Quad/Graphics, Inc. (QUAD) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: a decline in revenue and free cash flow, but an increase in EPS and net debt reduction. While direct mail shows potential, the lack of growth in catalogs and uncertainties in postal rates and digital competition temper optimism. Shareholder returns are positive, but the cautious guidance and management's reluctance to provide specifics on growth initiatives suggest a neutral outlook.
Key Financial Performance
Net Sales (Q4 2025) $631 million, a decrease of 5.7% compared to Q4 2024. The decline was due to lower paper sales, lower print volumes, and lower logistics and agency sales, including the loss of a large grocery client in 2024.
Net Sales (Full Year 2025) $2.4 billion, a 4.8% decline compared to 2024. The decline was attributed to lower paper sales, lower print volumes, and lower logistics and agency sales, as well as the loss of a large grocery client in 2024.
Adjusted EBITDA (Q4 2025) $55 million, compared to $63 million in Q4 2024. The decrease was due to lower net sales, increased investments in innovative offerings, and the divestiture of European operations, partially offset by lower SG&A expenses and improved manufacturing productivity.
Adjusted EBITDA (Full Year 2025) $196 million, compared to $224 million in 2024. The decrease was due to lower net sales, increased investments in innovative offerings, and the divestiture of European operations, partially offset by lower SG&A expenses and improved manufacturing productivity.
Adjusted Diluted EPS (Q4 2025) $0.36, consistent with Q4 2024.
Adjusted Diluted EPS (Full Year 2025) $1.01, an increase of $0.16 or 19% from 2024. The increase was due to higher adjusted net earnings and the beneficial impact of a lower share count due to stock buybacks.
Free Cash Flow (2025) $51 million, compared to $56 million in 2024. The decline was primarily due to a $17 million decrease in net cash provided by operating activities, mainly driven by timing of working capital, partially offset by a $12 million decrease in capital expenditures.
Net Debt Reduction (2025) $42 million. From 2020 to 2025, net debt was reduced by $726 million, a 70% reduction from over $1 billion of debt on January 1, 2020.
Capital Expenditures (2025) $45 million, representing approximately 2% of net sales, invested in growth, automation, and maintenance of offerings.
Shareholder Returns (2025) $22 million, including $14 million in cash dividends and $8 million in share repurchases.
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Operating Highlights
Direct Mail Agency: Formalized in 2025, combining strategy, planning, audience identification, creative, production, and measurement services. Leveraging proprietary data stack for targeted audiences and premarket testing for content validation.
Betty Creative and Rise Media Agencies: Produced work for brands like Aldi, Natural, CLR, and Gallo. Expanded offices in Austin, Texas, and Mexico City, Mexico to support client demand.
Gorilla Glue Campaign: Developed a scalable creative platform using generative AI and CGI technology. Rise Media became the media agency of record for Gorilla Glue and O'Keeffe's.
Pura Displays: Supported Pura's largest in-store retail promotion with integrated support across concept development, structural engineering, print production, and distribution.
Expansion of Agency Footprint: Opened new offices in Austin, Texas, and Mexico City, Mexico to support increasing client demand and win larger integrated assignments.
Emerging CPG Brands: Helping brands scale presence across big-box retailers with adaptive in-store displays tailored to retailer requirements.
AI Integration: Investments in AI for cost efficiency and revenue generation. AI-powered automation for workflows and marketing efficiency.
Postal Optimization: Expanded co-mail volume and high-density capabilities, generating greater savings for clients.
Leadership Changes: Promoted Dave Honan to President and aligned marketing and sales functions under Julie Currie to prioritize revenue generation.
Revenue Diversification Strategy: Targeted print categories like packaging and in-store marketing experienced growth. Focus on returning to net sales growth by 2028.
Long-term Financial Goals: Plans to improve adjusted EBITDA margin to 9.4% by 2028 and achieve low double-digit margins in the long term.
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Risk or Challenges
Net Sales Decline: Net sales decreased by 5.7% in Q4 2025 and 4.8% for the full year compared to 2024, driven by lower paper sales, print volumes, and logistics sales, including the loss of a large grocery client.
