Name: Quad/Graphics, Inc. Q4 2024 Earnings Call
Start: 2025-02-19T13:31:00.000Z

Executive Summary

Q4 2024 net sales were $708.4M, down 10.1% year-over-year on lower paper, agency solutions and print sales, including a lost grocery client; GAAP diluted EPS improved to $0.09 from $(0.47), and adjusted diluted EPS rose to $0.36 from $0.23, driven by productivity gains and cost reductions despite lower sales .
Adjusted EBITDA was $62.6M (8.8% margin) vs. $65.7M (8.3%) in Q4 2023; sequentially, EBITDA increased vs. Q3 2024 ($59.0M; 8.7%), reflecting operating improvements and cost savings .
Balance sheet strengthened: year-end 2024 net debt fell to $350.0M with leverage at 1.56x (from $469.8M; 2.01x in 2023); dividend increased 50% to $0.075 quarterly, signaling capital return while maintaining deleveraging .
2025 guidance introduced: organic net sales decline of 2–6%, adjusted EBITDA $180–$220M, FCF $40–$60M, capex $65–$75M, and leverage ~1.5x; decline reflects Europe divestiture, lower sales, and higher innovation investments; management expects stronger H2 2025 amid seasonality .
Catalysts and risks: retail media (In-Store Connect) momentum and data-stack monetization; postal-rate headwinds (potential ~10–13% midyear increase) and tariff risk (Canada paper); management has pre-bought Canadian paper to mitigate near-term exposure .

What Went Well and What Went Wrong

What Went Well

“Increased profitability margins and continued strong cash generation,” with adjusted EBITDA margin rising 48 bps in 2024; Q4 adjusted EPS up to $0.36 from $0.23, supported by productivity and cost reductions .
Strategic progress: proprietary household-based data stack and launch of At-Home Connect; building sales momentum for In-Store Connect, onboarding first Midwest grocery banner; management emphasizes investing in AI optimization tools for new revenue streams .
Capital allocation: net debt leverage reduced to 1.6x; dividend hiked 50% to $0.075; 2025 plan includes innovation investment, shareholder returns, and leverage to ~1.5x .

What Went Wrong

Q4 net sales declined 10.1% year-over-year due to lower paper, agency solutions and print sales, including the loss of a large grocery client; adjusted EBITDA slightly below prior year on lower sales .
International segment Q4 operating loss widened to $(4.9)M; full-year included $57.6M Europe-related impairment ahead of divestiture .
Ongoing postal-rate headwinds and macro (elevated rates impacting financial-services direct mail) pressured H1 volumes; management expects a high-single-digit revenue decline in Q1 2025 before improving with seasonality .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Net Sales ($USD Millions)	$787.9	$674.8	$708.4
Operating Income ($USD Millions)	$3.5	$(4.9)	$19.7
Net Earnings ($USD Millions)	$(22.0)	$(24.7)	$4.7
Diluted EPS (GAAP, $)	$(0.47)	$(0.52)	$0.09
Adjusted Diluted EPS (non-GAAP, $)	$0.23	$0.26	$0.36
Adjusted EBITDA ($USD Millions)	$65.7	$59.0	$62.6
Adjusted EBITDA Margin (%)	8.3%	8.7%	8.8%

Notes:

Drivers of Q4 2024 improvement in GAAP EPS and operating income: higher manufacturing productivity, cost reduction savings, lower restructuring/impairment/transaction charges, lower D&A and interest expense, offset by lower sales .
Estimate comparisons: Wall Street consensus (S&P Global) for Q4 2024 was unavailable at time of analysis due to data access limits, so beat/miss vs. estimates is not provided.

Segment breakdown (Net Sales and Operating Income):

Segment	Q4 2023 Net Sales ($MM)	Q4 2023 Op Inc ($MM)	Q4 2024 Net Sales ($MM)	Q4 2024 Op Inc ($MM)
US Print & Related Services	$700.2	$18.6	$627.2	$37.5
International	$87.7	$(1.9)	$81.2	$(4.9)

Key KPIs and Balance Sheet (Year-End):

Metric	FY 2023	FY 2024
Net Debt ($USD Millions)	$469.8	$350.0
Debt Leverage Ratio (x)	2.01x	1.56x
Net Cash Provided by Operating Activities ($MM)	$147.6	$112.9
Free Cash Flow ($MM)	$76.8	$55.7
Capital Expenditures ($MM)	$70.8	$57.2

Non-GAAP adjustments (Q4 2024):

Restructuring/impairment/transaction-related charges: $19.6M, including $11.4M employee termination and $9.0M impairment; transaction-related income $(2.4)M .
Adjusted EPS excludes these charges and applies a normalized 25% tax rate .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Organic Annual Net Sales Change	FY 2025	—	2% to 6% decline	New
Adjusted EBITDA	FY 2025	—	$180M–$220M	New
Free Cash Flow	FY 2025	—	$40M–$60M	New
Capital Expenditures	FY 2025	—	$65M–$75M	New
Year-End Debt Leverage Ratio	FY 2025	—	~1.5x	New
Annual Net Sales Change	FY 2024	5%–9% decline	~9% decline	Lowered (to high end of decline)
Adjusted EBITDA	FY 2024	$205M–$245M	$215M–$235M	Maintained midpoint (range narrowed)
Free Cash Flow	FY 2024	$50M–$70M	$50M–$70M	Maintained
Capital Expenditures	FY 2024	$60M–$70M	~$65M	Narrowed
Year-End Debt Leverage Ratio	FY 2024	~1.8x	~1.5x	Improved

Dividend:

Quarterly dividend increased to $0.075 (payable Mar 14, 2025; record Feb 28, 2025) .

