Q2 2025 Quad/Graphics Inc Earnings Call

Joel Quadracci: Good morning and welcome to Quad's second quarter 2025 Conference Call. During today's call, all participants will be in listen-only mode. Should you need assistance at any time, please signal a conference specialist by pressing the star keys followed by zero. A slide presentation accompanies today's webcast, and participants are invited to follow along, advancing the slides themselves. To access the webcast, follow the instructions posted in the earning release. Alternatively, you can access the slide presentation on the Investor section of Quad's website under the Events and Presentations link. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star, then one. To withdraw your question, please press star, then two. Please note this event is being recorded. I will now turn the conference call over to Katie Krebsbach, Quad's Senior Manager of Investor Relations. Katie, please go ahead.

Good morning and welcome to Cordes second quarter 2025 conference call.

During today's call all participants will be in listen-only mode. Should you need assistance? At any time? Please signal a conference specialist by passing the star Keys followed by zero.

A slight presentation accompanies. Today's webcast and participants are invited to follow along.

Advancing, the slides themselves.

To access the webcast. Follow the instructions posted in the earning release.

Alternatively, you can access the slide presentation on the investor section of quads website under the events and presentations link.

After today's presentation, there will be an opportunity to ask questions to ask a question. Please press star then 1 to withdraw your question. Please press star then 2 please note this event is being recorded.

I will now turn the conference call over to Katie krebsbach quartz senior manager of investor relations Katie, please go ahead.

Katie Krebsbach: Thank you, operator, and good morning, everyone. With me today are Joel Quadracci, Quad's Chairman, President, and Chief Executive Officer, and Tony Staniak, Quad's Chief Financial Officer. Joel will lead today's call with a business update, and Tony will follow with a summary of Quad's second quarter and year-to-date financial results, 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 adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, free cash flow, net debt, and debt leverage ratio. We have included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures.

Thank you, operator. And good morning, everyone.

Chairman president.

Executive officer and Tony stainiac course Chief Financial Officer.

Joel will lead today's call with a business update, and Tony will follow with a summary of Quad's second quarter and year-to-date financial results, followed by a 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 5 presentation on, slide 2.

Katie Krebsbach: Finally, a replay of the call will be available on the Investor section of Quad.com shortly after our call concludes today. I will now hand over the call to Joel.

Quad Financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-gaap Financial measures, including adjusted Eva adjusted evaa margin, adjusted diluted earnings per share free, cash flow, net debt and debt. Leverage ratio, we have included in the 5 presets to get financial measures, finally, a replay of the call will be available on the investor section of quad.com shortly after our call concludes today.

Joel Quadracci: Thank you, Katie, and good morning, everyone. Second quarter results met our expectations as we continue to differentiate ourselves as a marketing-experienced company that simplifies the complexities of marketing for brands and marketers. Our distinctive offering shown on slide three includes a suite of integrated solutions for creative production and media backed by intelligence and tech across all digital and physical channels. We continue to invest in our strategic growth areas, including innovative solutions and superior talent to stay ahead of industry trends and execute faster, better, and with more agility. Quad's overall supply chain continues to have limited direct exposure to tariffs. Our largest import is the paper we bring in from Canada, as well as books we manufacture in our facilities in Mexico. These products are compliant under the USMCA, and our expectation is that they will continue to be exempt from tariffs.

I will now hand over the call to Joel.

Thank you, Katie, and good morning, everyone. Second quarter results met our expectations as we continue to differentiate ourselves as a marketing experience company that simplifies the complexities of marketing for brands and marketers.

Our distinctive offering shown on slide 3 includes a suite of Integrated Solutions for Creative production and media. Backed by intelligence and Tech across all digital and physical channels.

We continue to invest in our strategic growth areas, including innovative solutions and superior talent, to stay ahead of industry trends and execute faster, better, and with more agility.

Quads overall supply chain continues to have limited direct exposure to tariffs.

Our largest import is the paper we bring in from Canada as we look at, as well as we manufacture books, we manufacture in our facilities in Mexico,

Joel Quadracci: During the second quarter, we did not see a significant pullback from clients due to tariffs or inflationary pressures. However, we continue to closely monitor for potential impacts on our clients, given the widespread uncertainty of when and how tariffs will ultimately be implemented. We are paying particular attention to our clients' supply chains for potential disruptions, as well as fluctuations in consumer demand that may affect their mission-critical marketing plans. Rising postal rates also continue to challenge our clients, but a special nine-month USPS catalog discount launching in October offers some relief. This 10% discount aims to test volume elasticity within the catalog vertical.

these products are compliant on the US MCA and our expectation is that they will continue to be exempt from tariffs.

During the second quarter, we did not see a significant pullback from clients due to tariffs or inflationary pressures.

However, we continue to close and monitor for potential impacts on our clients, given the widespread uncertainty of when and how terrorists will ultimately be implemented?

We are paying particular attention to our clients' supply chains for potential disruptions, as well as fluctuations in consumer demand that may affect their mission-critical marketing plans.

But a special 9-month, USPS catalog discount launching in October offers some relief.

Joel Quadracci: We appreciate the USPS agreeing to this test, which follows a recent study from the Postal Regulatory Commission confirming that rising rates negatively impact mail volume, a long-held view within Quad and other industries that rely on the USPS services to sustain essential communication and commerce. The PRC also has acknowledged for the first time that the current system is not meeting objectives, reinforcing the need for a sustainable approach. We are excited to welcome David Steiner as the recently appointed Postmaster General. He brings with him a compelling blend of operational expertise, financial discipline, and strategic vision, as well as an employee-friendly management approach at a critical time for the USPS. Quad looks forward to continuing our legacy of strong collaboration with the USPS leadership to ensure print remains a valuable part of the marketing ecosystem.

This 10% discount aims to test volume elasticity within the catalog vertical.

We appreciate the USPS agreeing to this test, which follows a recent study from the postal Regulatory Commission confirming that Rising rates negatively impact male volume A long-held View within quad and other industries. That rely on you on the USPS services to sustain essential communication and commerce.

The PRC also has acknowledged for the first time that the current system is not meeting objectives. Reinforcing the need for a sustainable approach.

We are excited to welcome David Steiner as the recently appointed Postmaster General.

He brings with him a compelling blend of operational, expertise, Financial discipline and strategic Vision as well as an employee friendly management, Approach at a critical time for the USPS.

Joel Quadracci: We continue to offer a two-pronged approach to help our clients mitigate the impact of postal rates, which remain the single largest marketing expense for mailers. The first prong is to provide innovative postal optimization solutions to maximize savings. Quad offers a full suite of postal solutions, including innovations like Household Fusion, in which we bundle multiple magazines from various publishers and catalogs from different brands destined for the same household into a single package to reduce costs, and expanded co-mail assets that drive additional posted savings opportunities through economies of scale. The second prong of this strategy focuses on offsetting price increases through improved response rates for mailed marketing products. Much of our offering focuses on using our proprietary data stack to enhance audience targeting and responsiveness across channels, including in-home direct mail. I will discuss further in a moment.

Quad looks forward to continuing our Legacy of strong collaboration with the USPS leadership, to ensure print remains a valuable part of the marketing ecosystem.

We continue to offer. A 2-prong approach to help our clients mitigate the impact of postal rates, which Remain the single largest market. Expense for mailers the first prong is to provide Innovative, postal optimization solutions to maximize savings quad offers a full Suite of postal Solutions including Innovations like household fusion and which we bundle multiple magazines from various Publishers and catalogs from different brands destined for the same household into a single package to reduce costs.

And expanded coal, male capabilities that drive additional posted savings opportunities through economies of scale.

The second prong of this strategy focuses on an offsetting price increases through improved response rates for mailed marketing products.

Joel Quadracci: On slide four, we share how Quad is investing in the rapidly evolving technology of artificial intelligence to create internal cost savings and support revenue generation. We organize our approach to AI application into three categories: process automation, which replicates and replaces repetitive human tasks; cognitive insights, which uses machine learning and algorithms to produce predictive insights; and cognitive engagement, where generative AI can continuously analyze large pools of data to dynamically create new net new content and insights. Quad leverages AI across these categories to optimize each aspect of the marketing process. In MX Intelligence, we are focusing on using AI-powered insights from our data stack to predict behaviors and optimize messaging to reach the right audiences. In MX Creative, we are applying AI-driven automation to accelerate the production of high-quality, customized content across channels, ensuring relevant connections at scale.

Much of our offering focuses on using our proprietary data stack to enhance audience targeting and responsiveness across channels including in-home direct mail. I will discuss further in a moment.

On slide 4 we share how quad is investing in the rapidly evolving. Technology of artificial intelligence to create internal cost savings and support Revenue generation.

We organize our approach to AI application into 3 categories.

Process automation, which replicates and replaces repetitive human tasks.

Cognitive insights, which uses machine learning and logarithms to produce predictive insights.

