Executive Summary

Q3 2025 delivered an EPS beat but a top-line miss: Adjusted diluted EPS of $0.31 vs S&P Global consensus $0.27; Net sales of $588.0M vs $605.5M consensus; Adjusted EBITDA of $52.6M modestly ahead of consensus $51.6M. The miss stemmed from lower paper sales, reduced print volumes, and softer logistics/agency revenue, partially offset by productivity gains . EPS/EBITDA consensus values marked with “*” were retrieved from S&P Global.
Guidance narrowed: Net sales decline now expected at 3%–5% (midpoint reaffirmed at -4%); Adjusted EBITDA tightened to $190–$200M (midpoint lowered to $195M); Free cash flow raised to $50–$60M; Capex cut to $50–$55M; year-end net debt leverage guided up to ~1.6x .
Operational priorities: Continued investment in AI audience tools (Snowflake Cortex prompts), data stack activation, and In‑Store Connect retail media network; management highlighted strong sales lift in recent CPG campaigns and patent-pending “wedge” signage form factor .
Capital returns and liquidity: $19M returned YTD ($11M dividends, $8M buybacks); dividend of $0.075/share declared for Dec 5; total available liquidity $166M; net debt leverage 2.28x at quarter-end reflecting seasonality and small acquisitions .
Stock reaction catalysts: The EPS beat and tighter FCF/EBITDA ranges may support near-term sentiment; however, the revenue miss and leverage uptick plus macro/postal backdrop could temper enthusiasm pending Q4 execution and retail media progress .

What Went Well and What Went Wrong

What Went Well

Adjusted EPS and EBITDA outperformed expectations: Adjusted diluted EPS rose 19% YoY to $0.31 and topped consensus; Adjusted EBITDA of $52.6M vs $51.6M consensus; margin improved YoY to 8.9% . EPS/EBITDA consensus marked “*” retrieved from S&P Global.
Strategic initiatives gained traction: Management integrated Snowflake’s natural language AI in Audience Builder, accelerating audience creation; Quad emphasized proprietary household-level data (92% of U.S. households) as a differentiator .
Retail media momentum: In‑Store Connect showed strong category sales lifts (DiGiorno +23%, Rockstar +25%, P&G laundry +8%), with a patent-pending vertical “wedge” signage receiving high client interest .

Management quote: “These innovations not only enhance client outcomes but also position Quad to drive long-term diversified growth, continue to improve operational efficiencies, and deliver sustained value to shareholders.” — Joel Quadracci, CEO

What Went Wrong

Top-line weakness: Net sales declined 13% YoY (7% ex-Europe divestiture) to $588.0M, reflecting lower paper sales, print volumes, and softer logistics/agency demand .
Leverage ticked up: Net debt leverage rose to 2.28x at September 30, with year-end guidance increased to ~1.6x (from ~1.5x) due to acquisition cash usage and lower-than-expected real estate proceeds .
Segment softness and mix: U.S. Print net sales fell and operating income declined vs prior year; International net sales down materially YoY following Europe divestiture; overall adjusted sales mix still transitioning .

Analyst concern: Q4 variability—management noted seasonal fluctuations with direct mail as a swing factor and reaffirmed net sales decline around ~4% at the midpoint .

Financial Results

Consolidated Metrics vs Prior Periods

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Net Sales ($USD Millions)	$674.8	$629.4	$571.9	$588.0
Diluted EPS (GAAP) ($)	-$0.52	$0.11	$0.00	$0.21
Adjusted Diluted EPS ($)	$0.26	$0.20	$0.14	$0.31
Adjusted EBITDA ($USD Millions)	$59.0	$45.5	$43.3	$52.6
Adjusted EBITDA Margin (%)	8.7%	7.2%	7.6%	8.9%

Segment Breakdown (Q3)

Segment	Net Sales Q3 2024 ($M)	Net Sales Q3 2025 ($M)	Operating Income Q3 2024 ($M)	Operating Income Q3 2025 ($M)
U.S. Print & Related Services	$579.1	$544.8	$51.2	$36.5
International	$95.7	$43.2	-$46.5	$2.5
Corporate	—	—	-$9.6	-$12.6
Total	$674.8	$588.0	-$4.9	$26.4

KPIs and Balance Sheet (YTD and Quarter-End)

KPI	9M 2024	9M 2025
Free Cash Flow ($USD Millions)	-$91.6	-$86.5
Net Cash Used in Operating Activities ($USD Millions)	-$45.9	-$50.0
Capital Expenditures ($USD Millions)	$45.7	$36.5

Item	Sep 30, 2024	Dec 31, 2024	Sep 30, 2025
Net Debt ($USD Millions)	$490.0	$350.0	$465.2
Net Debt Leverage Ratio (x)	—	1.56x	2.28x
Liquidity ($USD Millions)	—	—	$166
Dividend per Share ($)	—	—	$0.075 (declared)
Share Repurchases (2025)	—	—	$8M; 1.4M shares

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Annual Net Sales Change	FY 2025	2% to 6% decline	3% to 5% decline	Narrowed; midpoint maintained at -4%
Full-Year Adjusted EBITDA	FY 2025	$180M to $220M	$190M to $200M	Narrowed; midpoint lowered to $195M
Free Cash Flow	FY 2025	$40M to $60M	$50M to $60M	Raised midpoint; narrowed
Capital Expenditures	FY 2025	$65M to $75M	$50M to $55M	Lowered
Year-End Net Debt Leverage Ratio	FY 2025	~1.5x	~1.6x	Raised

