R.R. Donnelley & Sons (RRD) Q1 2021 Earnings Call Transcript

R.R. Donnelley & Sons (RRD)
Q1 2021 Earnings Call
Apr 28, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the RRD first-quarter 2021 results conference call. My name is Ashley, and I'll be your operator for today's call. [Operator instructions] Please note that this call is being recorded. I will now turn the call over to Johan Nystedt, RRD's senior vice president of finance.

Johan Nystedt -- Senior Vice President of Finance

Thank you, Ashley, and thank you, everyone, for joining RRD's first-quarter '21 results conference call. Joining me on today's call are Dan Knotts, RRD's president and chief executive officer; and Terry Peterson, our chief financial officer. At the conclusion of today's prepared remarks, Dan, Terry and I will take questions. As a reminder, we have prepared supplemental slides for today's call, which can be found on the investor section of our website at rrd.com.

As we review our results on today's call, I will be advancing the slides if you are connected by webcast. Alternatively, we will periodically reference page numbers from the supplemental slides for those participants who wish to follow along by advancing the slides themselves. The information reviewed during this call is addressed in more detail in our first-quarter press release, a copy of which is posted on the Investors section of our website at rrd.com. This information was also furnished to the SEC in the Form 8-K we filed yesterday.

In addition, we will also refer to forward-looking statements, including comments on our financial outlook and strategy, all of which involve risks and uncertainties, therefore, our actual results could differ materially from our current expectations. For a complete discussion of the factors that could cause our actual results to differ materially, please refer to the cautionary statement, including in our earnings release and the risk factors included in our annual report on Form 10-K, our quarter reports on Form 10-Q and other filings with the SEC. Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP results provide investors with useful supplementary information concerning the company's ongoing operations and is an appropriate way to evaluate the company's performance.

These non-GAAP results are provided for informational purposes only. Any references to non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the Investors section of our website as part of our press release. I will now turn the call over to Dan.

Dan Knotts -- President and Chief Executive Officer

Thanks, Johan. Good morning, everyone. It's great to be with you, and thank you for joining our call today. On behalf of all of us in RRD, I hope that you and your families continue to stay healthy and safe.

On today's call, I'm going to recap our first-quarter results and provide an overview of how we are deploying our extensive capabilities to win new opportunities in what remains a dynamic market. And then before turning the call over to Terry, I will share a couple of recent awards that reinforce the strength of our brand and the high-level performance we are delivering for our clients. Our first-quarter results represented a strong start to the new year reflecting the scale and breadth of our business model, very solid operating performance and our unwavering commitment to successfully navigate through this challenging pandemic environment. I'm especially proud of the RRD team for continuing to perform at a high level for our clients while protecting the health and safety of our global colleagues.

When the COVID-19 crisis emerged a little more than a year ago, we developed an aggressive game plan to strengthen our businesses amid a rapidly changing economic environment and very uncertain outlook. Guided by our strategic priorities, to strengthen our core, drive revenue performance and improve financial flexibility, over the last 12 months, the RRD team has been relentlessly executing our game plan and our results for the last three quarters reflect the positive impact of those actions. Highlighted by continued improvement in our organic sales decline trend, solid adjusted LIFO performance against 2020 strong results and a significant improvement in our operating cash flow versus the prior year, I am pleased with our Q1 operating and financial performance. Further, as aligned with our strategic priority to improve our balance sheet flexibility, we recently announced the extension of the maturity date for our ABL credit facility and the refinancing of a significant portion of our 2024 term loans with new senior secured notes.

Let me provide a little bit more color on our financials for the quarter. Despite the ongoing impact of the pandemic, our first-quarter sales exceeded our expectations. Back in February, we said that we expected net sales in the first quarter to be between $1.09 billion and $1.15 billion, reflecting lower pandemic-driven client demand, the conclusion of the Census project in 2020 and an exceptionally strong prepandemic first quarter of last year. Our net sales in the first quarter were $1.17 billion, which surpassed the high end of our guidance.

