Quad/Graphics (QUAD) Q2 FY26 earnings call: guidance and Q&A

Beyond paper and logistics, what drove revenue growth, what were the gross profit dynamics, and why wasn't annual revenue guidance tightened despite the upside?

Quad saw revenue growth in direct mail and in-store print. Paper, ink, and fuel surcharges are pass-throughs with lower profit rates, impacting Q2 EBITDA margin. The company typically waits until Q3 to narrow revenue guidance due to seasonal production and potential customer volume adjustments.

“We typically don't narrow the revenue guidance until we get through the third quarter with being a seasonal production business, we like to see how that third quarter and early fourth quarter are shaping up because customers can add or subtract volumes even in quarter as we go along.”

asked by Mark Zgutowicz · answered by Anthony Staniak

Can you elaborate on the Wakefern deal, its revenue/margin specifics, scaling potential, and if you're seeing synergies with other retail media partners like Vallarta and the new West Coast customer?

The Wakefern deal is a 'flywheel' example, expanding existing print relationships into broader marketing services. The Northeast is a key geography for CPGs. Vallarta's expansion and the new West Coast grocer's adoption demonstrate the ability to move product and achieve category lift, attracting CPGs and building a national footprint, indicating growing synergies.

“And so that kind of leads to your second question of what I like about Vallarta is, they're doubling the size. And this is after doing -- they were pretty early on doing a test. And they've seen it's not just the media that's come in. It's the fact that we're consistently proving we're moving cases.”

asked by Mark Zgutowicz · answered by J. Joel Quadracci

Can strong CPG partners like Nestle be leveraged to gain access to other stores for In-Store Connect, or is it primarily a direct sales effort?

It's a combination of direct efforts and a 'flywheel effect.' Retailer adoption is complex and takes time due to internal processes. However, as respected brands like Wakefern and Vallarta adopt, and CPGs commit larger budgets, it will encourage other retailers to join the network.

“As you see known brands that are well respected like Wakefern come to the table, there are people who are leaders in adopting technology and others who purposely want to be fast followers. And so I think you'll see as retailers like Wakefern come on and Vallarta ends up having the majority of their stores on it, you will start to see the people wanting to jump on.”

asked by Mark Zgutowicz · answered by J. Joel Quadracci

How meaningful were price increases (fuel, ink surcharges) to Q2 sales, and what's the expected trend for H2?

Logistics fuel surcharges adjust weekly, while ink surcharges (petroleum-based) take longer to filter through. The H1 impact from fuel and ink surcharges was in the 'low double-digit millions.' These are pass-throughs that help maintain bottom-line profit but affect gross margin. These trends are expected to continue in H2.

“I'd say, Kevin, in the first half of the year, you're talking like a low double-digit millions impact from fuel surcharges and then ink surcharges linked to petrochemical.”

asked by Kevin Steinke · answered by Anthony Staniak

How are clients reacting to the volatile macro environment, especially after some agency solutions clients pulled back spend?

Client reactions vary by category; the grocery space faces pressure from changing trends and GLP-1 effects, and lower-income consumers are impacted by inflation. There's concern about the follow-on effects of postage increases on mail volumes. No significant new pullbacks were reported, but the situation is dynamic.

“I mean I think the grocery space is under tremendous pressure, a lot from sort of changing trends in people choosing healthy food and you have the GLP-1 effect. So lots of pressure there are for our customers.”

asked by Kevin Steinke · answered by J. Joel Quadracci

How quickly will the Salt Lake City packaging plant ramp up capacity, and what is its expected impact on 2027?

The plant is expected to ramp up quickly due to existing client work and a strong pipeline. It will contribute 'lower double-digit millions' in revenue in 2027, with packaging EBITDA margins typically around 10%.

“I'm feeling pretty good that we will come on fairly quickly with that plant having fairly decent capacity. And the sales force understands that I always want to grow faster. So I think we've made the appropriate investments in personnel and talent and making sure that we are supporting this every which way to make sure we grow this.”

asked by Kevin Steinke · answered by J. Joel Quadracci

Has packaging become a greater focus than previously, what is the CapEx for the Salt Lake City plant, and what is the current revenue contribution from packaging?

Packaging has always been part of the strategic plan, integrated into the marketing flywheel. The Salt Lake City plant's CapEx is 'under $10 million' (leasing facility, equipment), fitting within 2026 CapEx guidance. Current packaging revenue is 'around $135 million.'

“It's like around $135 million of revenue, roughly speaking.”

asked by Barton Crockett · answered by Anthony Staniak

What is the total number of stores in the In-Store Connect network, and what is its current revenue contribution?

The In-Store Connect network is growing from approximately 70 stores to 'close to 130' with recent wins. The revenue contribution is 'still low' as the offering is in its early stages of ramping up.

“Still low, Barton. This is still in the early stages of ramping up.”

asked by Barton Crockett · answered by J. Joel Quadracci

What would be the normalized postage rate increases if the Postmaster General's reform plans were implemented, moving away from reliance on rate hikes?

The Postmaster General's plan aims to return to taxpayer support for USPS's universal service obligation, reducing reliance on price increases. The industry expects increases to settle back to inflation-linked rates (CPI), as was historically the case. Legislative action is crucial and urgent.

“What we'd expect as an industry and what we would ask the post office as a part of strings attached, so to speak, is get back to increases that the rest of the world gets, which is really associated with inflation, which is used to be measured by CPI, and they were capped at CPI.”

asked by Barton Crockett · answered by J. Joel Quadracci

What is the revenue and EBITDA impact of the pending exit from Lima, Peru, and the size of the facility?

The Lima facility is 'a little over a 200,000 square foot.' The exit will impact revenue by 'about $25 million to $30 million' and result in 'small adjusted EBITDA.'

“From a revenue perspective, it's about $25 million to $30 million of revenue and small adjusted EBITDA.”

asked by Barton Crockett · answered by Anthony Staniak