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 ...

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 significant overcapacity in a highly competitive environment creates downward pricing pressures and potential under-utilization of assets; the impact of fluctuations in costs (including labor and labor-related costs, energy costs, freight rates and raw materials, including paper and the materials to manufacture ink) an ...

Financial Data and Key Metrics Changes - Adjusted EBITDA increased by $11 million, or 24%, in the quarter, driven by net sales growth, improved manufacturing productivity, and cost reduction initiatives [5][39] - Net sales increased by 3% in the quarter, attributed to higher product sales in the United States and Mexico, as well as increased agency solution sales [17][25] - Adjusted diluted earnings per share rose to $0.15 in Q1 2023 from $0.04 in Q1 2022, primarily due to higher adjusted net earnings and stock repurchases [26] - Net debt increased by $87 million to $632 million as of March 31, 2023, with a debt leverage ratio of 2.39x, up 23 basis points from the previous quarter [13][27] Business Line Data and Key Metrics Changes - Growth in net sales was driven by the Mexico operations, catalogs, and agency solutions offerings, despite organic declines in large-scale print [25][12] - The company continues to gain segment share in large-scale print, winning significant contracts such as Reader's Digest [12] Market Data and Key Metrics Changes - The company is focused on accelerating market penetration and gaining visibility with new brands and verticals through participation in industry events [20] - The company hosted its 23rd Postal conference, which attracted approximately 300 clients, focusing on effective print delivery [21] Company Strategy and Development Direction - The company is pursuing a growth strategy as a marketing experience (MX) company, emphasizing integrated service excellence and evolving its culture [6][7] - The company aims to capitalize on its unique maker culture to attract top talent in the marketing industry [9] - The company is committed to reducing complexities for clients by providing integrated marketing solutions across all media channels [33] Management's Comments on Operating Environment and Future Outlook - Management noted that economic uncertainty has led clients to adopt a more conservative approach to marketing investments [5] - The company expects lower print volumes for the remainder of the year due to ongoing macroeconomic concerns, despite positive first-quarter growth [28] - Management reaffirmed the 2023 guidance and expressed confidence in achieving the low end of the targeted debt leverage range by year-end [27][43] Other Important Information - Free cash flow was negative $79 million in Q1 2023, primarily due to working capital timing and capital expenditures [40] - The company maintains strong liquidity with $321 million available under its revolving credit agreement and $9 million in cash [41] Q&A Session Summary - No specific questions or answers were documented in the provided content, indicating a smooth conference call with no significant inquiries from participants [31][32]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) Provides essential identification details for the company's quarterly report filing [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides the basic identification details for Quad/Graphics, Inc.'s Form 10-Q filing for the quarter ended March 31, 2023, including its incorporation state, address, contact number, and SEC filing status - Quad/Graphics, Inc. is a **Wisconsin-incorporated** company, filing a **Quarterly Report (Form 10-Q)** for the period ended March 31, 2023[2](index=2&type=chunk) Title of each class, Trading Symbol(s), and Name of each exchange on which registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Class A Common Stock, par value $0.025 per share | QUAD | The New York Stock Exchange | Outstanding Common Stock Shares as of April 28, 2023 | Class | Outstanding as of April 28, 2023 | | :----------------- | :------------------------------- | | Class A Common Stock | 39,153,019 | | Class B Common Stock | 13,556,858 | | Class C Common Stock | — | [PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) Presents the unaudited condensed consolidated financial statements and related disclosures for the reporting period [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 of Quad/Graphics, Inc. for the three months ended March 31, 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 charges, and other financial instruments [Condensed Consolidated Statements of Operations (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) Details the company's revenues, expenses, and net loss for the three months ended March 31, 2023 and 2022 | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | Change (YoY) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :------------- | | Net sales | $766.5 | $744.2 | +$22.3 (+3.0%) | | Products | $607.9 | $580.9 | +$27.0 (+4.6%) | | Services | $158.6 | $163.3 | -$4.7 (-2.9%) | | Total cost of sales | $617.5 | $619.6 | -$2.1 (-0.3%) | | Selling, general and administrative expenses | $89.2 | $79.1 | +$10.1 (+12.8%) | | Depreciation and amortization | $33.7 | $36.5 | -$2.8 (-7.7%) | | Restructuring, impairment and transaction-related charges | $26.0 | $3.6 | +$22.4 (+622.2%) | | Operating income | $0.1 | $5.4 | -$5.3 (-98.1%) | | Interest expense | $16.3 | $9.3 | +$7.0 (+75.3%) | | Net loss | $(24.6) | $(1.0) | -$23.6 (-2360%) | | Basic and diluted loss per share | $(0.50) | $(0.02) | -$0.48 | | Weighted average common shares outstanding (in millions) | 49.2 | 51.5 | -2.3 (-4.5%) | [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) Reports the net loss and other comprehensive income components for the three months ended March 31, 2023 and 2022 | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net loss | $(24.6) | $(1.0) | | Other comprehensive income, net of tax | $7.2 | $1.9 | | Comprehensive income (loss) | $(17.4) | $0.9 | [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2023, and December 31, 2022 | Asset/Liability Category | March 31, 2023 (in millions) | December 31, 2022 (in millions) | Change (QoQ) | | :----------------------------------- | :--------------------------- | :------------------------------ | :----------- | | Cash and cash equivalents | $8.7 | $25.2 | -$16.5 | | Total current assets | $642.1 | $704.5 | -$62.4 | | Total assets | $1,626.9 | $1,701.8 | -$74.9 | | Total current liabilities | $760.4 | $795.4 | -$35.0 | | Long-term debt | $478.9 | $506.7 | -$27.8 | | Total liabilities | $1,472.4 | $1,528.9 | -$56.5 | | Total shareholders' equity | $154.5 | $172.9 | -$18.4 | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Summarizes the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 | Cash Flow Activity | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net cash used in operating activities | $(50.6) | $(16.9) | | Net cash used in investing activities | $(26.4) | $(18.7) | | Net cash provided by (used in) financing activities | $60.3 | $(6.1) | | Net decrease in cash and cash equivalents | $(16.5) | $(41.6) | | Cash and cash equivalents at end of period | $8.7 | $138.3 | [Condensed Consolidated Statements of Shareholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Unaudited)) Details changes in the company's shareholders' equity components for the three months ended March 31, 2023 | Shareholder Equity Component | Balance at Dec 31, 2022 (in millions) | Net Loss (in millions) | Balance at Mar 31, 2023 (in millions) | | :----------------------------------- | :------------------------------------ | :--------------------- | :------------------------------------ | | Common Stock Amount | $1.4 | — | $1.4 | | Additional Paid-in Capital | $841.8 | — | $838.5 | | Treasury Stock Amount | $(23.5) | — | $(21.2) | | Accumulated Deficit | $(518.5) | $(24.6) | $(543.1) | | Accumulated Other Comprehensive Loss | $(128.3) | $7.2 | $(121.1) | | Quad's Shareholders' Equity | $172.9 | $(17.4) | $154.5 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides additional information and explanations for the figures presented in the condensed consolidated financial statements [Note 1. Basis of Presentation](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation) Explains the accounting policies and significant judgments used in preparing the financial statements - The Company's quarterly results are **seasonal**, with net sales and operating income typically higher in the **third and fourth quarters** due to increased back-to-school and holiday-related advertising and 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's products and services[26](index=26&type=chunk) [Note 2. Revenue Recognition](index=9&type=section&id=Note%202.