Organic sales declined 4.3%, further building on the sequential improvement we reported in the third and fourth quarters of last year and represented our lowest year-over-year decline since the global pandemic emerged. Our improving organic sales trend reflects both strengthening client demand and our commercial team's success in leveraging our industry-leading portfolio of marketing and business communications capabilities to win new clients and expand existing client relationships. Turning to the segments. I'm encouraged by the performance of Business Services, which delivered overall organic sales growth of 2.4%.

Importantly, we are capitalizing on emerging client opportunities and strengthening end markets to achieve organic increases in Packaging, Labels and Supply Chain services, three of our strategic growth product categories. Marketing Solutions reported a 22.5% organic sales decline largely related to clients deferring marketing spend amid an uncertain business environment, as well as last year's Census project, which wrapped up mid-2020. We do expect to see clients increase their marketing spend as economic conditions continue to improve. We delivered $37.4 million in adjusted income from operations, $13 million lower than a year ago, largely due to $11 million of unfavorable foreign exchange, primarily associated with our China operations.

The benefit of our ongoing actions to reduce our cost structure nearly offset the full impact from lower sales, including the Census not repeating and higher incentive compensation reported in the quarter. Through working capital improvements, we reduced the cash used in operating activities by $61 million. And as you've seen with our recent announcements, we continue to rework our debt to give us the flexibility needed to further expand our capabilities across our print and digital channels. I'm also encouraged by how our sales teams are winning new opportunities emerging from the pandemic, as well as those being created as a result of our clients' digital transformation initiatives.

As organizations rethink their approach to their marketing and business communication strategies, we are deploying the full-scale and breadth of our digital and print capabilities to support their evolving communication requirements. For example, we have a robust pipeline of opportunities across healthcare providers, health insurance companies and life sciences organizations. That's being driven by the scale and breadth of our regulated supply chain kitting and fulfillment services capabilities. Recently, the state health department looked to RRD to rapidly create and distribute personal protected equipment kits to home healthcare workers.

We sourced all the materials, including masks, face shields, gloves, protective gowns and safety goggles through our expansive vendor and partner network. We also handled the packaging, print materials, kitting fulfillment reporting and deliver of these time-sensitive PPE kits in just four weeks. Building on our supply chain, packaging and kitting capabilities, we've rolled out a branded solution for health and wellness kits called Care Kits by RRD. Our end-to-end solution encompasses kit ideation, design, item procurement, packaging, fulfillment and communications, both inside and outside the box.

Additionally, as direct-to-consumer sales channels continues to grow in the retail world, we are working with a number of online retailers who are marketing directly to consumers with subscription services that send boxes to customers every month. Subscription boxes and meal kits took off during the pandemic as consumers on lockdown had more time to cook and try new hobbies. Now brick-and-mortar retailers, restaurants and consumer packaged goods companies are investing in home subscription services to support and sustain the growing direct-to-consumer trend and RRD is well-positioned to support our clients' needs in this area. The global pandemic has also brought about a number of changes in consumer behaviors with one of the most significant being a shift to e-commerce.

As product sales shift online, we are innovating to further expand our creative and technical capabilities to help brands and retailers create rich user experiences and accelerate their go-to-market speed. Last month, we announced a suite of 3D solutions that features modeling, animation, rendering and interactive experiences to enable simulations and digital prototyping. One use case that's gaining traction is simulating the in-store shopping experience to create highly engaging and immersive experiences for online shoppers. As the spatial web evolves, we are positioning RRD to support our clients in this emerging area through our suite of 3D solutions.

Earning the right to grow with our existing clients through service quality and operational excellence is paramount to driving our revenue performance. Our business growth with MANN+HUMMEL, a leading expert in filtration, highlights our powerful Packaging Solutions' service and operational performance. RRD manufacturing -- manufactures folding cartons for MANN+HUMMEL, and is one of their highest rating folding carton vendors in their supply chain. Based on our performance in geographic reach, MANN+HUMMEL has selected RRD to be their folding carton supplier for their Mexico operations that we will support through our facility in Reynosa, Mexico.

