QUAD — Quad/Graphics, Inc.

Summary of QUAD Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Net Sales: $581 million, down 4.3% year-over-year (YoY) when excluding the divestiture of European operations.
• Adjusted EBITDA: $45 million, slightly down from $46 million YoY; adjusted EBITDA margin increased from 7.2% to 7.7%.
• Adjusted Diluted Earnings Per Share: $0.25, up 25% from $0.20 YoY.
• Free Cash Flow: Negative $107 million, compared to negative $100 million YoY, attributed to higher inventories and increased capital expenditures.
• Share Repurchases: $1 million in Q1, with a total of 7.6 million shares repurchased since 2022.
• Dividend: Increased by 33% to $0.10 per share.

2. Strategic Updates and Business Highlights:

• Continued investment in marketing solutions, particularly in audience strategy services leveraging Quad's proprietary data stack.
• Strong momentum in integrated solutions across creative, production, and media, particularly in targeted print offerings like direct mail and packaging.
• Implementation of a temporary surcharge on ink due to rising costs from oil and gas price increases.
• Development of innovative solutions such as the At-Home Direct platform, enhancing direct mail efficiency and effectiveness.

3. Forward Guidance and Outlook:

• 2026 Guidance: Net sales expected to decline by 1% to 5% compared to 2025, with adjusted EBITDA projected between $175 million and $215 million.
• Anticipation of a seasonal pattern with the second quarter expected to be the lowest for net sales, followed by increases in the third and fourth quarters.
• Free cash flow projected to be between $40 million and $60 million, with capital expenditures expected to be $55 million to $65 million.
• Long-term outlook remains positive, targeting an inflection point of net sales growth by 2028.

4. Bad News, Challenges, or Points of Concern:

• Declining Metrics: Notable declines in agency solutions sales, down 18% YoY, attributed to a shift from project-based work to agency of record engagements.
• Supply Chain Pressures: Ongoing cost pressures from inflation, geopolitical tensions, and postal rate increases impacting client marketing budgets.
• Delayed Payment: A $6 million note receivable from the divestiture of European operations remains unpaid, increasing net debt unexpectedly.
• Macro Economic Challenges: Persistent inflation and geopolitical tensions could dampen demand and affect marketing spend decisions.

5. Notable Q&A Insights:

• Impact of Macro Pressures: Joel Quadracci noted that while there are pressures from rising costs, clients are not significantly adjusting their marketing plans for the remainder of the year.
• Agency Solutions Outlook: There is optimism about growth in agency solutions, despite recent declines, as the transition to a full-service agency model continues.
• Postal Service Dynamics: There is cautious optimism regarding potential changes in postal rate hikes under new leadership, with ongoing advocacy for a more sustainable postal system.
• Client Engagement: Clients are increasingly adopting optimization programs to mitigate rising postage costs, indicating a proactive response to macroeconomic challenges.

Overall, while QUAD faces several challenges, particularly in agency solutions and macroeconomic pressures, the company remains committed to strategic growth and innovation, with a positive long-term outlook.