%20Revenue%20Recognition) Details the company's policies and disaggregated revenue streams from contracts with customers Disaggregated Revenue by Segment and Offering (Three Months Ended March 31, 2023 vs. 2022) (in millions) | Category | United States Print and Related Services (2023) | International (2023) | Total (2023) | United States Print and Related Services (2022) | International (2022) | Total (2022) | | :------------------------------------------ | :---------------------------------------------- | :------------------- | :----------- | :---------------------------------------------- | :------------------- | :----------- | | **Products** | | | | | | | | Catalog, publications, retail inserts and directories | $360.9 | $57.3 | $418.2 | $341.7 | $60.5 | $402.2 | | Direct mail and other printed products | $142.0 | $45.9 | $187.9 | $149.2 | $26.9 | $176.1 | | Other | $1.6 | $0.2 | $1.8 | $2.4 | $0.2 | $2.6 | | **Total products** | **$504.5** | **$103.4** | **$607.9** | **$493.3** | **$87.6** | **$580.9** | | **Services** | | | | | | | | Logistics services | $64.4 | $5.1 | $69.5 | $71.0 | $5.3 | $76.3 | | Marketing services and medical services | $88.7 | $0.4 | $89.1 | $86.8 | $0.2 | $87.0 | | **Total services** | **$153.1** | **$5.5** | **$158.6** | **$157.8** | **$5.5** | **$163.3** | | **Total net sales** | **$657.6** | **$108.9** | **$766.5** | **$651.1** | **$93.1** | **$744.2** | - The Company **capitalizes certain sales incentives** and **defers contract acquisition costs** for contracts over one year, amortizing them on a straight-line basis over the estimated contract life[32](index=32&type=chunk) [Note 3. Restructuring, Impairment and Transaction-Related Charges](index=10&type=section&id=Note%203.%20Restructuring,%20Impairment%20and%20Transaction-Related%20Charges) Outlines the nature and amounts of charges related to restructuring, asset impairments, and transaction costs Restructuring, Impairment and Transaction-Related Charges (Three Months Ended March 31, 2023 vs. 2022) (in millions) | Charge Type | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Employee termination charges | $13.1 | $1.1 | | Impairment charges | $9.5 | $0.1 | | Transaction-related charges | $0.6 | $0.2 | | Integration costs | $0.5 | — | | Other restructuring charges | $2.3 | $2.2 | | **Total** | **$26.0** | **$3.6** | - Impairment charges of **$9.5 million** in Q1 2023 were primarily for machinery and equipment no longer utilized due to facility consolidations and capacity reduction activities[36](index=36&type=chunk) - Restructuring reserves at March 31, 2023, totaled **$16.8 million**, with **$12.6 million** in short-term liabilities and **$3.6 million** in long-term liabilities[39](index=39&type=chunk) [Note 4. Receivables](index=12&type=section&id=Note%204.%20Receivables) Describes the company's accounts receivable and the allowance for credit losses - The Company recorded credit loss expense of **$0.9 million** in Q1 2023, an increase from **$0.7 million** in Q1 2022[42](index=42&type=chunk) Allowance for Credit Losses Activity (Three Months Ended March 31, 2023) (in millions) | Activity | Amount (in millions) | | :-------------------------- | :------------------- | | Balance at December 31, 2022 | $26.4 | | Provisions | $0.9 | | Write-offs | $(0.7) | | Translation | $0.2 | | Balance at March 31, 2023 | $26.8 | [Note 5. Inventories](index=12&type=section&id=Note%205.%20Inventories) Provides a breakdown of the company's inventory components Inventory Components (March 31, 2023 vs. December 31, 2022) (in millions) | Inventory Component | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :-------------------------------- | :--------------------------- | :------------------------------ | | Raw materials and manufacturing supplies | $150.6 | $173.7 | | Work in process | $44.4 | $38.3 | | Finished goods | $44.3 | $48.7 | | **Total** | **$239.3** | **$260.7** | [Note 6. Commitments and Contingencies](index=13&type=section&id=Note%206.%20Commitments%20and%20Contingencies) Discloses the company's legal, environmental, and other contractual obligations and potential liabilities - Management does not expect current lawsuits or environmental remediation obligations to have a **material impact** on the condensed consolidated financial statements[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 7. Debt](index=13&type=section&id=Note%207.%20Debt) Details the company's debt instruments, interest rates, and compliance with debt covenants - The Company transitioned its Senior Secured Credit Facility reference rate from LIBOR to SOFR effective February 1, 2023, with **no material financial statement impact**[47](index=47&type=chunk) - In Q1 2022, the Company repurchased and canceled **$2.4 million** of its 7.0% Senior Unsecured Notes due May 1, 2022, to reduce interest expense[48](index=48&type=chunk) [Note 8. Income Taxes](index=13&type=section&id=Note%208.