Quad Graphics Q2 Earnings Call Highlights

Quad Graphics NYSE: QUAD reported second-quarter results that were in line with its expectations, with net sales rising 1% year over year to $578 million and adjusted EBITDA declining modestly to $42 million from $43 million a year earlier.

Chairman and Chief Executive Officer Joel Quadracci said the company remains on track to meet its full-year 2026 guidance and is continuing to invest in targeted print categories, packaging, agency services and in-store retail media as part of its transformation into a marketing experience company.

“During the quarter, net sales increased compared to the second quarter of 2025, representing progress toward our 2028 projected full-year revenue growth,” Quadracci said. He also cited strong second-quarter free cash flow and a balance sheet that enabled the company to return $13 million to shareholders during the first half, including $10 million in dividends and $3 million in share repurchases.

Sales Mix Shifts Toward Targeted Print and Logistics

Chief Financial Officer and Treasurer Tony Staniak said second-quarter sales growth was driven primarily by higher paper sales through Quad Supplied Paper and higher logistics revenue. Direct mail and in-store print operations also posted growth during the quarter, according to Staniak.

For the first six months of 2026, net sales totaled $1.2 billion. Sales declined 2% from the prior-year period when excluding the effect of the February 2025 divestiture of Quad’s European operations. The year-to-date decline reflected lower large-scale print volumes and agency solution sales, partly offset by paper sales.

Revenue mix improved in some of the company’s targeted categories. Targeted print offerings, including direct mail, packaging and install, represented a 2% larger share of total sales in the first half than a year earlier. Logistics increased by 1% as a percentage of sales, supported by fuel surcharges, volumes and expanded list services through co-mail operations.

Those gains were offset by an expected 2% organic decline in large-scale print product lines, including magazines and retail inserts, as well as a 1% decline in agency solutions. Staniak said agency sales continued to be affected by spending pullbacks from certain existing clients and the company’s evolution from project-based work toward omnichannel agency-of-record relationships.

Adjusted EBITDA margin was 7.3% in the second quarter, down from 7.6% a year earlier, largely because paper, ink and fuel-related revenue carries lower margins. Staniak said fuel and ink surcharges had a low-double-digit-million-dollar impact during the first half, helping preserve EBITDA dollars but not providing incremental profitability.

Adjusted diluted earnings per share rose to $0.24 from $0.14 in the prior-year quarter. The increase reflected higher net earnings, lower interest expense from debt reduction, and lower depreciation and amortization, Staniak said.

Packaging Expansion and Retail Media Network

Quad is opening a 100,000-square-foot packaging facility in Salt Lake City that is expected to begin operations in the fourth quarter. The facility will complement packaging operations in Franklin, Wisconsin, and Spartanburg, South Carolina, while giving the company a Western U.S. presence.

Quadracci said the site is intended to reduce lead times and improve logistics for customers, while positioning Quad near consumer packaged goods companies and co-manufacturers in the region. The company expects the facility to ramp with existing customer work and new opportunities. Staniak said the project requires less than $10 million of capital expenditures, is included in the company’s 2026 capital spending guidance, and could contribute low-double-digit millions of revenue in 2027. At full scale, Quad’s packaging plants generally generate roughly $45 million to $50 million in revenue, he said.

Packaging currently represents about $135 million in annual revenue, according to Staniak. Quadracci said the company sees opportunity in folding cartons, including demand associated with consumer brands’ efforts to shift away from plastic packaging. Quad is targeting higher-value packaging categories rather than more commoditized products.

The company also highlighted expansion in its In-Store Connect retail media offering. Wakefern Food Corp. selected Quad’s Rise agency as its media agency of record and plans to deploy In-Store Connect at 30 ShopRite locations later this year. Vallarta, a California grocery chain, has decided to more than double its in-store count following an initial test, while another unnamed West Coast grocer plans to deploy the offering across an initial 25 stores.

Quadracci said Quad expects its in-store retail media network to grow from about 70 stores currently to nearly 130 stores as the new deployments are completed. Revenue from the offering remains low at this stage, Staniak said, but Quadracci emphasized that expanding the store network can attract more consumer packaged goods advertising budgets and additional retail partners.

Cash Flow, Debt and Tax Matter

Year-to-date free cash flow was negative $66 million, unchanged from the first half of 2025, reflecting the seasonal nature of Quad’s business. However, second-quarter free cash flow improved by approximately $7 million year over year to $41 million. The company generally expects negative free cash flow through the first nine months, followed by significant fourth-quarter generation as collections rise after its production peak.

Quad reduced net debt by $54 million, or 12%, from June 30, 2025, after adjusting for seasonal factors. Its second-quarter debt carried a blended interest rate of 6.6%, and available liquidity was $208 million. Its next significant debt maturity, totaling $205 million, is due in October 2029.

The company has not received the first approximately $6 million installment due under a note receivable associated with the sale of its European operations to Capmont. Staniak said Quad received limited payments in the second quarter and expects additional limited payments in the third quarter as Capmont pursues alternatives to meet its obligation.

Quad also recorded a $17 million accrual following an adverse income tax and value-added tax litigation ruling related to a 2011 audit assessment involving a Mexican subsidiary acquired in the World Color transaction. The final settlement amount and timing remain uncertain. Management said proceeds from the planned sale of its Lima, Peru, building are expected to substantially offset cash payments related to the Mexico tax matter, although timing is uncertain.

Guidance Reaffirmed Amid Cost and Postal Pressures

Quad reaffirmed its 2026 outlook despite the planned wind-down of Peru operations. The company continues to expect net sales to decline 1% to 5% from 2025, excluding $23 million of prior-year sales tied to the European business divestiture. It forecast adjusted EBITDA of $175 million to $215 million and free cash flow of $40 million to $60 million.

Management expects sales and EBITDA to increase in the third and fourth quarters as the company enters its seasonal production peak. Full-year capital expenditures are projected at $55 million to $65 million, including investments in automation, digital presses, direct mail and In-Store Connect.

Quadracci said geopolitical instability and related pressures on petrochemical supply chains continue to raise costs, particularly for ink, while energy and transportation costs remain volatile. The company is responding through supplier diversification, inventory planning and targeted price actions.

He also pointed to postage as a significant challenge for mailing customers after the U.S. Postal Service implemented a July 12 increase that Quad estimates will raise postage costs by up to 10% for many clients. Quad supports Postmaster General David Steiner’s proposal for public-service reimbursement tied to universal service obligations, which Quadracci said could reduce the Postal Service’s reliance on price increases over time.

About Quad Graphics (NYSE:QUAD)

Quad Graphics, Inc NYSE: QUAD is a global provider of print and related marketing services, serving a diverse range of clients in the publishing, retail, e-commerce and consumer packaged goods sectors. The company offers end-to-end solutions that span traditional print production, supply chain management and digital marketing support. Quad Graphics leverages a network of production facilities and distribution centers to deliver high-quality printed materials and integrated marketing programs that help clients reach their target audiences across multiple channels.

The company's core offerings include magazine and catalog printing, direct mail, retail inserts, shopper marketing materials, custom packaging and point-of-sale displays.

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