Earnings Call Themes & Trends

Topic	Q1 2025 (Apr)	Q2 2025 (Jul)	Q3 2025 (Oct)	Trend
AI/Data stack activation	Audience Builder 2.0 rollout; Google Cloud/Large Language Models vision	Audience Builder 2.0 launched; enhanced client use cases and ROAS	Natural language AI chat via Snowflake Cortex; faster audience builds	Accelerating adoption and sophistication
Postal rates	USPS July ~10% increase; 9-month catalog discount from Oct	PRC review acknowledges rate/volume trade-off; relief via discount	USPS will not raise market-dominant prices in Jan; co-mail savings (Onru) ramping	Tailwinds building; optimization offsets headwinds
Tariffs/macro	Limited direct exposure; client monitoring	No significant pullback; cautious optimism	No significant pullback; pass-through of ink/pigment cost via Jan 1 price increase	Manageable, monitored
In‑Store Connect	Expansion with Save Mart; home improvement retailer screens	Category lifts averaging 5–20%; broader deployments	Strong lifts (DiGiorno +23%, Rockstar +25%, P&G +8%); patent-pending “wedge” signage; pipeline growing	Building momentum
Asset sales	Sacramento sale (~$5M); Greenville closure	Continued facility sales; proceeds fund strategy	Effingham sale ($6.5M) at lower $/sqft; more properties for sale	Ongoing with mixed valuations
Debt/Liquidity	Liquidity $209M; leverage 2.11x	Liquidity $202M	Liquidity $166M; TTM leverage 2.28x; new bank (Flagstar) added	Liquidity down, leverage up on seasonality/acquisition

Management Commentary

Strategy and innovation: “Through targeted investments in AI-powered tools and systems, data and audience intelligence services, and our In-Store Connect retail media network... These innovations... position Quad to drive long-term diversified growth... and deliver sustained value to shareholders.” — Joel Quadracci, CEO
Guidance discipline: “We are narrowing our full-year 2025 Adjusted Annual Net Sales Change guidance and reaffirming a 4% decline at the midpoint... We are also narrowing full-year Adjusted EBITDA and Free Cash Flow within our original guidance ranges.” — Tony Staniak, CFO
Postal optimization: “We expanded our co-mailing capabilities by acquiring the co-mail assets of Onru... generating additional savings through economies of scale.” — Joel Quadracci
Retail media progress: “We introduced advancements... three new digital signage form factors... Nestlé DiGiorno experienced a 23% sales lift... Rockstar 25%... Procter & Gamble 8%.” — Joel Quadracci

Q&A Highlights

Targeted print growth: Direct mail up >6% YTD; packaging >9%; in‑store +11% — driven by data-personalization and consultative wins .
Q4 variability: Direct mail mix can swing; management reaffirmed full-year net sales decline ~4% excluding Europe .
Postal environment: No January price hike is a positive; Onru high-density co-mail is delivering larger-than-anticipated discounts; watch July actions .
Asset sales: Effingham pricing lower due to location; remaining properties smaller with expectations guided by historical norms .
Capital structure: Liquidity $166M after adding Flagstar; blended interest 7.1%; ~70% of debt pays lower interest if rates decline .

Estimates Context

Metric	Q3 2025 Consensus	Q3 2025 Actual	Surprise
Revenue ($USD Millions)	$605.5M*	$588.0M	Miss
Primary EPS ($)	$0.27*	$0.31	Beat
Adjusted EBITDA ($USD Millions)	$51.6M*	$52.6M	Beat
Primary EPS - # of Estimates	2*	—	—
Revenue - # of Estimates	2*	—	—

Forward look:

Q4 2025 consensus: Revenue $632.9M*, EPS $0.36*; Q1 2026 consensus: Revenue $620.6M*, EPS $0.24* — signaling expectations for seasonal uptick and subsequent normalization. Values marked “*” retrieved from S&P Global.

Implications:

Street may lift FCF conversion assumptions on lowered capex and narrowed EBITDA range; revenue trajectory likely remains conservative given mix, divestiture, and macro/postal dynamics .

Key Takeaways for Investors

Near-term: Expect constructive sentiment from the EPS/EBITDA beat and tighter FCF guide; monitor Q4 execution in direct mail volumes and retail media deployments for year-end leverage outcome (~1.6x guided) .
Revenue mix: Continued migration toward targeted print and integrated solutions; watch direct marketing, packaging, and In‑Store Connect for share gains amid magazine/retail insert declines .
AI/data moat: Audience Builder’s Snowflake-powered prompts should accelerate audience activation and campaign ROI; look for marquee client case studies and monetization pathways .
Postal dynamics: No January price increase plus Onru co-mail discounts are tailwinds; July actions and worksharing policy remain swing factors for catalogs and mailers .
Capital allocation: Balanced approach with dividends ($0.075/share) and opportunistic buybacks; facility sales proceeds and seasonal FCF can support deleveraging into year-end .
Risk checks: Lower paper/print volumes, agency softness, and macro uncertainties warrant cautious revenue assumptions; leverage temporarily elevated but targeted to ~1.6x by year-end .
Medium-term thesis: Management aims for net sales growth inflection in 2028 and at least 100 bps margin improvement vs 2024, supported by higher-margin services mix and productivity gains .

Values marked with “*” retrieved from S&P Global.

Quad/Graphics, Inc. (QUAD)·Q3 2025 Earnings Summary