A large nonprofit organization also recently awarded RRD a three-year contract for acquisition campaign services, including print management, direct mail, creative design, campaign production and fulfillment. As part of this contract, RRD maintains an on-site presence to enable better collaboration with key stakeholders and ensure smooth coordination and execution. For each campaign, we manage hundreds of orders that require the proper production and assembly of multiple components to meet their mailing requirements. Over this long-standing relationship, we are delivering cost-effective solutions while providing this client with maximum marketing flexibility.

Before I turn the call over to Terry, I'd like to highlight some recent notable recognition that reaffirms the strength of our marketing capabilities and operational performance. At the beginning of the year, Forrester Research, a leading independent research firm, ranked RRD as a strong performer among the top customer database and engagement agencies. Data management and analytics are critical for customer experience marketers, and Forrester found that advanced analytics and reporting are where RRD shines. We also received higher marks for collaboration than any agency in the study.

The recognition in The Forrester Wave Q1 2021 Report is another feather in the cap of our Marketing Solutions team reflecting our best-in-class approach to data, creative services and marketing technology. We're also excited to announce that our exceptional packaging work with the Pokemon Trading Card Game's Zacian and Zamazenta box has garnered some important industry recognition. Our Packaging Solutions team won three best of category awards, including the Sun Chemical Best Packaging Award from The Printing Industries of the Carolinas. The PICA Awards competition is one of the largest printing contests in the nation.

And the Pokemon TCG: Premium collector's box includes special gold versions of the two characters, as well as dice, metal coins and booster packs. Finally, our global outsourcing and creative team was recently recognized by the Business Continuity Institute, a global organization of business recovery experts. The team received two regional awards in India and South Asia for the Most Effective Recovery and Continuity and Resilience Team. Looking ahead, we're seeing solid progress in vaccination rates, consumer confidence and economic conditions, but we also know that challenges remain on the path to a full economic recovery.

As such, the RRD team continues to be intensely focused on executing our strategic priorities, and we remain confident that we are building a stronger RRD for the future. With that, I'll turn the call over to Terry.

Terry Peterson -- Chief Financial Officer

Thank you, Dan. Our start to 2021 was strong across the board despite a second consecutive quarter of significant foreign exchange headwinds. Our sales and adjusted income from operations came in at the top end of our earlier estimates, with the organic sales decline rate improving sequentially for the third consecutive quarter. Adjusted income from operations was solid despite unfavorable foreign exchange, which provided an $11 million headwind.

As a reminder, the first quarter of 2020 comparison was the strongest first-quarter adjusted LIFO we have ever delivered since the 2016 spin as most of our global operations had not yet been impacted by the pandemic. Recent actions to reduce our cost structure continue to mostly offset the impact of the pandemic and last year's Census. We also reported a $61 million improvement in operating cash flow versus the first quarter of 2020, due primarily to working capital improvements. In addition, total debt remained unchanged from year-end 2020.

This is the first time since our 2016 spin where we have avoided additional borrowings at the end of first quarter as compared to the previous year-end. Lastly, we made significant progress to further improve our balance sheet flexibility earlier this month when we completed an amendment to our ABL credit facility, which extended the maturity date to 2026. We also priced $400 million of new 6.125% senior secured notes, which we closed as planned earlier this morning. Most of those proceeds were used to repay a portion of our outstanding term loans, which effectively extends their maturity date to late 2026.

I'll talk more about these transactions later in my prepared remarks, but first, let me get started with a review of our first-quarter performance. Turning to Slide 8. Net sales were down 3.6% in the first quarter, which includes an increase of $14.5 million due to foreign exchange and a decrease of $6.5 million from the previous closure of our operations in Chile. On an organic basis, we reported a decline in net sales of 4.3%, primarily related to the impact of the ongoing pandemic and last year's Census project, which wrapped up mid-2020.

Our organic sales decline represented our lowest year-over-year decline rate since the pandemic affected our global operations. For the segments, Business Services reported another strong quarter with organic growth of 2.4%. We delivered organic growth in several of our strategic product categories, including Packaging, Labels and Supply Chain Management. While many of our global operations continue to be negatively impacted by the ongoing pandemic, our net sales increase in China more than offset these declines since the operations in China were closed for approximately one month in 2020 due to the pandemic.