%20Income%20Taxes) Explains the company's income tax expense, effective tax rate, and unrecognized tax benefits - The estimated annual effective income tax rate for Q1 2023 differs from the statutory rate primarily due to estimated **non-deductible expenses**, **foreign branch income**, and increases in **valuation allowance reserves**[49](index=49&type=chunk) - The Company anticipates a **$0.2 million** decrease in its liability for unrecognized tax benefits within the next twelve months due to audit resolutions or statute expirations[51](index=51&type=chunk) [Note 9. Financial Instruments and Fair Value Measurements](index=14&type=section&id=Note%209.%20Financial%20Instruments%20and%20Fair%20Value%20Measurements) Describes the company's financial instruments, including derivatives, and their fair value measurements - The Company holds one active interest rate swap contract with a notional amount of **$130.0 million**, fixed swap rate of **2.40%**, and termination date of March 28, 2024, which transitioned from LIBOR to SOFR in Q1 2023[53](index=53&type=chunk)[54](index=54&type=chunk) - Two interest rate collar contracts, effective February 1, 2023, with a notional amount of **$75.0 million** each, were entered into to reduce interest payment variability on variable-rate debt[56](index=56&type=chunk) - The fair value of the Company's total debt was approximately **$0.6 billion** at March 31, 2023, and December 31, 2022, measured using Level 2 inputs[60](index=60&type=chunk) [Note 10. Employee Retirement Plans](index=17&type=section&id=Note%2010.%20Employee%20Retirement%20Plans) Provides information on the company's pension and multiemployer retirement plans Net Pension Income Components (Three Months Ended March 31, 2023 vs. 2022) (in millions) | Component | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Interest cost | $(4.4) | $(2.4) | | Expected return on plan assets | $5.0 | $5.6 | | Net periodic pension income | $0.6 | $3.2 | | Amortization of actuarial loss | $(0.2) | — | | **Net pension income** | **$0.4** | **$3.2** | - The Company has withdrawn from all significant Multiemployer Pension Plans (MEPPs) and accrued a withdrawal liability of **$27.3 million** as of March 31, 2023[66](index=66&type=chunk) [Note 11. Loss Per Share](index=17&type=section&id=Note%2011.%20Loss%20Per%20Share) Details the calculation of basic and diluted loss per share for the reporting periods - Due to net losses in Q1 2023 and Q1 2022, all equity incentive instruments were **anti-dilutive** and excluded from diluted loss per share calculation[68](index=68&type=chunk) Loss Per Share (Three Months Ended March 31, 2023 vs. 2022) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss (in millions) | $(24.6) | $(1.0) | | Basic weighted average number of common shares outstanding (in millions) | 49.2 | 51.5 | | Diluted weighted average number of common shares outstanding (in millions) | 49.2 | 51.5 | | Basic and diluted loss per share | $(0.50) | $(0.02) | [Note 12. Equity Incentive Programs](index=18&type=section&id=Note%2012.%20Equity%20Incentive%20Programs) Describes the company's equity-based compensation plans and related expenses Total Equity Incentive Compensation Expense (Three Months Ended March 31, 2023 vs. 2022) (in millions) | Expense Type | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Restricted Stock ("RS") and Restricted Stock Units ("RSU") equity awards expense | $0.9 | $1.7 | | RSU liability awards expense | — | $0.2 | | Deferred Stock Units ("DSU") awards expense | $0.1 | — | | **Total equity incentive compensation expense** | **$1.0** | **$1.9** | - Total future compensation expense related to equity incentive programs as of March 31, 2023, is estimated at **$10.7 million**, primarily for RS and RSU awards[70](index=70&type=chunk) [Note 13. Shareholders' Equity](index=19&type=section&id=Note%2013.%20Shareholders'%20Equity) Provides details on the company's common stock classes, share repurchases, and equity components Common Stock Shares (in millions) (March 31, 2023 vs. December 31, 2022) | Class | Authorized Shares | Outstanding (Mar 31, 2023) | Treasury (Mar 31, 2023) | Total Issued (Mar 31, 2023) | Outstanding (Dec 31, 2022) | Treasury (Dec 31, 2022) | Total Issued (Dec 31, 2022) | | :------------------------ | :---------------- | :--------------------------- | :---------------------- | :-------------------------- | :--------------------------- | :---------------------- | :-------------------------- | | Class A stock ($0.025 par value) | 105.0 | 40.1 | 2.4 | 42.5 | 39.2 | 3.4 | 42.6 | | Class B stock ($0.025 par value) | 80.0 | 13.6 | — | 13.6 | 13.6 | — | 13.6 | | Class C stock ($0.025 par value) | 20.0 | — | 0.5 | 0.5 | — | 0.5 | 0.5 | - Class A common shares have **one vote per share**, while Class B and Class C common shares have **ten votes per share**; liquidation rights are equal for all three classes[74](index=74&type=chunk) - The Company repurchased **64,271 shares** of Class A common stock for **$0.3 million** in Q1 2023, with **$89.8 million** remaining under the authorized repurchase program[76](index=76&type=chunk) [Note 14. Accumulated Other Comprehensive Loss](index=20&type=section&id=Note%2014.