QUAD/GRAPHICS, INC. 2026 Q3 Earnings Call

Julie, please go ahead. Thank you, operator, and good morning, everyone.

With me today are Joel Quadracci, Quad's Chairman and Chief Executive Officer, and Tony Staniak, Quad's Chief Financial Officer and Treasurer. Joel will lead today's call with a business update, and Tony will follow with a summary of Quad's third quarter and year-to-date financial results and updated financial guidance, followed by Q&A. I would like to remind everyone that this call is being webcast and forward-looking statements are subject to Safe Harbor provisions as outlined in our quarterly news release and in today's slide presentation on slide two. Quad's financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-GAAP financial measures, including EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, adjusted diluted earnings per share, free cash flow, Net Debt, and Net Debt Leverage Ratio.

We've included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures. Finally, a replay of the call will be available on the Investors section of quad.com shortly after our call concludes today. I will now hand over the call to Joel.

Thank you, Julie, and good morning, everyone. I'll begin with key highlights shown on slide three. Quad's third quarter results were in line with our expectations. Driven by strong year-to-date results and continued new business momentum, we are updating full year 2026 guidance, including improving our adjusted annual net sales change guidance range. Our strong balance sheet continues to provide financial flexibility, enabling us to return $23 million to shareholders during the first three quarters of 2026, including $15 million in regular cash dividends and $8 million in share repurchases. We continue to convert our integrated marketing capabilities into new and expanded client relationships. During the quarter, we saw particularly strong momentum across our direct marketing, in-store, and retail media solutions. As shown on slide four, Quad's MX offering connects solutions across creative, production, and media, supported by intelligence and technology.

Our unified marketing platform helps clients simplify complex workflows and improve marketing effectiveness across physical and digital channels. This integrated suite of solutions powers Quad's growth flywheel. Successful execution in one area earns us the opportunity to expand into additional services. As we deliver a broader range of marketing solutions for our clients, we deepen relationships, generate repeat business, and create additional growth opportunities. For Quad, this expands our share of clients' marketing spend and diversifies our revenue sources. Clients benefit from a strategic partner who understands their business, seamlessly connects services, reduces handoffs, accelerates speed to market, and delivers measurable results. Transitioning to slide five. During the quarter, we announced Direct, Quad's newly branded full-service direct marketing agency. As marketers seek greater efficiency and accountability, Direct unifies audience intelligence, strategy, creative, execution, and measurement into a cohesive offering focused on delivering results. These connected capabilities reinforce Quad's growth flywheel.

Results generate insights that we use to refine strategy, audience targeting, and creative, leading to improved performance and increased client investment. As clients expand their direct marketing programs, we gain opportunities to provide additional agency services and increase print volumes. Our integrated approach has helped our direct mail business steadily grow over the past two years, leading to work with clients such as Valvoline Instant Oil Change, Heartland Dental, and Monogram. Slide six highlights one of Direct's newest partnerships with a national financial services firm. The client engaged Direct earlier this year to help restart its direct mail student loan acquisition program after a multi-year pause. As the client rebuilt its direct marketing capabilities, it sought a single accountable partner to help increase booked loans among undergraduate and graduate students.

The client chose Direct for our integrated approach, rapid pre-market testing, focus on innovation, and ability to execute seamlessly across strategy, creative production, and distribution. Through pre-market creative validation of Direct's newly designed pieces, we provided a data-driven foundation for the campaign, helping the client make more informed decisions before launch. Our print and postal expertise then helped optimize costs and supported efficient and timely execution during a critical fall lending window. The insights generated from these mailings will help inform a larger program planned for the peak 2027 student loan application season. This new relationship demonstrates how Direct's integrated agency model and deep industry knowledge are helping Quad win new clients, expand our role beyond execution, and create opportunities for incremental print volume and long-term profitable growth. Moving to Slide 7. As marketers work to engage consumers across an increasingly fragmented media landscape, it's more important than ever to understand how different channels influence consumer behavior.

