Quad Reports First Quarter 2024 Results Reaffirms full-year 2024 financial guidance, including 1.8x Net Debt Leverage by year end Exhibit 99.1 FOR IMMEDIATE RELEASE SUSSEX, WI, April 30, 2024 — Quad/Graphics, Inc. (NYSE: QUAD) ("Quad" or the "Company"), a global marketing experience company, today reported results for the first quarter ended March 31, 2024. Recent Highlights Joel Quadracci, Chairman, President and CEO of Quad, said: "Our first quarter results were in-line with our expectations, and we remai ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-34806 QUAD/GRAPHICS, INC. (Exact name of registrant as specified in its charter) Wisconsin 39-1152983 (State or other jurisdiction of incorporat ...

Financial Data and Key Metrics Changes - Net sales for Q4 2023 were $788 million, down 11% from Q4 2022, and full-year net sales were $3 billion, down 8% from 2022, primarily due to lower print, paper, and logistics sales, as well as the divestiture of Argentina print operations [12][14] - Adjusted EBITDA for Q4 2023 was $66 million, compared to $79 million in Q4 2022, with an adjusted EBITDA margin decline from 8.9% to 8.3% [13] - Full-year adjusted EBITDA was $234 million in 2023, down from $252 million in 2022, but the adjusted EBITDA margin improved from 7.8% to 7.9% [13] - Adjusted diluted earnings per share were $0.23 in Q4 2023, down from $0.41 in Q4 2022, and for the full year, it was $0.52 compared to $0.89 in 2022 [14] - Free cash flow was $77 million in 2023, down from $94 million in 2022, primarily due to increased capital expenditures [15] Business Line Data and Key Metrics Changes - Integrated solutions and targeted print now represent 63% of net sales, up from 54% five years ago, indicating a shift towards higher value offerings [39] - Large-scale print continues to decline, particularly in retail inserts, which have seen double-digit declines for many years [58] Market Data and Key Metrics Changes - The company expects annual net sales in 2024 to decline by 5% to 9%, influenced by organic declines in certain product lines and the end of a relationship with a large grocery client, which represented approximately 3% of 2023 net sales [21][22] - The U.S. Postal Service's significant postal rate increases have negatively impacted client budgets and mail volumes, leading to a decline in direct mail and catalog sales [61][66] Company Strategy and Development Direction - The company is focusing on becoming a marketing experience (MX) company, emphasizing integrated service excellence, market penetration in key verticals, and leveraging its unique company culture [38] - A strategic investment in retail media networks through the acquisition of DART Innovation aims to enhance in-store digital media solutions and improve the consumer purchasing journey [48][102] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in addressing business impacts from economic uncertainty and postal rate increases, while also managing costs effectively [35][60] - The company anticipates that the first quarter of 2024 will see the lowest adjusted EBITDA due to restructuring actions, with improvements expected in the second half of the year [26] Other Important Information - The company has reinstated a quarterly dividend of $0.05 per share, reflecting a commitment to returning capital to shareholders [17][104] - A multiyear debt reduction strategy has successfully reduced net debt by $564 million, achieving a leverage ratio of 2.0 times by the end of 2023 [18][29] Q&A Session Summary Question: Sales outlook for 2024 and expected declines in product categories - Management noted expected organic declines in large-scale print, particularly retail inserts, due to economic uncertainty and significant postal rate increases [31][60] Question: Impact of postal rate increases on business - Management indicated that the postal service's strategy of significant rate hikes is unsustainable and has led to reduced mail volumes, affecting client budgets [66][71] Question: Loss of a grocery client and future plans - Management acknowledged the loss of a longtime grocery client but emphasized the need to be compensated fairly for services provided and expressed confidence in backfilling the revenue loss over time [77][78] Question: Demand for agency solutions and business pipeline - Management reported a strong business pipeline for agency solutions, driven by a recent brand relaunch and increased access to new clients [80] Question: Reinstatement of the dividend and future plans - Management discussed the decision to reinstate the dividend as a sustainable starting point, with a focus on maintaining a strong balance sheet and continuing debt reduction [86][104]

4th Quarter 2023 Earnings Call Statements The factors that could cause actual results to materially differ include, among others: the impact of decreasing demand for printing services and significant overcapacity in a highly competitive environment creates downward pricing pressures and potential under-utilization of assets; the impact of increased business complexity as a result of the Company's transformation to a marketing experience company; the impact of changes in postal rates, service levels or regul ...

Financial Performance - Net Sales for Q4 2023 were $788 million, an 11% decrease compared to Q4 2022, primarily due to lower paper, print, and logistics sales, as well as the divestiture of the Argentina print operations[12] - Net Loss for Q4 2023 was $22 million, compared to a Net Loss of $9 million in Q4 2022, driven by lower sales, increased interest expense, and lower pension income[12] - Adjusted EBITDA for Q4 2023 was $66 million, down from $79 million in Q4 2022, due to lower sales and pension income, partially offset by improved manufacturing productivity[12] - Full-year 2023 Net Sales were $3.0 billion, an 8% decline from 2022, primarily due to lower print, paper, and logistics sales, and the divestiture of Argentina operations[14] - Full-year 2023 Net Loss was $55 million, compared to Net Earnings of $9 million in 2022, driven by lower sales, higher restructuring charges, and increased interest expense[14] - Adjusted EBITDA for 2023 was $234 million, down from $252 million in 2022, primarily due to lower pension income and sales, partially offset by cost savings[14] - Net sales for Q4 2023 decreased to $787.9 million from $885.2 million in Q4 2022, representing a decline of approximately 11%[29] - Full-year net sales for 2023 were $2,957.7 million, down from $3,217.0 million in 2022, a decrease of about 8.1%[31] - Net loss for Q4 2023 was $22.0 million, compared to a net loss of $8.7 million in Q4 2022[29] - Full-year net loss for 2023 was $55.4 million, compared to net earnings of $9.3 million in 2022[31] - Net earnings (loss) for 2023 was $(55.4) million, compared to $9.3 million in 2022, indicating a significant decline in profitability[35] - Adjusted EBITDA for 2023 was $233.7 million, down from $252.2 million in 2022, with Adjusted EBITDA Margin slightly increasing to 7.9% from 7.8%[38] - Adjusted net earnings (non-GAAP) for 2023 were $26.2 million, compared to $46.9 million in 2022[50] - Adjusted diluted earnings per share (non-GAAP) for 2023 was $0.52, down from $0.89 in 2022[50] - Earnings (loss) before income taxes were $(42.6) million in 2023, compared to $17.7 million in 2022[50] - Income tax expense at 25% normalized tax rate was $8.7 million in 2023, down from $15.6 million in 2022[50] Debt and Liquidity - Net Debt decreased by $75 million to $470 million at the end of 2023, with a Debt Leverage Ratio of 2.0x, down from 2.2x in 2022[14] - Cash and cash equivalents increased to $52.9 million as of December 31, 2023, up from $25.2 million at the end of 2022[33] - Total debt decreased to $362.5 million in 2023 from $506.7 million in 2022, reflecting a reduction in long-term debt[33] - Net Debt decreased to $469.8 million in 2023 from $545.0 million in 2022, with the Debt Leverage Ratio improving to 2.01x from 2.16x[44] - Net cash provided by operating activities decreased to $147.6 million in 2023 from $154.6 million in 2022[35] - Free Cash Flow for 2023 was $76.8 million, a decrease from $94.3 million in 2022[39] Cost Management and Restructuring - The company anticipates $60 million in cost savings from plant capacity and labor reduction initiatives in response to external headwinds[8] - Restructuring, impairment, and transaction-related charges for 2023 totaled $77.5 million, up from $44.8 million in 2022, primarily due to higher employee termination and impairment charges[38] - Restructuring, impairment, and transaction-related charges increased to $77.5 million in 2023 from $44.8 million in 2022[50] Guidance and Future Outlook - 2024 guidance includes a projected 5% to 9% decline in Annual Net Sales and Adjusted EBITDA of $205 million to $245 million, with a target Debt Leverage Ratio of approximately 1.8x[15] - The company reinstated a quarterly dividend of $0.05 per share and expects to continue opportunistic share repurchases[8] Operational Metrics - The company employs approximately 13,000 people across 14 countries and serves around 2,700 clients[25] - Quad is ranked as the 14th largest agency company in the U.S. by Ad Age (2023) and the second-largest commercial printer in North America[25] - The company highlights the impact of macroeconomic conditions, including inflation and high interest rates, on its business operations and financial performance[20] Non-GAAP Financial Measures - Adjusted EBITDA margin for 2023 was not explicitly stated, but the company emphasizes its importance as a key profitability metric[22][23] - The company uses non-GAAP financial measures such as EBITDA, Adjusted EBITDA, and Free Cash Flow to assess profitability and liquidity[51] Capital Expenditures and Depreciation - Depreciation and amortization expenses decreased to $128.8 million in 2023 from $141.3 million in 2022[35] - Purchases of property, plant, and equipment increased to $70.8 million in 2023 from $60.3 million in 2022, indicating higher capital expenditures[35] Shareholder Returns - Diluted weighted average number of common shares outstanding (non-GAAP) decreased to 50.7 million in 2023 from 52.5 million in 2022[50] - Basic weighted average number of common shares outstanding decreased to 48.4 million in 2023 from 50.7 million in 2022[50]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-34806 Quad/Graphics, Inc. (Exact name of registrant as specified in its charter) Wisconsin 39-1152983 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ...

Financial Data and Key Metrics Changes - Net sales for Q3 2023 were $700 million, a 16% decline compared to Q3 2022, with year-to-date net sales at $2.2 billion, down 7% from 2022 [31] - Adjusted EBITDA for Q3 2023 was $57 million, down from $69 million in Q3 2022, with an adjusted EBITDA margin slightly declining to 8.2% [33] - Adjusted diluted earnings per share were $0.11 in Q3 2023, compared to $0.32 in Q3 2022, with year-to-date adjusted diluted earnings per share at $0.28, down from $0.49 in 2022 [34] - Free cash flow was negative $18 million in the first nine months of 2023, but improved by $61 million compared to the same period in 2022, with $27 million generated in Q3 2023 [34][35] - Net debt increased by $39 million to $584 million as of September 30, 2023, with a debt leverage ratio of 2.36x [36] Business Line Data and Key Metrics Changes - Direct mail revenue decreased from 14% to 11% of total revenues year-to-date, but growth is expected in future years [32] - In-store signage product offerings continued to show high revenue growth, contributing positively to the overall revenue mix [32] Market Data and Key Metrics Changes - The company experienced industry-wide print volume reductions due to economic uncertainty, postal rate increases, and rising interest rates affecting specific clients [10][31] - The company noted a significant impact on categories sensitive to rising interest rates, such as financial services and direct mail [10] Company Strategy and Development Direction - The company is evolving into a marketing experience company, integrating various marketing resources to enhance client service [12][18] - The appointment of new board members and executives aims to strengthen the company's strategic leadership and drive revenue growth [14][16] - The company is focused on reducing debt and maintaining a strong balance sheet while investing in growth opportunities [42][43] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing economic uncertainty and its impact on print volumes, but expressed confidence in managing these challenges through disciplined cost management [10][11] - The company expects a seasonal ramp-up in sales for Q4, despite a lower base due to previous declines [61] - Management remains optimistic about future growth opportunities, particularly in integrated marketing solutions [70] Other Important Information - The company has made progress on its ESG commitments, focusing on diversity, sustainable resource consumption, and employee wellness [28] - The company plans to continue investing in automation initiatives to enhance operational efficiency [35] Q&A Session Summary Question: Flexibility of the business model and maintaining profitability - Management highlighted the ability to adjust costs and improve productivity as key factors in maintaining profitability despite lower sales outlook [46][49] Question: Changes in sales outlook and product category trends - Management noted economic softness as a primary factor affecting sales, with specific declines in large-scale print and targeted print categories [53][54] Question: Impact of postage rate increases on client behavior - Management indicated that clients typically adjust their strategies in response to rapid cost increases, focusing on data-driven marketing approaches [72][75] Question: International market performance - Management reported softness in Europe but noted strong growth in Mexico, with new product lines and customer acquisitions [79]

Quad/Graphics, Inc. (QUAD) Q2 2023 Results Conference Call August 2, 2023 10:00 AM ET Company Participants Katie Krebsbach - IR Manager Joel Quadracci - Chairman, President and CEO Tony Staniak - CFO Conference Call Participants Kevin Steinke - Barrington Research Associates Operator Good morning, and welcome to Quad's second quarter conference call. [Operator Instructions] A slide presentation accompanies today's webcast and participants are invited to follow along, advancing the slides themselves. To acce ...

