Quad Reports Net Sales Gain, But Larger Net Loss, in First Quarter 2023 Results

Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”), reported results for the first quarter ended March 31, 2023.

Recent Highlights

• Increased Net Sales 3% in the first quarter of 2023 compared to the first quarter of 2022, primarily due to higher print product sales in the United States and in Mexico, and also increased Agency Solutions sales as clients continue to embrace Quad’s unique integrated marketing offering.
• Reported Net Loss of $25 million compared to Net Loss of $1 million in the first quarter of 2022, while growing Adjusted EBITDA by $11 million or 24% to $60 million in the first quarter of 2023, compared to Adjusted EBITDA of $49 million in the first quarter of 2022.
• Grew Adjusted Diluted Earnings Per Share to $0.15 in the first quarter of 2023 compared to $0.04 in the first quarter of 2022.
• Increased capital expenditures to fortify investments in innovations that enhance the Company’s integrated marketing offering and drive profitable, long-term growth.
• Returned value to shareholders by repurchasing over 5% of our total outstanding common stock since the second quarter of 2022 for $10.3 million.
• Reaffirms full-year 2023 financial guidance.

Joel Quadracci, Chairman, President & CEO of Quad, said: “We continue to experience positive momentum and top-line growth, achieving a 3% increase in Net Sales in the first quarter of 2023 due to higher sales in our print product and Agency Solutions offerings. High-profile brands and marketers continue to recognize that better marketing is built on Quad. As a marketing experience, or MX, company, we have uniquely scalable, cross-channel solutions and extraordinary household reach, which power our integrated marketing offering, improving results while reducing friction and creating a more efficient overall marketing process. We are focused on providing a better marketing experience for our clients, which enables them to focus on delivering the best customer experience. In 2023, we will continue to make significant investments in people, products and services, processes, automation and technology, to further expand our through-the-line marketing offering to drive profitable growth.

“Economic uncertainty has prompted some clients to take a more conservative approach to the start of the year and, in many instances, reallocate where they invest their marketing dollars. Our integrated marketing offering easily supports these shifts in marketing spend to maximize results. We are able to offset softness in offerings, such as national magazines, while leaning into growth opportunities in others, like agency solutions, packaging and instore. We have flexibility and agility to pivot, and meet changing client needs.

“As always, we remain focused on enhancing Quad’s financial strength and creating shareholder value and will continue to prioritize growth while further reducing debt in 2023. We remain committed to creating a better, more purposeful and sustainable way forward for all our stakeholders.”

Summary Results

Results for the first quarter ended March 31, 2023, include:

• Net Sales — Net Sales were $767 million in the first quarter of 2023, an increase of 3% compared to the same period in 2022, despite the impact from the sale of the Company’s Argentina print operations in December 2022. Net Sales growth in the first quarter was primarily driven by higher print product sales in the United States and in Mexico, and also increased Agency Solutions sales.
  Net Loss — Net Loss was $25 million in the first quarter of 2023, $24 million higher than the first quarter of 2022, which had a Net Loss of $1 million. This was driven by higher restructuring, impairment and transaction-related charges, higher income tax expense, higher interest expense in this increased rate environment and lower pension income, partially offset by increased profitability from Net Sales growth, improved manufacturing productivity and savings from cost reduction initiatives.
• Adjusted EBITDA — Adjusted EBITDA was $60 million in the first quarter of 2023 as compared to $49 million in the same period in 2022. The increase was due to increased profitability from Net Sales growth, improved manufacturing productivity and savings from cost reduction initiatives.
• Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings Per Share increased to $0.15 in the first quarter of 2023, as compared to $0.04 in the first quarter of 2022, primarily due to higher adjusted net earnings as well as the beneficial impact from the Company’s repurchase of over 5% of total outstanding common stock since the second quarter of 2022 for $10.3 million.
• Net Cash Used in Operating Activities and Free Cash Flow — Net Cash Used in Operating Activities was $51 million in the first quarter of 2023, as compared to $17 million in the first quarter of 2022. Free Cash Flow decreased $43 million from last year to negative $79 million in the first quarter of 2023. The decline in Free Cash Flow was primarily due to the timing of working capital and increased capital expenditures to invest in our platform to drive sales growth and automation efficiencies. As a reminder, the Company historically generates the majority of its Free Cash Flow in the fourth quarter of the year.
• Net Debt — Debt less cash and cash equivalents increased by $87 million to $632 million at March 31, 2023, as compared to $545 million at December 31, 2022, primarily due to the negative $79 million Free Cash Flow in the first quarter of 2023.

Click to enlarge. | Credit: Quad Q1 2023 Earnings Call

Click to enlarge. | Credit: Quad Q1 2023 Earnings Call

2023 Guidance

Tony Staniak, CFO of Quad, said: “We started 2023 strong, building on the momentum from clients embracing our innovative integrated marketing offerings combined with disciplined cost management. This resulted in 3% Net Sales growth and 24% Adjusted EBITDA growth in the first quarter compared to 2022. We also returned value to shareholders during the first quarter by continuing to repurchase shares. Our share repurchases now total $10.3 million, or more than 5% of our total outstanding common stock, since the second quarter of 2022. Despite continued economic uncertainty, including lower anticipated print volumes during the remainder of the year, we remain confident in our 2023 guidance. We are a strong Free Cash Flow generator and will continue to prioritize investing in growth, opportunistically repurchasing shares and reducing debt. We are expecting to achieve the low end of our long-term targeted debt leverage range of 2.0x-2.5x by the end of 2023.”

Source: Quad

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