QUAD

Strategic Transformation & Growth Initiatives

• Quad is executing a transformation to a diversified marketing experience company, focused on growing higher-margin targeted print, packaging, and integrated agency/retail media offerings while managing the expected decline of mature large-scale print lines.
• Expanded packaging footprint via a new 100,000 square foot greenfield facility in Salt Lake City, Utah, expected to be operational in Q4 2026. The facility completes Quad's national U.S. packaging footprint, reduces client lead times and logistics costs, and serves high-growth CPG and co-manufacturing hubs in the Western U.S. Global packaging operations also include a facility in the Dominican Republic and strategic partnerships across Central America and Asia.
• Scaling In-Store Connect retail media network, with recent expanded partnerships: Wakefern Food Corp will deploy the solution across 30 ShopRite locations, Vallarta Supermarkets will more than double its in-store footprint, and a new leading West Coast grocer will deploy across an initial 25 stores. Total store count will grow from ~70 currently to ~130 once all 2026 rollouts are completed, creating a geographic flywheel that attracts increasing CPG advertising budgets.
• Secured a major expanded integrated agency relationship with Wakefern Food Corp, the largest U.S. retailer-owned grocery cooperative. Quad expanded from longstanding print circular work to become Wakefern's full-service media agency of record, providing paid media strategy, content creation, and in-store retail media services.
• Earned industry recognition for integrated marketing capabilities: named to Agency Agency Report for the 7th consecutive year, included in MMM's Agency 100 for the 3rd straight year for healthcare marketing expertise, and Rise (Quad's media agency) was recognized in Forrester's Media Management Services Landscape Q2 2026 report.

Technology & Efficiency Investments

• AI is embedded across agency operations, manufacturing, and internal workflows to reduce manual labor, accelerate speed to market, improve throughput, reduce downtime, and improve client outcomes. Examples include AI-generated creative assets at Betty (Quad's creative agency), AI-powered real-time campaign optimization at Rise, and AI-driven production scheduling and predictive maintenance in manufacturing.

Capital Allocation & Capital Structure

• Maintains a balanced capital allocation strategy: prioritize growth investments, maintain low debt balances, and return capital to shareholders via quarterly dividends and opportunistic share repurchases. Returned $13 million to shareholders in H1 2026 ($10 million in dividends, $3 million in share repurchases), and increased the quarterly dividend by 33% to 10 cents per share in early 2026.
• As of Q2 2026, has repurchased 7.9 million shares (14.1% of outstanding shares as of 2022) at an average price of $4.27 per share, with $66.3 million remaining in the authorized share repurchase program.
• Ended Q2 2026 with $208 million in available liquidity, blended interest rate of 6.6% on outstanding debt, and the next major debt maturity not due until October 2029. Interest derivatives cap 53% of rate exposure if rates rise, and lower interest costs for 66% of debt if rates fall.
• Reduced net debt by $54 million (12%) year-over-year as of Q2 2026, and expects to hit the low end of the long-term target net leverage range of 1.5x to 2.0x by end of 2026.

• Management reaffirmed full-year 2026 guidance, with no upward or downward revision from prior ranges. Excluding the 2025 European divestiture, full-year 2026 net sales are expected to decline 1% to 5% compared to 2025, with a 3% decline at the midpoint, reflecting continued improvement from the 10% decline in 2023-2024 and 5% decline in 2024-2025.
• Quad confirmed Q2 2026 net sales of $578 million will be the lowest quarterly net sales of 2026, with increasing net sales expected in Q3 and Q4 aligned with the company's seasonal production peak.
• Full-year 2026 adjusted EBITDA is guided to a range of $175 million to $215 billion, with a midpoint of $195 million that is essentially flat with 2025 adjusted EBITDA of $196 million. Adjusted EBITDA will follow the same seasonal trend as net sales, with higher results in the second half of the year.
• Full-year 2026 free cash flow is guided to a range of $40 million to $60 million, with a $50 million midpoint that is essentially flat with 2025 free cash flow of $51 million. Capital expenditures are expected to total $55 million to $65 million for the full year.
• Management reaffirmed the long-term 2028 financial outlook: net sales will reach an inflection point of positive full-year growth by 2028, driven by a higher mix of targeted print, packaging, and agency revenue. Adjusted EBITDA margins are expected to increase from current levels, free cash flow conversion as a percentage of adjusted EBITDA will improve to 35% from 26% in 2025, and the net debt leverage target range of 1.5x to 2.0x will be maintained.

