continue to be very confident in our ability to execute and ultimately deliver on our 2012 guidance. The primary driver behind our Q1 results was an overall reduction in spend from our consumer packaged goods clients, which is one of our largest client verticals. This reduction in spend created an almost $28 million drag on our first quarter revenue. While this decline impacted multiple products in all but our Shared Mail segment, I think it's important to recognize that we believe that the CPG revenue shortfall we are experiencing is not a secular decline.

I'd like to begin our segment discussion with the FSI business, which you know, is our most CPG-dependent segment. Specifically, the shortfall in FSI revenue was driven for the very most part by 3 dynamics. The first component is a continuation of the spending pullback that began in the third quarter of 2011. This reduction is caused by consumer packaged goods companies responding to the increased liability of coupon redemptions. During 2011, CPG manufacturers paid out an incremental $500 million in coupon reimbursement to retailers. Based on what we are seeing from consumer responsiveness in Q1 of 2012, we believe we will see this trend continue.

Additionally, during that same time period, most CPG budgets were placed under even more pressure due to lack of growth in domestic top line sales and increase in commodity costs.

The second factor is the loss of the custom co-op business that began in Q4 2011 and will continue to negatively impact us through the first 3 quarters of this year.

Lastly, we had one less regular co-op FSI date as compared to Q1 2011. Ultimately, given an environment where consumers remain focused on savings, experience tells us that when CPGs pull back on promotional spending, they risk losing market share to competitive brands, including private label. We believe that as this threat becomes real, CPG marketers will look to a solution, namely our FSI, proven to drive incremental sales volume and retailer support. In the meantime, our sales and marketing organization is continuing to aggressively work with our CPG clients to optimize coupon values and resume an increased frequency of promotional programs.

In our Neighborhood Targeted segment, we are also looking at a story that is strongly influenced by a cutback in CPG spending. As you know, this segment is made up of multiple products, including Newspaper Inserts and sampling. The decline in consumer packaged goods spending on these 2 products accounted for over 2/3 of the $17.9 million in quarterly revenue decline we experienced in this segment.

Moving on to our International Digital Media & Services segment, we continue to see growth in 2 businesses: our Digital business as well as NCH, our coupon clearing and analytics business. The ongoing strength of the U.S. coupon redemption market has continued to fuel our NCH business, creating growth in both their top and bottom lines.

We're also continuing to see momentum build in our Digital Media portfolio. Revenue within our Digital businesses grew nearly 60% year-over-year during the first quarter and we are tracking toward our annual digital plan of $30 million in revenue.

We are particularly excited about the growth we are seeing within our Online Display Advertising solution and new product offerings that we are rolling out over the next 60 days.

The positive momentum within our coupon clearing and Digital businesses was offset by continued softness within our In-Store business that is, again, a byproduct of the CPG reduction in spend.

Within Shared Mail, our largest business segment, revenue increased 1.7% versus prior year. As we discussed during our Q4 2011 earnings call, Shared Mail growth rates are going to exhibit a fair amount of variability from quarter-to-quarter. As in 2011, where we saw year-over-year quarterly growth rates that range from a low of 1.3% to a high of 5.4%, we will continue to experience unevenness as it relates to growth in the Shared Mail segment.

From a Shared Mail volume perspective, we saw a decrease in the number of pieces per package, primarily driven by softness within the food service category. When we look at segment profit, there were 2 primary factors contributing to lower flow-through in Q1: one, lower-than-expected pieces per package; and two, a year-over-year decline in wrap sell-through percentage. Revenue per package continues to be solid and we have also made some structural and reporting changes designed to improve our go-forward performance in the wrap. As I look at these factors driving this business, I see Q2 on plan from both a revenue and segment profit perspective, and I continue to be confident that we are on track to deliver 3% in annual Shared Mail revenue growth.

At this point, I would like to turn it over to Bob for some additional financial metrics and insights.

