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Quad/Graphics, Inc. (QUAD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered an in-line quarter operationally with notable beats versus consensus: revenue $629.4M vs $588.1M consensus, adjusted EBITDA $45.5M vs $41.6M consensus, and adjusted diluted EPS $0.20 vs $0.085 consensus; GAAP diluted EPS was $0.11 as restructuring charges fell materially year over year . Revenue decline of 4% (-2% organic) reflected lower paper, logistics, and agency sales plus the loss of a large grocery client; management reaffirmed full-year guidance and flagged tariff and USPS postage risks .
  • Free cash flow was -$100.3M (seasonal and working capital timing amid proactive paper buys ahead of potential tariffs), driving net debt up to $462.9M from $350.0M at year-end; management expects typical FCF seasonality with debt leverage ending ~1.5x in FY25 .
  • Strategic actions: completed sale of European ops (€41M), added two grocery partners to In-Store Connect, acquired Enru co-mail assets, increased dividend to $0.075 and repurchased 1.2M shares YTD ($6.7M) .
  • Call tone: constructive but cautious on tariffs and July postal rate hike; Q2 revenue/EBITDA expected lower sequentially before seasonal upswing in 2H; AI/data stack and retail media network momentum remain core narratives .

What Went Well and What Went Wrong

What Went Well

  • Material beat vs consensus across key metrics and improved profitability: net earnings of $5.8M vs loss in Q1’24; adjusted EPS doubled to $0.20; adjusted EBITDA $45.5M with improved manufacturing productivity and cost savings .
  • Strategic portfolio progress and commercial momentum: sale of European ops (€41M); two new regional grocers added to In-Store Connect; direct mail volumes +14% (sales +6%), supported by integrated MX wins across offerings .
  • Clear AI/data narrative and postal optimization innovations: “superior household-based data stack… AI-ready” and Audience Builder 2.0 roll-out; Household Fusion co-mail program and acquisition of Enru assets to deepen postal savings .

What Went Wrong

  • Top-line headwinds: net sales -4% (-2% organic) driven by lower paper/logistics/agency solutions and loss of a large grocery client; adjusted EBITDA margin compressed to 7.2% from 7.7% YoY .
  • Free cash flow and net debt worsened in Q1 due to working capital timing and proactive inventory (paper) purchases ahead of potential tariffs; net debt rose to $462.9M from $350.0M at 12/31/24 .
  • Near-term cadence weaker: management guided Q2 revenue and EBITDA below Q1 despite lapping the lost grocer, with seasonal softness and tariff uncertainty impacting demand visibility .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$654.8 $708.4 $629.4
GAAP Diluted EPS ($)($0.60) $0.09 $0.11
Adjusted Diluted EPS ($)$0.10 $0.36 $0.20
Adjusted EBITDA ($USD Millions)$50.6 $62.6 $45.5
Adjusted EBITDA Margin (%)7.7% 8.8% 7.2%
Free Cash Flow ($USD Millions)($70.1) $55.7 (FY) ($100.3)
Net Earnings ($USD Millions)($28.1) $4.7 $5.8
SegmentQ1 2024 Net Sales ($M)Q1 2024 Op Inc ($M)Q1 2025 Net Sales ($M)Q1 2025 Op Inc ($M)
United States Print & Related Services$578.9 ($1.3) $553.8 $31.7
International$75.9 $3.4 $75.6 $0.6
KPIsQ1 2024Q1 2025
Direct Mail Volume YoYN/A+14% (volume), +6% (sales)
Adjusted EPS ($)$0.10 $0.20
Free Cash Flow ($M)($70.1) ($100.3)
Net Debt ($M)$544.0 (as of 3/31/24) $462.9 (as of 3/31/25)
Shares Repurchased YTDN/A1.2M ($6.7M)
Q1 2025 Actual vs ConsensusConsensusActualBeat/Miss
Revenue ($USD Millions)588.1*629.4 Beat
Adjusted EBITDA ($USD Millions)41.6*45.5 Beat
Adjusted Diluted EPS ($)0.085*0.20 Beat

