Quad Q1 2025 Earnings Call: Tariffs, Postal Rate Hikes, Enru Acquisition

Yesterday morning I listened in on Quad’s first quarter 2025 earnings call, hosted by Quad Chairman, President, and CEO Joel Quadracci and CFO Tony Staniak. As highlighted in its latest financial results, the mega-size, Sussex, Wisconsin-based printing conglomerate continues to evolve beyond its traditional printing roots into an integrated marketing experience (MX) company, where offset and digital print output is just one arrow in its quiver. Navigating the long highway to reach that reinvention destination, though, is filled with road hazards and potential detours.

The latest bump in the road has been the tariffs initiated by President Trump, which have raised prices on imports and, even worse, created supply chain and pricing model uncertainties. Marketers, like Wall Street, dislike uncertainty, especially when it comes to executing their promotional campaigns.

Quadracci pointed out that Quad itself has limited direct exposure to the current wave of tariffs — but its customer base certainly does. The paper Quad imports from Canada and the books Quad manufactures at its plants in Mexico for U.S. clients are both exempt from tariffs due to the United-States-Mexico-Canada (USMCA) trade agreement signed in 2020.

“Our procurement teams are in various stages of evaluating or reallocating sourcing options for the remaining items in our supply chain that are affected by tariffs, which represented less than 11% of our 2024 procurement spend, including 1% of spend with China,” Quadracci said.

Even so, he recognizes that Quad’s customer base is being impacted by tariffs to varying degrees — and to the U.S. economic slowdown they may ultimately cause. “We are staying informed of our clients’ supply chains for potential disruptions as well as fluctuations in consumer demand to see how they may affect clients’ mission-critical marketing plans.”

He mentioned one retail customer that adjusted its marketing plans directly in response to the tariffs, as just one example. The retailer fears it may not be able to get product out of Vietnam in time for the selling season, so it has pulled back its marketing plan.

“They had already produced product in Vietnam, but now with everybody trying to get in there, and it’s an underdeveloped – still an underdeveloped platform, they just worry about the availability of capacity,” Quadracci revealed. “In other cases, we’ve seen people not know how to price products that are coming.”

As a result, many of Quad’s customers remain very anxious about tariffs. “And my concern is obviously the same as everyone else is: does this lead to a rapid slowdown in the economy? But it’s also really about what are the unintended dislocations that cause changes in how our customers act.”

Click to enlarge.

Latest on the Postal Front

Another ongoing concern has been ongoing postal rate hikes, which comprise the largest marketing cost expenditure for mailers. Quadracci reported he had just returned from the National Postal Forum in Nashville, where he was able to meet with some USPS officials about the impact of price increases and delivery standards, including the 10% rate hike, on average, that will go into effect on July 13.

He also said an announcement of a new Postmaster General to replace Louis DeJoy is imminent. “Our understanding is that the White House is weighing in … on who the Board of Governor is picking as their candidate. So that will be telling in terms of do they rethink a flawed plan that was put in place by the previous Postmaster General where they felt that they — with volumes down — let’s just make it up in pricing.”

Postal rate hikes have especially impacted Quad’s magazine and retail insert printing revenues this past year. However, he does see a potential bright spot for more printed catalog work due to an upcoming postal promotion.

“The USPS has agreed to test volume elasticity, specifically with catalogers, through a special nine-month promotion beginning October 1,” Quadracci noted. “This promotion will provide catalogers with a 10% discount. With additional USPS add-on promotion, catalogers could realize up to 12% off published rates during the promotional period.”

What Drove the Enru Acquisition?

Quadracci also provided some commentary on what led to Quad’s recent purchase of Enru, the former LSC Communications-MCL third party co-mailing assets that were included in the sale of LSC to CJK Group.

“Enru … also does third party co-mail for other printers, which we do as well and will continue to do because it’s very important that the industry as a whole keep making sure that this medium is viable for our customers,” he explained.

“They bring a little bit more — a different type of capability in what is called more of a high density approach where you can play with mail lists and merge things together to get a different discount rate in certain places where you can have a high density factor. [With Enru], we’re not only bringing more volume together for the industry — that’s important to keep the discounts up —  we’re also combining different capabilities to further enhance it for everybody,” according to Quadracci.

“… The combination of the high density and then more the five digit that we do will really work together to enhance it for our customers and collectively the industry’s customers. And it also it comes with some equipment that we’ve been able to upgrade parts of our platform with,” he concluded. “Yes, it’s a small acquisition, but it’s important to our clients.”