Robert L. Recchia

Thanks, Rob. Obviously, we did not get off to the start we would have liked in the first quarter of 2012. The FSI and Neighborhood Targeted segments continue to be challenged, while Shared Mail and NCH, once again, put up good numbers. As we look at the second quarter, we expect these trends to continue, and as a result, have begun a process to review and reduce costs across all business lines. These spending reductions will have a little, if any, effect on the second quarter, but we believe will positively impact the back half of the year. While I do not have a cost reduction target to give you at this time, we will do what is necessary to stay on our plan to deliver our EBITDA and diluted cash EPS goals.

SG&A costs for the first quarter, excluding stock compensation, were $75.3 million, down $1.2 million or 1.5% from the same period last year. As in prior years, we'll continue to manage these costs aggressively. However, given the softness in the FSI and Neighborhood Targeted segments, additional spending cuts in discretionary items and underperforming businesses are in order.

Our capital spending was unusually high in the first quarter. We purchased a new printing press, which we will use to in-source much of our Insert print work that today goes through third parties. The effects will be to improve margins on turnkey work that we sell, which has been growing as a percentage of the total Insert revenue. We expect capital expenditures to return to normalized levels in the second quarter and we are forecasting $32 million or less in CapEx for the full year.

As noted in our release, we purchased $1.4 million or 59,122 shares of VCI stock during the quarter. This was due in part to the acceleration of expected first quarter purchases into the fourth quarter of 2011, where we spent $59.3 million purchasing over 3 million shares, which was approximately $22 million more than originally planned. We expect to continue our share repurchase program as outlined in our 2012 guidance press release.

We'll now open it up to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of William Bird with Lazard Capital Markets.

William G. Bird - Lazard Capital Markets LLC, Research Division

You highlighted the 2 pressure points you saw on Shared Mail, lower piece per pack, decline in the wrap sell-through. What are you seeing kind of those dynamics in the June quarter?

Robert A. Mason

As we look to Q2, Bill, I will tell you that -- I mentioned in the script, I think, that we see both revenue growth as well as flow-through being back on track in Q2. We're here in late April so we've got a fair amount of visibility into Q2. So from a volume standpoint, we feel pretty good about that. And we also see improvement in wrap sell-through percentage.

William G. Bird - Lazard Capital Markets LLC, Research Division

And then just secondly on the buyback, I just want to understand. I guess, I think you had set an expectation of kind of prorated buybacks for the year. The first quarter seemed kind of light. I guess, what's your perspective on buybacks, particularly given what the stock's doing today?

Robert L. Recchia

This is Bob. I will tell you we can't get into the specifics about when we're in the market or when we're not in the market or why. I can tell you that the guidance that we gave you, which assumed we would use half of our free cash to buy back shares, is still relevant today. So you should assume that we will be active.

Operator

Our next question is from the line of Alexia Quadrani with JPMorgan.

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

Can you just give us a bit more color on the FSI business in terms of the decline you saw there? How much the industry volume declines were down? How much do you think pricing was? Any color on how you think the market is sort of proceeding from a competitive perspective? And then I got the sense that things in the CPG side, I think -- at a conference, I think you might have mentioned, maybe look like they were improving a little bit earlier in the quarter. Did they take another step down as the quarter sort of went on?

Robert A. Mason

Well, actually, I think we got a 4-parter there, so I'll try and cover them. And if I don't get to all of them, remind me, please. Industry overall is flattish, I would tell you. Don't want to get into any specifics in terms of pricing. In competitiveness, I don't think there's been any change as it relates to that either. We called out on our '12 guidance that we expected to see our share decreased as we work through 2012, and that was primarily driven by the loss of the custom co-op program and that continues to be the case. As far as the headwinds that I mentioned earlier, I would tell you there's no new news there, that it's really a continuation of the factors that I called out. It's the continued liability associated with redemption, and that it's the top line pressure in sales that most CPGs are feeling and -- domestically anyway. I think the other element that you should keep in mind is that in 2012 Q1, we had one less FSI date in '12 than we did in 2011.

