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Quad/Graphics(QUAD) - 2025 Q1 - Earnings Call Transcript
Quad/GraphicsQuad/Graphics(US:QUAD)2025-04-30 12:30

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 expenses [25] - 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 [25] 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 committed to growing its offerings through strategic investments in innovative solutions and superior talent while managing economic uncertainties [5] - Quad's focus on generative AI and partnerships with Google Cloud aims to enhance marketing effectiveness and personalization at scale [12][34] - The acquisition of Enru's co-mail assets is intended to expand postal optimization solutions and increase co-mail volumes [11][49] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are indications of dislocation in demand due to tariffs, there has not been a significant pullback in client marketing plans [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][32] - Management remains cautious about potential economic slowdowns and is prepared to adapt to changing demand environments [32] Other Important Information - The company completed the sale of its European operations for approximately $42 million and is progressing with the sale of additional properties [28] - The company 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, there hasn't been a significant trend of pullback in demand [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 opportunities if the postal service adjusts its pricing strategy [46] Question: Can you elaborate on the acquisition of Enru and its benefits? - The acquisition brings additional capabilities in high-density mailing and equipment upgrades, enhancing the company's co-mailing solutions [49][50] Question: What is the current status of in-store connect clients? - The company has expanded its in-store connect offering to over 45 stores, with plans for further growth in the mid-market grocery space [52][53] Question: How is the company leveraging AI in its marketing efforts? - The rollout of Audience Builder 2.0 is enhancing the ability to utilize the data stack for targeted marketing, showing strong performance in responsiveness [68][69]