And cognitive engagement, or generative AI, can continuously analyze large pools of data to dynamically create new content and insights.

Quad leverages AI across these categories to optimize each aspect of the marketing process.

In MX intelligence, we are focusing on using AI powered insights. From our data stack to predict behaviors and optimize messaging to reach the right audiences.

Joel Quadracci: In MX Production, we are streamlining workflows like scheduling and machine maintenance to reduce manual intervention and improve speed to market without compromising quality. In MX Media, we are using AI to optimize campaign performance through continuously refining media execution across digital and physical channels, tracking real-time progress and making intelligent adjustments for maximum impact. Transition to slide five, marketers increasingly rely on audience intelligence to drive stronger campaign outcomes and quantifiable ROI, and our AI-powered household-based data stack is helping meet that need. Our data stack includes more than 20,000 addressable demographic transactional, attitudinal, and behavioral characteristics, as well as hundreds of proprietary interests, or what we call passions, representing 92% of the U.S. households. We are actively applying our data stack to client work across all channels. One major use case for our data stack is enhancing clients' media buying with precision at scale.

In MX creative, we are applying AI driven automation, to accelerate the production of high-quality customized content across channels, ensuring relevant connections at scale.

In MX production, we are streamlining workflows like scheduling and machine maintenance to reduce manual intervention and improve speed to market without compromising quality.

And an MX media. We are using AI to optimize campaign performance through continuously refining media execution across digital and physical channels, tracking real-time progress, and making intelligent adjustments for maximum impact.

Transition to slide, 5 marketers, increasingly rely on audience, intelligence to drive stronger cam a campaign outcomes and quantifiable Roi and our AI powered household. Ba based data stack is helping meet that need

Our data stack includes more than 20,000, addressable demographic, transactional attitudinal and behavioral characteristics, as well as hundreds of proprietary interests, or what we call passions, representing 92% of the US households.

Joel Quadracci: For example, Spirit of Gallo, the fourth largest spirit supplier by volume in the U.S., relies on our data guide to guide its buying strategy across out-of-home, social, and connected TV media channels. Gallo is pleased with the progress our partnership has generated so far, and we look forward to growing together in the future quarters. We also use our data stack to enhance direct marketing campaign effectiveness. By filtering target characteristics and passions from our data stack, we optimize mailing lists to increase response rates and achieve a greater ROI for our clients' initiatives. Earlier this year, we applied our data stack to identify the best potential customers for our direct mail campaign we helped execute for a nationwide home services company.

We are actively applying our data stack to client work across all channels. 1 major use case for our data sack is enhancing clients media, buying with Precision at scale.

For example, Spirit of gallow, the fourth largest Spirit supplier by volume in the US, relies on our data. Guide to guide, its buying strategy across out of home, social and connected TV media channels, Gallow is pleased with the progress. Our partnership has generated so far and we look forward to Growing together in the future quarters.

We also use our data stack to enhance the effectiveness of direct marketing campaigns.

Our data stacked. We optimize mailing list to increase response rates and achieve a greater Roi for our clients initiatives.

Joel Quadracci: The new customer acquisition mailing led to more than an 80% increase in revenue and a 65% increase in return on ad spend compared to the client's 2024 mailing campaign. As we highlighted last quarter, Quad is providing integrated marketing services for Valvoline Instant Oil Change across creative production and media. Using a combination of demographic and transactional characteristics, we are generating targeted lists to market to clients' grand openings and store remodels through in-home direct mail. The initial results from this application of our data stack are quite promising. In addition to the use cases I've outlined, we're exploring new avenues to monetize our differentiated data capabilities, and I look forward to sharing more about these opportunities on future calls. The biggest hurdle to scaling data applications is the time and specialized knowledge required to interpret the relevant data for a particular use case.

Earlier this year, we applied our data stack to identify the best potential customers for a direct mail campaign, we helped execute for our Nationwide Home Services Company.

The new customer acquisition mailing led to more than an 80% increase in revenue and a 65% increase in return on ad, spend compared to the clients 2024 mailing campaign.

As we highlighted last quarter cloud is providing integrated marketing services for valving. Instant Oil Change across creative production and media using accommodation of demographic and transactional characteristics. We are generating targeted lists to market the client's grand openings and store remodels through in-home Direct Mail. The initial results from this application of our data stack are quite promising.

In addition to the use cases I've outlined, we're exploring new avenues to monetize our differentiated data capabilities, and I look forward to sharing more about these opportunities on future calls.

Joel Quadracci: During the quarter, we solved for this challenge through the launch of Audience Builder 2.0, an AI-powered tool that enables Quad employees to easily access our data stack to create complex, high-propensity audiences. By year's end, we expect to finish integrating a large language model within the tool to enable even faster audience creation using natural language prompts. These queries can be as simple as, "Build me an audience of all potential customers who are in the market for premium pet food who shop online." The tool will then generate an audience list following the requested parameters in a format that can be deployed directly to online or offline channels. On slide six, we provide an update on In-Store Connect by Quad, which leverages the high foot traffic of brick-and-mortar stores to generate direct consumer connections for retailers and brands.

The biggest hurdle to scaling data applications, is the time, and specialized knowledge required to interpret the relevant data for a particular use case.

During the quarter, we solve for this challenge, through the launch of audience Builder, 2.0 an AI powered tool that enables quad employees to easily access our data stack to create complex High propensity audiences.

By Year's End, we expect to finish integrating a large language model within the tool to enable even faster audience. Creation, using natural language prompts

These queries can be as simple as quote build me, audience of all potential customers who are in the market for Premium Pet Food, Who shop online. And of quote, the tool will then generate an audience list following the requested parameters in a format that can be deployed directly to online or offline Channel channels.

Joel Quadracci: We recently announced our partnership with Vaiarda, a leading Latino-owned grocery chain in California, known for providing high-quality, authentic ingredients to its customers. By the end of the summer, In-Store Connect will go live in 15 Vaiarda stores, featuring messages in both English and Spanish, and providing CPGs with expanded access to shoppers. Steve Netherton, Chief Information Officer and Vice President of Continuous Improvement for Vaiarda Supermarkets, said, "In-Store Connect gives us an effective tool to communicate our unique products and potential savings to shoppers while opening new opportunities for brands to engage with communities we serve in meaningful, measurable ways." I am pleased to share that we have successfully doubled our In-Store Connect footprint with the SaveMart companies, recently installing the solution in 15 additional stores. This marks the first grocery client to expand its store count beyond our initial test phase.

on slide 6, we provide an update on in-store connect by quad, which leverages the high foot track traffic of brick, and mortar stores to generate direct Consumer Connections for retailers and brands

We recently announced our partnership with iarta, a leading Latino-owned grocery chain in California known for providing high-quality, authentic ingredients to its customers.

By the end of the summer in-store, connect will go live in 15 by Arta, stores featuring messages in both English, and Spanish, and providing cpgs with expanded access to Shoppers.

Steve netherton Chief Information officer and vice president, continuous Improvement, for viad of supermarkets said.

In-store connect gives us an effective tool to communicate our unique products and potential savings to shoppers. While opening new opportunities for brands to engage with communities, we serve in meaningful, measurable ways.

I'm pleased to share that we have successfully doubled our in store connect footprint with the save Mart companies recently installed the solution in 15 additional stores. This marks the first grocery client to expand its store count beyond our initial test phase.

Joel Quadracci: With In-Store Connect, we are strengthening our roles as strategic advisors, helping physical retailers adapt to a rapidly evolving media environment. Our dynamic real-time advertising channel delivers measurable results for advertisers and retailers alike. Based on a sampling of data from transaction logs, Quad has seen an average of 5% to 20% product sales lift from participating brands. The range in sales lift depends on campaign objectives. Promotional campaigns on our platform often generate the highest returns, with some achieving sales increases greater than 20% for featured products. Brand awareness ads, like those from Mickelow Ultra, consistently deliver single-digit sales increases, adding steady value over time. In addition to individual product lift, In-Store Connect has demonstrated its ability to boost across entire product categories. We are also using In-Store Connect to help other types of retailers create their own internal store in store retail media ecosystems.

Within store connect we are strengthening our role as a strategic advisers, helping physical retailers adapt to a rapidly evolving media environment, our dynamic real time advertising channel delivers measurable results for advertisers and retailers alike.

Based on our sampling of data from transaction logs Quanta has seen an average of 5% to 20% product sales lift from participating brands.

The range in sales lift depends on campaign objectives promotional.

Promotional campaigns on our platform often generate the highest returns with some achieving sales increases greater than 20% for featured products.

Brand awareness ads like those for Michelob ultra consistently deliver single digit sales increases, adding steady valuable over time in.

In addition to individual product lift in store connect has demonstrated its ability to boost across the entire product categories.

We're also using in store connect to help other types of retailers create their own internal store in store retail media ecosystems.

