Quad Reports Q4 and Full-Year 2023 Results: Include Reduction in Net Debt, Reinstatement of Quarterly Dividend

Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”), a global marketing experience company, has reported results for the fourth quarter and full year ended December 31, 2023.

Recent Highlights

• Achieved 2023 guidance and reported Net Sales of $3.0 billion in 2023 compared to $3.2 billion in 2022.
• Anticipating $60 million of cost savings from recent plant capacity and labor reduction initiatives in response to ongoing external headwinds, including significant postal rate increases and economic uncertainty that negatively impact print volumes.
• Recognized a Net Loss of $55 million in 2023 compared to Net Earnings of $9 million in 2022 primarily due to lower sales, higher restructuring expenses and increased interest costs despite decreasing debt.
• Achieved Adjusted EBITDA of $234 million and Adjusted EBITDA Margin of 7.9% in 2023, compared to Adjusted EBITDA of $252 million and Adjusted EBITDA Margin of 7.8% in 2022.
• Generated $148 million of Net Cash Provided by Operating Activities and Free Cash Flow of $77 million in 2023.
• Reduced Net Debt by $564 million or 55% over the past four years as part of a multi-year debt reduction strategy, achieving Net Debt Leverage of 2.0x at December 31, 2023.
• Introduces 2024 guidance including using continued strong cash generation to reduce Net Debt Leverage to approximately 1.8x and lowering long-term targeted Net Debt Leverage range to 1.75x to 2.25x.
• Returned capital to shareholders by repurchasing 2.9 million shares of Quad Class A common stock in 2023, bringing total repurchases to 5.9 million shares since commencing buybacks in 2022, representing approximately 11% of Quad’s March 31, 2022, outstanding shares.
• Reinstated quarterly dividend of $0.05 per share, and expect to continue to be opportunistic in terms of our future share repurchases.

Joel Quadracci, Chairman, President and CEO of Quad, said: “We delivered solid full-year results primarily due to our strong operating performance, which was partially offset by revenue challenges created by significant postal rate increases and ongoing economic uncertainty that negatively impacted print volumes. Despite these challenging macro factors, we achieved our 2023 financial guidance, and were pleased with our cash generation, which we continued to use to strengthen our balance sheet through debt reduction. We ended the year having reduced net debt by $564 million or 55% since January 1, 2020.

“Our distinction as a global marketing experience, or MX, company continues to gain traction with brands and marketers because we offer a tailored suite of solutions that is flexible, scalable and connected, and streamlines the complexities of marketing, removing friction from wherever it occurs in the marketing journey. As a result, our integrated marketing platform provides a better marketing experience for our clients so they can focus on delivering the best customer experience to theirs.

“We continue to make strategic investments to grow our business, especially in areas such as data and analytics, media and client technology. Earlier this month, we announced our acquisition of DART Innovation, an in-store digital media solutions provider, which further bolsters Quad’s retail expertise and offerings. With DART’s capabilities and technology, we aim to revolutionize the shopping experience for retailers, consumer packaged goods companies and consumers by delivering targeted promotions on digital screens right at the store shelf – the most critical moment in the purchasing decision. This strategic investment expands and seamlessly integrates into Quad’s suite of solutions, and enables a frictionless consumer purchasing journey across home, online and in-store.

“Looking ahead to 2024, our pipeline for new business remains strong. We will prioritize growth across verticals and product lines with the greatest expansion opportunities while continuing to manage through headwinds in our core print business, including expected postal rate increases for our clients in 2024. Despite these headwinds, which also include the loss of a long-standing client, we expect sustained strong cash generation in 2024, and we will continue to strategically invest in innovative solutions and superior talent to support future diversified revenue growth.”