Plant Closure: The closure of the Thomaston, Georgia print plant in early 2026 will result in operational disruptions and potential workforce-related challenges.
Postal Rate Increases: Potential postal rate increases could impact print and marketing spend, affecting client demand and revenue.
Economic Uncertainty: Inflationary pressures and tariffs on clients could reduce marketing budgets and demand for Quad's services.
Debt Management: While debt has been reduced significantly, maintaining low net debt leverage and managing interest rate exposure remain critical challenges.
Client Loss: The loss of a large grocery client in 2024, which annualized in 2025, highlights risks related to client retention and revenue concentration.
Market Competition: Competitive pressures in the marketing and print industry could impact Quad's ability to maintain or grow its market share.
Integration Challenges: The integration of Enru's co-mail volume and capabilities may face operational hurdles, impacting efficiency and client satisfaction.
AI and Technology Investments: Investments in AI and automation may not yield expected productivity gains or could face implementation challenges.
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Guidance & Outlook
2026 Financial Guidance: Net sales are expected to decline 1% to 5% compared to 2025, excluding $23 million of 2025 net sales from the divestiture of European operations. Adjusted EBITDA is projected to be between $175 million and $215 million, with a midpoint of $195 million, consistent with 2025. Adjusted EBITDA margin is expected to increase by 30 basis points to 8.4%. Free cash flow is anticipated to range from $40 million to $60 million, with a midpoint of $50 million. Capital expenditures are expected to increase to $55 million to $65 million, focusing on growth and automation investments. Net debt leverage ratio is projected to decrease to approximately 1.5x by the end of 2026.
2028 Financial Outlook: Net sales are expected to return to growth by 2028, driven by integrated solutions and targeted print offerings. Excluding large-scale print product lines, the business is anticipated to grow at a 3% CAGR through 2028. Adjusted EBITDA margin is projected to improve to 9.4% by 2028, with long-term goals of reaching low double-digit margins. Free cash flow conversion as a percentage of adjusted EBITDA is expected to improve from 26% in 2026 to 35% by 2028 and 40% in the long term. The company plans to maintain a net debt leverage ratio in the range of 1.5x to 2.0x.
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Shareholder Return Plan
Quarterly Dividend Increase: Quad increased its quarterly dividend by 33% to $0.10 per share, or $0.40 per share on an annualized basis, reflecting a focus on long-term shareholder value.
2025 Dividend Payments: Quad provided $14 million in cash dividends during 2025.
2026 Dividend Approval: The Board approved a 33% increase in dividends to $0.10 per share quarterly, representing a sustainable $5 million increase in expected cash dividend payments in 2026 compared to 2025.
Share Repurchase Program: Since 2022, Quad has repurchased 7.4 million shares at an average price of $4.11, representing approximately 13% of its total outstanding common stock as of that time.
2025 Share Repurchases: Quad repurchased 1.5 million shares at an average price of $5.40 for $8 million during 2025.
Remaining Authorization: As of December 31, 2025, $69.5 million of authorized repurchases remain under the program.
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Key Q&A
Q:Can you provide more commentary on the growth trends in direct mail and how you see the momentum carrying into 2026 and beyond?
A:Direct mail (DM) has shifted from generic mail to more personalized, data-driven mail, resulting in higher response rates. Quad is focusing on innovation in DM and integrating it with other marketing efforts like In-Store Connect. This approach is creating new opportunities and driving growth in the DM space.
Q:Have you seen any greater uptake in catalogs or other channels due to the delayed postal rate increase?
A:No significant growth in catalogs has been observed due to the delayed postal rate increase. Catalog volumes have declined, especially in prospecting mailings, due to high postal costs. However, Quad has offset some of the impact through initiatives like the Enru acquisition and enhanced carrier route density levels.
Q:Can you provide updates on In-Store Connect in terms of the pipeline or further store deployments?
A:Quad has learned that in-store media takes longer for retailers to execute due to its impact on various business areas. However, there has been an acceleration in conversations and opportunities, with new accounts and deployments expected soon. Capital has been reserved for growth in In-Store Connect in 2026.
Q:What factors are you considering for the higher or lower end of the sales and adjusted EBITDA guidance ranges for 2026?
