Core Insights - Quad/Graphics reported Q2 2025 results with adjusted diluted EPS of $0.14, meeting expectations, while GAAP revenue reached $571.9 million, exceeding estimates by $16.95 million [1][5][14] - Revenue declined by 9.8% year-over-year, attributed to the sale of European operations and lower paper and logistics sales [1][5][14] - The company reaffirmed its FY2025 outlook despite ongoing market uncertainties [1][15] Financial Performance - Adjusted diluted EPS (Non-GAAP) for Q2 2025 was $0.14, a 16.7% increase from $0.12 in Q2 2024 [2] - Revenue for Q2 2025 was $571.9 million, down from $634.2 million in Q2 2024, reflecting a 9.8% decline [2] - Adjusted EBITDA fell to $43.3 million, with a margin of 7.6%, down from 8.2% in the previous year [2][6] Business Overview - Quad/Graphics focuses on transforming traditional print services into comprehensive marketing solutions, emphasizing integrated, data-driven offerings [3][4] - The company aims to maintain long-standing client relationships, with its top 10 customers accounting for about 20% of sales [4] Operational Highlights - The company experienced a net loss of $(0.1) million in Q2 2025, an improvement from a $(2.8) million loss in the same period last year [6] - Cash flow remained negative, with free cash flow year-to-date at $(65.9) million, although better than the prior year [7] Strategic Initiatives - Quad/Graphics launched Audience Builder 2.0, an AI-powered tool for audience targeting, covering 92% of U.S. households [10] - The In-Store Connect platform expanded to over 45 locations, enhancing market penetration through partnerships with regional grocers [11] - The acquisition of Enru's co-mailing assets aims to improve postal optimization services [12] Segment Performance - The U.S. print and related services segment reported net sales of $524.5 million, while the International segment generated $47.4 million in sales [13] Future Guidance - Management expects adjusted annual net sales to decline between 2% and 6% for 2025, with adjusted EBITDA projected between $180 million and $220 million [14] - Free cash flow is anticipated to turn positive by year-end, estimated at $40 million to $60 million for 2025 [14]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $572 million, a decrease of 4% compared to Q2 2024, excluding a 6% impact from the divestiture of European operations [27] - Adjusted EBITDA was $43 million in Q2 2025, down from $52 million in Q2 2024, with the adjusted EBITDA margin declining from 8.2% to 7.6% [28] - Year-to-date adjusted diluted earnings per share increased to 34¢ in 2025 from 22¢ in 2024, attributed to higher earnings and share repurchases [29] Business Line Data and Key Metrics Changes - Revenue from targeted print offerings increased by 2%, driven by direct marketing, packaging, and in-store solutions, while large-scale print offerings decreased by 2% due to organic declines in magazines and retail inserts [27] - The company reported a 7% increase in sales for direct mail and packaging, and a 13% increase for in-store solutions [56] Market Data and Key Metrics Changes - The company noted that rising postal rates continue to challenge clients, but a new USPS catalog discount launching in October aims to alleviate some pressure [7] - The postal rate commission acknowledged that pricing increases have negatively impacted volume, leading to discussions about potential caps on future rate increases [43][44] Company Strategy and Development Direction - The company is investing in artificial intelligence to enhance marketing processes, focusing on process automation, cognitive insights, and cognitive engagement [10] - The launch of Audience Builder 2.0 aims to democratize access to the company's data stack, allowing for faster audience creation and improved client targeting [15][46] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the operating environment, noting that while there are concerns about tariffs, there has not been a significant pullback from clients [69] - The company reaffirmed its 2025 guidance, expecting net sales to decline by 2% to 6% compared to 2024, with a projected adjusted EBITDA range of $180 million to $220 million [34] Other Important Information - The company completed the sale of its Sacramento facility for approximately $5 million and made progress on the acquisition of Onur, a co-mailing and logistics provider [31][73] - The company plans to maintain a balanced capital allocation strategy, including returning capital to shareholders through dividends and share repurchases [32] Q&A Session Summary Question: What is the outlook on postal rates and the USPS? - Management expressed optimism about the new postmaster general and the potential for a 10% discount for catalogers, which could help mitigate volume declines due to rising rates [41][42] Question: Can you elaborate on the Audience Builder 2.0 tool? - The tool automates audience creation from the data stack, allowing users to generate audience lists using simple prompts, enhancing client targeting capabilities [46][48] Question: What are the trends in sales and the impact of the grocery client loss? - The grocery client represented about 3% of revenue, and while there was a decline in sales, the company expects increasing volumes in the upcoming quarters [65][66] Question: How is the company managing asset sales and net debt? - The company is actively selling facilities and has included estimates of potential sales in its net debt guidance, which is projected to decrease by $50 million [75][76]

