Quad's Earnings Call Discusses Impact of Packaging Growth and Macroeconomic Challenges

Despite macroeconomic challenges putting pressure on the printing industry, Quad’s Q2 earnings call yesterday placed a focus on the company’s continued investment in areas of growth and budding technology. Joel Quadracci, CEO and chairman of the Sussex, WI -based company shed light on Quad’s investment in the packaging space with its new 100,000-sqft-facility planned for Salt Lake City, UT.

“Our packaging business continues to scale, delivering year-over-year growth in 2025 and expected growth for full year 2026,” Quadracci said. “For our clients, the expansion will help reduce lead times, improve logistics efficiency, and support packaging programs across multiple regions, while maintaining the quality, consistency, and partnership our clients expect from us.”

The facility, which is expected to be operational in Q4 of this year, joins the company’s existing packaging operations in Spartanburg, SC, and Franklin, WI. Strategic investment for Quad also includes its focus on the MX Solutions Suite – its integrated marketing agency that pairs data and analytics with creative, production, media, and technology – and In-Store Connect, its retail media network, which is now expanding beyond its initial test stores. Quadracci shared several case studies illustrating the power of these initiatives before addressing how Quad is navigating macroeconomic challenges.

Another area of growth for Quad is its investment in AI, something Quadracci says is "an integral part of each business unit's infrastructure that we deploy to improve efficiency, reduce manual processes, accelerate speed to market, and drive better business outcomes for both Quad and our clients."

The company is using AI to create and manipulate realistic models, analyze campaign performance in real time, optimize and reduce manual work, and its being employed in areas of manufacturing with automation, optimization of production schedules, predictive maintenance, intervention, and to improve throughput and reduce downtime.

Flipping the conversation to challenges, he noted that supply chain volatility is a concern, particularly when it comes to transportation costs, including diesel.

“Ongoing security concerns continue to create uncertainty for global shipping routes, including traffic through the Strait of Hormuz, contributing to longer lead times and elevated logistic costs in some markets,” he explained. “As a result, we continue to experience cost pressures in certain areas of our business, most notably ink, we are actively managing these challenges by diversifying our supplier base, optimizing inventory planning, and implementing targeted price actions where appropriate.”

Another concern is the rising postal costs, but Quadracci noted that the company supports Postmaster General David Steiner’s plan to pursue solutions to fix “a broken USPS business model.” The relief won’t come before some hardship though.

“On July 12, the United States Postal Service implemented its most recent increase, which we estimate will result in an average postage increase of up to 10% for many of our mailing clients,” Quadracci said. “Quad Postal Affairs team remains actively engaged with policymakers in Washington, as well as the Postal Service, working on behalf of our clients and the broader mailing ecosystem.

He went on to explain that Quad is also actively trying to mitigate the rate increases by focusing on maximizing cost savings and improving response rates for its customers.

“Our layered postal optimization model combines various co-mail sortation and bundling solutions to generate substantial client savings,” he noted.

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Breaking Down the Breakdown

Following Quadracci’s state of the company, Tony Staniak, CFO and treasurer, shared a financial overview of the company for Q2 and YTD. 

He noted the company reported net sales of $578 million, a 1% increase YoY, driven by higher paper sales and logistics revenue. He then pointed out the impact of the divestiture of Quad’s European operations.

“Net sales were $1.2 billion in the first half of 2026, a 2% decline compared to the first half of 2025, when excluding the 2% impact of the February 28, 2025 divestiture of our European operations, on a year-to-date basis, the decline in net sales was primarily due to lower large-scale print volumes and agency solution sales, partially offset by higher paper sales,” he said.

Staniak explained the company expects to generate net proceeds from the sale of its Waukee, IA; Thomaston, GA; and Lima, Peru facilities, which will be reinvested into the company.

“We began the process of closing our Peruvian operations and selling our building in Lima in the second quarter of 2026,” he said. “With this strong cash generation, we intend to continue investing to drive growth as a marketing experience company, maintain lower debt balances, and return capital to shareholders through our quarterly dividend and share repurchases.”

Quad expects to see increased adjusted EBITDA margin by 2028 as the company’s sales mix changes, Staniak said. Further, the company expects its free cash flow conversion as a percentage of adjusted EBITDA to increase from approximately 26% in 2025 to 35% by 2028 due to “lower interest payments on decreasing debt balances and lower restructuring payments.”

Quadracci closed the call, noting, “Quad remains committed to our strategic vision, leveraging our integrated marketing platform to drive diversified growth, improve print and marketing efficiencies, and create meaningful value for all of our stakeholders.”

Those wishing to listen to the full earnings call can click here.