A:Factors include the impact of postal rates on planned declines, momentum in direct mail, in-store media, and packaging. Targeted print categories with higher margins are expected to lift overall margins, while cost management remains a focus.
Q:What is your approach to capital allocation going forward, considering the dividend increase and share repurchases?
A:Quad plans a balanced approach, including potential tuck-in acquisitions, investments in growth initiatives like In-Store Connect, shareholder returns through dividends and buybacks, and maintaining low debt leverage to stay prepared for opportunities.
Q:How is the first quarter of 2026 starting relative to the guidance metrics, particularly revenue?
A:The first quarter, typically a lower volume period, is on track with expectations. Decent volumes have been observed in February, and there is a sense of increased confidence in decision-making among clients.
Q:Are you seeing any significant marketing pullbacks by large retailers?
A:No significant pullbacks have been observed. Some shifts, like reduced retail inserts, have already played out. Clients are showing interest in improving marketing strategies and exploring new channels like In-Store Connect.
Q:What is the visibility into postal rate changes for 2026 and beyond?
A:A midyear postal rate increase of 6%-8% is expected and built into plans. The longer-term trajectory is uncertain, but there is hope for a shift towards growth-oriented pricing under the new Postmaster General.
Q:Is the rise of digital performance marketing solutions like Google’s Performance Max creating competitive pressures for Quad?
A:Quad uses all digital channels, including Google and YouTube, for ad placements. The focus is on helping clients integrate and measure the effectiveness of various digital channels, which presents an opportunity rather than a competitive pressure.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on certain growth initiatives planned for 2026, stating they are in the planning process but not ready to be disclosed. Additionally, the long-term trajectory of postal rate changes remains uncertain, with no clear visibility provided.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Austin
Betty
CEO
Joel
MX solution
Mexico City
Slide marketing
Upson County
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agency client
campaign
client USPS
culture
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display retailer
efficiency
end cap
expert client
fragrance
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job
legacy
manufacturer
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medium planning
office
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platform mail
retailer Pura
role
shareholder
solution suite
success
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value audience
QUAD Transcript
Quad/Graphics, Inc. (QUAD) Q4 2025 Earnings Call Transcript
Unknown2-18
The earnings call presents a mixed picture: a decline in revenue and free cash flow, but an increase in EPS and net debt reduction. While direct mail shows potential, the lack of growth in catalogs and uncertainties in postal rates and digital competition temper optimism. Shareholder returns are positive, but the cautious guidance and management's reluctance to provide specifics on growth initiatives suggest a neutral outlook.
Quad/Graphics, Inc. (QUAD) Q3 2025 Earnings Call Transcript
Unknown10-29
The earnings call reveals several negative factors: declining net sales, reduced adjusted EBITDA, and negative free cash flow despite some improvement. The Q&A highlights uncertainty in postal pricing, which impacts marketing spend and revenue. The adjusted EBITDA midpoint was lowered, indicating weaker financial performance. Although EPS increased, the overall financial outlook suggests challenges. These factors combined with the lack of clear guidance on postal rate impacts and asset sales lead to a negative sentiment, predicting a stock price decline of -2% to -8% over the next two weeks.
Quad/Graphics, Inc. (QUAD) Q2 2025 Earnings Call Transcript
Unknown7-30
The earnings call presents mixed signals: a slight decline in EBITDA margin, but improved EPS and reduced net debt. The Q&A highlights potential risks with postal rates and management's vague responses. Despite growth in targeted print categories and optimistic guidance for the next quarters, the overall market sentiment remains cautious, especially with the expected decline in organic net sales. Given these factors, the stock price is likely to remain stable, resulting in a neutral sentiment prediction.
Quad/Graphics, Inc. (QUAD) Q1 2025 Earnings Call Transcript
Unknown4-30
The earnings call highlights several negative factors: a loss of a major client, facility closures, and negative free cash flow. Despite a dividend increase and share repurchase, these positives are overshadowed by the decline in net sales and EBITDA, margin contraction, and the uncertain demand outlook due to tariffs. Additionally, the Q&A reveals management's uncertainty about future demand and supply constraints. Overall, these factors suggest a negative sentiment with potential stock price decline in the short term.
QUAD Report
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