PART I — FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and related notes for the company [ITEM 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Quad/Graphics, Inc. for the three and six months ended June 30, 2023 and 2022, including statements of operations, comprehensive income (loss), balance sheets, cash flows, and shareholders' equity, along with detailed notes explaining the basis of presentation, revenue recognition, restructuring, debt, income taxes, financial instruments, employee retirement plans, earnings per share, equity incentive programs, shareholders' equity, accumulated other comprehensive loss, and segment information [Condensed Consolidated Statements of Operations (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) This statement provides a detailed breakdown of revenues, costs, and net earnings or losses over specific periods **Three Months Ended June 30, 2023 vs. 2022 (in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $703.1 | $757.7 | $(54.6) | (7.2)% | | Cost of Sales | $569.8 | $618.1 | $(48.3) | (7.8)% | | Operating Income | $8.4 | $14.2 | $(5.8) | (40.8)% | | Net Earnings (Loss) | $(6.1) | $5.3 | $(11.4) | (215.1)% | | Basic and Diluted EPS | $(0.12) | $0.10 | $(0.22) | (220.0)% | **Six Months Ended June 30, 2023 vs. 2022 (in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $1,469.6 | $1,501.9 | $(32.3) | (2.2)% | | Cost of Sales | $1,187.3 | $1,237.7 | $(50.4) | (4.1)% | | Operating Income | $8.5 | $19.6 | $(11.1) | (56.6)% | | Net Earnings (Loss) | $(30.7) | $4.3 | $(35.0) | (814.0)% | | Basic and Diluted EPS | $(0.62) | $0.08 | $(0.70) | (875.0)% | [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) This statement presents net earnings or loss and other comprehensive income or loss components for the period **Comprehensive Income (Loss) (in millions):** | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30, | $1.5 | $(0.1) | | Six Months Ended June 30, | $(15.9) | $0.8 | - For the three months ended June 30, 2023, comprehensive income was **$1.5 million**, a significant improvement from a loss of $0.1 million in the prior year, primarily driven by positive translation adjustments[13](index=13&type=chunk) - For the six months ended June 30, 2023, comprehensive loss was **$15.9 million**, compared to income of $0.8 million in the prior year, despite positive translation adjustments, indicating other factors contributing to the overall loss[13](index=13&type=chunk) [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific dates **Condensed Consolidated Balance Sheets (in millions):** | Asset/Liability | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | $11.3 | $25.2 | $(13.9) | (55.2)% | | Total Current Assets | $574.8 | $704.5 | $(129.7) | (18.4)% | | Total Assets | $1,537.3 | $1,701.8 | $(164.5) | (9.7)% | | Total Current Liabilities | $715.2 | $795.4 | $(80.2) | (10.1)% | | Long-Term Debt | $451.6 | $506.7 | $(55.1) | (10.9)% | | Total Liabilities | $1,383.7 | $1,528.9 | $(145.2) | (9.5)% | | Total Shareholders' Equity | $153.6 | $172.9 | $(19.3) | (11.2)% | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This statement details the cash inflows and outflows from operating, investing, and financing activities **Six Months Ended June 30, 2023 vs. 2022 (in millions):** | Activity | 2023 | 2022 | Change ($) | | :--- | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $0.3 | $(23.5) | $23.8 | | Net Cash Used in Investing Activities | $(42.7) | $(31.2) | $(11.5) | | Net Cash Provided by (Used in) Financing Activities | $28.3 | $(113.2) | $141.5 | | Net Decrease in Cash and Cash Equivalents | $(13.9) | $(168.1) | $154.2 | - Operating cash flow significantly improved, moving from a net use of **$23.5 million** in 2022 to a net provision of **$0.3 million** in 2023[18](index=18&type=chunk) - Financing activities shifted from a net use of **$113.2 million** in 2022 to a net provision of **$28.3 million** in 2023, primarily due to increased net borrowings of debt and lease obligations[18](index=18&type=chunk)[204](index=204&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Unaudited)) This statement outlines changes in shareholders' equity components, including accumulated deficit and comprehensive loss **Shareholders' Equity Changes (Six Months Ended June 30, 2023 vs. Dec 31, 2022) (in millions):** | Item | Dec 31, 2022 | June 30, 2023 | Change ($) | | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $172.9 | $153.6 | $(19.3) | | Accumulated Deficit | $(518.5) | $(549.2) | $(30.7) | | Accumulated Other Comprehensive Loss | $(128.3) | $(113.5) | $14.8 | | Treasury Stock | $(23.5) | $(24.9) | $(1.4) | - The accumulated deficit increased by **$30.7 million**, reflecting the net loss incurred during the period[20](index=20&type=chunk) - Accumulated other comprehensive loss improved by **$14.8 million**, primarily due to foreign currency translation adjustments and interest rate derivatives adjustments[20](index=20&type=chunk)[13](index=13&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Basis of Presentation](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation) This note details the company's policies and information regarding basis of presentation - The Company's financial results are subject to seasonality, with net sales and operating income typically higher in the second half of the calendar year, driven by increased catalogs and retail inserts for back-to-school and holiday promotions[24](index=24&type=chunk) - Macroeconomic conditions, including weakened demand, supply chain disruptions, rising inflationary costs, labor pressures, and recessionary concerns, have impacted the Company, leading to ongoing evaluation of cost reduction measures[26](index=26&type=chunk) [Note 2. Revenue Recognition](index=9&type=section&id=Note%202.%20Revenue%20Recognition) This note details the company's policies and information regarding revenue recognition **Disaggregated Revenue by Segment and Offering (Three Months Ended June 30, in millions):** | Category | United States Print and Related Services | International | Total | | :--- | :--- | :--- | :--- | | **2023** | | | | | Total Products | $449.3 | $110.6 | $559.9 | | Total Services | $139.2 | $4.0 | $143.2 | | **Total Net Sales** | **$588.5** | **$114.6** | **$703.1** | | **2022** | | | | | Total Products | $490.6 | $103.3 | $593.9 | | Total Services | $158.8 | $5.0 | $163.8 | | **Total Net Sales** | **$649.4** | **$108.3** | **$757.7** | **Disaggregated Revenue by Segment and Offering (Six Months Ended June 30, in millions):** | Category | United States Print and Related Services | International | Total | | :--- | :--- | :--- | :--- | | **2023** | | | | | Total Products | $953.8 | $214.0 | $1,167.8 | | Total Services | $292.3 | $9.5 | $301.8 | | **Total Net Sales** | **$1,246.1** | **$223.5** | **$1,469.6** | | **2022** | | | | | Total Products | $983.9 | $190.9 | $1,174.8 | | Total Services | $316.6 | $10.5 | $327.1 | | **Total Net Sales** | **$1,300.5** | **$201.4** | **$1,501.9** | - Product offerings include various print operations and global paper procurement, while services include logistics, marketing services (data & analytics, technology, media, creative, managed services), and medical services[31](index=31&type=chunk)[32](index=32&type=chunk) [Note 3. Restructuring, Impairment and Transaction-Related Charges](index=11&type=section&id=Note%203.