Joel Quadracci: The focus here is to elevate the shopper experience with promotional contact directly in aisle. As we shared last quarter, one of the nation's largest home improvement retailers currently has more than 550 of our digital screens installed in approximately 100 of its stores. Transitioning to slide seven, during the quarter, the company and its leadership received several recognitions and awards reflecting Quad's industry expertise. For the sixth year in a row, we ranked among AdAge's top 25 world's largest agency companies. We also earned a repeat spot on and M's Agency 100 for our expertise in healthcare marketing. Several of our leaders received industry recognition during the quarter too, ranging from Commerce Marketers' pioneering retail media to e-commerce studio professionals and Adweek's most influential leaders driving growth across advertising, marketing, media, and tech.

Here's to elevate the shopper experience with promotional contact directly in aisle as we shared last quarter one of the nation's largest home improvement retailers currently has more than 550 of our digital screens installed in approximately.

101 in stores.

Transitioning to slide seven during the quarter the company and its leadership received several recognitions and awards, reflecting larger industry expertise for the sixth year in a row rewrite ranked among AD Age's top 25 world's largest agency companies. We also earned a repeat spot on M M and EMS agency 100 for expertise.

And health care market.

Several of our leaders received industry recognition during the quarter to ranging from commerce Mercury's pioneering regional media.

E Commerce studio professionals and AD weeks, most influential leaders driving growth across advertising marketing media and tech.

Joel Quadracci: As an industry thought leader, Quad regularly partners with some of the nation's most reputable researchers to explore marketing trends, as shown on slide eight. Quad recently partnered with the Harris Poll, one of the longest-running surveys in the U.S., to conduct a cross-generational consumer study on how Americans engage with digital and physical media. The study, titled The Return of Touch Report: Reimagining Consumer Engagement in 2025, finds that consumers desire tactile brand experiences, including in-store shopping and immersive print catalogs and direct mail.

As an industry thought leader Quad regularly partners with some of the nation's most reputable researchers to explore marketing trends as shown on slide eight.

Todd recently partnered with the Harris poll, one of the longest running surveys in the U S to conduct a cross generational consumer study on how Americans engage with digital and physical media.

The study titled the return of touch report re imagining consumer engagement in 2025 finds that consumers desire tactile brand experiences, including in store shopping and immersive print catalogs and direct mail. Some peaks key findings are that 71% of consumers say experienced a brand in a fish.

Joel Quadracci: Some key findings are that 71% of consumers say, "Experience a brand in a physical store deepens my connection and loyalty to it." 71% of consumers also say, "Print catalogs or magazines feel more authentic than digital campaigns." Findings were even more compelling for younger generations, as 86% of Gen Z and Millennials say, "Touching and feeling products are essential to my purchasing decisions," and 73% say they look forward to receiving catalogs from brands. These trends support Quad's belief that integrating digital and physical touchpoints is essential to impactful marketing. That is why we have built our services to seamlessly connect creative production and media solutions across online and offline channels to enhance customer engagement and improve marketing ROI. On slide nine, we spotlight a longtime partner that leverages tactile media to improve engagement with consumers.

Nicole store deepens, my connection and loyalty to it.

71% of consumers also say print catalogs magazines feel more authentic and digital campaigns.

Findings were even more compelling for younger generations is 86% of Gen Z and millennial say touching and feeling products are central to my purchasing decisions and 73% say they look forward to receiving catalogs from brands.

These trends support was believes that integrating digital and physical touch points is essential to impactful marketing.

That's why we have built their services to seamlessly connect creative production and media solutions across online and offline channels to enhance customer engagement and improved marketing ROI.

On slide nine we spotlight a longtime partner that leverages tactile media to improve engagement with consumers knitwear.

Joel Quadracci: Knitwell Group has a portfolio of iconic American fashion brands, including Talbots and Chico's. Catalogs play a vital role in marketing these brands, and Quad has proudly served as Talbot's trusted catalog print partner for more than 15 years. Beyond print execution and paper sourcing, Quad employees work as an extension of Talbot's marketing team, working directly on site in the client's facilities where they handle creative premedia that supports the brand's catalogs and social channels. Building on our strong manufacturing and service record with Talbots, Quad has recently expanded our partnership with other affiliates of Knitwell Group, winning catalog and direct mail print execution for three brands under the Chico's portfolio. Transitioning to slide 10, we are proud to share new work we debuted for Natrol, the nation's leading drug-free sleep aid brand.

<unk> group has a portfolio of iconic American fashion brands, including tablets and Chico's.

Catalogs play a vital role in marketing these brands and Qantas, probably served as talbots trusted catalog print partner for more than 15 years.

Beyond print execution in paper sourcing quad employees work as an extension of Talbot's marketing team working directly on site in the client facilities, where they handle creative pre media that supports the brands catalogs and social channels.

Building on our strong manufacturing and service record with Talbots Quad is recently expanded our partnership with other affiliates of net well group winning catalog and direct mail print execution for three brands under the Chico's portfolio.

Transitioning to slide 10, we were proud to share new work, we debuted for neutral the nations, leading drug free sleep aid brand.

Joel Quadracci: As Natrol's agency of record, our Betty Creative Agency was engaged to help reposition the brand from a sleep supplement to a wellness performance partner. We collaborated with MVP quarterback Josh Allen to promote the client's new Sleep and Restore product line through a campaign featuring 15 and 30-second video spots across digital, linear TV, and connected TV, including Amazon, SLING TV, and Walmart Connect. The spot entitled "This Is Me" has garnered strong results, receiving over 1.8 million YouTube views and 5.8 million Instagram reel views in under two months. The campaign has also been picked up by major media outlets and marketing publications, including People, Sports Illustrated, Bleacher Report, and Media Post.

As Nate Trolls, the agency of record or Betty Creative agency was engaged to help reposition the brand from a sleep supplement to our wellness performance partner, we collaborated with N V. P quarterback Josh Allen to promote the clients new sleep and restore product line through our campaign, featuring 15 and 32nd video sprouts across Deere.

Linear television and connected TV, including Amazon select TV and Walmart connect.

The spot entitle. This is me has garnered strong results receiving over 1.8 million Youtube views and $5 8 million Instagram real abuse in under two months.

Campaign has also been picked up by major media outlets and marketing publications, including people Sports illustrated Bleacher report and the Eminem and media post.

Joel Quadracci: Rebecca Lyall, Natrol's Chief Marketing Officer, said, "Utilizing MVP quarterback Josh Allen, we have been able to tap into a huge new audience and seen the impact utilizing top-tier talent at scale can have." We are thrilled about the "This Is Me" spot that has gone live along with the Natrol Pro Sleeper sweepstakes, and I am even more excited about what is still to come. Natroll is just one of three standout creative campaigns our Betty Agency has launched in the last two months, including new work for the Minnesota Lottery and a creative campaign for Kemps, a Midwest dairy products brand owned by dairy farmers in America. Before I turn over the call to Tony, I would like to recognize our employees and thank them for their continued hard work, particularly as we prepare for our peak busy season.

Rebecca while neutrals, Chief marketing Officer said utilizing MVP quarterback Josh Allen, we've been able to tap into a huge new audience and seeing the impact utilizing top tier talent at scale can have we're thrilled about the Miss this means spot that's gone live along with the neutral pro sleeper sweepstakes and their <unk>.

Even more excited about what's still to come.

Nitro is just one of three standout creative campaigns are Betty agency has launched in the last two months, including new work for the Minnesota Lottery and accretive campaigning for camps, our Midwest dairy products brand owned by dairy farmers of America.

Before I turn over the call to Tony I would like to recognize our employees and thank them for their continued hard work, particularly as we prepare for our peak busy season.

Joel Quadracci: Through our persistent commitment to innovation, we are simplifying the complexities of marketing and driving better business outcomes for our clients. With that, I will now turn the call over to Tony for the financial review.

There are persistent and commitment to innovation, where supply is simplifying the complexities of marketing and driving better business outcomes for our clients with that I will now turn the call over to Tony for the financial review.

Tony Staniak: Thanks, Joel, and good morning, everyone. On slide 11, we show our diverse revenue mix. Net sales were $572 million in the second quarter of 2025, a decrease of 4% compared to the second quarter of 2024, when excluding the 6% impact of the February 28, 2025 divestiture of our European operations. The decline

Thanks, Joel and good morning, everyone.

On slide 11, we show our diverse revenue mix net sales were $572 million in the second quarter of 2025, a decrease of 4% compared to the second quarter of 'twenty 'twenty four when excluding the 6% impact of the February 28, 2025 divestiture of our European operations the decline in net.

