Delivers Fourth Consecutive Quarter of Sales Growth, Achieving Net Sales Increase of 5% or Net Sales Increase of 9% Excluding Divestitures; Continues Strategic Investments to Accelerate Growth as a Marketing Experience Company

SUSSEX, WI — Quad/Graphics, Inc. (“Quad” or the “Company”), today reported results for the first quarter ended March 31, 2022.

Recent Highlights

• Increased Net Sales 5% in the first quarter of 2022, or 9% sales growth excluding divestitures, driven by increased pricing in response to inflationary cost pressures; print segment share gains from new clients; and Net Sales growth in Targeted Print and Agency Solutions.
• Reported Net Loss of $1 million and Adjusted EBITDA of $49 million in the first quarter of 2022, compared to Net Earnings of $10 million and Adjusted EBITDA of $70 million in the first quarter of 2021.
• Implemented additional price increase, effective May 15, 2022, to help offset inflationary cost pressures.
• Continued making strategic investments in talent, equipment, technology, products and services to accelerate growth as a marketing experience company.
• Increased inventory levels of commercial printing paper and other materials to protect clients from ongoing supply chain disruptions and prepare for the seasonally higher production period in the second half of the year.

Maintained significant liquidity including $138 million of cash on hand and up to $397 million in unused capacity under Quad’s revolving credit agreement as of March 31, 2022.

Paid remaining $209 million on the unsecured 7.00% senior notes on May 2, 2022.

Joel Quadracci, Chairman, President & CEO of Quad, said: “Our continued positive sales growth momentum included print segment share gains from new clients and Net Sales growth in our Targeted Print and Agency Solutions offerings. Our unique platform helps brands reimagine their marketing experience to be more streamlined, impactful, flexible and frictionless. We will continue to make investments in the platform, including in our talent, equipment, technology, products and services, to further expand our through-the-line marketing offering to drive profitable growth.

“We were also not immune to macro-economic headwinds, including ongoing supply chain disruptions that impacted productivity and cost inflation, such as labor. We continue to work diligently to mitigate these impacts and, given the pace of inflation, implemented an additional price increase, which will go into effect May 15.

“As always, we remain focused on enhancing Quad’s financial strength and creating shareholder value and, to that end, will continue to prioritize growth while improving productivity and reducing debt during 2022. As a company committed to creating ‘a better way,’ we will continue to leverage our more than 50-year heritage of platform excellence, innovation and strong culture and social purpose to create a better, more purposeful and sustainable way forward for all our stakeholders.”

Summary Results

Results for the first quarter ended March 31, 2022, include:

Net Sales — Net Sales were $744 million in the first quarter of 2022, reflecting topline growth up 5% from the same period in 2021. Excluding the divestiture of QuadExpress, a third-party logistics (3PL) business, Net Sales increased 9% from the first quarter of 2021. The Net Sales increase during the first quarter was due to increased pricing in response to inflationary pressures, print segment share gains from new clients, and Net Sales growth in Targeted Print and Agency Solutions.

Net Earnings (Loss) and Adjusted EBITDA — Net Loss was $1 million in the first quarter of 2022, a decline of $11 million compared to the first quarter of 2021, which recorded Net Earnings of $10 million. Adjusted EBITDA was $49 million in the first quarter of 2022, as compared to $70 million last year. These declines were primarily due to the negative impact of supply chain disruptions on our productivity, investments in hiring and training labor in advance of peak production season during the second half of the year, and cost inflation, which was partially offset by revenue growth. Given the increasing rate of cost inflation, we have implemented a price increase, effective May 15, 2022, to help offset the impact of cost inflation on our profit margins.

Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings Per Share was $0.04 in the first quarter of 2022, as compared to $0.19 in the first quarter of 2021.

Net Cash Provided by (Used in) Operating Activities and Free Cash Flow — Net Cash Used in Operating Activities was $17 million in the first quarter of 2022, as compared to the first quarter of 2021 with Net Cash Provided by Operating Activities of $73 million. Free Cash Flow decreased $92 million from last year to negative $36 million in the first quarter of 2022. The decline in Free Cash Flow was primarily due to higher working capital needs in 2022 due to supply chain challenges with resulting longer lead times, and to prepare for the seasonally higher production period in the second half of the year. 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 $40 million to $664 million at March 31, 2022, as compared to $624 million at December 31, 2021, primarily due to investments in working capital, talent and equipment to enable continued sales growth.

2022 Guidance

The Company’s full-year 2022 financial guidance is unchanged and is as follows:

⁽¹⁾ Annual Net Sales Change excludes the Net Sales impact from the divestiture of QuadExpress, which was sold on June 30, 2021.
(2) Debt Leverage Ratio is calculated at the midpoint of the Adjusted EBITDA guidance.

Tony Staniak, CFO of Quad, said: “We are pleased to have delivered 9% Net Sales growth excluding divestitures as more and more brands and marketers recognize the unique value of our through-the-line marketing offering. Our strong liquidity enabled us to pay off the remaining $209 million of our unsecured 7.00% senior notes on May 2, 2022, as part of our multi-year debt reduction plan, which includes achieving 2.25x debt leverage by the end of 2022. We will remain nimble as we manage supply chain challenges and cost inflation while continuing to invest in our business to drive revenue in our seasonally higher production period in the back half of the year, and accelerate our growth as a marketing experience company.”

Quarterly Conference Call

Quad will hold a conference call at 10 a.m. ET on Wednesday, May 4, to discuss first quarter 2022 results. As part of the conference call, Quad will conduct a question and answer session. Investors are invited to email their questions in advance to [email protected].

Participants can pre-register for the webcast by navigating to https://dpregister.com/sreg/10165069/f219d3e6d1. Participants will be given a unique PIN to gain immediate access to the call on May 4, bypassing the live operator. Participants may pre-register at any time, including up to and after the call start time.

Alternatively, participants without internet access may dial in on the day of the call as follows:

U.S. Toll-Free: 1-877-328-5508
International Toll: 1-412-317-5424
An audio replay of the call will be posted on the Investors section of Quad’s website shortly after the conference call ends. In addition, telephone playback will also be available until June 4, 2022, accessible as follows:

U.S. Toll-Free: 1-877-344-7529
International Toll: 1-412-317-0088
Replay Access Code: 11233437