%20Restructuring,%20Impairment%20and%20Transaction-Related%20Charges) This note details the company's policies and information regarding restructuring, impairment, and transaction-related charges **Restructuring, Impairment and Transaction-Related Charges (in millions):** | Charge Type | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Employee Termination Charges | $1.9 | $0.5 | $15.0 | $1.6 | | Impairment Charges | $1.1 | $0.0 | $10.6 | $0.1 | | Transaction-Related Charges | $0.0 | $0.3 | $0.6 | $0.5 | | Integration Costs | $0.5 | $0.0 | $1.0 | $0.0 | | Other Restructuring Charges | $6.1 | $2.4 | $8.4 | $4.6 | | **Total** | **$9.6** | **$3.2** | **$35.6** | **$6.8** | - Total restructuring, impairment, and transaction-related charges significantly increased to **$9.6 million** for the three months and **$35.6 million** for the six months ended June 30, 2023, compared to $3.2 million and $6.8 million respectively in 2022, primarily due to higher employee termination and impairment charges[34](index=34&type=chunk) - Impairment charges in 2023 included **$1.1 million** (three months) and **$10.6 million** (six months) for property, machinery, and equipment no longer utilized due to facility consolidations and capacity reductions[37](index=37&type=chunk)[38](index=38&type=chunk) [Note 4. Receivables](index=13&type=section&id=Note%204.%20Receivables) This note details the company's policies and information regarding receivables **Allowance for Credit Losses (in millions):** | Item | Amount | | :--- | :--- | | Balance at December 31, 2022 | $26.4 | | Provisions | $1.5 | | Write-offs | $(0.8) | | Translation | $0.2 | | Balance at June 30, 2023 | $27.3 | - The allowance for credit losses increased to **$27.3 million** as of June 30, 2023, from $26.4 million at December 31, 2022, reflecting provisions for potential uncollectible accounts[46](index=46&type=chunk) [Note 5. Inventories](index=14&type=section&id=Note%205.%20Inventories) This note details the company's policies and information regarding inventories **Components of Inventories (in millions):** | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Raw Materials and Manufacturing Supplies | $130.9 | $173.7 | | Work in Process | $30.8 | $38.3 | | Finished Goods | $38.9 | $48.7 | | **Total** | **$200.6** | **$260.7** | - Total inventories decreased to **$200.6 million** at June 30, 2023, from $260.7 million at December 31, 2022, with reductions across all categories, particularly raw materials[47](index=47&type=chunk) [Note 6. Commitments and Contingencies](index=14&type=section&id=Note%206.%20Commitments%20and%20Contingencies) This note details the company's policies and information regarding commitments and contingencies - The Company is involved in various lawsuits in the normal course of business, but management does not expect the liabilities to have a material impact on the financial statements[48](index=48&type=chunk) - Environmental reserves are provided for probable and reasonably estimable remediation obligations, and the Company believes it is in material compliance with environmental laws[49](index=49&type=chunk) [Note 7. Debt](index=14&type=section&id=Note%207.%20Debt) This note details the company's policies and information regarding debt - The Senior Secured Credit Facility's reference rate transitioned from LIBOR to SOFR effective February 1, 2023, with no material impact on financial statements[50](index=50&type=chunk) - In 2022, the Company repurchased and repaid all outstanding **$209.1 million** of its 7.0% Senior Unsecured Notes due May 1, 2022, using revolving credit facility liquidity and cash on hand[51](index=51&type=chunk)[52](index=52&type=chunk) [Note 8. Income Taxes](index=15&type=section&id=Note%208.%20Income%20Taxes) This note details the company's policies and information regarding income taxes - For the six months ended June 30, 2023, income tax expense was recorded using the actual year-to-date effective income tax rate, which differs from the statutory rate due to non-deductible expenses, GILTI, and net increases in valuation allowance reserves[53](index=53&type=chunk) - The liability for unrecognized tax benefits increased to **$11.5 million** as of June 30, 2023, from $11.1 million at December 31, 2022, with an anticipated $0.1 million decrease within the next twelve months[56](index=56&type=chunk) [Note 9. Financial Instruments and Fair Value Measurements](index=15&type=section&id=Note%209.%20Financial%20Instruments%20and%20Fair%20Value%20Measurements) This note details the company's policies and information regarding financial instruments and fair value measurements - The Company holds an interest rate swap (notional **$130.0 million**, fixed rate **2.40%**) to reduce variable-rate debt interest variability, which was de-designated as a cash flow hedge in 2020 and now has fair value changes recognized in interest expense[59](index=59&type=chunk)[60](index=60&type=chunk) - Two interest rate collar contracts (each notional **$75.0 million**, floor **2.09%/2.25%**, ceiling **5.00%**) became effective February 1, 2023, designated as cash flow hedges to manage variable-rate debt interest payments[61](index=61&type=chunk)[62](index=62&type=chunk) - The fair value of total debt was approximately **$0.6 billion** at June 30, 2023, and December 31, 2022, measured using Level 2 inputs (interest rates for similar borrowings)[65](index=65&type=chunk) [Note 10. Employee Retirement Plans](index=18&type=section&id=Note%2010.%20Employee%20Retirement%20Plans) This note details the company's policies and information regarding employee retirement plans **Net Pension Income (in millions):** | Component | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Interest Cost | $(4.4) | $(2.4) | $(8.8) | $(4.8) | | Expected Return on Plan Assets | $5.0 | $5.5 | $10.0 | $11.1 | | Net Periodic Pension Income | $0.6 | $3.1 | $1.2 | $6.3 | | Amortization of Actuarial Loss | $(0.2) | $0.0 | $(0.4) | $0.0 | | **Net Pension Income** | **$0.4** | **$3.1** | **$0.8** | **$6.3** | - Net pension income decreased significantly to **$0.4 million** for the three months and **$0.8 million** for the six months ended June 30, 2023, compared to $3.1 million and $6.3 million respectively in 2022, primarily due to increased interest cost on pension liabilities and decreased expected return on plan assets[70](index=70&type=chunk) - The Company has reserved **$26.3 million** for multiemployer pension plan (MEPPs) withdrawal liability as of June 30, 2023, with payments scheduled until April 2032 for GCIU and February 2024 for GCC[71](index=71&type=chunk) [Note 11. Earnings (Loss) Per Share](index=19&type=section&id=Note%2011.%20Earnings%20(Loss)%20Per%20Share) This note details the company's policies and information regarding earnings (loss) per share **Earnings (Loss) Per Share (EPS):** | Period | 2023 | 2022 | | :--- | :--- | :--- | | Basic and Diluted EPS (3 Months Ended June 30) | $(0.12) | $0.10 | | Basic and Diluted EPS (6 Months Ended June 30) | $(0.62) | $0.08 | | Basic Weighted Average Shares Outstanding (3 Months) | 49.3 million | 52.1 million | | Diluted Weighted Average Shares Outstanding (3 Months) | 49.3 million | 54.1 million | | Basic Weighted Average Shares Outstanding (6 Months) | 49.2 million | 51.8 million | | Diluted Weighted Average Shares Outstanding (6 Months) | 49.2 million | 53.8 million | - Due to net losses in the three and six months ended June 30, 2023, all equity incentive instruments were anti-dilutive and excluded from diluted EPS calculations[73](index=73&type=chunk) [Note 12. Equity Incentive Programs](index=20&type=section&id=Note%2012.%20Equity%20Incentive%20Programs) This note details the company's policies and information regarding equity incentive programs **Total Equity Incentive Compensation Expense (in millions):** | Period | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Restricted Stock and RSU Equity Awards | $1.2 | $1.2 | $2.1 | $2.9 | | DSU Awards | $1.1 | $0.7 | $1.2 | $0.7 | | **Total** | **$2.3** | **$1.9** | **$3.3** | **$3.8** | - Total equity incentive compensation expense for the six months ended June 30, 2023, was **$3.3 million**, a decrease from $3.8 million in the prior year[75](index=75&type=chunk) - Future compensation expense related to equity incentive programs is estimated at **$9.4 million** as of June 30, 2023, with **$2.6 million** expected for the remainder of 2023[75](index=75&type=chunk) [Note 13. Shareholders' Equity](index=21&type=section&id=Note%2013.