%20Accumulated%20Other%20Comprehensive%20Loss) Presents the changes in components of accumulated other comprehensive loss Changes in Accumulated Other Comprehensive Loss (Three Months Ended March 31, 2023) (in millions) | Component | Balance at Dec 31, 2022 (in millions) | Other Comprehensive Income before Reclassifications (in millions) | Amounts Reclassified to Net Earnings (in millions) | Net Other Comprehensive Income (in millions) | Balance at Mar 31, 2023 (in millions) | | :------------------------------------ | :------------------------------------ | :------------------------------------------------ | :----------------------------------------- | :----------------------------------- | :------------------------------------ | | Translation Adjustments | $(88.6) | $6.5 | — | $6.5 | $(82.1) | | Interest Rate Derivatives Adjustments | $(4.1) | $0.1 | $0.5 | $0.6 | $(3.5) | | Pension Benefit Plan Adjustments | $(35.6) | — | $0.1 | $0.1 | $(35.5) | | **Total** | **$(128.3)** | **$6.6** | **$0.6** | **$7.2** | **$(121.1)** | [Note 15. Segment Information](index=21&type=section&id=Note%2015.%20Segment%20Information) Provides financial data for the company's operating segments: United States Print and Related Services, International, and Corporate - Quad is a **global marketing experience company** with operating segments: **United States Print and Related Services**, **International**, and **Corporate**[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) Segment Net Sales and Operating Income (Three Months Ended March 31, 2023 vs. 2022) (in millions) | Segment | Products Net Sales (2023) | Services Net Sales (2023) | Operating Income (Loss) (2023) | Restructuring, Impairment and Transaction Related Charges (2023) | Products Net Sales (2022) | Services Net Sales (2022) | Operating Income (Loss) (2022) | Restructuring, Impairment and Transaction Related Charges (2022) | | :------------------------------------ | :------------------------ | :------------------------ | :----------------------------- | :--------------------------------------------------------------- | :------------------------ | :------------------------ | :----------------------------- | :--------------------------------------------------------------- | | United States Print and Related Services | $504.5 | $153.1 | $7.3 | $22.5 | $493.3 | $157.8 | $11.8 | $1.7 | | International | $103.4 | $5.5 | $7.7 | $2.6 | $87.6 | $5.5 | $3.7 | $1.6 | | Corporate | — | — | $(14.9) | $0.9 | — | — | $(10.1) | $0.3 | | **Total** | **$607.9** | **$158.6** | **$0.1** | **$26.0** | **$580.9** | **$163.3** | **$5.4** | **$3.6** | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&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 operational results for the three months ended March 31, 2023, compared to the same period in 2022. It covers an overview of the business, key performance metrics, industry trends, detailed analysis of operating results by segment, and a discussion of liquidity and capital resources [Cautionary Statement Regarding Forward-Looking Statements](index=24&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) Warns readers about the inherent risks and uncertainties associated with forward-looking business projections - Forward-looking statements are 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 quickly enough[89](index=89&type=chunk)[90](index=90&type=chunk)[94](index=94&type=chunk) [Overview](index=26&type=section&id=Overview) Introduces Quad as a global marketing experience company, outlining its strategic priorities and key performance metrics - Quad is a **global marketing experience company** serving over **2,900 clients** with approximately **15,000 employees** in **14 countries**, leveraging an integrated marketing platform for strategy, data & analytics, technology, media, creative, and managed services[95](index=95&type=chunk) - **Strategic Priorities**: - Walk in the Shoes of Clients: Focus on client needs, problem-solving, and strengthening relationships at higher organizational levels[96](index=96&type=chunk) - Grow the Business Profitably: Acquire new clients, expand existing accounts with holistic solutions, and make disciplined investments in growth and talent[97](index=97&type=chunk) - Advance One-of-a-Kind Integrated Marketing Platform: Continuously enhance the platform through innovation, Lean Enterprise methodologies, and strategic divestitures[98](index=98&type=chunk) - Empower