Quad Reports Q3 and YTD 2024 Results, Discusses Collaboration with Google Cloud

Quad/Graphics, Inc., a global marketing experience company, reported results for the third quarter ended September 30, 2024.

• Recognized Net Sales of $675 million in the third quarter of 2024 compared to $700 million in 2023, and realized Net Loss of $25 million or $0.52 Diluted Loss Per Share for the third quarter of 2024.
• Achieved Non-GAAP Adjusted EBITDA of $59 million in the third quarter of 2024, increased from $57 million in the third quarter of 2023, and delivered $0.26 Adjusted Diluted Earnings Per Share for the third quarter of 2024.
• Increased Adjusted EBITDA Margin by 54 basis points to 8.7% in the third quarter of 2024 compared to the same period in 2023.
• Amended and extended $690 million bank debt agreement to October 2029.
• Built sales momentum for its in-store retail media network, In-Store Connect by Quad.
• Announced collaboration with Google Cloud to power next-generation, AI-driven marketing solutions.
• Received $41 million of net cash proceeds from the sale of its former Saratoga Springs, New York, manufacturing facility.
• Entered into a definitive agreement to sell the majority of its European operations for an enterprise value of €41 million (approximately $45 million) to Capmont; expects to close the transaction by year end.
• Declared quarterly dividend of $0.05 per share.
• Updates full-year 2024 financial guidance, including Net Sales trending to the higher end of decline in its original guidance range, while maintaining guidance midpoints for Adjusted EBITDA and Free Cash Flow and improving anticipated year-end 2024 Net Debt Leverage from approximately 1.8x to 1.5x.

Joel Quadracci, Chairman, President and CEO of Quad, said: “During the third quarter, we continued our focus on differentiating ourselves as a marketing experience, or MX, company, including investments in innovative solutions that align with our growth priorities. I am pleased to report that our in-store retail media network is expanding and producing measurable results for both retailers and consumer brands. Already, we have launched a test phase of In-Store Connect by Quad in 15 stores with The Save Mart Companies and are rolling out testing phases with two additional grocery chains by year end.

“In the third quarter, we also announced an exciting collaboration with Google Cloud to launch AI-powered solutions that will enable brands to create highly personalized content at scale across multiple marketing channels. By combining our data expertise with Google Cloud’s advanced AI capabilities, we not only will improve audience targeting, but will also reimagine how brands connect with consumers through streamlined, automated solutions that drive impactful results without compromising their unique brand voice.

“As always, we remain focused on delivering superior service to our clients while driving profitability, further enhancing Quad’s financial strength and creating shareholder value. Last week, we announced our agreement to sell the majority of our European operations, which represents just 5% of our total Net Sales, to Capmont for an enterprise value of €41 million or approximately $45 million. This proposed sale aligns with Quad’s ongoing strategic focus to optimize our business portfolio for growth as an MX company. We expect to use proceeds from the sale to reduce debt and make further investments in our solutions suite. We will continue to maintain state-of-the-art print operations in locations that support our MX offering, including The Americas, with North America comprising our largest base of operations.

“We look forward to sharing a more comprehensive update on our strategy and growth opportunities at our upcoming Investor Day on November 20, 2024, in New York City.”

Added Tony Staniak, Chief Financial Officer of Quad: “Our flexible operating model, higher labor productivity and disciplined approach to managing all aspects of our business enabled us to deliver higher Adjusted EBITDA Margin in the third quarter and on a year-to-date basis compared to the prior year, despite Net Sales pressure. We also continued to be a strong cash generator, including realizing $41 million of net proceeds from the sale of our former Saratoga Springs, New York, manufacturing facility, and we expect to receive approximately $32 million in cash and $13 million in debt reduction for a total enterprise value of approximately $45 million by year end from the sale of the majority of our European operations. Our full-year Net Sales is trending toward the higher end of decline in our original guidance range; however, we are maintaining the midpoints of our guidance ranges for Adjusted EBITDA and Free Cash Flow due to increased manufacturing productivity and cost reductions. With our strong cash generation, we expect to reduce Net Debt by over $700 million, or 68%, compared to January 1, 2020, to reach Net Debt Leverage of approximately 1.5x. Additionally, we are pleased to have recently extended our $690 million bank debt agreement to October 2029 due to the continued long-term partnership and support of our premier bank group. Given the strength of our balance sheet, we will continue to make strategic investments in our business, accelerate our offerings as a marketing experience company, and return capital to shareholders through our quarterly dividend. We also expect to be opportunistic in terms of our future share repurchases.”