Joel Quadracci: in net sales during the second quarter was primarily due to lower paper and logistics sales. Net sales were $1.2 billion in the first half of 2025, a 3% decline compared to the first half of 2024, when excluding the 4% impact of the Europe divestiture. On a year-to-date basis, the decline in net sales was primarily due to lower paper, logistics, and agency solution sales, including the loss of a large grocery client, which annualized at the beginning of March 2025. Comparing our net sales breakdown between the first half of 2024 and 2025, our revenues and percentage of total sales increased 2% in our targeted print offerings, driven by direct marketing, packaging, and in-store, while our large-scale print offerings decreased 2% in our revenue mix due to expected organic declines in magazines and retail inserts. Slide 12 provides a snapshot of our second quarter 2025 financial results.

During the second quarter was primarily due to lower paper and logistics sales.

Net sales were $1 $2 billion in the first half of 2025% to 3% decline compared to the first half of 2024, when excluding the 4% impact of the Europe divestiture on.

On a year to date basis. The decline in net sales was primarily due to lower paper logistics and agency solution sales, including the loss of a large grocery client, which annualized at the beginning of March 2025.

Comparing our net sales breakdown between the first half of 2024 and 2025, our revenue as a percentage of total sales increased 2% in our targeted print offerings driven by direct marketing packaging and in store, while our large scale print offerings decreased 2% in our revenue mix due to expected organic.

Declines in magazines and retail inserts.

Slide 12 provides a snapshot of our second quarter 2025 financial results.

Joel Quadracci: Adjusted EBITDA was $43 million in the second quarter of 2025, as compared to $52 million in the second quarter of 2024, and adjusted EBITDA margin declined from 8.2% to 7.6%. On a year-to-date basis, adjusted EBITDA was $89 million in 2025 compared to $102 million in 2024, and adjusted EBITDA margin declined from 7.9% to 7.4%. The decrease in adjusted EBITDA in both periods was primarily due to the impact of lower sales, increased investments in innovative offerings to drive future revenue growth, and the divestiture of our European operations, partially offset by lower selling, general, and administrative expenses, benefits from improved manufacturing productivity, and savings from cost reduction initiatives. Adjusted diluted earnings per share was $0.14 in the second quarter of 2025, as compared to $0.12 in the second quarter of 2024. Year-to-date, adjusted diluted earnings per share was $0.34 in 2025 compared to $0.22 in 2024.

<unk> EBITDA was $43 million in the second quarter of 2025 as compared to $52 million in the second quarter of 2024, and adjusted EBITA margin declined from eight 2% to seven 6%.

On a year to date basis, adjusted EBITDA was $89 million in 2025 compared to $102 million in 2024, and adjusted EBITDA margin declined from seven 9% to seven 4%.

The decrease in adjusted EBITDA in both periods was primarily due to the impact of lower sales increased investments and innovative offerings to drive future revenue growth and the divestiture of our European operations, partially offset by lower selling general and administrative expenses benefits from improved manufacturing productivity and savings.

From cost reduction initiatives.

Adjusted diluted earnings per share was <unk> 14 cents in the second quarter of 2025 as compared to 12 cents in the second quarter of 2024 year to date adjusted diluted earnings per share was 34 cents in 2025 compared to 22 cents in 2020 for the increases are due to higher earnings and the beneficial impact of share repurchases.

Joel Quadracci: The increases are due to higher earnings and the beneficial impact of share repurchases. Free cash flow improved $16 million from last year to negative $66 million in the six months ended June 30, 2025, and included $34 million of free cash flow generation in the second quarter of 2025. The increase in free cash flow is primarily due to an increase in cash earnings, including lower restructuring payments and lower interest payments, as well as a $9 million decrease in capital expenditures. In addition, during the first quarter of this year, we made proactive inventory purchases of paper and other materials in advance of potential sales. This inventory was utilized during the second quarter, which also contributed to improved working capital compared to the first quarter. We show the seasonality of our free cash flow and debt leverage on slide 13.

Free cash flow improved $16 million from last year to negative $66 million in the six months ended June 32025, and included $34 million of free cash flow generation in the second quarter of 2025, the increase in free cash flow is primarily due to an increase in cash earnings including low.

Restructuring payments and lower interest payments as well as a $9 million decrease in capital expenditures.

And during the first quarter of this year, we made proactive inventory purchases of paper and other materials in advance of potential tariffs. This inventory was utilized during the second quarter, which also contributed to improved working capital compared to the first quarter.

We show the seasonality of our free cash flow and debt leverage on slide 13, due to the seasonality of our business from the timing of holiday related advertising and promotions, we typically generate negative free cash flow in the first nine months of the year, followed by large positive free cash flow in the fourth quarter.

Joel Quadracci: Due to the seasonality of our business from the timing of holiday-related advertising and promotions, we typically generate negative free cash flow in the first nine months of the year, followed by large positive free cash flow in the fourth quarter. In 2025, we anticipate a similar seasonal pattern for our free cash flow and debt leverage. When removing the impact of seasonality, our net debt has decreased by $84 million from June 30, 2024 to June 30, 2025. Our free cash flow, in addition to proceeds from asset sales, fuels our capital allocation strategy, as shown on slide 14. During the second quarter, we made progress on the sale of closed facilities, including the sale of our 65,000 square foot Sacramento, California, building for approximately $5 million. We continue to expect to generate future cash proceeds from additional owned facilities that are currently for sale.

In 2025, we anticipate a similar seasonal pattern for our free cash flow and debt leverage.

When removing the impact of seasonality our net debt has decreased by $84 million from June 32024 to June 30th 2025.

Our free cash flow. In addition of proceeds from asset sales fuels, our capital allocation strategy as shown on slide 14.

During the second quarter, we made progress on the sale of close facilities, including the sale of our 65000 square foot Sacramento, California building for approximately $5 million, we continue to expect to generate future cash proceeds from additional owned facilities that are currently for sale.

Joel Quadracci: Our strong cash generation recently enabled us to deepen our product offering by acquiring the co-mail assets of Enru, a co-mail and logistics solutions provider. It is crucial to provide the industry and our clients with additional co-mail postal optimization solutions, since postage is the largest cost for our clients to produce and deliver print marketing campaigns. We are pleased that the Enru integration is going well. In addition to the Enru acquisition, we have used our strong cash generation to maintain low debt balances and return $15 million of capital to shareholders year to date. This year, we increased the quarterly dividend by 50% to $0.075 per share, and our next dividend is payable on September 5th. In addition, we repurchased 1.4 million shares of Class A Common stock thus far in 2025.

Our strong cash generation recently enabled us to deepen our product offering by acquiring the Colombian assets mantra co mail and logistics solutions provider.

It is crucial to provide the industry and our clients with additional call mail postal optimization solutions. Since postage is the largest cost for our clients to produce and deliver print marketing campaigns. We are pleased that the on unreal integration is going well.

In addition to the honor of acquisition, we have used our strong cash generation to maintain low debt balances and returned $15 million of capital to shareholders year to date. This.

This year, we increased the quarterly dividend by 50% to suddenly half cents per share and our next dividend is payable on September 5th. In addition, we repurchased one 4 million shares of class a common stock. Thus far in 2025. This brings total repurchases to seven 3 million shares since we commenced buybacks in 2022.

Joel Quadracci: This brings total repurchases to 7.3 million shares since we commenced buybacks in 2022, representing approximately 13% of Quad's March 31, 2022, outstanding shares. We believe this represents strong value, and we will remain opportunistic in terms of our future share repurchases. Slide 15 includes a summary of our debt capital structure. At the end of the second quarter, our debt had a blended interest rate of 7.2%, and our total available liquidity, including cash on hand, under our most restrictive debt covenant was $202 million, with our next significant maturity of $193 million not due until October 2029. As a reminder, given uncertainty regarding interest rates, we entered into two interest rate collar agreements for $150 million notional value during 2023. The interest rate collars cap our exposure if interest rates increase, and we benefit if interest rates were to fall, down to approximately 2% so far.

Representing approximately 13% our quads March 31, 2022 outstanding shares. We believe this represents strong value and we will remain opportunistic in terms of our future share repurchases.

Slide 15 includes a summary of our debt capital structure at the end of the second quarter, our debt had a blended interest rate of seven 2% and our total available liquidity, including cash on hand under our most restrictive debt covenants was $202 million with our next significant maturity of $193 million not due until on.

<unk> 2029.

As a reminder, given uncertainty regarding interest rates, we entered into two interest rate collar agreements for $150 million notional value. During 2023, the interest rate collars catheter exposure if interest rates increase and we benefit if interest rates were to fall down to approximately 2% silver including.

Joel Quadracci: Including these interest rate collars, we would pay lower interest expense on approximately 86% of our June 30th debt if interest rates declined. We reaffirm our 2025 guidance, as shown on slide 16. We continue to expect net sales to decline 2% to 6% compared to 2024, excluding 2025 net sales of $23 million and 2024 net sales of $153 million from our divested European operations. Full-year 2025 adjusted EBITDA is expected to be between $180 million and $220 million, with $200 million at the midpoint of that range. Compared to the second quarter of 2025, which is our lowest quarter for print volumes, we expect sequentially higher adjusted EBITDA in the third and fourth quarters of 2025 during our seasonal production peak.