Earnings Call Themes & Trends

Topic	Q2 2024 (Previous Mentions)	Q3 2024 (Previous Mentions)	Q4 2024 (Current Period)	Trend
AI/technology initiatives	Launched “Betty” creative agency; 3D Commerce scanning; pipeline building; retail media tech partnerships (Swiftly)	Announced Google Cloud AI partnership; integrating household data with AI for content personalization	Continued data-stack build; Google Cloud AI optimization and monetization; At-Home Connect automation	Expanding AI-driven solutions and commercialization
Data stack & audience	Household-centric data; integrated media/creative; monetization plans emerging	Data-stack powering audience targeting; AI-assisted planning; transparency emphasis	250M consumers, 3B data points, 20k attributes; adding transactional data and AI-ready architecture	Scaling datasets and use-cases
Retail Media Networks (In-Store Connect)	Partnerships (Save Mart; Homeland rollout Oct); building pipeline	Save Mart launched 15 stores; Homeland launched 15; department/home improvement interest	Ongoing sales momentum; onboarding first Midwest grocery banner; RMN spend projected to grow materially	Network expanding; early results promising
Postal rates & macro	Significant postal hikes; headwinds; H2 seasonal ramp expected; cost optimization	2023 July spike hurt volumes; guidance to ~9% decline; productivity offsets; asset sales	Potential ~10–13% midyear increase; Postmaster resignation; data-led print responsiveness to offset costs	Ongoing headwind; advocacy and optimization efforts
Regional trends & portfolio	International mix decreased; Latin America down YoY in H1; strong US focus	Strong Mexico volumes (education books); Europe divestiture agreed	Mexico growth expected; Europe sale progressing/early 2025; Q4 Int’l loss widened	US-led; Mexico strengthening; Europe exit
Tariffs & sourcing	—	—	Canada paper tariff risk (25% hypothetical); pre-bought Canadian paper; minimal China exposure	Monitoring; near-term mitigation executed

Management Commentary

CEO: “We have built a superior household-based data stack for smarter audience intelligence and activation… [and] will continue to invest in our industry-differentiating data capability, including AI optimization tools, to drive new revenue streams.”
CEO: “Our full-year 2024 results reflect our disciplined operating performance, including increased profitability margins and continued strong cash generation that we used to further reduce debt despite the expected decrease in sales.”
CFO: “In 2025, we will shift our capital allocation priorities… amplify strategic investments in innovation… increase return of capital through a 50% higher quarterly dividend and opportunistic share repurchases, and… further reduce our debt leverage to approximately 1.5x.”
CFO (call): “2025 adjusted EBITDA… $180–$220M… decline vs. 2024 due to divestiture of Europe, lower net sales, and increased investments in innovation… EBITDA margin similar to 2024.”

Q&A Highlights

Growth investments: Capex midpoint ~$70M in 2025 targeting AI and In-Store Connect hardware; scaling labor for offerings; explicit focus on data stack, At-Home Connect, In-Store Connect .
2025 organic outlook: ~4% decline midpoint; expected growth in Agency Solutions, Targeted Print, International (Mexico); ongoing decline in Large Scale Print (retail inserts) .
Tariff exposure: Canada paper most impacted; costs are client pass-through; company pre-bought Canadian paper to weather short-term; limited China exposure; some Mexico exports to US could be re-sourced if needed .
Revenue pacing: Q1 2025 likely high single-digit decline; improvement through the year with seasonal peak and back-half agency sales .
Asset sales and leverage: Europe sale closing early 2025; additional facility sales expected in 2025; leverage targeted ~1.5x; maintain dry powder for buybacks/M&A .
Postal leadership and rates: CEO flagged Postmaster resignation; expects midyear rate hike (10–13%); Quad advocating for moderation while optimizing print responsiveness via data .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2024 revenue and EPS was unavailable due to access limits at time of analysis, so estimate comparisons are not included. Management-level context indicates operational improvements offsetting sales pressure, but formal consensus beat/miss assessment cannot be provided.

Key Takeaways for Investors

Margins and cash discipline: Adjusted EBITDA margin expanded vs. prior year; Q4 operating income and GAAP EPS improved materially on productivity and lower charges despite sales pressure .
Balance sheet strength and capital returns: Net debt reduced to $350M (1.56x leverage); dividend increased 50% with intent to maintain low leverage and be opportunistic on buybacks .
2025 set-up: Guidance implies continued investment (AI, RMN) and Europe divestiture drag on EBITDA; expect seasonality with stronger H2; near-term softness in Q1 likely a headwind for traders .
Strategic growth pillars: Data-stack monetization and At-Home Connect can drive Targeted Print and media; In-Store Connect network scaling with grocery wins is a key narrative to watch for revenue diversification .
Macro risks: Postal-rate increases (~10–13% midyear) and potential Canada paper tariffs are notable external risks; Quad is mitigating via pre-buys and data-driven print effectiveness .
Segment mix: US operating income improved sharply in Q4; International operating losses widened—Europe divestiture should simplify portfolio and reduce risk .
Actionable: Near-term positioning should account for Q1 2025 revenue softness and macro rate/tariff headlines; medium-term thesis hinges on execution in RMN and data-led offerings while sustaining low leverage and disciplined capital returns .

Quad/Graphics, Inc. (QUAD)·Q4 2024 Earnings Summary