Employees: Foster a culture of trust, innovation, and growth through flexible work, talent acquisition, training, and community engagement[101](index=101&type=chunk) - Enhance Financial Strength and Create Shareholder Value: Drive profitable growth, maximize Free Cash Flow, maintain a strong balance sheet, and strategically allocate capital for debt reduction, investments, and shareholder returns[106](index=106&type=chunk) - The Company's total liquidity as of March 31, 2023, was **$330.1 million**, comprising **$321.4 million** unused revolving credit capacity and **$8.7 million** cash and cash equivalents[107](index=107&type=chunk)[162](index=162&type=chunk) - **Key Performance Metrics**: - Net sales growth: Measures ability to increase sales through existing and new clients, and expanded solutions[110](index=110&type=chunk) - EBITDA and EBITDA margin: Assess operating performance by increasing revenues and controlling variable expenses[111](index=111&type=chunk) - Net cash provided by (used in) operating activities: Evaluates liquidity for meeting obligations and funding investments[112](index=112&type=chunk) - Free Cash Flow: Quantifies cash available for balance sheet strengthening, strategic investments, and shareholder returns[113](index=113&type=chunk) - Debt Leverage Ratio: Monitors debt levels for optimal business operation and capital capacity[114](index=114&type=chunk)[115](index=115&type=chunk) - **Macroeconomic conditions**, including **rising interest rates**, **inflationary cost pressures** on raw materials (paper, ink, energy), **labor shortages**, and distribution challenges, are expected to continue impacting the Company's results through fiscal year 2023[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) [Results of Operations for the Three Months Ended March 31, 2023, Compared to the Three Months Ended March 31, 2022](index=32&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031,%202023,%20Compared%20to%20the%20Three%20Months%20Ended%20March%2031,%202022) Analyzes the company's financial performance, including sales, expenses, and profitability, for the current and prior-year quarters Summary Results (Three Months Ended March 31, 2023 vs. 2022) (in millions) | Metric | March 31, 2022 | Restructuring, Impairment and Transaction-related Charges Impact | Other Operating Income Elements Impact | Interest Expense Impact | Net Pension Income Impact | Income Taxes Impact | March 31, 2023 | | :------------------- | :------------- | :------------------------------------------------------------- | :------------------------------------- | :---------------------- | :------------------------ | :------------------ | :------------- | | Operating Income | $5.4 | $(22.4) | $17.1 | N/A | N/A | N/A | $0.1 | | Operating Margin | 0.7% | (2.9)% | 2.2% | N/A | N/A | N/A | 0% | | Net Loss | $(1.0) | $(16.8) | $12.9 | $(5.3) | $(2.1) | $(12.3) | $(24.6) | | Diluted Loss Per Share | $(0.02) | $(0.35) | $0.27 | $(0.11) | $(0.04) | $(0.25) | $(0.50) | - Total net sales increased by **$22.3 million (3.0%)** to **$766.5 million** in Q1 2023, driven by a **4.6% increase** in product sales, partially offset by a **2.9% decrease** in service sales[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - Cost of product sales increased by **$13.0 million (2.6%)** due to higher paper costs and print volumes, while cost of service sales decreased by **$15.1 million (13.0%)** due to lower freight costs and other initiatives[137](index=137&type=chunk)[138](index=138&type=chunk) - Selling, general and administrative expenses increased by **$10.1 million (12.8%)** to **$89.2 million**, primarily due to higher employee-related and selling-related costs[139](index=139&type=chunk) - Depreciation and amortization decreased by **$2.8 million (7.7%)** due to fully depreciated property, plant and equipment[140](index=140&type=chunk) - Restructuring, impairment and transaction-related charges significantly increased by **$22.4 million** to **$26.0 million**, primarily due to higher employee termination charges (**$12.0 million** increase) and impairment charges (**$9.4 million** increase)[141](index=141&type=chunk) EBITDA and EBITDA Margin (Three Months Ended March 31, 2023 vs. 2022) (in millions) | Metric | March 31, 2023 (in millions) | % of Net Sales (2023) | March 31, 2022 (in millions) | % of Net Sales (2022) | | :-------------------------- | :--------------------------- | :-------------------- | :--------------------------- | :-------------------- | | EBITDA (non-GAAP) | $34.2 | 4.5% | $45.1 | 6.1% | - United States Print and Related Services segment operating income decreased by **$4.5 million (38.1%)** to **$7.3 