Quad/Graphics Earnings Call: Innovation Amid Challenges

Quad/Graphics, Inc. Class A ((QUAD)) has held its Q2 earnings call. Read on for the main highlights of the call.

Quad/Graphics, Inc. Class A Earnings Call: Balancing Innovation and Challenges

Quad/Graphics, Inc. Class A’s recent earnings call reflected a mixed sentiment, showcasing the company’s continuous innovation and expansion in AI and data-driven marketing, which has spurred growth in targeted print and in-store solutions. However, the company is also grappling with declining net sales, a drop in adjusted EBITDA, and persistent postal rate challenges.

AI and Data Innovations

Quad has made significant strides in AI and data innovations, notably with the launch of Audience Builder 2.0. This AI-powered tool enhances data accessibility and audience targeting, potentially boosting client ROI. The integration of AI across various marketing processes is optimizing operations and improving client outcomes.

In-Store Connect Expansion

The company has successfully doubled the footprint of its In-Store Connect initiative with Save Mart Companies and partnered with Vallarta, enhancing consumer engagement. This expansion has resulted in a 5% to 20% product sales lift from participating brands, demonstrating the effectiveness of Quad’s in-store solutions.

Recognition and Industry Leadership

Quad continues to be recognized for its industry leadership, featuring among Ad Age’s top 25 world’s largest agency companies for the sixth consecutive year. Additionally, it earned a repeat spot on MM&M’s Agency 100 for excellence in healthcare marketing, reinforcing its strong market presence.

Successful New Campaigns

Quad’s Betty creative agency launched a successful campaign for Natrol, achieving impressive engagement with over 1.8 million YouTube views and 5.8 million Instagram reel views in under two months. This success highlights Quad’s creative capabilities and market reach.

Positive Cash Flow Improvements

The company reported a $16 million improvement in free cash flow from the previous year, attributed to reduced capital expenditures and proactive inventory management. This improvement underscores Quad’s commitment to financial efficiency.

Targeted Print Growth

Quad experienced growth in direct mail and packaging sales, which increased by 7%, and in-store sales grew by 13%, driven by its integrated marketing solutions. This growth highlights the company’s ability to adapt and thrive in the evolving print market.

Decline in Net Sales

Despite these successes, Quad faced a 4% decline in net sales in Q2 2025 compared to Q2 2024. This decrease was primarily due to lower paper and logistics sales, as well as the divestiture of European operations.

Adjusted EBITDA Decline

Adjusted EBITDA fell to $43 million in Q2 2025, down from $52 million in Q2 2024, with a margin decline from 8.2% to 7.6%. This decline was driven by lower sales and increased investments, posing a challenge for the company.

Ongoing Postal Rate Challenges

Rising postal rates continue to be a significant challenge for Quad, despite a 10% USPS catalog discount. These increases affect client marketing expenses and overall mail volume, impacting the company’s bottom line.

Loss of a Major Client

The loss of a major grocery client has negatively impacted net sales for the first half of 2025, contributing to a 3% decline compared to the first half of 2024. This loss underscores the competitive nature of the market.

Forward-Looking Guidance

Looking ahead, Quad reaffirmed its 2025 guidance, projecting a net sales decline between 2% to 6% compared to 2024, excluding the impact of the European operations divestiture. The company expects full-year adjusted EBITDA to range from $180 million to $220 million, with a midpoint of $200 million. Quad anticipates 2025 free cash flow between $40 million and $60 million and aims to reduce the net debt leverage ratio to approximately 1.5x by the end of the year. Strategic investments in AI and data capabilities remain a focus, despite challenges from postal rate increases.

In summary, Quad/Graphics, Inc. Class A’s earnings call highlighted a company at the crossroads of innovation and challenge. While AI and data-driven marketing innovations are driving growth, declining net sales and postal rate challenges present hurdles. The company’s forward-looking guidance reflects cautious optimism, with strategic investments aimed at sustaining growth and efficiency.