These interest rate collars, we would pay lower interest expense.

86% of our June 30th that if interest rates decline.

We reaffirm our 2025 guidance as shown on slide 16, we continue to expect net sales declined 2% or 6% compared to 2024, excluding 2025 net sales of $23 million and 2024 net sales of $153 million from our divested European operations.

Full year 2025, adjusted EBITDA is expected to be between $180 million and $220 million with $200 million at the midpoint of that range compared to the second quarter of 2025, which is our lowest quarter for print volumes, we expect sequentially higher adjusted EBITDA in the third and fourth quarters of 2025 during.

Our seasonal production peak.

Joel Quadracci: We are closely monitoring the potential impacts of tariffs and inflationary pressures on our clients, in addition to the recent postal rate increases, which could affect print and marketing spend. As we have always done in times of economic disruption, we will remain nimble and adapt to the changing demand environment while maintaining our disciplined approach to how we manage all aspects of our business. We expect 2025 free cash flow to be in the range of $40 million to $60 million. Finally, our net debt leverage ratio is expected to decrease to approximately 1.5 times by the end of 2025, achieving the low end of our long-term targeted net debt leverage range of 1.5 times to 2.0 times. As a reminder, we may operate above this range at certain times of the year, primarily due to the seasonality of our business.

We are closely monitoring the potential impact from tariffs and inflationary pressures on our clients. In addition to the recent postal rate increases, which could affect print and marketing spend as we have always done in times of economic disruption, we will remain nimble and adapt to the changing demand environment, while maintaining our disciplined approach to how we manage all aspects of our business.

Yes.

We expect 2025 free cash flow to be in a range of 40 million to $60 million and finally, our net debt leverage ratio is expected to decrease to approximately 1.5 times by the end of 2025, achieving the low end of our long term targeted net debt leverage range of one five times to two point all the time.

<unk>.

As a reminder, we may operate above this range at certain times of the year, primarily due to the seasonality of our business.

Joel Quadracci: Slide 17 includes a summary of our 2028 financial outlook and our long-term financial goals as we continue to build on our momentum as a marketing experience company. Compared to net sales declining 10% in 2024, we expect the rate of net sales to improve to negative 4% in 2025, excluding the year of divestiture, and then reach an inflection point of net sales growth in 2028. We are strategically investing for the long term, as we expect growth in our integrated solutions and targeted print offerings to outpace organic decline in our large-scale print product lines of retail inserts and magazines.

Slide 17 includes a summary of our 2020 financial outlook and our long term financial goals as we continue to build on our momentum as a marketing experience company comp.

Compared to net sales declining 10% in 2024, we expect the rate of net sales decline improved to negative 4% in 2025, excluding the Europe divestiture and then reach an inflection point of net sales growth in 2028.

We're strategically investing for the long term as we expect growth in our integrated solutions and targeted print offerings to outpace organic decline in our large scale print product lines of retail inserts and magazines.

Joel Quadracci: In addition, by 2028, we expect to improve adjusted EBITDA margin by at least 100 basis points compared to 2024, and then reach low double-digit adjusted EBITDA margins in the long term as our net sales mix of higher margin services and products increases, while continuing to improve manufacturing productivity and reduce costs. Regarding free cash flow, we expect to improve our free cash flow conversion as a percentage of adjusted EBITDA from approximately 25% based on 2025 guidance to 35% by 2028 and to 40% in the long term, primarily due to lower interest payments on decreasing debt balances and lower restructuring payments. Finally, we continue to expect to maintain our current long-term targeted debt leverage range of 1.5 times to 2.0 times as part of our balanced capital allocation strategy.

In addition by 2020, and we expect to improve adjusted EBITDA margin by at least 100 basis points compared to 2020 bar and then reach low double digit adjusted EBITDA margins in the long term as our net sales mix of higher margin services and products increases, while continuing to improve manufacturing productivity and reduce costs.

Regarding free cash flow, we expect to improve our free cash flow conversion as a percentage of adjusted EBITDA from approximately 25% based on 2025 guidance to 35% by 2028 and 40% in the long term, primarily due to lower interest payments on decrease in debt balances and lower restructuring payments.

Finally, we continue to expect to maintain our current long term targeted debt leverage range of one five times to two point times as part of our balanced capital allocation strategy.

Joel Quadracci: We believe it requires a compelling long-term investment, and we remain focused on achieving our financial goals, including returning capital to shareholders. With that, I'd like to turn the call back to our operator for questions.

We believe the cloud is a compelling long term investment and we remain focused on achieving our financial goals, including returning capital to shareholders.

With that I'd like to turn the call back to our operator for questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press *1 on your touchtone phone. If you are using a speakerphone, please pick up your headset before pressing the keys. To withdraw your question, please press *2. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Kevin Steinke, with Barrington Research Associates. Please go ahead.

Thank you.

We will now begin the question and answer session to ask a question you met the Star then one on your Touchtone phone if.

If youre using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then tool at this time, we will pause momentarily to assemble our roster.

Yeah.

The first question comes from the line of Kevin Steinke key with Barrington Research Associates. Please go ahead.

Katie Krebsbach: Morning, Kevin.

Good morning, Kevin.

Operator: Kevin.

Debbie.

Katie Krebsbach: I wanted to start off by asking you about the landscape in terms of the postal rates and the post office. It sounded like, again, a little more optimism on that front that you voiced on this call with maybe a little more focus on the pricing versus volume trade-off. I know you keep in touch closely with folks at the postal service, so maybe give us a little bit more on how you see that progressing and if we potentially can get a little more relief on that front while also recognizing you do a lot for your clients to help offset rising rates.

So I wanted to start off by asking about the landscape in terms of the.

Postal.

Rates in the post office at it you know it sounded like again, a little more optimism on that front that your voice on this call with maybe a little more.

<unk> focus on that.

The pricing versus volume trade off.

I know you keep in touch closely.

With the folks at the postal service, so kind of maybe give us a little bit more on how you see that progression progressing and if we potentially can get more relief on that front. While also recognizing you do a lot for your clients to help offset.

You know rising rates.

Joel Quadracci: A lot going on here. Last week was the formal transition of the old Postmaster General to the new one. I was actually at the reception for him at the National Postal Museum, which is part of the Smithsonian Institute. I knew David when he was CEO of Waste Management, and I know him as a strong, practical, people-oriented leader. I am optimistic about his talents being able to be applied to what is a rather complicated story. The other thing happening is they did just implement that expected 11% postal rate increase, which puts more weight on top of the 50% to 70% that they have increased over the past four years alone. That was expected. I think that the hope here is that they are starting to recognize that those increases have hurt them, as well as volume in the industry.

Yeah, a lot going on here last week was the formal transition of the old postmaster general to the new one I was actually at the reception for him at the.

National Postal Museum, which is purpose Smithsonian Institute.

I knew David when he was CEO of waste management, and I know him as a strong practical people oriented leader and so I'm optimistic about his talents being able to be applied to what is a rather complicated story, but.

The other things happening as they did just implement the expected 11% postal rate increase which you know puts more weight on top of the 50% to 70% that they've increased over the past four years alone, but that was expected and I think that the the whole peer is is that they're starting to recognize that.

Those increases have hurt them.

Well as volume in the industry and it's an age old argument that when you increase your biggest cost to your clients.

Joel Quadracci: It is an age-old argument that when you increase your biggest cost to your clients, volume will go down. They seem to finally be believing that. One of the things that they are doing, which is encouraging, is this test that starts in October, which goes for nine months, where if you reach certain criteria as a cataloger, you can get up to a 10% discount. That is really important because it is the prospecting side using catalogs where the volume dries up the quickest when rates increase. Hopefully, that relief will help show maybe less decline and, in some cases, some growth. We are looking forward to that. The other big thing that happened is the Postal Rate Commission, which really oversees the rate structure of the post office, started a review of everything a couple of years ahead of when they usually do it.

And we'll go down they seem to finally be believing that.

And so one of the things that they're doing which is encouraging as this test that starts in October which goes for nine months.

Or if you reach certain criteria is a cataloger that you can get up to a 10% discount that's really important because it's the prospecting side using catalogs, where the volume drives up the quickest when rates increase so hopefully that relief will help show.

You know maybe less decline and in some cases some growth and so we're looking forward to that the other big thing that happened is the postal rate Commission, which really oversees the rate structure of the post office started a review of everything a couple of years ahead of when they usually do it and some initial things just.

Joel Quadracci: Some initial things just came out last week. We just submitted new comments this week that they are accepting is that they recognize formally that the pricing increases have hurt volume. There is even a recommendation to go to once-a-year price increases because it is hard for businesses to manage. They also went as far as to suggest that the rate increases should be capped again under CPI increases. That is something we are watching and we will be participating in. I am encouraged by it. It is a complicated, difficult thing to manage. It is not easy for any Postmaster General to come in and fix something like this. I like what we are hearing. I like the direction.