%20Shareholders'%20Equity) This note details the company's policies and information regarding shareholders' equity **Common Stock Shares (in millions):** | Class | Authorized Shares | Outstanding (June 30, 2023) | Outstanding (Dec 31, 2022) | | :--- | :--- | :--- | :--- | | Class A | 105.0 | 39.0 | 39.2 | | Class B | 80.0 | 13.6 | 13.6 | | Class C | 20.0 | 0.0 | 0.0 | - The Company repurchased **1,408,048 shares** of Class A common stock for **$5.0 million** during the six months ended June 30, 2023, with **$85.0 million** remaining under the authorized repurchase program[80](index=80&type=chunk) - Quarterly dividends have been suspended since the second quarter of 2020[81](index=81&type=chunk) [Note 14. Accumulated Other Comprehensive Loss](index=22&type=section&id=Note%2014.%20Accumulated%20Other%20Comprehensive%20Loss) This note details the company's policies and information regarding accumulated other comprehensive loss **Changes in Accumulated Other Comprehensive Loss (Six Months Ended June 30, 2023 vs. Dec 31, 2022) (in millions):** | Component | Dec 31, 2022 | June 30, 2023 | | :--- | :--- | :--- | | Translation Adjustments | $(88.6) | $(75.8) | | Interest Rate Derivatives Adjustments | $(4.1) | $(2.3) | | Pension Benefit Plan Adjustments | $(35.6) | $(35.4) | | **Total** | **$(128.3)** | **$(113.5)** | - Accumulated other comprehensive loss improved by **$14.8 million**, primarily driven by positive translation adjustments (**$12.8 million**) and interest rate derivatives adjustments (**$1.8 million**) during the six months ended June 30, 2023[83](index=83&type=chunk) [Note 15. Segment Information](index=23&type=section&id=Note%2015.%20Segment%20Information) This note details the company's policies and information regarding segment information - Quad operates with two reportable segments: United States Print and Related Services (**84-85%** of consolidated net sales) and International (**15-16%** of consolidated net sales), plus a Corporate category[84](index=84&type=chunk)[115](index=115&type=chunk) **Segment Operating Income (Three Months Ended June 30, in millions):** | Segment | 2023 Operating Income | 2022 Operating Income | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | United States Print and Related Services | $11.8 | $19.9 | $(8.1) | (40.7)% | | International | $8.3 | $6.2 | $2.1 | 33.9% | | Corporate | $(11.7) | $(11.9) | $0.2 | (1.7)% | | **Total** | **$8.4** | **$14.2** | **$(5.8)** | **(40.8)%** | **Segment Operating Income (Six Months Ended June 30, in millions):** | Segment | 2023 Operating Income | 2022 Operating Income | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | United States Print and Related Services | $19.1 | $31.7 | $(12.6) | (39.7)% | | International | $16.0 | $9.9 | $6.1 | 61.6% | | Corporate | $(26.6) | $(22.0) | $(4.6) | 20.9% | | **Total** | **$8.5** | **$19.6** | **$(11.1)** | **(56.6)%** | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Quad/Graphics, Inc.'s financial condition and results of operations, covering an overview of the business, key performance metrics, industry trends, and a detailed analysis of financial performance for the three and six months ended June 30, 2023, compared to the prior year. It also discusses liquidity, capital resources, debt obligations, and compliance with covenants [Cautionary Statement Regarding Forward-Looking Statements](index=27&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section outlines the risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements subject to risks and uncertainties, including decreasing demand for printed materials, fluctuations in costs and raw material availability, macroeconomic conditions (inflation, interest rates, recession), increased business complexity, and the inability to reduce costs rapidly[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - Other risks include changes in postal rates, failure to attract talent, cyber incidents, decline in distribution channels, digital media impact, negative publicity, client contract performance, international operation risks, and challenges in managing acquisitions or divestitures[96](index=96&type=chunk) [Overview](index=29&type=section&id=Overview) This section provides a high-level summary of the company's business, key metrics, and industry trends [Business Overview](index=29&type=section&id=Business%20Overview) This section describes Quad's global marketing solutions and strategic priorities for growth and shareholder value - Quad is a global marketing experience company providing integrated marketing solutions from strategy to execution across offline and online channels, serving over **2,900 clients** in various industries[101](index=101&type=chunk) - The Company's strategic priorities include: walking in clients' shoes, growing the business profitably, advancing its integrated marketing platform, empowering employees, and enhancing financial strength to create shareholder value[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[107](index=107&type=chunk)[112](index=112&type=chunk) - The United States Print and Related Services segment accounts for approximately **84-85%** of consolidated net sales, while the International segment accounts for **15-16%**[115](index=115&type=chunk) [Key Performance Metrics Overview](index=32&type=section&id=Key%20Performance%20Metrics%20Overview) This section identifies the primary financial and operational metrics used by management to assess company performance - Key performance metrics used by management include net sales growth, EBITDA, EBITDA margin, net cash provided by (used in) operating activities, Free Cash Flow, and Debt Leverage Ratio[116](index=116&type=chunk) - Free Cash Flow is used to quantify cash available for debt reduction, strategic investments, and returning capital to shareholders[120](index=120&type=chunk) - The Debt Leverage Ratio assesses liquidity and balance sheet flexibility, with a target range of **2.0x to 2.5x**[121](index=121&type=chunk)[213](index=213&type=chunk) [Overview of Trends Affecting Quad](index=33&type=section&id=Overview%20of%20Trends%20Affecting%20Quad) This section discusses macroeconomic conditions, market demand shifts, and regulatory changes impacting the company's operations - The Company faces increased demand for end-to-end marketing services across traditional and digital channels, driving its integrated marketing platform strategy[124](index=124&type=chunk) - Macroeconomic conditions, including inflation, rising interest rates, and supply chain disruptions, have weakened demand and increased costs for raw materials (paper, ink), distribution, and labor[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - Postal rate increases and service level adjustments by the USPS may reduce demand for printed products, prompting clients to explore alternative delivery methods[129](index=129&type=chunk)[131](index=131&type=chunk) [Results of Operations for the Three Months Ended June 30, 2023, Compared to the Three Months Ended June 30, 2022](index=35&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030,%202023,%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030,%202022) This section analyzes the company's financial performance for the three months ended June 30, 2023, compared to the prior year [Summary Results](index=35&type=section&id=Summary%20Results) This section provides a concise overview of key financial changes and their primary drivers for the period **Summary of Financial Changes (Three Months Ended June 30, 2023 vs. 2022) (in millions, except per share):** | Metric | 2022 | Change from 2022 | 2023 | | :--- | :--- | :--- | :--- | | Operating Income | $14.2 | $(5.8) | $8.4 | | Operating Margin | 1.9% | (0.7)% | 1.2% | | Net Earnings (Loss) | $5.3 | $(11.4) | $(6.1) | | Diluted EPS | $0.10 | $(0.22) | $(0.12) | - Operating income decreased by **$5.8 million**, and net earnings shifted to a loss of **$6.1 million**, primarily due to a **$6.4 million** increase in restructuring, impairment, and transaction-related charges and a **$6.1 million** increase in interest expense[137](index=137&type=chunk)[139](index=139&type=chunk) [Operating Results (Consolidated)](index=36&type=section&id=Operating%20Results%20(Consolidated)) This section details consolidated revenues, costs, and operating income, highlighting significant changes and contributing factors **Consolidated Operating Results (Three Months Ended June 30, in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $703.1 | $757.7 | $(54.6) | (7.2)% | | Total Cost of Sales | $569.8 | $618.1 | $(48.3) | (7.8)% | | SG&A Expenses | $83.3 | $86.9 | $(3.6) | (4.1)% | | Depreciation and Amortization | $32.0 | $35.3 | $(3.3) | (9.3)% | | Restructuring, Impairment, Transaction-Related Charges | $9.6 | $3.2 | $6.4 | 200.0% | | Operating Income | $8.4 | $14.2 | $(5.8) | (40.8)% | - Total net sales decreased by **$54.6 million (7.2%)**, driven by a **$34.0 million** decrease in product sales (mainly paper sales and decreased print volumes) and a **$20.6 million** decrease in service sales (primarily logistics)[143](index=143&type=chunk)[144](index=144&type=chunk) - Cost of sales decreased by **$48.3 million (7.8%)**, largely due to lower paper costs, the Argentina divestiture, lower print volumes, and improved manufacturing productivity[145](index=145&type=chunk)[146](index=146&type=chunk) [EBITDA and EBITDA Margin—Consolidated](index=38&type=section&id=EBITDA%20and%20EBITDA%20Margin%E2%80%94Consolidated) This section presents consolidated EBITDA and EBITDA margin, explaining changes and their impact on profitability **Consolidated EBITDA and EBITDA Margin (Three Months Ended June 30, in millions):** | Metric | 2023 | % of Net Sales | 2022 | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | EBITDA (non-GAAP) | $40.8 | 5.8% | $52.6 | 6.9% | - EBITDA decreased by **$11.8 million** to **$40.8 million**, and EBITDA margin declined to **5.8%** from 6.9%, primarily due to increased restructuring, impairment, and transaction-related charges, and lower logistics and print volumes[151](index=151&type=chunk) [United States Print and Related Services Segment Analysis](index=39&type=section&id=United%20States%20Print%20and%20Related%20Services%20Segment%20Analysis) This section analyzes the financial performance of the United States Print and Related Services segment, including sales and operating income **US Print and Related Services Segment (Three Months Ended June 30, in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Product Sales | $449.3 | $490.6 | $(41.3) | (8.4)% | | Service Sales | $139.2 | $158.8 | $(19.6) | (12.3)% | | Operating Income | $11.8 | $19.9 | $(8.1) | (40.7)% | | Operating Margin | 2.0% | 3.1% | N/A | N/A | | Restructuring, Impairment, Transaction-Related Charges | $8.6 | $1.6 | $7.0 | nm | - Operating income for this segment decreased by **$8.1 million (40.7%)**, and operating margin fell to **2.0%**, mainly due to a **$7.0 million** increase in restructuring, impairment, and transaction-related charges and decreased print volumes[156](index=156&type=chunk)[157](index=157&type=chunk) [International Segment Analysis](index=40&type=section&id=International%20Segment%20Analysis) This section analyzes the financial performance of the International segment, including sales and operating income **International Segment (Three Months Ended June 30, in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Product Sales | $110.6 | $103.3 | $7.3 | 7.1% | | Service Sales | $4.0 | $5.0 | $(1.0) | (20.0)% | | Operating Income | $8.3 | $6.2 | $2.1 | 33.9% | | Operating Margin | 7.2% | 5.7% | N/A | N/A | | Restructuring, Impairment, Transaction-Related Charges | $1.0 | $1.3 | $(0.3) | (23.1)% | - International segment operating income increased by **$2.1 million (33.9%)**, and operating margin improved to **7.2%**, driven by a **$17.0 million** increase in print product volume and pricing, mainly in Mexico, and favorable foreign exchange impacts[160](index=160&type=chunk)[162](index=162&type=chunk) [Corporate Segment Analysis](index=41&type=section&id=Corporate%20Segment%20Analysis) This section analyzes the financial performance of the Corporate segment, including operating expenses and charges **Corporate Operating Expenses (Three Months Ended June 30, in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operating Expenses | $11.7 | $11.9 | $(0.2) | (1.7)% | | Restructuring, Impairment, Transaction-Related Charges | $0.0 | $0.3 | $(0.3) | nm | - Corporate operating expenses decreased by **$0.2 million (1.7%)**, primarily due to a **$0.3 million** decrease in restructuring, impairment, and transaction-related charges[165](index=165&type=chunk) [Results of Operations for the Six Months Ended June 30, 2023, Compared to the Six Months Ended June 30, 2022](index=42&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030,%202023,%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030,%202022) This section analyzes the company's financial performance for the six months ended June 30, 2023, compared to the prior year [Summary Results](index=42&type=section&id=Summary%20Results) This section provides a concise overview of key financial changes and their primary drivers for the six-month period **Summary of Financial Changes (Six Months Ended June 30, 2023 vs. 2022) (in millions, except per share):** | Metric | 2022 | Change from 2022 | 2023 | | :--- | :--- | :--- | :--- | | Operating Income | $19.6 | $(11.1) | $8.5 | | Operating Margin | 1.3% | (0.7)% | 0.6% | | Net Earnings (Loss) | $4.3 | $(35.0) | $(30.7) | | Diluted EPS | $0.08 | $(0.70) | $(0.62) | - Operating income decreased by **$11.1 million**, and net earnings shifted to a loss of **$30.7 million**, primarily due to a **$28.8 million** increase in restructuring, impairment, and transaction-related charges, a **$13.1 million** increase in interest expense, and a **$5.5 million** decrease in net pension income[168](index=168&type=chunk)[170](index=170&type=chunk) [Operating Results (Consolidated)](index=43&type=section&id=Operating%20Results%20(Consolidated)) This section details consolidated revenues, costs, and operating income for the six-month period, highlighting significant changes **Consolidated Operating Results (Six Months Ended June 30, in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $1,469.6 | $1,501.9 | $(32.3) | (2.2)% | | Total Cost of Sales | $1,187.3 | $1,237.7 | $(50.4) | (4.1)% | | SG&A Expenses | $172.5 | $166.0 | $6.5 | 3.9% | | Depreciation and Amortization | $65.7 | $71.8 | $(6.1) | (8.5)% | | Restructuring, Impairment, Transaction-Related Charges | $35.6 | $6.8 | $28.8 | nm | | Operating Income | $8.5 | $19.6 | $(11.1) | (56.6)% | - Total net sales decreased by **$32.3 million (2.2%)**, primarily due to a **$7.0 million** decrease in product sales (paper sales, Argentina divestiture) and a **$25.3 million** decrease in service sales (logistics volumes)[173](index=173&type=chunk)[174](index=174&type=chunk) - Cost of sales decreased by **$50.4 million (4.1%)**, driven by lower paper costs, Argentina divestiture impact, improved manufacturing productivity, and other cost reduction initiatives[175](index=175&type=chunk)[176](index=176&type=chunk) [EBITDA and EBITDA Margin—Consolidated](index=45&type=section&id=EBITDA%20and%20EBITDA%20Margin%E2%80%94Consolidated) This section presents consolidated EBITDA and EBITDA margin for the six-month period, explaining changes and their impact **Consolidated EBITDA and EBITDA Margin (Six Months Ended June 30, in millions):** | Metric | 2023 | % of Net