The recovery from last year's closure primarily benefited our Packaging and Commercial Print product categories in the year-over-year comparison. Marketing Solutions reported an organic decline of 22.5% as a result of the pandemic ongoing impact on our clients' marketing-related spend and the completion of the Census project in mid-2020. On Slide 9, adjusted income from operations of $37.4 million was $13 million lower versus the first quarter of 2020, and the corresponding operating margin decreased from 4.1% in 2020 to 3.2% this quarter. Results for the 2021 quarter were negatively impacted by approximately $11 million due to foreign exchange, which is mostly associated with our operations in China.

Proactive actions to reduce the company's cost structure nearly offset the impact of lower sales and higher variable incentive compensation expense. Adjusted SG&A expense of $152.9 million in the first quarter is down $5.7 million or 3.6% and from the prior year, reflecting our ongoing efforts to lower our cost to serve. Adjusted earnings per share from continuing operations was $0.08 in the first quarter, as compared to $0.27 reported in the prior-year quarter. The reduction was attributable to lower adjusted income from operations and unfavorable income taxes.

Our adjusted effective tax rate was 47% in the quarter versus 3.9% in the prior-year quarter, which included benefit from the CARES Act. Our GAAP results for the quarter included pre-tax restructuring, impairment and other charges of $5.8 million, which were $5.4 million lower than last year due to lower employee termination charges associated with the 2020 closure of the operations in Chile. Turning now to the balance sheet and cash flow on Slide 10. As of March 31, 2021, we had total cash on hand of $262 million, and total debt outstanding of $1.5 billion, which remained unchanged from the prior year-end.

Availability on the credit facility was $512 million at the end of the quarter and total available liquidity including cash on hand was $774 million, which was up $644 million at March 31, 2020. The gross leverage ratio of 3.9 times at March 31, 2021, improved from 4.8 times at March 31, 2020, while net leverage ratio of 3.2 times improved from 3.8 times a year ago. First quarter's net cash used by operating activities was $18.9 million, which was an improvement of $60.7 million as compared to the 2020 quarter. The significant year-over-year improvement was primarily driven by favorable working capital, partially offset by lower earnings and LSC bankruptcy-related payments.

Capital expenditures of $13 million were $4.7 million lower compared to the 2020 quarter. Slide 11 summarizes several key actions we have taken to improve our balance sheet during the year. Collectively, our efforts have yielded a reduction in total debt outstanding of nearly $900 million since 2016, while significantly improving both our gross and net leverage. In regards to the pending sale of our printing facility in Shenzhen, China, we continue to wait for the required government approvals so we can complete this sale.

Once the transaction closes, we expect to record a significant gain on the sale. To date, we have collected $123.3 million in deposits, and we are scheduled to collect one additional deposit of approximately $50 million in 2021. Our contract with the buyer requires them to pay the final installment in 2022, even if the government's final approval is delayed. If the buyer fails to comply with terms of the agreement or terminates for any reason, RRD is entitled to retain 30% of the purchase price in liquidated damages.

Slide 12 shows the various maturities of our outstanding debt as of December 31, 2020, ended March 31, in addition to the pro forma maturities at March after giving effect to the April ABL credit facility amendment and the closing of our new senior secured notes and the use of those proceeds. Completing these two transactions represents another significant step forward in our plan to improve our balance sheet flexibility to better support our strategic initiatives. Our expectations for full year and second quarter of 2021 are reflected on Slide 13. As the COVID-19 infection rates remain elevated in many parts of the world, we expect the path forward to remain uncertain and volatile.

As such, we are unable to furnish our typical guidance for 2021. However, I do have the following observations and guidance for 2021. Net sales for the year are expected to be flat to up low single digits, taking into consideration reductions from the Census project and one-time pandemic related projects in the last half of 2020, offset by a modest economic recovery as the year progresses. Net sales in the second quarter are expected to be between $1.1 billion and $1.15 billion, up 88% to 13% organically, reflecting improvement from the pandemic, partially offset by last year's Census project.

