Quad/Graphics(US:QUAD)2025-10-29 19:49Financial Performance - Total net sales decreased by $86.8 million, or 12.9%, from $674.8 million in Q3 2024 to $588.0 million in Q3 2025 [146]. - Product sales decreased by $70.7 million, or 13.3%, primarily due to a $41.9 million decrease in paper sales and a $29.6 million decrease in print product lines [147]. - Service sales decreased by $16.1 million, or 11.1%, mainly due to a $12.4 million decrease in logistics sales [148]. - Total operating expenses decreased by $118.1 million, or 17.4%, from $679.7 million in Q3 2024 to $561.6 million in Q3 2025 [146]. - EBITDA increased by $25.6 million, reaching $45.3 million in Q3 2025, with an EBITDA margin of 7.7% compared to 2.9% in Q3 2024 [156]. - Net earnings improved to $10.2 million in Q3 2025 from a loss of $24.7 million in Q3 2024 [157]. - Net sales decreased by $174.5 million, or 8.9%, from $1,963.8 million in 2024 to $1,789.3 million in 2025, with product sales down 8.6% and service sales down 9.7% [180][181][182]. - Total operating expenses decreased by $234.7 million, or 11.9%, from $1,964.3 million in 2024 to $1,729.6 million in 2025, driven by reductions in cost of sales and selling, general, and administrative expenses [180][187]. - EBITDA increased by $38.8 million, from $79.5 million in 2024 to $118.3 million in 2025, with an EBITDA margin of 6.6% compared to 4.0% in the previous year [189][190]. Debt and Liquidity - Quad's total liquidity as of September 30, 2025, was $230.2 million, consisting of $224.0 million unused capacity under its revolving credit agreement and $6.2 million in cash [122]. - The Company's consolidated debt and finance lease obligations increased by $92.2 million during the nine months ended September 30, 2025, primarily due to $50.0 million in cash used in operating activities and $36.5 million in purchases of property, plant, and equipment [130]. - The Net Debt Leverage Ratio is monitored to determine the appropriate level of debt, which is critical for capital allocation and deployment [129]. - The Net Debt Leverage Ratio increased to 2.28x as of September 30, 2025, from 1.56x as of December 31, 2024, primarily due to a $115.2 million increase in Net Debt and a $20.0 million reduction in trailing twelve months Adjusted EBITDA [221]. - Total debt and finance lease obligations were $471.4 million as of September 30, 2025, compared to $379.2 million as of December 31, 2024 [221]. - The Company was in compliance with all financial covenants in its debt agreements as of September 30, 2025 [223]. Operational Changes - The acquisition of Enru co-mail assets on April 1, 2025, and the divestiture of European operations on February 28, 2025, impacted the comparability of results [106]. - The Company expects to incur additional restructuring and integration costs in future reporting periods related to eliminating excess manufacturing capacity and aligning its cost structure [143][177]. - The Company continues to face challenges from increased postage costs and reduced service standards from the USPS, which may lead clients to explore alternative delivery methods [135][136]. - The Company has invested significantly in mail preparation and optimization capabilities to mitigate the impact of postage cost increases [139]. Shareholder Returns - The company aims to maintain low net debt leverage while increasing return of capital to shareholders through dividends and share buybacks [121]. - The Company repurchased 1,439,535 shares of Class A common stock for a total of $7.8 million during the nine months ended September 30, 2025 [228]. - As of September 30, 2025, there were $69.7 million of authorized repurchases remaining under the share repurchase program [228]. Market Position and Strategy - The company serves approximately 2,100 clients across various industries, employing around 11,000 people in 11 countries [112]. - Quad's MX Solutions Suite integrates creative, production, and media solutions, enhancing marketing effectiveness and driving cost efficiencies [113]. - The company leverages a proprietary data stack representing over 250 million consumers to optimize audience targeting and marketing strategies [114]. - Quad's media services are supported by over $3.0 billion in marketplace leverage, providing cost-efficient options across all channels [119]. - The company focuses on increasing growth investments as a marketing experience company to fuel net sales growth [121]. - Quad's comprehensive testing services enable clients to gauge media effectiveness and optimize marketing strategies at a lower cost [114]. Cost Management - The Company's operating income for the three months ended September 30, 2025, was $26.4 million, with an operating margin of 4.5% [142]. - Restructuring, impairment, and transaction-related charges decreased by $32.0 million, or 81.4%, from $39.3 million in Q3 2024 to $7.3 million in Q3 2025 [153]. - Interest expense decreased by $4.2 million, or 24.7%, from $17.0 million in Q3 2024 to $12.8 million in Q3 2025 [156]. - Selling, general, and administrative expenses decreased by $7.5 million, or 8.5%, from $88.4 million in Q3 2024 to $80.9 million in Q3 2025 [151]. - Depreciation and amortization decreased by $5.1 million, or 20.9%, from $24.4 million in Q3 2024 to $19.3 million in Q3 2025 [152].