Came out last week with we just submitted new comments. This week that are that they are accepting is that they recognize formally that the pricing increases have hurt volume. There is even a recommendation to go to once a year price increases because it's hard for businesses to manage.

But they all also a win as far as to suggest that the rate increases should be capped again under CPI increases and so that's something we're watching and we will be participating in and so I'm encouraged I'm encouraged by it. It is a complicated difficult thing to manage so it's it's not.

Easy for any postmaster general to come in and fix something like this but I like what we're hearing I like the direction and we're gonna stay very closely in touch with the post office.

Joel Quadracci: We are going to stay very closely in touch with the post office as they think about their next moves because they are engaging with the industry again, which is nice to see.

They think about their next moves.

Because they are engaging with the industry again, which is nice to see.

Katie Krebsbach: Okay, great. I just wanted to shift to your ongoing investments in growth and innovation and a lot of the discussion about AI in your remarks and specifically the launch of Audience Builder 2.0. You noted in your press release that that is a significant milestone in being able to activate this wealth of data that you have. So maybe can you touch on it, but what does it do for you that you were not able to do before and how that benefits the client and ultimately how that contributes to maybe growth in your business?

Okay great.

And I just wanted to shift to your.

Ongoing investments in.

Growth in innovation and you know a lot of discussion about AI in your remarks.

Specifically the launch of audience builder 2.0 are you.

You noted in your press release that that's a significant milestone in being able to activate this wealth of data that you have so maybe can you you know you touched on it but.

What does it do for you that you weren't able to do before and.

You know how that benefits the client and ultimately how that contributes to maybe you know growth and and.

And your business.

Joel Quadracci: Yeah. Yeah. I would say the data stack that we have done and partnered with Google Cloud to really launch it and be able to make sure that we will be able to use it in the ways that we expect to in the future. What it really kind of does, Audience Builder, which was built on the Snowflake platform, really helps kind of democratize the access to the data. So it is one thing to have a large data stack. It is another to kind of translate and dive into it and say, "You know, here is the audience I need to build from that data stack that is good for this specific customer and the attributes they are looking for." Traditionally, you are working with some data scientists to try and navigate that.

Yeah, I'd say the data stack that we've done in partnership with Google cloud to really to watch it and be able to make sure that that that will be able to use it in ways that we expect to in the future what it really kind of does the audience builder, which was built on the snowflake that platform really helps kind of democratize the access.

The data so it's one thing to have a large data stack, it's another to kind of translate and dive into it and say.

Here's the audience I need to build from that data stack. That's good for this specific customer in the attributes they're looking for traditionally youre working with some data scientists to try and navigate that and they're doing all sorts of work and modeling to pull out the right data and the data stack what audience build or 2.0 does is it.

Joel Quadracci: They are doing all sorts of work and modeling to pull out the right data in the data stack. What Audience Builder 2.0 does is actually allows us to automate that. Even someone like me, although hopefully they will keep me from doing that, could actually start entering some of the attributes into the model. We use some AI features to help navigate through the data stack to automatically pull those out. As I referenced before, the next phase of this is where we are going to apply generative AI or large language models to actually help do prompts into the data stack. So you go from having to input into multiple fields to actually just prompting the AI to go find, "I want the person who likes to run outside and uses these types of shoes for what they like to do.

Actually allows us to automate that and so even someone like me, although I hopefully they'll keep you from doing that.

Could actually start entering some of the attributes into the model.

And we use some AI features to help navigate through the data.

Stack to automatically pull those out and as I referenced before the next phase of this is where we're going to fly you know general survey or large language models.

Actually help pumps into the data stack. So when you go from having to input into multiple fields to actually just prompting the AI to go find I want the person who likes to run outside.

And users.

These types of shoes.

Oh for what they like to do please create an audience of 300000 people, who look like that and it will then automatically navigate it and so you can sort of see the progression of the use of AI on the data stack, but again AI as a tool and so the way I look at it as a way to make things much more.

Joel Quadracci: Please create an audience of 300,000 people who look like that." It will then automatically navigate it. So you can sort of see the progression of the use of AI on the data stack. Again, AI is a tool. The way I look at it, it is a way to make things much more accessible in a faster pace so that customers will be able to iterate the audience data faster than ever.

More accessible in a faster pace, so that customers will be able to iterate the audience data faster than ever.

Katie Krebsbach: Yeah, that sounds really interesting. Do you think this is a tool or something you can go out to your client base and kind of show them that this is a differentiator and, you know, ultimately, these sort of tools that you continue to build and launch kind of continue to drive new business wins for you?

Yeah that sounds really.

Really interesting I mean do you think this is.

A tool or something you can go out to your client base and you kind of show them that this is a differentiator and you know ultimately these sort of tools that you continue to build and launch.

Kent and I continue to drive new business wins for you.

Joel Quadracci: Yeah. Yeah. I think there is a lot of differentiators that happen. Certainly, this will be the data stack is, but where we spend our time, and I am trying to show you in the script and roll out in the examples, it is not the data stack onto itself. It is not an AI model onto itself. It is what is it applied to to help the customer sell more business? That is what we are totally focused on. When we talk about the data stack and that we have got Audience Builder 2.0 to help navigate it, what we are really saying to the customer is, "We got this great data stack. Now we are going to be able to grab data faster than ever, more accurately than ever." We are, at the same time, showing them where to apply that.

Yeah, Yeah, I think I think there's a lot of differentiators that happened certainly this will be the data stack is blood, but where we spend our time and I'm trying to show you in the script and roll out in the examples is it something that is that the data stack on to itself. It's not an AI model onto itself. It's what is it applied to to help the customer.

Sell more business and that's what we're totally focused on and so you know when we talk about the the the data stack and that we've got.

The audience two point all to help navigate it what we're really saying that the customers. We've got this great data stack now, we're gonna be able to grab data faster than ever more accurately than ever and were at the same time, showing them where to apply that and so great. We got the audience data quickly. It may help us more quickly say this much.

Joel Quadracci: So, great, we got the audience data quickly. It may help us more quickly say, "This much should be in social. This much of your budget should be in direct mail. These are the different places you should spend the money." It is that complexity that the customers are asking us to help them with. That is why, I think it is important to understand in a complex marketing world that is evolving here, it is not like one thing that a customer is looking for. They are looking for help in how to use that one thing and how does it tie to the three or four other things that are happening.

It should be and social this much in your budget should be a direct mail. These are the different places you should spend the money. It's that complexity that the customers are asking us to help them with and that's why you know I think it's important to understand in a complex marketing world. That's evolving here, it's not like one thing that the customer is looking for they're looking for help in how to do.

Use that one thing and how does it tie to the three or four other things that are happening I mean in the in the half or even in the quarter I'm really excited by.

Joel Quadracci: I mean, in the half or even in the quarter, I am really excited by the 7% increases in sales we are seeing in direct mail and packaging and a 13% increase in sales for in-store because we are not selling those individual products by mimicking what they are already doing. We are getting the sales by tying in complexity of new offerings to help them get more responsiveness out of that.

The 7% increases in sales, we're seeing a direct mail and packaging and a 13% increase in sales for in store, because we're not selling those individual products by mimicking what they're already doing we're getting the sales by tying in complexity of new offerings to help them get more.

Parts of it nets out of that and like an example in direct mail I'm not just saying, we're going to replicate what youre doing we're actually saying, let's start with new audience and let's figure out how to come up with a challenge or a direct mail piece to the one you're currently doing by the way, we will test that virtually in our virtual testing platform before.

Joel Quadracci: Like an example in direct mail, I am not just saying we are going to replicate what you are doing. We are actually saying, "Let us start with a new audience and let us figure out how to come up with a challenger direct mail piece to the one you are currently doing." By the way, we will test that virtually in our virtual testing platform before we roll it out. That is not how it is typically done. So we are winning big programs based on tying those complexities together. The same in packaging. We are not just trying to do the same form factor someone is doing. In the case of a battery supplier, they are trying to get away from plastic. So we help create a form factor that just uses paper that fits the machines they are going to do. So we won that.

We roll it out that's not how it typically damage. So we're winning big programs based on tying those complexities together the same in packaging. We're not just trying to do the same form factor someone's doing in the case of a battery supplier, they're trying to get away from plastic. So we help create a form factor that just uses paper.

That fits the machines theyre going to do so we won that but also in packaging. We have cases, where we're using the same sort of virtual analytics to inform what the form factor and what the creative should look like on the packaging, Washington, the aisle, but Furthermore, our in store group that is saying here's the signage that should accompany it in the <unk>.