Our latest Return of Touch research, conducted with The Harris Poll, reinforces a trend we've discussed before. Consumers continue to value physical shopping and brand experiences alongside digital interactions. In fact, 70% of Americans say seeing how a brand shows up in physical space helps them understand it better, and 71% say in-store experiences deepen their connection and loyalty to that brand. Product packaging also plays an important role. 84% of Americans say they have greater trust in a brand when it pays attention to packaging details, such as texture and finishing, and 55% say packaging has influenced a purchase decision.

Through our capabilities in direct mail, packaging, retail displays and signage, and in-store media, Quad helps marketers meet this consumer demand for physical brand interaction while connecting physical and digital channels to create a more effective and cohesive customer experience. For Quad, these insights help shape client strategies while reinforcing the relevance of our integrated MX platform. On Slide 8, our in-store brand activation services are increasingly leading to larger, more strategic client relationships. Brands looking to enter retail or expand their in-store presence need a partner who can take an idea from concept to shelf quickly and at scale. By integrating design, production, and distribution from the start, Quad helps clients move efficiently from concept to execution. These services contribute to Quad's growth flywheel in two important ways. First, a successful display program builds trust and often leads to repeat business, additional retailers, and larger programs.

Second, as those relationships grow, clients often turn to Quad for other marketing solutions, allowing us to capture an even larger share of their marketing spend. We've seen this pattern with growing brands such as LMNT, AG1, and Momentous. Each relationship began with a quick-turn display project and expanded into additional services, including pre-market testing, packaging, or direct mail. FlavCity is a recent example of this strategy in action. As shown on Slide 9, what we began as a single end-cap display project earlier this year has expanded across five product lines and three major retailers, Target, Walmart, and Meijer. As we've consistently delivered at scale and met each retailer's unique requirements, we've earned the client's confidence and expanded our relationship.

Most recently, FlavCity selected Quad to manage its retail display and signage fulfillment business, and we are now growing into agency services, with both Betty and Rise supporting an upcoming product launch. FlavCity illustrates how we can turn a single project into a broader multi-service relationship. It's a repeatable model that allows us to deepen client relationships, cross-sell additional solutions, and generate revenue across more of our portfolio. Turning to Slide 10. We continue to make meaningful progress expanding In-Store Connect by Quad, our in-store retail media network. We are currently deploying the network across more than 100 additional stores, demonstrating strong retailer adoption and continued progress in building a scaled platform for CPG advertisers. Part of this momentum is driven by a large national discount store chain, which recently agreed to deploy In-Store Connect in initial 30 stores in Florida this winter.

Screens will be placed in high-traffic aisles featuring cereal, salty snacks, and soft drinks, categories where CPG brands already advertise across our network. The new partnership establishes In-Store Connect's presence in the Southeast U.S. and supports our strategy of building a valuable network for CPG advertisers and regional grocers. With thousands of stores nationwide, the retailer also represents a meaningful long-term expansion opportunity as we demonstrate value through the initial deployment. Another growth driver is our recently announced partnership with Chedraui USA, which will deploy In-Store Connect in 25 Smart & Final stores in California this fall. The agreement builds on our long-standing relationship with the client, providing print and production support for weekly circulars across its grocery banners.

Like the integrated support we highlighted with Wakefern last quarter, this example demonstrates how our connected retail solutions work together, allowing us to expand existing client relationships into broader, higher-value marketing partnerships. Looking ahead, we remain focused on expanding our footprint, attracting more advertisers, and deploying capital with discipline, with the goal of growing In-Store Connect into a more meaningful contributor to Quad's long-term growth and revenue diversification strategy. As we pursue growth and deliver client work, we continue to navigate a dynamic macro environment as shown in Slide 11. Ongoing conflict and geopolitical instability in the Middle East have contributed to supply chain volatility, particularly for certain petrochemical-based materials. We continue to proactively manage these pressures through disciplined operational execution, including diversifying our supplier base, optimizing inventory planning, and implementing pricing actions where necessary.