Excluding the unpredictable impact from changes in foreign exchange rates and the possible impact from future inflation and labor availability, non-GAAP adjusted income from operations and the resulting operating margin are expected to be flat to up slightly from the prior year as the company continues to benefit from aggressive cost-reduction actions. Non-GAAP adjusted income from operations for the second quarter is expected to be up from the prior year, reflecting an increase in volume and continued cost reduction efforts partially offset by unfavorable foreign exchange of approximately $10 million, assuming the exchange rates do not change from the current rates. Depreciation expense is expected to be approximately $135 million for the year. Interest expense is expected to range from $120 million to $125 million, excluding GAAP-only charges of approximately $9 million to $10 million associated with terminating certain interest rate swap agreements in connection with the April 2021 senior secured note issuance and term loan prepayment.

Interest expense is expected to reflect benefits from lower average borrowings and a lower average interest rate in 2021 as compared to 2020. The full-year non-GAAP effective tax rate is expected to be approximately 35%, which is higher than reported in 2020 as nonrecurring benefits were reflected in 2020, and the benefit from the CARES Act has expired. Operating cash flow is expected to be slightly lower than the prior year, reflecting a reduction due to the repayment of half of the employer portion of payroll taxes deferred in 2020 and payments to settle LSC bankruptcy-related obligations. Capital expenditures are expected to be approximately $80 million for the year.

And now, operator, let's open up the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] And our first question comes from Charles Strauzer with CJS Securities.

Charles Strauzer -- CJS Securities -- Analyst

Hi. Good morning. Just to sum up with the guidance. And Terry, maybe this is for you, but talking about the Q2 adjusted LIFO.

Any additional color there as to how much of an increase you see -- you may expect to see year over year there?

Terry Peterson -- Chief Financial Officer

Yeah. I mean it's -- again, there's still some uncertainty with how the quarter will perform on a LIFO basis. But I would generally say that if the increase was $10 million or less. That's probably reasonably conservative.

And if it's over $10 million, that's probably in the category of achievable, but more on the aggressive side. So that's probably the best color that I can provide on how we see LIFO for next quarter.

Charles Strauzer -- CJS Securities -- Analyst

Great. That's helpful. Thank you. And then just talking about the China facility that's still pending sale.

Any thoughts there as to give you any trepidation that won't close? Or is that still proceeding as you kind of expected to?

Terry Peterson -- Chief Financial Officer

No. That still continues. There's no change in kind of our viewpoint in time or viewpoint on that going through or not. So we still feel very optimistic that that will close.

All the work with the Chinese government, though, that is in the hands of the developer that is buying the property from us. Those communications are -- and all of that work is being done by them. But we do get regular updates from them. They've continued to make all their deposits on time with us, and we have no reason to believe that the upcoming deposit for about $50 million later this year, we have no reason to believe that that won't come in on time.

Charles Strauzer -- CJS Securities -- Analyst

Great. Great. And then lastly, on the housekeeping front. Tell us the -- what's remaining payment-wise there? If you could kind of give us a sense of that?

Terry Peterson -- Chief Financial Officer

So in first quarter, we had roughly a little over $9 million of bankruptcy payments there. That was largely to settle the SERP liability for them as part of the bankruptcy being accepted by the courts. We also had a payment as a result of that settlement of about $2.5 million, again, included in the $9 million, but that was for the MEP plan participants. And then separately, we have negotiated settlements with one of the three MEP plans, and we negotiated a discounted settlement for that.

So that will result in a payment of just a little over $9 million again in the second quarter. So that is a discounted settlement as it's an attractive offer, and we decided to fund that in order to alleviate that liability. We did take a -- yes, there's a $1.7 million gain that's reflected in the non-GAAP results this quarter for that, but the funding of that will happen in April or second quarter here. Besides that, we have two remaining MEP plans with the LSC.

And we'll have some level of funding for that. It's a few million dollars a year for those, assuming that we don't execute any more settlements for those remaining two plans. And then there is the -- we have a small amount of funding related to one lease that we had to take over as part of the guarantees that we had from the spin time, but it was a lease that was rejected as part of the bankruptcy process. So one lease there that will have a little bit of funding just to terminate that, there's -- that is -- I believe we're past the lease term.