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

Yes, so just so I understand it correctly, the industry-wide volumes were down in the second half of last year, but now they're flattish. So maybe it's getting a little bit better, but you're contending with the market share issue of losing the custom co-ops and that's what is continuing to be a drag or am I misunderstanding it?

Robert A. Mason

Yes, I don't know that I feel confident enough to say that the industry is showing market improvement. I would tell you it's a continuation of kind of what we saw in the back half of '11. We're projecting right now for the industry to be slightly down in 2012.

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

And then can you remind us your drop dates, your publication dates in Q2? Is it the same year-over-year?

Robert A. Mason

Q2 is -- I got that number. It's 10 this year, and I believe it's 10 last year as well. Yes. So it's an even number of dates year-over-year.

Operator

Our next question is from the line of Mark Zgutowicz with Piper Jaffray.

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

Rob, what was the pieces per package number in the quarter?

Robert A. Mason

9.6, Mark.

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

9.6. So that's off of 10 from the previous quarter roughly?

Robert A. Mason

Exactly, yes.

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

Okay. And maybe you can talk about what you think drove that down and also just maybe some additional color on the wrap side as well, why you saw weakness there?

Robert A. Mason

Yes. The pieces per package primarily came about because of the softness in the food service category. And what I will also tell you is primarily a single client, a national client, and the good news behind that is that the delta between 2011 and '12 for this client was really a calendarization issue. So we see this client as part of an ongoing relationship with ourselves and that business coming back as we work through the next 3 quarters of the year. That was really the predominant driver. The good news is that in Q1, Specialty Retail was up slightly for the quarter. And from a revenue perspective, grocery was up about 3%. So in 2 very key categories, we saw some growth, and that's encouraging. From a wrap standpoint, I think ultimately, it comes down to an execution issue. I think we got to do a better job in terms of selling that product and executing against it. We've made some changes in terms of reporting lines, and I think we're looking forward to that situation improvement. We'll work through the rest of 2012.

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

Was wrap maybe a function of just holding on price a little bit more than maybe you wanted to or is that -- am I way off-base there?

Robert A. Mason

I can't say that, that was a price-driven thing. I don't think any of the volume there came about because of us being overaggressive in terms of price. I really think we need to enhance our focus and we need to execute better there.

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

Okay. And then you mentioned in Q2 some confidence in the outlook there. I mean, you said confidence on your plan, and I know you're not going to tell us what your plan is for the quarter. But maybe you can talk about what your plan was in Q1 and sort of how you have performed against that.

Robert A. Mason

Yes, and I would look on it, Mark, as the plan being to deliver 3% in terms of annual growth in Shared Mail. And I know the magnitude of the miss in Q1, while we're not happy with 1.7%, is not that great. We're basically off by $4 million on $1 billion product line. And as we go into Q2 with the visibility we have today and we see that growth, we get much closer to the 3% that we've targeted for annual growth. And the flow-through has kind of given us the benefit of double-digit improvements in terms of segment profitability.

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

And I'm just curious -- I think a lot of the investors are kind of curious, why is the visibility better this quarter than it was in Q1 and sort of what's the variability there? Because obviously, we're sort of at the same points in the quarter as we were in Q1, but it seems like visibility from quarter-to-quarter is [indiscernible] of extreme?

Robert A. Mason

Yes, and part of what you're referring to is probably the falloff from where we were from a growth standpoint in Q4 to Q1. I mean, we recognized and tried to communicate that we see the Shared Mail business is something that has the fair amount of variability from quarter-to-quarter. And there were some events and some impacts in Q4 that we called out would clearly not be repeating. That was primarily the bump we got in grocery around the holiday week and some of the Specialty Retail activity that came about as they got off the sidelines in Q3 and started to engage in their must-win time frame. So I don't think the visibility is any more improved, but as -- what I can tell you is based on what I've seen in terms of our sales forecast and projections and pipelines. I do feel very confident that we are on track to get back to the levels in terms of what is expected, in terms of both [indiscernible] and segment profit.

