Quad/Graphics, Inc. Q3 FY2025 earnings call

• Quad is making targeted investments in AI-powered tools, data and audience intelligence services, and In-Store Connect retail media network. These investments fortify Quad's strengths as a marketing experience company and advance revenue diversification.
• MX offering includes integrated solutions for creative, production, and media across digital and physical channels. Quad monitors macroeconomic pressures like tariffs and postage costs, passed on print material cost increases, and collaborated with USPS on postage rates.
• Deployed postal optimization solutions like co-mailing and bundling, used audience data for targeted marketing, and integrated generative AI into Audience Builder.
• In-Store Connect retail media network showed positive results with CPG campaigns, including significant sales lifts for clients like Nestle USA, PepsiCo, and P&G. Favorite Child worked with Aldi to refresh packaging. Quad's integrated approach to direct mail helped a large auto insurer relaunch its direct mail channel.

In the third quarter of 2025, net sales were $588 million, a 7% decrease compared to the third quarter of 2024 (excluding the 6% impact of the February 28, 2025 divestiture of European operations). Year-to-date net sales were $1.8 billion, a 4% decline compared to the first 9 months of 2024 (excluding the 5% impact of the Europe divestiture). Targeted print offerings increased 2% in revenue mix. Adjusted EBITDA in Q3 2025 was $53 million, with a margin of 8.9%, down from $59 million and 8.7% in Q3 2024. Year-to-date adjusted EBITDA was $141 million, with a margin of 7.9%, down from $161 million and 8.2% in 2024. Free cash flow was negative $87 million in the 9 months ended September 30, 2025, an improvement of $5 million from the previous year.

• Net sales guidance narrowed to a decline of 3%-5% (midpoint 4%) compared to previous guidance of 2%-6%.
• Adjusted EBITDA guidance narrowed to $190 million-$200 million.
• Free cash flow expected to be in the range of $50 million-$60 million (higher end of original range).
• CapEx expected to be between $50 million and $55 million.
• Net debt leverage ratio expected to increase to approximately 1.6x by the end of 2025.

• Macroeconomic pressures such as inflation, employment rates, tariffs, and high postage costs may negatively impact clients' marketing plans.
• Uncertainty around the macro environment could lead to client actions that affect Quad's business.
• Seasonality of the business impacts free cash flow, with negative free cash flow in the first 9 months and positive in the fourth quarter.

Q: Talked about trends in targeted print categories, specifically catalog, direct mail, packaging, in-store A: Catalog is muted due to postal increase; direct mail up over 6% YTD, packaging over 9% YTD, in-store plus 11% YTD. Direct mail benefits from data-driven personalization.

Q: Impact of no postal rate hike in January for categories A: News well received, but previous large rate increases still affect responsiveness. Co-mail acquisition helps with discounts. Waiting to see client 2026 planning impact.

Q: Updated guidance on sales, adjusted EBITDA, CapEx A: Net sales midpoint at 4% YTD, adjusted EBITDA range narrowed, CapEx range decreased as focus shifts to technology and automation. Free cash flow increases due to lower CapEx.

Q: In-Store Connect developments A: Exciting developments with new form factors like the wedge sign, patent pending. Positive results in CPG campaigns, pizza and energy drink saw significant sales lifts. Believes in-store advertising is important as people intend to purchase in grocery stores.

Q: Postage rate impact on holiday season A: Holiday season environment seems normal despite previous volatility. Asset sales: Effingham sale lower due to location, remaining properties follow historical square foot norms.

Q: Square footage of Sussex property for sale A: About 200,000 square feet in a building across the street from Quad's headquarters