Quad/Graphics(US:QUAD)2025-10-29 13:30Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $588 million, a decrease of 7% compared to Q3 2024, excluding a 6% impact from the divestiture of European operations [20] - Adjusted EBITDA was $53 million in Q3 2025, down from $59 million in Q3 2024, with an adjusted EBITDA margin improving from 8.7% to 8.9% year-to-date [21] - Adjusted diluted earnings per share increased by 19% to $0.31 in Q3 2025 from $0.26 in Q3 2024, and year-to-date adjusted diluted earnings per share rose by 33% to $0.65 in 2025 from $0.49 in 2024 [22] Business Line Data and Key Metrics Changes - Revenue mix as a percentage of total net sales increased by 2% in targeted print offerings, driven by growth in direct marketing, packaging, and in-store solutions [20] - Direct mail revenue increased by over 6% year-to-date, packaging grew by over 9%, and in-store solutions rose by 11% year-to-date [36] Market Data and Key Metrics Changes - The USPS announced it would not issue a January price increase for market-dominant mail, which is expected to positively impact marketers as they finalize their 2026 media plans [6][39] - High postage rates continue to significantly impact the industry, but the lack of a January increase is seen as favorable for clients [39] Company Strategy and Development Direction - The company is making targeted investments in AI-powered tools, data intelligence services, and retail media networks to diversify revenue and return to net sales growth by 2028 [4] - The strategic focus includes maximizing savings for clients while increasing marketing effectiveness through innovative solutions like co-mailing and audience intelligence [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future growth of In-Store Connect, citing strong sales lift results from campaigns with major clients [16] - The company is closely monitoring macroeconomic pressures, including inflation and tariffs, which could affect client marketing spend [31] Other Important Information - The company returned $19 million of capital to shareholders year-to-date through dividends and share repurchases, with a 50% increase in the quarterly dividend [25] - The company expects free cash flow in Q4 2025 to be between $137 million and $147 million, following a seasonal pattern of negative cash flow in the first nine months of the year [23] Q&A Session Summary Question: Trends in targeted print categories - Management noted that catalog sales are muted due to postal increases, while direct mail, packaging, and in-store solutions are seeing growth [36][37] Question: Impact of USPS postponing price increase - Management indicated that the postponement is favorable and could positively influence client spending for 2026 [39][40] Question: Updated guidance for net sales - Management discussed variability in direct mail as a transactional area that could impact sales outlook for Q4 [42][44] Question: Adjusted EBITDA and CapEx guidance - The midpoint for adjusted EBITDA was slightly decreased, while capital expenditures are expected to shift towards technology and automation [46][48] Question: Updates on In-Store Connect deployment - Management reported increased interest from clients and a strong pipeline for In-Store Connect, with positive feedback on new digital signage solutions [49][50]