It's just a matter of returning the facility to its previous years.

Charles Strauzer -- CJS Securities -- Analyst

Great. Thank you for that. And Dan, maybe this is one for you. But on the Marketing Solutions side, obviously, that's been the laggard like given the pandemic hitting that the hardest.

What are you hearing from clients about any kind of a return to spending post-COVID? Are you expecting to see some of that ramp in the back half of the year, especially with -- when you lapse the Census work?

Dan Knotts -- President and Chief Executive Officer

Yeah, Charlie, I think Marketing Solutions, unlike some of the areas we've talked about within Business Services, it continues to lag, that recovery is continuing to extend out. I think the good news on that in the meantime, we are -- as I mentioned in my previous comments that we are pursuing the areas that are recovering faster, that we're well-positioned and leveraging our and flexing our platform to be able to go do that in the interim period as the Marketing Solutions continues to recover. But I think two things are important there. And yes, the Census is obviously impacting the size of those numbers because we're not doing it this year versus the last year.

But the first one is, as you look at consistency of economic recovery and you look at markers looking for return on their investment, so having a sustained -- consistent, sustained economic recovery, we do believe, based on feedback from clients that as that occurs and they get comfortable -- more comfortable with that relative to unemployment, consumer confidence, consumer spending, etc., which all are trending in the right direction, that they want to be back in the mail. And we do expect to see that marketing spend increase as the year unfolds, assuming that the economic recovery sustains in a consistent manner, and we don't take steps backwards. So that recovery is lagging, I think the economic recovery, but we do expect that to come forward. And I think the second part of that is dependent upon industry.

So it's going to happen in a different pace depending upon the recovery of the industry, right? So as we think about airlines and when we think about hotels, very different than some of the retailers, strategies, etc., not for profits, so I think it's paramount. It's proven. It works. They're in a quest for driving their revenue performance, top-line performance as well.

And I think as the economy continues to recover, we recover, we will see a recovery in Marketing Solutions.

Charles Strauzer -- CJS Securities -- Analyst

And then when you look at the other side of the business that -- especially the Packaging has been very well. And are you seeing a pickup in kind of repeat business or recurring business that could carry forward from some of the kind of one-time stuff that was related to COVID?

Dan Knotts -- President and Chief Executive Officer

Yeah. We -- I mean the -- on the Supply Chain side, in particular, but the -- that -- the good news about that is it connects from Supply Chain to Packaging and Labels opportunities as well with a number of those clients. So the short answer to that, Charlie, is yes. We are having ongoing conversations with clients about that.

And exploring additional leveraging that platform and the capabilities of that platform and pursuing new opportunities, but we are having recurring conversations and do expect to see some degree of recurring revenue. As Terry talked about, we had a lot of one-time items that happened in -- I shouldn't say a lot. A number of several one-time large -- very large projects that happened in the Q4 time frame of last year. But as we have conversations, the current conversations we are having are progressing and is talking about recurring business.

Charles Strauzer -- CJS Securities -- Analyst

Great. Thank you very much for taking my questions.

Dan Knotts -- President and Chief Executive Officer

Yup. Thanks, Charlie.

Operator

Your next question comes from Bill Mastoris with Baird.

Bill Mastoris -- Robert W. Baird -- Analyst

Hello. How are you guys doing? So the first question I have is for Terry. And with the placement of the six and one-eights, and is that going to be really the last of really your debt issuances until maybe we approach 2024? Are we done for a while?

Terry Peterson -- Chief Financial Officer

We certainly -- the need to do something else at this point is significantly down, obviously, with the recent transactions. I can never say never because in all honesty, I mean the -- I probably was a year ahead of myself in terms of -- with this recent issuance, but it's really just driven by the market conditions that today was just very, very attractive, and it was an opportunistic placement for us. So I can never say never. But certainly, the need to do anything in advance of the late 2026 maturities, it's down pretty low right now.

But again, I'll never say never.

Bill Mastoris -- Robert W. Baird -- Analyst

No. Completely understand. And we're very light to -- actually, no debt maturities for the balance of this year and fairly light debt maturities for 2022 and 2023. Can we safely assume that this is going to be really handled with free cash flow or proceeds from asset sales or kind of as a last resort, maybe the ABL? Is that a safe assumption?