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

Okay. And just a follow-on to Alexia's question. CPG, we as well just been hearing on a margin that CPG spend on traditional is improving on a year-over-year basis, and specifically if you look at the magazine segment, you'll see that. I'm curious if you look at FSI, is that coupon specific there? And -- or does the Shared Mail really just have a longer tail to the recovery? And then specifically on Neighborhood Targeted, that's been a pretty volatile segment for you guys and we've obviously comped over some already pretty tough comps. And I would say you had a relatively easy comp, at least in our opinion, and you saw growth decelerate -- or, I'm sorry, accelerate to the downside in March. So maybe you can speak to that as well and sort of what the dynamics are going on there?

Robert A. Mason

Sure. In terms of the CPG spending pattern, your numbers are a little bit different than the ones I've seen. I've seen numbers from Kantar that showed, during 2011, overall CPG spend was down about 1 point and down about 3 points in Q4. I do think that the uniqueness of us having a promotion-driven vehicle, where 2/3 of the cost of a program with us ends up being in redemption, creates this headwind for us more than you'd see in, for instance, magazine pages. So I think there's a little bit of a unique factor there that does not color or impact other traditional media. So that's what I would tell you about the CPG side of the business and you've asked a question about the volatility of Neighborhood Targeted. I think that we had, on the last couple of calls, pointed out that we would be cycling through some of the ROP issues that it caused the declines in terms of revenue within Neighborhood Targeted over the course of 2011. And I think we have seen our way through that for the most part. But within that segment, over 2/3 of the decline that we saw in Q1 was really focused on the shopper marketing program that CPGs had executed in 2011. And again, because of the dynamics going on with their business right now, we have seen significant cutbacks from those programs.

Operator

Our next question is from the line of Dan Salmon with BMO Capital Markets.

Daniel Salmon - BMO Capital Markets U.S.

I just want to follow up a little bit on Shared Mail operating profit and just to understand the dynamics there a little bit better. We've seen some quarters in the past just, for example, the third quarter of last year, where you were a little below the 3% level. You were hoping for in the sort of 1% to 2% range, but still be able to generate that double-digit operating profit growth. Is there something different here, and I think particularly around dynamics of unused postage and whatnot or you've been doing a lot of good work lately that maybe sort of running their course and just to understand a little bit better how that would accelerate as you forecast the revenue getting back up to that 3% range.

Robert L. Recchia

I think the key in this quarter in terms of flow-through is we increased packages by about 1%, but pieces per package were down 4%. So we went from 10 to 9.6. And the key in terms of flow-through is going to be price, but the second piece of it's going to be pieces per package. So the overall metric in terms of revenue per package were still up, up about 1.2%, so that number was good. But we did it over more packages, which isn't always the best way to go. So yes, I just think you got a lot of variables in terms of the flow-through and where it shows up depending upon whether you're getting more -- the type of packages we get, the size of the packages, the unused postage, the pricing, there's a lot of pieces that work to get the number. The unused postage was up about 2 percentage points, so from about 14.9 to 17. That's a real number in terms of opportunity lost, but that is a function of the 9.6 pieces. So we've got to get the pieces per package growing from quarter-to-quarter and then you combine that with some price, you'll see the flow-through that you're looking for.

Operator

Our next question is from the line of Bill Warmington with Raymond James.

Bethany Caster

This is Bethany Caster sitting in for Bill Warmington. I was wondering if you could give us a sense of your expected growth trends by division over the course of the year. You've talked about how you expect the second quarter to be back on track. What do third and fourth quarters look like?

