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Quad/Graphics, Inc. (QUAD)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered in-line EPS and an upside on revenue versus Street; Adjusted Diluted EPS was $0.14, matching consensus, with Net Sales of $571.9M beating estimates, while Adjusted EBITDA modestly missed by ~$0.3M; full-year guidance was reaffirmed .
  • Management emphasized AI-enabled data activation (Audience Builder 2.0), expanding In-Store Connect, and postal optimization as strategic growth vectors; targeted print categories (direct mail, packaging) and in-store media continued to show healthy momentum .
  • Macro headwinds (postal rate hikes, tariff uncertainty) remain, but management tone was “cautious optimism” and reiterated expectations for materially higher H2 profits due to seasonality, citing “quadruple higher Adjusted EBITDA” in Q3–Q4 vs Q2 .
  • Capital allocation remained balanced: dividend maintained ($0.075/share), $15M YTD capital returned (dividends + buybacks), and Enru co-mail asset acquisition to deepen postal savings solutions; net debt leverage targeted to ~1.5x by year-end .

What Went Well and What Went Wrong

  • What Went Well

    • Audience Builder 2.0 launch materially accelerates audience creation and positions Quad’s data stack for generative AI workflows; quote: “By year’s end, we expect... a large language model... to enable even faster audience creation using natural language prompts.” .
    • In-Store Connect expansion (Vallarta partnership, Save Mart footprint doubled) with demonstrated 5%–20% product sales lifts; quote: “Based on a sampling of data... average of 5%-20% product sales lift...” .
    • Targeted print momentum: “7% increases in sales... in direct mail and packaging and... 13% increase... for in-store,” underpinning the mix shift toward higher-margin offerings .

  • What Went Wrong

    • Year-over-year revenue declined 10% (ex-Europe divestiture: -4%) on lower paper/logistics sales; Adjusted EBITDA margin compressed to 7.6% (from 8.2%) .
    • Seasonally soft quarter (Q2 typically lowest volume), plus lapping loss of a large grocery client (~3% of revenue) weighed on top-line; Q2 revenue fell sequentially vs Q1 .
    • Postal rate increases and tariff uncertainty continue to pressure mailing volumes and client plans; management flagged ongoing monitoring and mitigation efforts .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Net Sales ($USD Millions)$634.2 $629.4 $571.9
Operating Income ($USD Millions)$15.1 $19.6 $13.7
Adjusted EBITDA ($USD Millions, non-GAAP)$51.8 $45.5 $43.3
Adjusted EBITDA Margin (%)8.2% 7.2% 7.6%
GAAP Diluted EPS ($)($0.06) $0.11 $0.00
Adjusted Diluted EPS ($, non-GAAP)$0.12 $0.20 $0.14

Segment Net Sales ($USD Millions)

SegmentQ2 2024Q1 2025Q2 2025
US Print & Related Services$544.3 $553.8 $524.5
International$89.9 $75.6 $47.4
Total$634.2 $629.4 $571.9

KPIs

KPIQ2 2024Q1 2025Q2 2025
Free Cash Flow ($USD Millions, quarter)—($100.3) $34.0
Net Debt ($USD Millions, period end)$532.0 (6/30/2024) $462.9 (3/31/2025) $448.2 (6/30/2025)
Debt Leverage Ratio (x)—2.11x (3/31/2025) 2.13x (6/30/2025)
Total Available Liquidity ($USD Millions)——$202

Vs. S&P Global Consensus (Estimates)

MetricQ1 2025 EstimateQ1 2025 ActualQ2 2025 EstimateQ2 2025 Actual
Revenue ($USD Millions)$588.05*$629.40 $554.85*$571.90
Primary EPS ($)$0.085*$0.20 $0.14*$0.14
EBITDA ($USD Millions)$41.55*$45.50 $43.60*$43.30

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Adjusted Annual Net Sales Change (ex-Europe)FY 20252% to 6% decline 2% to 6% decline Maintained
Full-Year Adjusted EBITDAFY 2025$180M–$220M $180M–$220M Maintained
Free Cash FlowFY 2025$40M–$60M $40M–$60M Maintained
Capital ExpendituresFY 2025$65M–$75M $65M–$75M Maintained
Year-End Debt Leverage RatioFY 2025~1.5x ~1.5x Maintained