Terry Peterson -- Chief Financial Officer

Yeah. That is. That is. I mean those are obviously very small maturities that are coming up.

The April 2021 maturity is behind us now. So yes, I mean we have really nothing until the February of '22 has come due. And again, each of these upcoming maturities, they're all kind of in the small enough category to just be dealt with, with existing cash flow proceeds from asset sales and then kind of the last choice is availability on the credit facility. So you've got that nailed.

Bill Mastoris -- Robert W. Baird -- Analyst

And so if you do have excess cash, will you opportunistically maybe go out into the marketplace and repurchase debt maybe to kind of, if you will, further ease some of the later maturities?

Terry Peterson -- Chief Financial Officer

I wouldn't go past the 2024s because I still have a stub left on the term loans to take care of. If I had more cash or extra cash above that, my first go to would be to do a further repayment -- a prepayment on the term loans. Those are the next medium-sized maturity that's coming up here and it's January 2024, so I would chip away at that. And I'm kind of assuming that it -- I won't be able to get anything notable in the market at a reasonable price on the '23s or the '22s.

There are just not a lot of liquidity with those. So again, assuming that I can't get anything there at a price that I view as reasonable, we would look to the term loans to prepay that, which does not require any additional cost for prepaying that at par.

Bill Mastoris -- Robert W. Baird -- Analyst

OK. Great. Next question I have is for Dan, and that has to do with expanding digital services to capture a larger portion of your clients' marketing spend. I mean are these digital services being expanded with your in-house capabilities? Or are they being done in partnerships with outside third parties? How is that evolving?

Dan Knotts -- President and Chief Executive Officer

Yeah. The answer to that, Bill, is both. We are continuing to expand our own in-house capabilities. We mentioned previously, innovation and new offerings and -- that we're continuing to develop.

It's in a very concentrated area. And I think what's important about that to reinforce is that the digital, when we talk about the ability to expand digital as being complementary to print to capture the larger portion of marketing spend as being able to differentiate ourselves and having that combination of the digital and the physical to take on more of that print spend, but it's in a targeted area within the digital world because digital is obviously a very broad definition. The -- but the second part of that is we are absolutely working with the -- and continue to explore additional opportunities to work with third parties. Technology is changing very, very rapidly.

Investments are following regularly on that as -- and required as technology changes rapidly. So using partnerships to stay up with that a bit in those key areas that we think are relevant for us to partner and build on or expand our digital capabilities to support our current print channel offering. So the short answer to that is it's a combination of both, internal investments, expansion, as well as third-party relationships.

Bill Mastoris -- Robert W. Baird -- Analyst

Thank you very much. I appreciate the color.

Dan Knotts -- President and Chief Executive Officer

Thanks, Bill.

Operator

[Operator instructions] That concludes our question-and-answer session. I will now turn the call back over to Dan Knotts.

Dan Knotts -- President and Chief Executive Officer

Great. Thank you, and thank you, everyone, for joining us on the call today. A summary of our key takeaways from the call can be found on Slide 15 of the presentation. In closing, I'd like to say thank you to all of our RRD employees around the world for your ongoing dedication to serving and supporting our clients and our company.

I'm grateful for your focus, your energy and your commitment as we continue to learn and evolve in today's challenging climate. Please know your efforts are greatly appreciated. Thank you, everyone, and have a great day.

Johan Nystedt -- Senior Vice President of Finance

Thanks, Dan. As a reminder, information to access an audio replay of RRD's first-quarter 2021 results call can be found on the Investors section of our website at rrd.com. Thank you for joining us, and that concludes the RRD's first-quarter 2021 earnings call.

Operator

[Operator signoff]

Duration: 40 minutes

Call participants:

Johan Nystedt -- Senior Vice President of Finance

Dan Knotts -- President and Chief Executive Officer

Terry Peterson -- Chief Financial Officer

Charles Strauzer -- CJS Securities -- Analyst

Bill Mastoris -- Robert W. Baird -- Analyst

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