Joel Quadracci: In packaging, we have cases where we are using the same sort of virtual analytics to inform what the form factor and what the creative should look like on the packaging when it is in the aisle. Furthermore, our In-Store Connect group then is saying, "Here's the signage that should accompany it in the aisle with the packaging." Finally, when you look at those, we are tying complexities together, just not mimicking what people are doing. That is the whole power of this MX marketing solution is we are going to have all the buzzwords working for us, the AI tools, the you name it, the data stacks. But it is how you are applying it and how the customers can feel comfortable that we are going to make it easy.

Well with the packaging and then finally you also find me and when you look at those we're time complexities together just not mimicking what people are doing and that's the whole power of this air Max marketing solution is we're gonna have all the buzzwords working for us the AI tools you name it the data stacks, but it's.

How you're applying it and how the customers can feel comfortable that we're going to make it easy.

Katie Krebsbach: Great. Very helpful color. I appreciate you touching on some of the, it sounds like really healthy growth rates in the targeted print categories. I believe you said 7% and 13% for a couple of the categories there.

Great very helpful color and I appreciate you touching on.

Some of the you know it sounds like really healthy growth rates in the targeted print categories. I believe you said, 7% and 13%.

For a couple of years ago.

Yeah.

Joel Quadracci: Yeah, year to date. A little higher in the quarter.

So a little higher at border, but Oh, okay, great well yeah. That's.

Katie Krebsbach: Okay, great. Well, that's very helpful color. I know that kind of dovetails into this bigger picture. My question is, any evidence you can point to that gives you greater confidence about this journey you're on to achieving net sales growth? I know you continue to say by 2028, but it sounds like there's some real tangible evidence you're seeing so far this year that the strategy in that journey continues to progress and take hold.

That's very helpful color and I, you know because that kind of dovetails in.

Just like bigger picture question as you know any evidence you can point to that you know gives you greater confidence.

About this journey you're on to it.

Achieving net sales roles I know you continue to say by 2028, but you know it sounds like there's some kind of real tangible evidence you're seeing so far this year that you know the strategy and that journey continues to progress and take hold.

Joel Quadracci: Yeah. Yeah. I mean, I think you look at the pie charts that we show you of targeted print versus large-scale print. In large-scale print, that is viable marketing material. Retail inserts still work. People still want magazines, but they have the biggest decline rate. Part of the migration to increasing the share of pie in targeted print and the integrated solution side is that you have that steady decline, but it is still good revenue. It is good cash flow revenue. That kind of dictates it a little bit. I mean, in fact, I think we are seeing a little bit less decline in retail interest than we typically expect. Some of that is maybe some market share and maybe a little bit more resilience in some categories, but it will continue to decline.

Yeah, I mean, I think you look at the Pie charts that we show you of all targeted print versus large scale print.

In large scale print that is viable marketing material.

Retail inserts still work people still want the magazine, but they had the biggest decline rate and so part of the migration to increasing <unk>.

Sure, a pie and targeted print and E on.

The integrated solution side is that you have that steady decline, but it's still good revenue. It's good cash flow revenue and so that kind of dictates that a little bit I mean in fact, I think we're seeing a little bit less decline in retail interest than we typically expect some of that is maybe some market share and maybe a little bit more.

Zillionths in some categories, but it will continue to decline. So so that's the healthy balance that people have to think about about why 2028 for the flip we still have this big goofy.

Joel Quadracci: That is the healthy balance that people have to think about, about why 2028 for the flip. We still have this big, girthy print volume stuff that creates good cash flow, and we will manage it as we manage it while we grow the other stuff. It is how we are winning the other stuff that encourages me because we are not winning it by just doing the me-too pitch. We are doing it by using intelligence to create those channels to be more customer-centric from a growth rate standpoint, higher ROI.

Volume stuff that creates good cash flow and we'll manage it as we management, while we grow the other stuff, but it's it's how we're winning the other stuff that encourages me because we're not winning it by just doing the need to pitch, we're doing it by using intelligence to create those channels to be more customer centric from AR.

Growth rate standpoint higher ROI.

Katie Krebsbach: All right. Fantastic. That is, again, really great commentary. I appreciate it. I will turn it back over.

Alright, fantastic, that's again really great commentary I appreciate it I'll I'll turn it back over.

Joel Quadracci: Okay. Thanks. Thanks. We will talk to you later. I will take the next question.

Okay parents will talk to you later.

Operator next question.

Operator: Thank you. Next question comes from the line of Barton Crockett with Rosenblatt. Please go ahead.

Thank you next question comes from the line of Barton Crockett with Rosenblatt. Please go ahead.

Tony Staniak: Good morning, Barton. Barton Crockett.

Barton one button.

Operator: Good morning. Thanks for taking the question. I guess a couple of things I was curious about on the numbers. One is, your sales trend, kind of excluding the Europe divestiture, down 4% in the quarter, a little bit of a deceleration from the down 2% in the first quarter, even though I think you had the benefit of lapping the loss of a grocery client. I was just wondering if you could just remind us how material was that grocery impact and also unwrap a little bit, unpack a little bit about what prompted the deceleration here in trend in the second quarter versus the first.

Good morning.

Thanks for taking the question I guess, a couple of things I was curious about on the numbers one is.

You know your sales.

Sales trend kind of excluding the Europe divestiture down 4% in the quarter.

A little bit of a deceleration from the down 2%.

In the first quarter, even though I think you had the benefit of lapping the loss of a grocery client.

And I was just wondering if you could just remind us how material was that grocery impact.

And also unwrap, a little bit unpack, a little bit about what.

Prompted a deceleration here in trains in the second quarter versus the first.

Tony Staniak: I will start with your question on the grocery client. That was, we had disclosed earlier, 3% of revenue. I think $90 million to $100 million on the top line for a year. When you look at quarter over quarter, you are right on the trend Q1 versus Q2. Q2 is typically our lowest volume quarter. We saw a higher organic decline in some of those larger print product lines in that quarter. We also saw some volume get into the first quarter that might typically have fallen into the second quarter, which explains the quarter over quarter trend. We are still, for the year, down 3% on the top line, so closer to the better end of our range of 2% to 6%. We expect increasing volumes going into our third and then the fourth quarter. It is just a matter of lower volumes in Q2.

Yeah. So I'll start with your question on the grocery client that was we had disclosed earlier, 3% of revenue, so I'm thinking on $90 million to $100 million.

On the top line for a year.

And then when you look at quarter over quarter and Youre right on the on the trend in Q1 versus Q to.

Q2 is typically our lowest volume quarter, we saw you know.

Higher organic decline in some of those larger print product lines in that quarter. We also saw some volume get into the first quarter that might typically have fallen into the second quarter, which explains the kind of the quarter over quarter trend, but.

But we're still you know for the year were down 3% on the top line so closer to the.

Better end of our range of 2% to 6%.

And now we expect increasing volumes going into our third and then the fourth quarter.

So it's just a matter of more volumes in Q2.

Operator: Okay. To that end, I know you guys have the full-year guidance. Anything you can say about how the third quarter is trending based on what you can see so far?

Okay.

So to that end I mean.

I know you guys have a full year guidance any anything you can say about how the third quarter is trending based on what you can see so far.

Joel Quadracci: I guess I didn't see any of the volumes in the quarter to be alarming. But I will say, we were worried about the effect of tariffs in the last quarter, and we talked about that, but we also said that we hadn't seen large-scale pullback because of tariffs. I'd say the tone that I'm hearing in the marketplace now is cautious optimism that, boy, the world is still functioning after all this stuff that's happened, that, again, I think people are sort of charging ahead. We'll continue to look at what kind of impact maybe as the tariffs roll out it will have on the consumer. But as I talk to catalogers, there seems to be an optimism there, cautious optimism. I think in retail, a little bit of the same, but you have to, it depends on who you talk to and what category.

Yeah, I guess I didn't see any of the volumes in the quarter to be alarming, but I will say, we were worried about the effect of tariffs.

And you know the last quarter, and we talked about that but we also said that we hadn't seen.

Large scale pullback because of tariffs I'd say the tone that I'm hearing in the marketplace now is cautious optimism.

That boy you know the world is still functioning of after all the stuff that's happened that you know.

Again, I think people are sort of charging ahead, we will continue to look at what kind of impact maybe as the church rollout. It will have on the consumer but as I talk to catalogers, there seems to be an optimism there cautious optimism.

I think in retail a little bit of the same but you know you have to have it depends on who you talk to them what category.

Joel Quadracci: So, I think that I'm feeling comfortable with what we're seeing and what we're hearing in terms of our guidance and relative to our guidance.

So.

I think that I'm feeling comfortable with what we're seeing and what we're hearing in terms of our guidance and.

Relative to our guidance.

Operator: But it sounds like you said that trends have been, volumes are up, and that was a comment I want to make sure I understand. Are you saying?

But it sounds like you said that trends have been you know volumes are up.

And that that was a comment I want make sure I understand what you're saying, yeah, I think as the rest of the iron as the rest of the year plays out you should expect compared to the second quarter higher revenue and EBITDA in the third and then the fourth to be the highest revenue.