Added Tony Staniak, Chief Financial Officer: “As always, we remain focused on delivering top-quality service and solutions to our clients while further enhancing our financial strength. Although revenue headwinds will continue into 2024, we expect to increase our Adjusted EBITDA margin due to an anticipated $60 million in cost savings from recent plant capacity and labor reduction initiatives. We will use our continued strong cash generation to further reduce Net Debt, and are lowering our long-term targeted Net Debt Leverage range to 1.75x to 2.25x. While reducing debt, we will also invest in accelerating our competitive position as an MX company and return capital to shareholders through our reinstated quarterly dividend. We also expect to be opportunistic in terms of our future share repurchases.”

Summary Results

Click to enlarge. | Credit: Quad Q4 2023 Earnings Presentation

Results for the fourth quarter ended December 31, 2023, include:

• Net Sales — Net Sales were $788 million in the fourth quarter of 2023, a decrease of 11% compared to the same period in 2022 primarily due to lower paper, print and logistics sales, as well as the 2022 divestiture of the Company’s Argentina print operations.

• Net Loss — Net Loss was $22 million in the fourth quarter of 2023 compared to Net Loss of $9 million in the fourth quarter of 2022. The decrease is primarily due to lower sales, increased interest expense from elevated interest rates, and lower pension income, partially offset by benefits from improved manufacturing productivity and savings from cost reduction initiatives.

• Adjusted EBITDA — Adjusted EBITDA was $66 million in the fourth quarter of 2023 as compared to $79 million in the same period in 2022. The decrease was due to lower sales and lower pension income, partially offset by benefits from improved manufacturing productivity and savings from cost reduction initiatives.

• Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings Per Share was $0.23 in the fourth quarter of 2023, as compared to $0.41 in the fourth quarter of 2022, primarily due to lower adjusted net earnings and partially offset by the beneficial impact from the Company repurchasing Class A shares totaling approximately 11% of its outstanding shares beginning in the second quarter of 2022, for a total purchase price of $23 million.

Results for the year ended December 31, 2023, as compared to our 2023 financial guidance, include:

• Net Sales — Net Sales were $3.0 billion in 2023, a decrease of 8% from 2022 primarily due to lower print, paper and logistics sales, as well as the 2022 divestiture of the Company’s Argentina print operations.

• Net Loss — Net Loss was $55 million in 2023, compared to Net Earnings of $9 million in 2022. The decrease is primarily due to lower sales, higher restructuring and impairment charges, increased interest expense from elevated interest rates, and lower pension income, partially offset by benefits from improved manufacturing productivity and savings from cost reduction initiatives.

• Adjusted EBITDA — Adjusted EBITDA was $234 million in 2023, compared to $252 million in 2022. The decrease was primarily due to $11 million of lower pension income as well as the impact of lower sales, partially offset by benefits from improved manufacturing productivity and savings from cost reduction initiatives.

• Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings Per Share was $0.52 in 2023, compared to $0.89 in 2022.

• Net Cash Provided by Operating Activities and Free Cash Flow — Net Cash Provided by Operating Activities was $148 million in 2023, compared to $155 million in 2022. Free Cash Flow was $77 million in 2023, compared to $94 million in 2022. The decline in Free Cash Flow was primarily due to $11 million of increased capital expenditures as the Company continues to invest in its automation initiatives and $7 million of lower Net Cash Provided by Operating Activities.

• Net Debt — Net Debt decreased by $75 million to $470 million at December 31, 2023, as compared to $545 million at December 31, 2022. The Debt Leverage Ratio decreased to 2.0x at December 31, 2023, from 2.2x at December 31, 2022.

Click to enlarge. | Credit: Quad Q4 2023 Earnings Presentation

Dividend

Quad’s Board of Directors reinstated a regular quarterly cash dividend of $0.05 per share. The dividend will be payable on March 12, 2024, to shareholders of record on February 27, 2024.

2024 Guidance

The Company’s full-year 2024 financial guidance is as follows:

Click to enlarge. | Credit: Quad Q4 2023 Earnings Presentation

Source: Quad

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