million**, primarily due to a **$20.8 million** increase in restructuring, impairment and transaction-related charges[150](index=150&type=chunk) - International segment operating income increased by **$4.0 million (108.1%)** to **$7.7 million**, driven by increased print volume and pricing, and cost saving initiatives, primarily in Mexico[157](index=157&type=chunk) - Corporate operating expenses increased by **$4.8 million (47.5%)** to **$14.9 million**, mainly due to a **$3.2 million** increase in employee-related costs[160](index=160&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's cash flows, debt levels, and ability to meet its financial obligations and fund operations - Net cash used in operating activities increased by **$33.7 million** to **$50.6 million** in Q1 2023, primarily due to increased cash used in changes in operating assets and liabilities and decreased cash from earnings[164](index=164&type=chunk) - Net cash used in investing activities increased by **$7.7 million** to **$26.4 million**, mainly due to a **$9.6 million** increase in purchases of property, plant and equipment[165](index=165&type=chunk) - Net cash provided by financing activities increased by **$66.4 million** to **$60.3 million**, primarily due to a **$64.7 million** increase in net borrowings of debt and lease obligations[166](index=166&type=chunk) Free Cash Flow (Non-GAAP) (Three Months Ended March 31, 2023 vs. 2022) (in millions) | Metric | March 31, 2023 (in millions) | March 31, 2022 (in millions) | | :--------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(50.6) | $(16.9) | | Less: purchases of property, plant and equipment | $28.7 | $19.1 | | **Free Cash Flow (non-GAAP)** | **$(79.3)** | **$(36.0)** | Debt Leverage Ratio (Non-GAAP) (March 31, 2023 vs. December 31, 2022) (in millions) | Metric | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :------------------------------------------------- | :--------------------------- | :------------------------------ | | Total debt and finance lease obligations | $640.2 | $570.2 | | Less: Cash and cash equivalents | $8.7 | $25.2 | | **Net Debt (non-GAAP)** | **$631.5** | **$545.0** | | Divided by: Adjusted EBITDA (non-GAAP) | $263.7 | $252.2 | | **Debt Leverage Ratio—Net Debt (non-GAAP)** | **2.39 x** | **2.16 x** | - The Debt Leverage Ratio increased to **2.39x** at March 31, 2023, from **2.16x** at December 31, 2022, primarily due to an **$86.5 million** increase in Net Debt, but remains within management's target range of **2.0x to 2.5x**[176](index=176&type=chunk) - The Company was in compliance with all financial covenants in its debt agreements as of March 31, 2023, including Total Leverage Ratio (**2.39 to 1.00** vs. max **3.75 to 1.00**) and Senior Secured Leverage Ratio (**2.37 to 1.00** vs. max **3.50 to 1.00**)[178](index=178&type=chunk)[180](index=180&type=chunk) - The Company repurchased **64,271 shares** of Class A common stock for **$0.3 million** in Q1 2023, with **$89.8 million** remaining under the **$100.0 million** share repurchase program authorized in 2018[183](index=183&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&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 [Interest Rate Risk](index=43&type=section&id=Interest%20Rate%20Risk) Assesses the company's exposure to fluctuations in interest rates on its variable-rate debt and hedging strategies - The Company is exposed to interest rate risk on **$342.2 million** of variable rate debt (weighted average **7.1%**) and has hedged **$280.0 million** of variable rate debt to fixed rate using interest rate swaps and collars[188](index=188&type=chunk) - A hypothetical **10% increase** in market interest rates on variable rate debt would not materially impact interest expense, and a **10% change** in market rates would change the fair value of fixed rate debt by approximately **$0.1 million**[188](index=188&type=chunk) [Foreign Currency Risk and Translation Exposure](index=44&type=section&id=Foreign%20Currency%20Risk%20and%20Translation%20Exposure) Explains the company's exposure to foreign exchange rate movements and their impact on consolidated financial statements - The Company's foreign currency exposure is **limited** as most operating revenues and expenses are in local currencies, but **translation risk** impacts consolidated financial position[189](index=189&type=chunk)[190](index=190&type=chunk) - A hypothetical **10% adverse change** in foreign currency exchange rates would result in an approximate **$10.4 million** decrease in net current assets of foreign subsidiaries[190](index=190&type=chunk) [Credit Risk](index=44&type=section&id=Credit%20Risk) Describes how the company manages