Quad Reports 1Q 2022 Results

Quad/Graphics, Inc. reported results for the first quarter ended March 31, 2022.

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 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, Quad has implemented a price increase, effective May 15, 2022, to help offset the impact of cost inflation on our profit margins.

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.

“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,” said Joel Quadracci, chairman, president and CEO of Quad. “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,” added Quadracci. “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.”

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.

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.

“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,” noted Tony Staniak, CFO of Quad. “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.”