Summary of Quad's Q2 2026 Earnings Call

1Key Financial Results and Metrics

Net Sales: $578 million for Q2 2026, a 1% increase year-over-year. Year-to-date sales were $1.2 billion, reflecting a 2% decline compared to the same period in 2025 (adjusted for a divestiture).

Adjusted EBITDA: $42 million in Q2 2026, down from $43 million in Q2 2025; adjusted EBITDA margin decreased from 7.6% to 7.3%. Year-to-date adjusted EBITDA was $87 million, slightly down from $89 million in 2025, but the margin improved from 7.4% to 7.5%.

Adjusted Diluted EPS: Increased to $0.24 in Q2 2026 from $0.14 in Q2 2025, and year-to-date EPS rose to $0.48 from $0.34.

Free Cash Flow: Negative $66 million year-to-date, but improved to positive $41 million in Q2 2026, an increase of approximately $7 million from the previous year.

2Strategic Updates and Business Highlights

Growth Initiatives: Quad is expanding its packaging business with a new facility in Salt Lake City, expected to be operational by Q4 2026. This facility aims to enhance logistics efficiency and reduce lead times for clients.

Agency Solutions: Quad's integrated marketing platform is gaining traction, with notable expansions in partnerships, such as with Wakefern Food Corp, which has led to increased media and marketing services.

In-Store Connect: Quad is expanding its in-store media network, with significant growth in partnerships with regional grocers, including Vallarta and a new West Coast client.

Industry Recognition: Quad received accolades for its integrated marketing model, including being named in Ad Age's Agency Report for the seventh consecutive year.

3Forward Guidance and Outlook

2026 Guidance: Quad expects a net sales decline of 1% to 5% for 2026, with Q2 being the lowest sales quarter. Adjusted EBITDA is projected between $175 million and $215 million, with free cash flow expected to be in the range of $40 million to $60 million.

Long-term Outlook: By 2028, Quad anticipates a return to revenue growth, improved adjusted EBITDA margins, and enhanced free cash flow conversion.

4Challenges and Points of Concern

Cost Pressures: Ongoing geopolitical tensions and rising costs, particularly in ink and logistics due to fuel prices, are impacting margins. The USPS has implemented a postage increase of up to 10%, which could further pressure client volumes.

Client Spending Caution: Some clients have reduced spending, particularly in agency solutions, reflecting a cautious approach in a volatile economic environment.

Tax Litigation: Quad faces uncertainty regarding a $17 million tax ruling related to its Mexican subsidiary, which could impact cash flow.

5Notable Q&A Insights

Revenue Growth: Analysts inquired about revenue growth outside of paper and logistics, with Quad noting increases in direct mail and in-store print operations.

Client Sentiment: Management indicated mixed client reactions, with grocery clients facing pressure but still investing in driving traffic.

Packaging Strategy: The new Salt Lake City facility is expected to contribute low double-digit millions in revenue by 2027, driven by environmental shifts away from plastic packaging.

In-Store Connect Expansion: Quad's in-store media network is growing, with plans to increase store counts significantly, although current revenue contributions remain low. Overall, Quad is navigating a challenging macroeconomic landscape while pursuing strategic growth initiatives, particularly in packaging and integrated marketing solutions. The company remains committed to its long-term vision despite facing cost pressures and client spending caution.