Sales | 2022 | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | EBITDA (non-GAAP) | $75.0 | 5.1% | $97.7 | 6.5% | - EBITDA decreased by **$22.7 million** to **$75.0 million**, and EBITDA margin declined to **5.1%** from 6.5%, primarily due to a **$28.8 million** increase in restructuring, impairment, and transaction-related charges[182](index=182&type=chunk) [United States Print and Related Services Segment Analysis](index=46&type=section&id=United%20States%20Print%20and%20Related%20Services%20Segment%20Analysis) This section analyzes the financial performance of the United States Print and Related Services segment for the six-month period **US Print and Related Services Segment (Six Months Ended June 30, in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Product Sales | $953.8 | $983.9 | $(30.1) | (3.1)% | | Service Sales | $292.3 | $316.6 | $(24.3) | (7.7)% | | Operating Income | $19.1 | $31.7 | $(12.6) | (39.7)% | | Operating Margin | 1.5% | 2.4% | N/A | N/A | | Restructuring, Impairment, Transaction-Related Charges | $31.1 | $3.3 | $27.8 | nm | - Operating income for this segment decreased by **$12.6 million (39.7%)**, and operating margin fell to **1.5%**, primarily due to a **$27.8 million** increase in restructuring, impairment, and transaction-related charges[188](index=188&type=chunk)[189](index=189&type=chunk) [International Segment Analysis](index=47&type=section&id=International%20Segment%20Analysis) This section analyzes the financial performance of the International segment for the six-month period **International Segment (Six Months Ended June 30, in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Product Sales | $214.0 | $190.9 | $23.1 | 12.1% | | Service Sales | $9.5 | $10.5 | $(1.0) | (9.5)% | | Operating Income | $16.0 | $9.9 | $6.1 | 61.6% | | Operating Margin | 7.2% | 4.9% | N/A | N/A | | Restructuring, Impairment, Transaction-Related Charges | $3.6 | $2.9 | $0.7 | 24.1% | - International segment operating income increased by **$6.1 million (61.6%)**, and operating margin improved to **7.2%**, driven by a **$25.8 million** increase in print volume, primarily in Mexico and Peru, and a **$5.2 million** increase in paper sales[192](index=192&type=chunk)[194](index=194&type=chunk) [Corporate Segment Analysis](index=48&type=section&id=Corporate%20Segment%20Analysis) This section analyzes the financial performance of the Corporate segment for the six-month period, including operating expenses **Corporate Operating Expenses (Six Months Ended June 30, in millions):** | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operating Expenses | $26.6 | $22.0 | $4.6 | 20.9% | | Restructuring, Impairment, Transaction-Related Charges | $0.9 | $0.6 | $0.3 | 50.0% | - Corporate operating expenses increased by **$4.6 million (20.9%)**, primarily due to a **$3.2 million** increase in employee-related costs and a **$0.3 million** increase in restructuring, impairment, and transaction-related charges[198](index=198&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flows, debt, and financial flexibility, including capital allocation strategies [Net Cash Provided by (Used in) Operating Activities](index=48&type=section&id=Net%20Cash%20Provided%20by%20(Used%20in)%20Operating%20Activities) This section details cash flows generated from or used in the company's primary business operations - Net cash provided by operating activities increased by **$23.8 million**, from $23.5 million used in 2022 to $0.3 million provided in 2023, primarily due to a **$52.6 million** increase in cash flows from changes in operating assets and liabilities[202](index=202&type=chunk) [Net Cash Used in Investing Activities](index=49&type=section&id=Net%20Cash%20Used%20in%20Investing%20Activities) This section details cash flows related to the acquisition and disposal of long-term assets and investments - Net cash used in investing activities increased by **$11.5 million** to **$42.7 million**, mainly due to an **$11.7 million** increase in purchases of property, plant, and equipment[203](index=203&type=chunk) [Net Cash Provided by (Used in) Financing Activities](index=49&type=section&id=Net%20Cash%20Provided%20by%20(Used%20in)%20Financing%20Activities) This section details cash flows related to debt, equity, and dividend transactions affecting the company's capital structure - Net cash provided by financing activities increased by **$141.5 million**, shifting from a $113.2 million use in 2022 to a $28.3 million provision in 2023, primarily due to a **$143.5 million** increase in net borrowings of debt and lease obligations[204](index=204&type=chunk) [Free Cash Flow](index=49&type=section&id=Free%20Cash%20Flow) This section presents the non-GAAP measure of cash available for debt reduction, strategic investments, and shareholder returns **Free Cash Flow (non-GAAP) (Six Months Ended June 30, in millions):** | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $0.3 | $(23.5) | | Less: Purchases of Property, Plant and Equipment | $45.2 | $33.5 | | **Free Cash Flow** | **$(44.9)** | **$(57.0)** | - Free Cash Flow improved by **$12.1 million**, from $(57.0) million in 2022 to $(44.9) million in 2023, due to increased operating cash flows, partially offset by higher capital expenditures[208](index=208&type=chunk) [Debt Leverage Ratio](index=50&type=section&id=Debt%20Leverage%20Ratio) This section analyzes the company's debt leverage ratio, assessing its financial health and compliance with covenants **Debt Leverage Ratio (non-GAAP):** | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Debt and Finance Lease Obligations | $615.4 | $570.2 | | Less: Cash and Cash Equivalents | $11.3 | $25.2 | | **Net Debt** | **$604.1** | **$545.0** | | Divided by: Adjusted EBITDA (Trailing Twelve Months) | $258.3 | $252.2 | | **Debt Leverage Ratio** | **2.34x** | **2.16x** | - The Debt Leverage Ratio increased to **2.34x** at June 30, 2023, from 2.16x at December 31, 2022, primarily due to a **$59.1 million** increase in Net Debt, while remaining within management's target range of **2.0x to 2.5x**[213](index=213&type=chunk) [Debt Obligations](index=51&type=section&id=Debt%20Obligations) This section provides an overview of the company's outstanding debt instruments and their key terms - As of June 30, 2023, the Company's debt instruments included **$59.9 million** outstanding on the revolving credit facility and **$536.9 million** on Term Loan A under the Senior Secured Credit Facility, plus **$2.5 million** under a Master Note and Security Agreement[214](index=214&type=chunk) [Covenants and Compliance](index=52&type=section&id=Covenants%20and%20Compliance) This section confirms the company's adherence to financial covenants under its debt agreements - As of June 30, 2023, the Company was in compliance with all financial covenants, including a Total Leverage Ratio of **2.34x** (max **3.75x**), Senior Secured Leverage Ratio of **2.32x** (max **3.50x**), and Interest Coverage Ratio of **5.27x** (min **3.00x**)[215](index=215&type=chunk)[217](index=217&type=chunk) - The Company's Total Leverage Ratio of **2.34x** means restrictions on dividend payments, capital stock repurchases, and certain other payments are not currently applicable[218](index=218&type=chunk) [Share Repurchase Program](index=53&type=section&id=Share%20Repurchase%20Program) This section details the company's share repurchase activities and remaining authorization under its program - During the three months ended June 30, 2023, the Company repurchased **1,343,777 shares** of Class A common stock for **$4.7 million**, with **$85.0 million** remaining under the **$100.0 million** authorized program[220](index=220&type=chunk) [Risk Management](index=53&type=section&id=Risk%20Management) This section outlines the company's exposure to market risks and its strategies for mitigation - The Company is exposed