Robert L. Recchia

For us to tell you what the third and fourth quarters look like at this point would be a little bit of a stretch. We don't have that type of visibility. We look at all the trends that are in place. We've got our compensation plans, which are driving behavior. And we have plan, obviously, that gets us to our EBITDA and our cash EPS goals. But I can't really give you any kind of specific metrics that are going to give you comfort for the third and fourth quarter, because I would be telling you basically what our forecast is. That's the best I could do.

Bethany Caster

That's fair. And -- actually, let me get through one housekeeping question. What was your wrap sell-through?

Robert A. Mason

Our wrap sell-through for Q1 was 69%, and that was off about 9.5 percentage points from prior year, Bethany.

Bethany Caster

Okay. And then the -- finally, can you talk about your pricing trends for Shared Mail?

Robert A. Mason

I don't want to get into the specifics, Bethany. What we have said for 2012 is we're going to be very surgical with how we apply price. We're going to use price to get business, we're going to use price to keep business and we're going to use price where we see our ability to capture full value for what we're delivering to clients. So I think we continue to be very pleased with what we accomplished in 2011 and the momentum that's given us as we work through '12 at this point.

Operator

And our next question is from the line of Dan Leben with Robert W. Baird.

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

First on the Shared Mail side, just talk about what the contribution was from the postage increase?

Robert A. Mason

We've got them at 0.9%, Dan, in terms of top line. And again, that's postal pass-through. We were -- as we projected very successful in terms of passing that along, but it's about 0.9% of the top line growth.

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Okay, great. And then, Bob, you mentioned the CapEx was up for our new printing press around the Insert work. Could you just talk a little bit more about what the opportunity you're seeing there is on the turnkey work and how we should think about that flowing through the P&L?

Robert L. Recchia

Well, when we looked at what we were sending outside, a lot of it are Shared Mail work that we take in from customers, we call ASI work where we actually provide the printing. But we don't have the right format, so we outsource all of that. We did the analysis and looked and said, look, if we take this inside, we can improve margins on this work by x percent, and that was the justification for the press. It has some ancillary benefit as you get into the Neighborhood Targeted business, which continues to be more and more competitive from a placement and a printing standpoint. So this gives us some additional capabilities in terms of format. It's new technology, so it's faster, it's much less expensive to run. And I think it'll -- can keep us competitive on the Neighborhood Targeted side for those types of formats, but it will also give us some improvement on the work that we're sending outside today to third-party printers. How it flows through, I mean, obviously it should enhance the margin on Shared Mail for a small percentage of what we do there. So I'm not sure you're going to see any kind of a major increase or a pop there, but it does give us some increased margin on that business.

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Okay, great. And then what was the contribution to growth in the quarter from that type of work from a revenue standpoint that you had outsourced?

Robert L. Recchia

Yes, I don't know that number off the top of my head. I wouldn't know.

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then last one for me. Rob, I think you mentioned there's some reporting changes around the wrap that you were implementing. Can you just expand on that a little bit?

Robert A. Mason

What we've done there, Dan, is just created better alignment with the Shared Mail product and the Shared Mail sales organization. We just felt like there's an opportunity to enhance focus, and that's what that change has done. We need to improve our execution, and I'm confident with these changes that we can look forward to that.

Operator

[Operator Instructions] Our next question is from the line of Alex Potter [ph] with Manning & Napier Advisors.

Unknown Analyst

I just have a couple. First was that you mentioned that you're kind of focusing on cost cutting to get back on track. Just -- but can you give us any color on what you're trying to do or how you're going to take those costs out or where you're going to take those costs out from?

Robert L. Recchia

Yes, this is Bob. I'm not sure I'd even call it get back on track. We just -- we're trying to rightsize some of these -- the cost structures with some of the businesses that are down and create savings for the back half of the year. So how we do that, we're in the process of doing, so I can't really tell how we do it, but it's done from the top down. We look at every area of the business. We look at service levels, we looked at functions, do we need them, are they still critical. So it's a very thorough review that we do internally. We don't bring in outside people to help us with it and we're good at this. So we're in the process of doing it. Certainly on the next call, I'll give you more color as to what we're doing and what to expect from it. But at this point, it's a little bit premature for me to give you anything.