For the second quarter of 2026, Quad reported total net sales of $578 million, a 1% increase year-over-year from Q2 2025. Year-to-date (H1 2026) net sales were $1.2 billion, a 2% decline year-over-year after excluding the 2% impact of the February 2025 divestiture of European operations. By segment contribution as a percentage of total net sales (comparing H1 2025 to H1 2026):

1. Targeted Print (including direct mail, packaging, and in-store offerings): Increased 2% in contribution share, with standalone direct mail and in-store print operations reporting year-over-year revenue growth in Q2 2026. Packaging currently contributes ~$135 million in annual revenue, and the new Salt Lake City greenfield facility is expected to add low double-digit millions in annual revenue once fully ramped.
2. Logistics: Increased 1% in contribution share, driven by fuel surcharges, higher volumes, and additional services from enhanced cold mail operations. Q2 2026 revenue growth was also supported by higher paper sales from Quad-supplied paper.
3. Large-Scale Print (including magazines and retail inserts): Experienced an expected 2% organic decline in contribution share.
4. Agency Solutions: Experienced a 1% decline in contribution share, impacted by temporary pullback in client spend amid a strategic shift from project-based work to long-term omnichannel agency of record engagements. In-Store Connect, Quad's retail media offering, is still in early ramp-up and contributes low single-digit revenue to the segment currently.

• The company faces ongoing macro pressures: inflationary and supply chain cost volatility, especially for ink and diesel fuel used in logistics operations, and elevated geopolitical and trade uncertainty that has resulted in cautious client marketing and print spend.
• A 10% average postage increase implemented by USPS in July 2026 adds further pressure to mailing volumes, as postage is the single largest expense for most of Quad's mailing clients, and sustained large postage hikes have created a volume-price spiral for the mailing industry.
• Quad has not received the full $6 million annual principal and interest payment on a note receivable from the buyer of its divested European operations, resulting in a $6 million higher-than-expected net debt balance. Limited payments have been received, and the buyer is pursuing alternatives to meet its obligation.
• Quad received an adverse tax litigation ruling for a Mexican subsidiary related to a 2011 audit. A $17 million reserve has been accrued, but the final settlement amount and timing of payment remain uncertain.
• Seasonal swings in free cash flow are typical for Quad, with negative free cash flow normally generated in the first nine months of the year, leading to temporary deviations from target net leverage ranges.

Q: The analyst asks if there was revenue growth outside of paper and logistics, how gross profit dynamics work for this growth, and why management did not tighten full-year revenue guidance despite Q2 results. / A: Management confirms revenue growth in direct mail and in-store print in addition to paper and logistics, with ink and fuel surcharges pass through at lower profit margins, explaining the 30 basis point year-over-year decline in adjusted EBITDA margin. Management states it typically waits until after Q3 to narrow guidance, as client volumes can shift quarter-to-quarter, especially in retail where spending adjusts based on economic conditions, so it maintains the existing range for conservatism.

Q: The analyst asks how quickly the new Salt Lake City packaging facility will ramp up, what market dynamics are driving continued packaging expansion, and what its expected 2027 revenue contribution will be. / A: Management says the facility will start operations in Q4 2026, with minimal impact in 2026 and most revenue contribution coming in 2027, where it will add low double-digit millions in top-line revenue at ~10% EBITDA margins. The facility is greenfield (lower capital cost than acquisition) and started with existing client work plus a strong pipeline of new opportunities. Packaging is growing ~5% annually driven by regulatory and consumer demand to replace plastic packaging with folding cartons, and Quad focuses on higher-margin decorative packaging for pharmaceuticals and premium CPG rather than low-margin commodity packaging.

Q: The analyst asks how much capital was spent on the new Salt Lake City facility, what current packaging and In-Store Connect revenue and store count are, and how these businesses fit into the 2028 long-term plan. / A: Total capex for the facility is under $10 million, as Quad leases the existing building and only invests in new equipment, making it far more capital efficient than acquiring existing packaging assets. Current annual packaging revenue is ~$135 million; In-Store Connect is in early ramp-up with low current revenue, and will grow to ~130 total stores after 2026 rollouts, up from ~70 today. Packaging expansion was always part of the long-term strategic plan, as it integrates with Quad's marketing flywheel to offer fully integrated brand solutions to CPG clients, accelerating growth beyond standalone packaging or marketing services.

Q: The analyst asks what normalized annual postage increases would be if USPS reform passes, and how long reform would take to implement. / A: Quad supports Postmaster General Steiner's reform plan, which would restore public service reimbursement for USPS's universal service mandate, removing the need for large inflation-beating rate hikes. Management states that a normalized regime would cap annual postage increases at CPI (inflation), consistent with historical policy. While reform is bipartisan and widely supported, legislative negotiation takes time, but Quad is actively engaged in Washington to advance the bill as quickly as possible to stop the current price-volume spiral.