the risk of financial loss from clients failing to meet their obligations - The Company manages credit risk through client evaluations and continuous monitoring, maintaining an allowance for credit losses of **$26.8 million** as of March 31, 2023[193](index=193&type=chunk) - The Company has a diverse client base, with its largest client accounting for less than **5%** of net sales in Q1 2023[194](index=194&type=chunk) [Commodity Risk](index=45&type=section&id=Commodity%20Risk) Addresses the company's exposure to price volatility and supply chain pressures for key raw materials like paper, ink, and energy - Primary raw materials (paper, ink, energy) are subject to **price fluctuations** and **supply chain pressures**; the Company mitigates risk through **price adjustment clauses** in contracts and **natural gas hedges**[196](index=196&type=chunk)[197](index=197&type=chunk)[199](index=199&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 or cash flows, but could influence future client demand[201](index=201&type=chunk) [ITEM 4. Controls and Procedures](index=45&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 March 31, 2023 - The Company's disclosure controls and procedures were evaluated and deemed **effective** as of March 31, 2023[202](index=202&type=chunk) - There were **no material changes** in the Company's internal control over financial reporting during the fiscal quarter ended March 31, 2023[203](index=203&type=chunk) [PART II — OTHER INFORMATION](index=46&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) Contains additional non-financial information and disclosures not covered in Part I [ITEM 1A. Risk Factors](index=46&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[205](index=205&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's share repurchase activities for Class A common stock during the quarter ended March 31, 2023, under its authorized program Issuer Purchases of Equity Securities (Quarter Ended March 31, 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) | | :-------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------- | | January 1, 2023 to January 31, 2023 | — | — | — | 90.1 | | February 1, 2023 to February 28, 2023 | — | — | — | 90.1 | | March 1, 2023 to March 31, 2023 | 403,844 | 3.98 | 64,271 | 89.8 | | **Total** | **403,844** | | **64,271** | | - During Q1 2023, the Company repurchased **64,271 shares** of Class A common stock at a weighted average price of **$3.98 per share**, totaling **$0.3 million**, with **$89.8 million** remaining under the **$100.0 million** repurchase program[206](index=206&type=chunk) [ITEM 6. Exhibits](index=47&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications, written statements, and financial statements in iXBRL format - Exhibit (31.1): Certification of the Chief Executive Officer[210](index=210&type=chunk) - Exhibit (31.2): Certification of the Chief Financial Officer[210](index=210&type=chunk) - Exhibit (32): Written Statement of the Chief Executive Officer and Chief Financial Officer[210](index=210&type=chunk) - Exhibit (101): Financial statements in Inline eXtensible Business Reporting Language (iXBRL) format[210](index=210&type=chunk) - Exhibit (104): Cover Page Interactive Data File (iXBRL)[210](index=210&type=chunk) [Signatures](index=48&type=section&id=Signatures) This section contains the signatures of the principal executive officer and principal financial officer, certifying the filing of the report - The report was signed by **J. Joel Quadracci, Chairman, President and Chief Executive Officer**, and **Anthony C. Staniak, Chief Financial Officer**, on May 3, 2023[213](index=213&type=chunk)

Financial Performance - Net sales reached $32 billion in 2022, an 11% increase compared to 2021, excluding divestitures[60] - The company achieved an Adjusted EBITDA of $2522 million for the full year 2022[20] - Adjusted Diluted Earnings Per Share for the full year 2022 was $089[78] - Free Cash Flow for the year ended December 31, 2022, was $943 million[100] Debt Management - Net debt was reduced by $489 million, a 47% reduction over the past three years[46] - Net Debt as of December 31, 2022, was $545 million[22] - The Debt Leverage Ratio as of December 31, 2022, was 216x[22] - The company is targeting approximately 20x Debt Leverage by the end of 2023, a 55% reduction in debt since January 1, 2020[6] 2023 Guidance - The company anticipates an annual net sales change of 0% to 5% decline in 2023[84] - Full-year Adjusted EBITDA is projected to be between $210 million and $250 million in 2023[74]

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, 2022 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 ...