Financial Performance & Guidance - Net sales for the second quarter of 2025 were $571.9 million, compared to $634.2 million in the second quarter of 2024[33] - Adjusted EBITDA for the second quarter of 2025 was $43.3 million, with an Adjusted EBITDA Margin of 7.6%[33, 51] - The company anticipates a 2% to 6% decline in adjusted annual net sales for 2025, excluding the divested European operations[41, 44] - Full-year Adjusted EBITDA is projected to be between $180 million and $220 million for 2025[41] - Free cash flow is expected to be between $40 million and $60 million for the full year 2025[41] Debt & Leverage - Net debt as of June 30, 2025, was $448.2 million[54] - The debt leverage ratio as of June 30, 2025, was 2.13x[54] - The company aims for a long-term targeted debt leverage range of 1.5x to 2.0x[43] Strategic Initiatives & Market Trends - Quad's proprietary core dataset features 250 million consumers, mapped to their physical home address[9] - A survey indicates that 71% of consumers feel a deeper connection and loyalty to brands experienced in physical stores[21] - 71% of consumers find print catalogs and magazines more authentic than digital campaigns[21]

Core Insights - Quad/Graphics, Inc. reaffirmed its full-year 2025 financial guidance while continuing to invest in strategic growth areas such as data and audience intelligence, AI-enabled tools, and in-store retail media networks [1][3][11] Recent Highlights - The second quarter results met expectations, with ongoing investments aimed at differentiating the company as a marketing experience provider [3][4] - Quad launched Audience Builder 2.0, an AI-powered tool enhancing audience targeting capabilities [4][7] - A new partnership was established with Vallarta Supermarkets, expanding the In-Store Connect retail media network [5][7] Financial Performance - Net Sales for Q2 2025 were $572 million, a 10% decline from $634 million in Q2 2024, with a 4% decline when excluding the impact of the European operations divestiture [7][8] - The company reported a net loss of $0.1 million in Q2 2025, an improvement from a net loss of $3 million in Q2 2024 [8][15] - Adjusted EBITDA for Q2 2025 was $43 million, down from $52 million in Q2 2024 [8][15] Year-to-Date Financial Results - For the six months ended June 30, 2025, net sales were $1.2 billion, a 7% decrease compared to the same period in 2024 [15] - Net earnings for the first half of 2025 were $6 million, compared to a net loss of $31 million in the same period in 2024 [15][29] - Free Cash Flow improved to negative $66 million in the first half of 2025, compared to negative $82 million in the same period in 2024 [15][40] Guidance for 2025 - The company maintains its guidance for 2025, projecting a 2% to 6% decline in adjusted annual net sales, adjusted EBITDA between $180 million to $220 million, and free cash flow of $40 million to $60 million [11][15]

Financial Data and Key Metrics Changes - In Q1 2025, net sales were $629 million, a decrease of 2% compared to Q1 2024, excluding the divestiture of European operations [23] - Adjusted EBITDA was $46 million in Q1 2025, down from $51 million in Q1 2024, with the adjusted EBITDA margin declining from 7.7% to 7.2% [24] - Adjusted diluted earnings per share doubled to $0.20 in Q1 2025 from $0.10 in Q1 2024, primarily due to higher net earnings and lower interest expense [26] - Free cash flow was negative $100 million in Q1 2025, compared to negative $70 million in Q1 2024, mainly due to timing of working capital [26] Business Line Data and Key Metrics Changes - Organic net sales decline was primarily due to lower paper, logistics, and agency solution sales, including the loss of a large grocery client [23] - Revenue as a percentage of total sales increased by 3% in Latin America and 2% in targeted print offerings, offset by a 4% decrease in large scale print offerings [23] Market Data and Key Metrics Changes - The company is closely monitoring the impacts of tariffs and recessionary pressures on clients' businesses, with tariffs affecting less than 11% of procurement spend [6][7] - The U.S. Postal Service announced a 10% increase in postage costs expected to take effect on July 13, which may impact many mailing clients [8] Company Strategy and Development Direction - The company is focused on becoming a marketing experience (MX) company, integrating creative production and media across digital and physical channels [5] - Strategic investments are being made in innovative solutions and talent while managing economic uncertainties [5] - The acquisition of Enru's co-mail assets aims to enhance postal optimization solutions and increase co-mail volumes [10] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are signs of dislocation in the market due to tariffs, there hasn't been a significant pullback in client demand [41] - The company expects organic net sales to decline by 2% to 6% in 2025, with adjusted EBITDA anticipated to be between $180 million and $220 million [31] - Management is optimistic about the potential for new client acquisitions and the effectiveness of integrated marketing solutions [47] Other Important Information - The company completed the sale of its European operations for approximately $42 million [28] - The company has increased its dividend by 50% from 2024 and has repurchased 1.2 million shares of Class A common stock year-to-date in 2025 [29] Q&A Session Summary Question: How has the external environment impacted demand outlook? - Management indicated that while there are some adjustments in marketing plans due to tariffs, overall demand has not significantly changed [41][42] Question: What are the implications of the upcoming postal rate increase? - Management noted that clients have built the 10% increase into their plans, and there is potential for promotional opportunities to offset this increase [46] Question: Can you elaborate on the acquisition of Enru's co-mail assets? - The acquisition brings additional capabilities in high-density mailing and equipment upgrades, enhancing the company's offerings [50][51] Question: What is the current status of in-store connect clients? - The company has expanded its in-store connect presence to over 45 stores, with plans for further growth [52] Question: How does the company utilize AI in its marketing strategies? - The company is rolling out Audience Builder 2.0, which leverages AI to enhance data accessibility and improve marketing performance [68][70]