Additional management cadence comment: expects “quadruple higher Adjusted EBITDA” in Q3 and Q4 vs Q2 due to seasonal production peak .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
AI/Technology initiativesGoogle Cloud LLMs to activate proprietary household-based data; At-Home Connect for trigger-based personalized direct mail Audience Builder 2.0 launched; LLM integration by year-end to enable natural-language audience building Accelerating
Supply chain/tariffsLimited direct exposure; forward paper buys to mitigate potential Canada tariffs; clients’ plans monitored No significant client pullbacks; cautious optimism; monitoring tariff impacts on clients and demand Stabilizing with vigilance
Postal rates/regulatoryUSPS hikes pressured volumes; advocacy for policy shifts; promo discounts noted 11–13% hike; USPS 9-month catalog discount (10%); PRC review considering CPI caps and annual increases Constructive engagement, potential relief
Product performance (Targeted Print, In-Store)Direct mail volumes up; in-store expansion underway (Save Mart, Homeland) 7% sales growth in direct mail/packaging, 13% in in-store; Vallarta partnership; Save Mart footprint doubled Improving mix
Regional trends (Mexico)Mexico growth in education book printing Continued strategic extension; Intl net sales down due to Europe divestiture Mixed (Mexico strong; Europe divested)
Capital allocationIncreased capex for innovation/retail media; dividend up 50%; buybacks resumed Dividend maintained ($0.075); $15M capital returned YTD; opportunistic buybacks Ongoing, balanced

Management Commentary

  • “Audience Builder 2.0… enables Quad employees to easily access our proprietary data stack to create complex, high-propensity audiences… integrating a large language model… [for] natural language prompts.”
  • “In-Store Connect… delivers measurable results… average of 5%-20% product sales lift… promotional campaigns… greater than 20%.”
  • “Direct mail and packaging… 7% increases in sales… and 13% increase… for in-store” driven by integrated MX approach tying data, creative, production, and media .
  • Postal reform outlook: PRC recognizes price hikes hurt volume; testing 10% catalog discount; exploring CPI-capped, annualized increases .
  • Strategic pipeline: AI across MX Intelligence/Creative/Production/Media to lower costs and improve campaign ROI .

Q&A Highlights

  • Postal rates: leadership transition at USPS; PRC review acknowledges volume harm; 9-month catalog discount starting October; longer-term hope for CPI caps and annual cadence .
  • Enru acquisition terms: $15M upfront, $2M later in 2025, earnout over five years; strengthens co-mail and postal optimization capabilities .
  • Asset sales: Sacramento building ~$5M closed; additional facilities (Effingham IL, Waukee IA, Greenville MI) marketed; timing could slip into 2026; year-end net debt guide includes expected proceeds .
  • Seasonality and trajectory: Q2 is lowest volume; expect higher revenue and EBITDA in Q3, with Q4 highest of the year; full-year within 2–6% decline guidance .
  • Tariff impact: limited direct exposure; proactive inventory; cautious optimism; continued monitoring of client supply chains .

Estimates Context

  • Q2 2025: Revenue beat ($571.9M vs $554.9M*), EPS in-line ($0.14 vs $0.14*), EBITDA modest miss ($43.3M vs $43.6M*). Q1 2025 similarly beat on revenue and EPS, and beat EBITDA .
  • With USPS discount testing and H2 seasonality, Street models for H2 margins likely need to reflect management’s “quadruple higher Adjusted EBITDA” vs Q2 and stronger volumes; FY EBITDA guide midpoint at $200M supports this .
    *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Execution: Revenue beat and EPS in-line amid soft seasonal quarter, with reaffirmed FY guide and a clear path to stronger H2 profitability on seasonality and mix shift to higher-margin offerings .
  • Strategic differentiation: AI-enabled data stack (Audience Builder 2.0) and integrated MX offering are translating to tangible client wins and improved ROI, likely sustaining targeted print and in-store growth .
  • Postal mitigation: Near-term 10% USPS catalog discount and PRC’s openness to CPI caps could moderate volume headwinds; Quad’s postal optimization (co-mail, Household Fusion) positions it to capture share and protect client economics .
  • Capital discipline: Dividend maintained; opportunistic buybacks; asset sale proceeds and FCF support deleveraging to ~1.5x by year-end despite investment in innovation and retail media .
  • Watch H2 cadence: Management expects Q3/Q4 to materially out-earn Q2; traders should look for sequential improvements in revenue/EBITDA and updates on postal discount impact and tariff stability as catalysts .
  • M&A tuck-ins aligned with strategy: Enru enhances postal savings capabilities and co-mail density; expect continued small, capability-enhancing moves rather than large-scale M&A .
  • Risk monitor: Persistent postal rate hikes (until reforms implemented) and tariff execution represent key swing factors; Quad’s mitigation and diversified mix help buffer impacts .