Quad/Graphics' Positive Q2 Financial Results Aided by Integrated Marketing Platform

SUSSEX, Wis. - August 1, 2018 - Quad/Graphics, Inc. ("Quad/Graphics" or the "Company") reported results for its second quarter ending June 30, 2018. For full financial results, please see the accompanying information.

Second Quarter Financial Highlights

• Increased net sales 5% to $1 billion.
• Increased net earnings by $2 million to $9 million and diluted earnings per share by $0.05 to $0.18.
• Achieved Non-GAAP Adjusted EBITDA and Margin of $90 million and 8.8%, respectively, and generated Non-GAAP Adjusted Diluted Earnings Per Share of $0.23.
• Repurchased $37 million of Quad/Graphics stock and launches a new $100 million share repurchase program authorized by the Board of Directors.
• Declares quarterly dividend of $0.30 per share.

Joel Quadracci

"Our results for the second quarter of 2018 were in-line with our expectations and reflect the positive impact on revenue from our transformation to a marketing solutions provider," said Joel Quadracci, Quad/Graphics Chairman, President and CEO. "Our integrated marketing platform is unique and enables our clients to strategically plan, produce, deploy, manage and measure their marketing content across traditional and digital channels. By having a fully integrated offering, we reduce complexity, improve process efficiencies and enhance marketing spend effectiveness for our clients."

Quadracci added: "Our investments in Ivie & Associates and Rise Interactive continue to strengthen our integrated marketing platform and the client value we create. Recent wins validate that our strategy is working, especially in the digital marketing and technology solutions spaces. For example, one of our large national retail clients recently partnered with Quad for digital services including paid search, social and display placement, spend optimization, and analytics reporting in addition to the traditional services we already provide for them including creative, production, media planning, printing and distribution. As we move ahead, we will continue to strengthen our integrated marketing platform to ensure our products and services continue to help our clients and generate additional revenue across all our businesses."

Summary Results

Net sales increased 5.4% during the second quarter 2018 to $1 billion, reflecting the impact of the Ivie & Associates and Rise Interactive investments as part of the Company’s transformation to a marketing solutions provider. Organic sales declined 2.2%, after excluding acquisition sales impact of 6.2%, increased pass-through paper sales of 1.6% and a -0.2% foreign exchange impact. The results reflect ongoing print industry volume and pricing pressures, and are consistent with the Company’s previous guidance. Net earnings increased 40% during the second quarter 2018 to $9 million and diluted earnings per share improved by $0.05 to $0.18 compared to $0.13 in 2017. Non-GAAP Adjusted Diluted Earnings Per Share for the second quarter 2018 declined 4% to $0.23 compared to $0.24 in the second quarter of 2017. Second quarter 2018 Non-GAAP Adjusted EBITDA was $90 million compared to $94 million in second quarter 2017, and Adjusted EBITDA Margin was 8.8% compared to 9.7% in 2017.

Net sales increased 1.1% during the six months ended June 30, 2018. Organic sales declined 3.7%, after excluding acquisition sales impact of 4.1% and increased pass-through paper sales of 0.7%, reflecting print industry volume and pricing pressures. Net earnings for the six months ended June 30, 2018, decreased $26 million to $6 million, or $0.11 per share, and included a special non-cash charge of $22 million for an employee stock ownership plan contribution as part of the benefit of tax reform and $21 million in higher restructuring charges. Excluding the special contribution and restructuring changes, Non-GAAP Adjusted Diluted Earnings Per Share improved 5% to $0.80 during the six months ended June 30, 2018, compared to $0.76 for 2017. Year-to-date Non-GAAP Adjusted EBITDA was $200 million compared to $213 million for 2017, and Adjusted EBITDA margin was 10.1% compared to 10.8% in 2017.

Net cash provided by operating activities was $41 million for the first six months of 2018 compared to $112 million in 2017, and Free Cash Flow was negative $13 million. The decline to 2017 was primarily due to expected timing differences in 2018 versus 2017 for cash generated from working capital, which will be weighted more toward the fourth quarter, and includes an intentional build-up in paper inventories in anticipation of supply constraints. As a reminder, the Company generates the majority of its Free Cash Flow in the second half of the year.

"We delivered second quarter results in-line with our expectations and we remain on track to deliver on our 2018 financial guidance," said Dave Honan, Executive Vice President and Chief Financial Officer for Quad/Graphics. "Our Debt Leverage Ratio of 2.34x remains well within our long-term targeted range of 2.0x to 2.5x and includes the impacts from $37 million of share repurchases in the quarter and $71 million in strategic investments made for Ivie and Rise in 2018. We believe the strength of our balance sheet gives us the ability to balance our use of capital between investing back into our business and returning capital to our shareholders, including our consistent dividend and our share repurchases. We are pleased to announce our Board of Directors authorized a new $100 million stock repurchase program to provide sufficient capacity for us to repurchase shares in the future. We remain stringently focused on transforming our business and driving shareholder value as we move forward."

Quad/Graphics’ next quarterly dividend of $0.30 per share will be payable on September 7, 2018, to shareholders of record as of August 20, 2018.

Source: Quad/Graphics

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 Printing Impressions.