Unknown Analyst

No, fair enough. And then my last question was on the IDMS segment. You mentioned how Digital is growing rapidly, but then the In-Store is really what crushed it. What -- can you explain of anything that you're planning on doing there to kind of focus and turn that In-Store business around or is it just a matter of the co-op loss?

Robert A. Mason

Yes, I mean, there's 3 things that tend to drive that business. A, it's CPG participation, Alex, because that's really where the revenue stream comes from and that is where the drag is occurring. Because the majority of the tactics within the In-Store business are offer-driven. It creates that enhanced redemption liability. So there's been an overall softness in the In-Store activity. The things we do to mitigate that are twofold: one, expand our retail network, the number of stores that we do business with that hold our tactics; and two, our share of In-Store tactics compared to our competitors and we are actively working at both of those things, as well as talking to clients about doing more nonoffer-related In-Store tactics. In other words, more pure advertising as opposed to coupon offerings. So those are the things we're doing to try to mitigate that drag that's occurring within IDMS and In-Store right now.

Operator

Our next question is from the line of Edward Atorino with Benchmark Company.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

On your outlook for 2Q for this year in Mail, is there an order pattern? It's only April, you still have 2 months to go. Is it just verbal indication that's -- just sort of flesh out why you're thinking things will be a lot better?

Robert A. Mason

Well, there are 3 things that I would tell you. And one, we're starting to see a pattern in April in terms of the production run, so we've got some actuals underneath, that's right. Two, we've got a sales forecast that we developed into a very formalized process and put a fair amount of work and credibility behind. And then three, we've got some predictive tools that use order entry patterns that are bounced off those sales forecast and our current actual production volumes that can help create more confidence and we use all of those things on an ongoing basis, and that's really behind what's driving the confidence in terms of seeing that business uptick in Q2.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Was it sort of product concentrated, does it cut back cereal or dog food or was it just right across the board?

Robert A. Mason

It was volume or -- and it was primarily driven by food service in a single, large national client within food service.

Operator

Our next question is a follow-up from the line of Mark Zgutowicz with Piper Jaffray.

Mark J. Zgutowicz - Piper Jaffray Companies, Research Division

Just hoping you could give us the total pieces Shared Mail number and the packages' volume or growth?

Robert L. Recchia

I got it right here. The packages were just over $900 million and the pieces per package at 9.6.

Operator

And I'm showing no additional questions. Please continue with any closing remarks.

Robert A. Mason

Great. In closing, what I would tell you is this quarter's results were, in large part, defined by continued cyclical challenges within the CPG vertical. It's not new news, and it's something that I believe from the comparable sales standpoint we're going to begin to cycle through in the fourth quarter this year. If you look at our overall business, there are a number of things that give me considerable confidence going forward. First, an economic environment where consumers continue to demand savings and marketers look for proven ways to maximize the performance of their budgets. Second, there's foundational strength in our Shared Mail business, as well as the continued momentum we're seeing within NCH and our Digital businesses. Third, we've got a strong and flexible financial structure, free cash flow profile and a track record of proactively managing cost. And fourth, our sales leadership team is laser-focused on improving our long-term position within the CPG vertical, including increasing our market share, continued efforts toward client offer optimization and enhanced overall execution.

In summary, I remain very confident in our ability to deliver our 2012 guidance. Despite our slow start and nagging CPG headwinds, our core offerings are well positioned, the growth within our Digital business shows tremendous potential and our entire team is aligned and motivated to execute our plans. I'm looking forward to the next 3 quarters of 2012 and creating a foundation for our company's growth in 2013 and beyond.

I want to thank you all for joining us on the call this morning and we look forward to talking to you all soon. Thank you.

Operator

And, ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

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