• Net Sales were $675 million in the third quarter of 2024, a decrease of 4% compared to the same period in 2023 primarily due to lower paper and agency solutions sales, including the loss of a large grocery client.
• Net Loss was $25 million in the third quarter of 2024 compared to a Net Loss of $3 million in the same period in 2023. The increase was primarily due to a $28 million increase in restructuring, impairment and transaction-related charges, net (including a $47 million increase in non-cash impairment charges primarily related to the European divestiture partially offset by a $21 million gain on the sale of the former Saratoga Springs, New York, facility) and the impact from lower Net Sales, partially offset by benefits from increased manufacturing productivity, savings from cost reduction initiatives, and lower depreciation and amortization.
• Adjusted EBITDA was $59 million in the third quarter of 2024 compared to $57 million in the same period in 2023, primarily due to increased manufacturing productivity and savings from cost reduction initiatives, partially offset by the impact from lower Net Sales.
• Adjusted Diluted Earnings Per Share was $0.26 in the third quarter of 2024 compared to $0.11 in the same period in 2023.

• Net Sales were $2 billion in the nine months ended September 30, 2024, a decrease of 9% compared to the same period in 2023 primarily due to lower paper sales and lower print volumes, including the impact from client mix and increased gravure volume that has a lower unit price with a higher profit margin, as well as lower agency solutions sales, including the loss of a large grocery client.
• Net Loss was $56 million in the nine months ended September 30, 2024, compared to Net Loss of $33 million in the same period in 2023. The increase was primarily due to a $35 million increase in restructuring, impairment and transactions-related charges, net (including a $50 million increase in non-cash impairment charges primarily related to the European divestiture partially offset by a $21 million gain on the sale of the former Saratoga Springs, New York, facility) and the impact from lower Net Sales, partially offset by benefits from increased manufacturing productivity, savings from cost reduction initiatives, and lower depreciation and amortization.
• Adjusted EBITDA was $161 million in the nine months ended September 30, 2024, a decrease of $7 million compared to the same period in 2023. The decrease was due to lower Net Sales, partially offset by benefits from increased manufacturing productivity and savings from cost reduction initiatives.
• Adjusted Diluted Earnings Per Share was $0.49 in the nine months ended September 30, 2024, compared to $0.28 in the same period in 2023, primarily due to higher Adjusted Net Earnings and the beneficial impact from the Company repurchasing Class A shares totaling approximately 11% of its outstanding shares since the second quarter of 2022.
• Net Cash Used in Operating Activities was $46 million in the nine months ended September 30, 2024, compared to Net Cash Provided by Operating Activities of $41 million in the nine months ended September 30, 2023. Free Cash Flow was negative $92 million in the nine months ended September 30, 2024, compared to negative $18 million in the same period in 2023, as the Company realized working capital benefits in 2023 from decreasing inventory due to an improved supply chain environment compared to 2022. As a reminder, the Company historically generates most of its Free Cash Flow in the fourth quarter of the year, and we expect fourth quarter 2024 Free Cash Flow to be $142 million to $162 million.
• Net Debt was $490 million at September 30, 2024, compared to $470 million at December 31, 2023 and $584 million at September 30, 2023. Compared to December 31, 2023, Net Debt increased primarily due to the negative $92 million of Free Cash Flow in the nine months ended September 30, 2024, less $69 million of proceeds from asset sales. Quad now expects to reduce Net Debt to approximately $330 million, or 1.5x Net Debt Leverage, at the end of this year pending the sale of the majority of its European operations. With the amended and extended bank debt agreement, the Company will make regular quarterly amortization payments, a $9 million payment in November 2026 and a $193 million payment at maturity in October 2029.

Click to enlarge. | Credit: Quad Q3 Earnings Call

Quad’s next quarterly dividend of $0.05 per share will be payable on December 6, 2024, to shareholders of record as of November 18, 2024.

The Company updates its full-year 2024 financial guidance as follows:

Click to enlarge. | Credit: Quad Q3 Earnings Call

Source: Quad

The preceding press release was provided by a company unaffiliated with Printing Impressions. The views expressed within do not directly reflect the thoughts or opinions of the staff of Printing Impressions.