Values with asterisks retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (2/18/25)Current Guidance (4/29/25)Change
Organic Annual Net Sales ChangeFY 20252% to 6% decline 2% to 6% decline Maintained
Adjusted EBITDA ($M)FY 2025$180–$220 $180–$220 Maintained
Free Cash Flow ($M)FY 2025$40–$60 $40–$60 Maintained
Capital Expenditures ($M)FY 2025$65–$75 $65–$75 Maintained
Year-End Debt Leverage RatioFY 2025~1.5x ~1.5x Maintained
DividendQuarterly$0.075/share $0.075/share Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
AI/data & Google CloudAnnounced collaboration; expanding AI-driven solutions Continued investment in household-based data stack; AI tools emphasized Audience Builder 2.0 rollout; Google Cloud LLMs; case studies show strong responsiveness Strengthening
Postal rates & elasticityPostal changes cited as risk factor —USPS July 13 increase (~10%); 9-month catalog discount (10–12%) starting Oct 1 Elevated focus
Tariffs/macroInflation/high rates/recession concerns; divestiture plans Macroeconomic caution in outlook Limited direct supply chain exposure; client demand uncertainty; proactive paper purchases Heightened uncertainty
In-Store Connect (retail media)Save Mart test in 15 stores; adding chains Momentum continues Two new grocers; >45 stores with 30 more coming; home improvement deployment (550 screens) Expanding footprint
Portfolio optimization (Europe)Definitive agreement to sell majority of Europe (€41M EV) Close expected early 2025 Sale completed (€41M) Completed
Capital allocationDividend $0.05 and leverage to ~1.5x Dividend raised to $0.075; share repurchases ongoing 1.2M shares repurchased YTD ($6.7M); $0.075 dividend Ongoing

Management Commentary

  • “Our first quarter results were in-line with our expectations, and we remain on track to achieve our 2025 guidance.” — Joel Quadracci .
  • “Our powerful data capability… is enabled by technology to help our clients connect the right message with the right audience at the right time.” — Joel Quadracci .
  • “We estimate many of our mailing clients will experience an average of 10% increase in postage costs… USPS will test volume elasticity… with a 10% discount (up to 12% with add-ons).” — Joel Quadracci .
  • “We are closely monitoring the potential impacts of tariffs and recessionary pressures… We are reaffirming our 2025 guidance… and remain committed to returning capital to shareholders.” — CFO Tony Staniak .

Q&A Highlights

  • Demand cadence/seasonality: Despite lapping the lost grocer, management expects Q2 revenue and EBITDA below Q1 due to seasonal softness; sequential ramp expected in Q3/Q4 with peak holiday production .
  • Tariff impacts: Early signs of client marketing plan adjustments (e.g., Vietnam supply timing, pricing uncertainty), but not yet a broad trend; Quad’s direct tariff exposure limited under USMCA (Canada/Mexico compliant) .
  • Postal environment: Leadership change at USPS and catalog elasticity test could partially offset the July rate hike; management sees opportunity if macro noise doesn’t intensify .
  • AI execution: Audience Builder 2.0 with Google Cloud LLMs enhances audience selection and personalization; case studies evidencing improved responsiveness .
  • In-Store Connect scale: >45 stores with 30 more coming; mid-market grocers aggregating “eyeballs” to attract CPGs; expansion beyond grocery into home improvement channels .

Estimates Context

  • Q1 2025 beat: Revenue $629.4M vs $588.1M consensus*, adjusted EBITDA $45.5M vs $41.6M*, adjusted EPS $0.20 vs $0.085*; beats driven by lower restructuring/D&A/interest expense, manufacturing productivity, and cost reductions, partially offset by lower sales .
  • Forward look: Consensus for Q2 2025 implies EPS $0.14*, revenue $554.9M*, EBITDA $43.6M*, consistent with management’s directional guide of lower Q2 EBITDA than Q1 and then sequential improvement in Q3/Q4 .
  • Revision watch: Given Q1 beats and reaffirmed FY guide, estimates for 2H could drift higher if postal promotions aid volumes and MX wins (direct mail/retail media) continue; conversely, tariff-driven dislocations could cap top-line upside.

Values with asterisks retrieved from S&P Global.

Forward Consensus SnapshotQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)554.9*605.5*632.9*
Adjusted EBITDA ($USD Millions)43.6*51.6*54.2*
Adjusted Diluted EPS ($)0.14*0.27*0.36*

Key Takeaways for Investors

  • Solid execution against a challenging backdrop: Quad beat consensus on revenue, EBITDA, and EPS while reaffirming FY25 guidance; profitability benefits from productivity and cost controls appear durable .
  • Near-term setup: Expect softer Q2 before seasonal 2H recovery; watch for tariff developments and USPS catalog elasticity test to influence 2H mail volumes .
  • Strategic growth vectors: In-Store Connect scaling (>45 stores, +30 pending) and AI-enabled data stack (Audience Builder 2.0) underpin MX-led wins, notably in direct mail and omnichannel retail .
  • Cash flow/leverage path: Q1 FCF negative due to working capital timing and proactive inventory; management still targets ~1.5x year-end leverage, consistent with guidance .
  • Capital returns: $0.075 dividend and opportunistic buybacks (1.2M shares YTD) provide shareholder support; sustained cash generation will be key to funding growth and returns .
  • Risk monitor: Tariff-induced client marketing adjustments and July USPS rate hike are key variables; management cited limited direct tariff exposure but potential client impacts .
  • Trading implications: In-line to positive narrative with beats and guide reaffirmation; near-term softness in Q2 is known; watch for incremental wins in MX solutions, postal relief impact, and tariff clarity as catalysts into 2H.