to market risks from changes in interest rates, foreign currency exchange rates, economic conditions impacting credit, and commodity prices, which are actively managed through policies and procedures[224](index=224&type=chunk) [Contractual Obligations](index=53&type=section&id=Contractual%20Obligations) This section summarizes the company's significant contractual commitments and payment obligations - Contractual obligations have not materially changed from those listed in the Company's 2022 Annual Report on Form 10-K[222](index=222&type=chunk) [New Accounting Pronouncements](index=53&type=section&id=New%20Accounting%20Pronouncements) This section reports on the impact of recently issued accounting standards on the company's financial statements - As of June 30, 2023, there have been no new accounting pronouncements requiring disclosure in this Quarterly Report on Form 10-Q[223](index=223&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details Quad/Graphics, Inc.'s exposure to various market risks, including interest rate, foreign currency, credit, and commodity risks, and outlines the Company's strategies for managing these exposures. It provides quantitative and qualitative information on potential impacts from hypothetical changes in market conditions [Interest Rate Risk](index=53&type=section&id=Interest%20Rate%20Risk) This section details the company's exposure to interest rate fluctuations on its debt and hedging strategies - The Company is exposed to interest rate risk on **$319.5 million** of variable rate debt (weighted average **7.3%**) and price risk on **$295.9 million** of fixed rate debt and finance leases (weighted average **6.1%**) as of June 30, 2023[225](index=225&type=chunk) - Interest rate swaps and collars are used to hedge variable-rate debt, converting **$280.0 million** to fixed rate, and a hypothetical **10%** increase in market interest rates would not materially impact interest expense or the fair value of fixed rate debt[225](index=225&type=chunk) [Foreign Currency Risk and Translation Exposure](index=54&type=section&id=Foreign%20Currency%20Risk%20and%20Translation%20Exposure) This section describes the company's exposure to foreign currency exchange rate changes and its hedging practices - Foreign currency exposure is limited in most countries as operating revenues and expenses are primarily in local currencies, with foreign exchange contracts used to hedge net exposures[226](index=226&type=chunk)[228](index=228&type=chunk) - A hypothetical **10%** adverse change in foreign currency exchange rates would result in an approximate **$9.9 million** decrease in net current assets subject to translation risk (**$98.9 million** as of June 30, 2023)[227](index=227&type=chunk) [Credit Risk](index=54&type=section&id=Credit%20Risk) This section outlines the company's management of credit risk associated with its receivables and client base - Credit risk is managed through client evaluations, credit reviews, and credit scoring models, with an allowance for credit losses of **$27.3 million** as of June 30, 2023[230](index=230&type=chunk) - The Company has a diverse client base, with no single client accounting for more than **5%** of net sales during the three and six months ended June 30, 2023[231](index=231&type=chunk) [Commodity Risk](index=55&type=section&id=Commodity%20Risk) This section discusses the company's exposure to price volatility in raw materials and energy, and mitigation strategies - The primary raw materials are paper, ink, and energy, with supply currently under pressure due to shortages and inflation; price adjustment clauses in sales contracts generally mitigate paper price risk[232](index=232&type=chunk)[233](index=233&type=chunk) - The Company produces most of its ink internally to control quality, cost, and supply, and mitigates energy price risk through natural gas hedges and passing fuel cost increases to clients in logistics[234](index=234&type=chunk)[235](index=235&type=chunk) - A hypothetical **10%** change in paper and other raw material prices is not expected to have a significant direct impact on consolidated annual results, but significant increases could influence future client demand[237](index=237&type=chunk) [ITEM 4. Controls and Procedures](index=55&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of Quad/Graphics, Inc.'s disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter ended June 30, 2023 [Disclosure Controls and Procedures](index=55&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's controls for ensuring timely and accurate financial disclosures - Management, with the CEO and CFO, evaluated and concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023[238](index=238&type=chunk) [Changes in Internal Control Over Financial Reporting](index=55&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes to the company's internal control over financial reporting during the quarter - There were no changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2023, that materially affected or are reasonably likely to materially affect it[239](index=239&type=chunk) PART II — OTHER INFORMATION This section includes other required disclosures such as risk factors, equity sales, and exhibits [ITEM 1A. Risk Factors](index=56&type=section&id=ITEM%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors were reported since the Annual Report on Form 10-K filed on February 27, 2023[241](index=241&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides details on the Company's repurchases of its Class A common stock during the quarter ended June 30, 2023, under its authorized share repurchase program **Issuer Purchases of Equity Securities (Class A Common Stock):** | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | | April 1, 2023 to April 30, 2023 | — | — | $89,805,953 | | May 1, 2023 to May 31, 2023 | 412,731 | $3.27 | $88,454,515 | | June 1, 2023 to June 30, 2023 | 931,046 | $3.67 | $85,036,595 | | **Total (Quarter)** | **1,343,777** | | | - During the quarter ended June 30, 2023, the Company repurchased **1,343,777 shares** of Class A common stock for a total purchase price of **$4.7 million**, with **$85.0 million** remaining under the **$100.0 million** authorized program[220](index=220&type=chunk)[242](index=242&type=chunk) [ITEM 5. Other Information](index=56&type=section&id=ITEM%205.%20Other%20Information) This section indicates that there is no other information to report under this item - No other information was reported under this item[245](index=245&type=chunk) [ITEM 6. Exhibits](index=57&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including amended bylaws, CEO and CFO certifications, and financial statements in iXBRL format - Exhibits include Amended Bylaws, CEO and CFO certifications (Rule 13a-14(a) or 15d-14(a) and 18 U.S.C. Section 1350), and financial statements in iXBRL format[247](index=247&type=chunk) [Signatures](index=58&type=section&id=Signatures) This section contains the signatures of the Chairman, President, and Chief Executive Officer, J. Joel Quadracci, and the Chief Financial Officer, Anthony C. Staniak, certifying the filing of the report - The report is signed by J. Joel Quadracci, Chairman, President and Chief Executive Officer, and Anthony C. Staniak, Chief Financial Officer, on August 2, 2023[250](index=250&type=chunk)

• Debt Leverage Ratio is defined as total debt and finance lease obligations less cash and cash equivalents ("Net Debt") divided by the last twelve months of Adjusted EBITDA. Net Debt and Debt Leverage Ratio Income tax expense at 25% normalized tax rate 2.6 0.7 Quad Adjusted Diluted Earnings Per Share May 11, 2023 Chairman, President & Chief Executive Officer The factors that could cause actual results to materially differ include, among others: the impact of decreasing demand for printed materials and sign ...