Quad/Graphics Earnings Call: AI Integration and Strategic Growth

The recent earnings call for Quad/Graphics, Inc. Class A reflected a sentiment of cautious optimism. While the company is experiencing positive developments such as the integration of AI technology, increased sales from its In-Store Connect platform, and improved free cash flow, it also faces challenges like declining net sales, reduced adjusted EBITDA, and high postal costs. The overall tone suggests that strategic investments are showing promise amidst these ongoing challenges. AI Integration and Data Intelligence Quad has successfully integrated a generative AI chat feature into its Audience Builder platform. This enhancement, utilizing Cortex AI functionality from Snowflake, allows media strategists to better uncover consumer insights, marking a significant step forward in data intelligence and strategic marketing capabilities. In-Store Connect Success The company’s In-Store Connect platform has recorded significant sales lifts for consumer packaged goods (CPG) campaigns. Notable examples include a 23 percentage point sales lift for Nestle USA and a 25 percentage point increase for PepsiCo, highlighting the platform’s effectiveness in boosting in-store sales. Revenue Mix Improvement Quad has seen an improvement in its revenue mix, with targeted print offerings showing growth. Direct marketing has increased by over 6%, packaging by over 9%, and in-store offerings by 11% year-to-date, indicating a strategic shift towards more profitable segments. Positive Impact from USPS Decision The United States Postal Service’s decision not to increase prices for market dominant mail in January has positively influenced client plans for 2026 media, providing a more stable cost environment for Quad’s clients. Improved Free Cash Flow and Shareholder Returns Quad reported an improvement in free cash flow by $5 million year-to-date, with $19 million returned to shareholders. This includes $11 million in dividends and $8 million in share repurchases, reflecting a commitment to enhancing shareholder value. Net Sales Decline The company reported net sales of $588 million in Q3 2025, a 7% decrease compared to Q3 2024. This decline is primarily attributed to lower paper sales and the divestiture of European operations. Adjusted EBITDA Decrease Adjusted EBITDA decreased to $53 million in Q3 2025 from $59 million in Q3 2024, with the adjusted EBITDA margin declining year-to-date from 8.2% to 7.9%, indicating pressure on profitability. High Postal Costs Impacting Catalogs Significant postal rate increases since 2021 have negatively impacted catalog performance, with rates rising by 60%, posing a challenge to this segment of Quad’s business. Asset Sale Challenges The company faced challenges with lower-than-expected proceeds from the sale of buildings in Effingham, Illinois, primarily due to the geographic location, affecting its asset divestiture strategy. Forward-Looking Guidance During the Third Quarter 2025 Conference Call, Quad provided updated guidance for the full year 2025. The company expects net sales to decline by 3% to 5%, excluding the impact of the European operations divestiture. Adjusted EBITDA is projected to be between $190 million and $200 million, with free cash flow anticipated to range from $50 million to $60 million. Capital expenditures are adjusted to $50 million to $55 million, and the net debt leverage ratio is expected to slightly increase to approximately 1.6x by year-end. Quad is focusing on targeted print offerings and AI-powered tools, aiming for net sales growth by 2028. In summary, Quad/Graphics, Inc. Class A’s earnings call highlighted a mix of promising developments and ongoing challenges. The company’s strategic investments in AI and targeted print offerings are showing potential, while it navigates declining net sales and high postal costs. The forward-looking guidance suggests a cautious yet optimistic outlook, with a focus on achieving growth by 2028.