Tony Staniak: I think as the rest of the year plays out, you should expect, compared to the second quarter, higher revenue in EBITDA in the third, and then the fourth to be the highest revenue in EBITDA quarter of the year.

Revenue and EBIT quarter of the year.

Operator: Seasonally, but on a year-over-year basis, does the trend, are you saying the trend improves, or just it goes up seasonally quarter to quarter?

Seasonally but on a year over year basis since the trend are you, saying, they're trying to improve or just it goes up seasonally corner to corner.

Tony Staniak: It will stay within the guidance range that we gave of the 2% to 6% on the quarters.

It'll it'll stay within the guidance range that we gave up the two effects.

Yeah on the quarters.

Operator: All right. All right. Then you guys, in terms of the asset sales, you guys had a couple of things going on here that I just want to make sure I understand what is in the results you just reported. So you guys had closed Sacramento, so that cash is in the door here in the quarter you just reported. Is that correct?

Alright, Alright, and then you guys are in terms of the asset sales you guys had a couple of things going on here.

And I just want to make sure I understand what's in the results you just reported so.

You guys had closed Sacramento and so that cash is in the door here in the recording you just reported is that correct.

Tony Staniak: That is correct. $5 million.

That is correct $5 million.

Operator: You guys had bought Enru, I think, for $34 million. That outflow is also in the quarter you just reported?

And then you guys had bought and room I think for 34 million and that outflow is also in the quarter you just reported.

B, we paid 16 million upfront and that's in the quarter that we just reported.

Tony Staniak: We paid $16 million upfront, and that is in the quarter that we just reported. There is a $2 million cash payment later this year. Then there is an earnout that depends on how the business performs that makes up the rest of the potential purchase price over five years.

There is a $2 million cash payment later this year.

And then there is an earn out that depends on how the business performs.

That makes up the rest of the potential purchase price.

Over five years.

Operator: Okay. All right. Now, in terms of the other kind of assets, I mean, is there, can you just remind us what do you have that is on the block right now that could be sold that is remaining at this point?

Okay.

Alright, now in terms of the.

Other kind of assets I mean is there can you just remind us what do you have there.

Is on the block right now that could be sold its remaining at this point.

Tony Staniak: We have two buildings located in Effingham, Illinois. These are all from earlier plant closures. We have one building in Waukee, Iowa, and we have one building in Greenville, Michigan, which was our most recent plant closure done in the early part of the second quarter. The Greenville and Waukee plants are relatively small, around 100,000 square feet. Effingham has a little more between the two buildings, a little more square footage to it.

We've got two buildings located in Effingham, Illinois. These are all from earlier plant closures.

We have one building and walkie, Iowa, and we have one building in Greenville, Michigan, which was our most recent plant closure done in the early part of the second quarter.

The Greenville, and I'll walk he plants are are relatively small and I think around 100000 square feet.

<unk> got a little more between the two buildings little more square footage to it.

Operator: Okay. All right. In terms of your guide for net debt at $300 million, I think from what was $350, so about a $50 million net reduction, which kind of squares with the middle point of your free cash flow guidance for the year. How are you guys kind of treating cash from potential asset sales when you are guiding for net debt? Is that kind of not included or anything you can say about that?

Okay.

Right now in terms of your your guide for net debt at 300 million I think from what was $3 50.

So about a 50 million that reduction, which kind of squares with the middle point of your free cash flow guidance for the year.

Are you guys. How are you guys kind of treating our cash from potential asset sales.

When you're guiding for net debt is that kind of not included or.

And if you can say about that.

Okay.

Tony Staniak: Yeah. I would say we do make estimates on when we think facilities are going to sell and what we think they are going to sell for, and we do include that in the year-end guidance. So, it is possible, depending on the timing of asset sales, that the only impact it would have would be on the net debt and the debt leverage. You know, and again, we will eventually sell those buildings. So depending on timing, yeah, it is possible something could slip into 2026.

Yeah, I would say, we do make estimates on when we think facilities are going to sale and it's all in what we think theyre going to sell for and we do include that.

In the year end guidance so.

It's possible depending on the timing of asset sales that.

The only the only impact you would have would be on the net debt and the debt leverage you now and again, we will eventually sell those buildings so depending on timing yeah, it's possible something could slip into 2026.

Operator: Okay. All right. That is cool. I guess the final point is, you know, this postal service report, which sounds interesting. The recommendation for CPI capped rate increases would sound like revolutionary compared to the last four years of much bigger than inflation at a time when inflation has been elevated. What would it take for that to be implemented, and what would be the timing for that to be implemented, and what is the probability of that in your opinion?

Okay.

Alright.

That's cool and then I guess the the final point is on this postal service before.

It sounds interesting.

The recommendation.

For C P I tapped rate increases.

It sounded like.

Revolutionary comparisons the last four years of a much bigger than inflation.

At a time when inflation has been elevated.

The what would it take for that to be implemented and what would be the timing for that to be implemented and what is the probability of that.

In your opinion.

Joel Quadracci: Yeah, that's a good question that we will have to play out because that, you know, they are the governing body that overlooks it. There is lots of process that goes on here. There is lots of input being gathered this week, quite frankly. What the process will be, how long that will take is a little bit yet to be seen. It is not revolutionary. It is actually where we came from until, you know, the pandemic happened, until after the pandemic happened, where they were allowed to use the authority to go above the CPI increase. But for the many years, decade plus before that, it was capped at CPI. If you look at that range, you know, what happened was, yeah, we had decline in print, but it was pretty consistent and manageable.

Yeah. That's a good question that we'll have to play out because as you know there you know there'd be governing body that overlooks it and theres lots of process that goes on here there's lots of.

Input being gathered this week quite frankly, and so what what the process will be how long that will take us it will be yet to be seen it's not revolutionary it's actually where we came from.

Until the pandemic happen until after the pandemic cap and where they are allowed to use these.

The authority to go above the.

The CPI increase but for the many years decade, plus before that it was capped at CPI and if you look at that range.

What happened was is yeah, we had decline in print, but it was pretty consistent and manageable and then as soon as you know pandemic happened you saw a big increase in the decline of print, but then it bounced way back back to a little bit better than the decrease that it was seeing but that's when they really started cranking the prices so in the <unk>.

Joel Quadracci: Then as soon as the pandemic happened, you saw a big increase in the decline in print, but then it bounced way back, back to a little bit better than the decrease that it was seeing. But that is when they really started cranking the prices. So in the next subsequent from 2022 on is when you suddenly saw the print decline accelerate because you just saw the pricing increase so dramatically. I guess the challenge is, is they got to run it like a declining business. I think the previous Postmaster General declared he wanted to run it like a growing business. The only way you can grow revenue if volume is declining is you crank pricing. That is a very short-term thing to do. So I think there is a lot of people in the industry really pushing to come up with something that works.

Next subsequent from 22, one is when you suddenly saw the print decline accelerate because you just saw the pricing increased so dramatically and I guess the challenge is is they've got to run it like a declining business I think the previous postmaster general liquidity wanted to run it like a growing business, where the only way you can grow.

<unk> revenue if volume is declining as you crank pricing well, that's that's a very short term thing to do and so I think theres a lot of people in the industry really pushing to come up with something that works and will it be a cap at CPI I don't know, but I think lessons being learned here and I think there's a real.

Joel Quadracci: Will it be a cap at CPI? I do not know. But I think lessons are being learned here, and I think there is a real impetus and desire to want to come up with something that allows the industry to, you know, be healthy, which means the post office can be healthy. But it is going to take some complexity and some heavy lifting to get that happening. I wish I could give you a more succinct answer, but we will share it as we see it happening.

Will impetus and desire to want to come up with something that allows the industry too.

Be healthy, which means the post office can be healthy.

But it's going to take some complexity and some heavy lifting to get that happening.

I wish I could give you a more succinct answer, but we will we will share it as we see it happening.

Operator: Okay. All right. That's helpful. That's it for me for questions. Thank you.

Okay, Alright, that's helpful.

That's it for me for questions. Thank you alright.

Joel Quadracci: All right. Thanks, Barton. Operator.

Alright, Thanks Barton.

Operator.

Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Joel Quadracci for closing remarks.

Q.

This concludes our question and answer session I would like to turn the conference back over to John Karachi for closing remarks.

Joel Quadracci: All right. Thank you, everyone, for joining today's call. I want to close by reiterating that Quad remains steadfast in our strategic vision, leveraging our integrated marketing platform to unlock diversified growth, improve print and marketing efficiencies, and create meaningful value for all stakeholders. With that, thank you again and have a great day.

Alright. Thank you everyone for joining today's call and I want to close by reiterating that quad remained steadfast in our strategic vision, leveraging our integrated marketing platform to unlock diversified growth improved print and marketing efficiencies and create meaningful value for all stakeholders with that thank you again and have a great day.

Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Thank you the conference has now concluded.

For attending today's presentation you may now disconnect.