Quad/Graphics(US:QUAD)2024-07-31 17:54Financial Data and Key Metrics Changes - Net sales for Q2 2024 were $634 million, a 10% decline compared to Q2 2023, with year-to-date net sales at $1.3 billion, a 12% decline from the first half of 2023 [18][19] - Adjusted EBITDA for Q2 2024 was $52 million, up from $50 million in Q2 2023, with an adjusted EBITDA margin increase of 100 basis points to 8.2% [20] - Adjusted diluted earnings per share increased to $0.12 in Q2 2024 from $0.02 in Q2 2023, with year-to-date adjusted diluted earnings per share at $0.22 compared to $0.17 in 2023 [21] Business Line Data and Key Metrics Changes - Print volumes were negatively impacted by external headwinds, including postal rate increases and elevated interest rates, leading to a decline in paper, print, and agency solution sales [4][18] - Magazines and catalogs increased as a portion of net sales mix by 3% due to recent segment share wins, such as AARP [19] - The company launched "In-Store Connect" to enhance retail media networks, partnering with Save Mart and Homeland Stores to drive consumer engagement [6][28] Market Data and Key Metrics Changes - Latin American net sales decreased by 2% primarily due to lower educational book volume exported to the U.S. [19] - The retail media networks are expected to grow significantly, with eMarketer predicting ad spend in omnichannel retail media networks to exceed $100 billion by 2027 [5] Company Strategy and Development Direction - The company is focusing on expanding its presence in retail media networks and enhancing its marketing experience offerings through integrated service excellence [5][6] - The launch of "Betty," a creative agency, aims to provide fully integrated, flexible creative solutions to meet market demands [7][8] - The company is committed to managing costs as variable and optimizing its manufacturing platform for efficiency [4] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing macroeconomic headwinds, including postal rate increases and elevated interest rates, impacting sales guidance [26] - The company expects a seasonal ramp-up in sales during the second half of 2024, driven by restructuring benefits and increased sales during peak periods [48] - Management expressed confidence in the pipeline for new business and the potential for growth in verticals with significant expansion opportunities [17] Other Important Information - The company anticipates generating over $740 million in free cash flow and proceeds from asset sales from 2020 to 2024, aiming to reduce net debt by over $600 million during the same period [22] - The company reaffirmed its full-year guidance, expecting a net sales decline of 5% to 9% for 2024 [26][27] Q&A Session Summary Question: What is the pipeline for your retail media networks? - Management indicated that the retail media networks are developing quickly, with significant interest from retailers to capitalize on the opportunity [31][32] Question: How do you view competition in the retail media network landscape? - Management acknowledged competition but emphasized their unique full-service offering, which includes content creation and digital screen deployment [37][38] Question: Can you provide an update on asset sales? - Management confirmed that four properties are for sale, with ongoing interest and a belief that they will eventually sell [51][54] Question: How is the competitive environment affecting your business? - Management noted that while there are pressures, they have gained segment share and are well-positioned to help clients offset postal rate increases [55][56]