Quad Reports Strong Q4 and Full-Year 2022 Results; Provides 2023 Guidance
Quad/Graphics, Inc. (NYSE: QUAD) (“Quad” or the “Company”), reported results for the fourth quarter and full year ended December 31, 2022.
Recent Highlights
- Increased Net Sales by 9%, or 11% when excluding divestitures, outperforming the 2022 guidance range of 8% to 10% growth when excluding divestitures, due to increased sales in all offerings.
- Delivered Net Earnings of $9 million in 2022 compared to $38 million in 2021, primarily due to higher 2021 net non-recurring earnings of $72.0 million ($54.0 million, net of 25% normalized tax) from asset sales and a property insurance gain.
- Achieved Adjusted EBITDA of $252 million in 2022, near the high end of the $235 million to $255 million guidance range, and an increase of $5 million compared to 2021 when excluding a $13 million property insurance gain in 2021.
- Grew Adjusted Diluted Earnings Per Share to $0.89 in 2022 compared to $0.60 in 2021.
- Generated $155 million of Net Cash from Operating Activities in 2022, an increase of $18 million compared to 2021, and Free Cash Flow of $94 million in 2022, an increase of $8 million compared to 2021.
- Reduced Net Debt by $489 million or 47% over the past three years, achieving Net Debt Leverage of 2.16x at December 31, 2022, and the lowest Net Debt Leverage since 2018.
- Provides 2023 guidance including using Free Cash Flow to reduce Net Debt Leverage to approximately 2.0x, the low end of our long-term targeted leverage range of 2.0x - 2.5x.
Click to enlarge. Source: Quad investor presentation
Joel Quadracci, Chairman, President & CEO of Quad, said: “We delivered strong 2022 results, outperforming our top-line guidance with an 11% increase in Net Sales when excluding divestitures. These results reflect increased sales in all our offerings, including increases in pricing to partially offset inflationary costs, print segment share gains from both new and existing clients, as well as continued growth in our Agency Solutions offerings and international locations. Our strategy as a marketing experience, or MX, company is effective. Increasingly, brands and marketers recognize the unique value that only Quad can provide through our integrated marketing platform. They are engaging us for holistic, multichannel, through-the-line solutions that remove friction and speed the marketing process, while improving results.
“Throughout 2022, we navigated multiple challenges, including paper and supply chain disruptions, inflationary cost pressures and labor shortages. We worked thoughtfully and diligently to mitigate the impact of these external factors on our business while proactively managing client expectations. Of note, we reduced Net Debt by 47% over the past three years and have a strong balance sheet that allows us to continue to make strategic investments in our business, accelerate our competitive position and drive profitable long-term growth.
“While we continue to see growth in the Agency Solutions part of our business, economic uncertainty has prompted some clients to take a more conservative approach to the start of the year and pull back on their near-term print advertising spend. As always, we take a disciplined approach to managing all aspects of our business and will continue to align our cost structure to revenue opportunities. At the same time, we will aggressively push forward on our growth strategy as an MX company. This includes increased investment in our people, processes and technology, including enhancing our Agency Solutions offerings and bringing aboard experienced business development professionals who can sell into our critical growth verticals.
“We remain committed to creating a better, more purposeful and sustainable way forward for all our stakeholders. We will remain nimble and adjust as necessary to changing economic conditions, while looking ahead for growth opportunities as an MX company.”
Summary Results
Results for the fourth quarter ended December 31, 2022, include:
- Net Sales — Net Sales were $885 million in the fourth quarter of 2022, an increase of 4% compared to the same period in 2021. Net Sales growth in the fourth quarter was driven by increased pricing to partially offset inflationary cost pressures and growth in the Company’s international locations and Targeted Print offerings.
- Net Loss — Net Loss was $9 million in the fourth quarter of 2022, an improvement of $12 million compared to the fourth quarter of 2021, which had a Net Loss of $21 million. This increase was due to increased earnings from Net Sales growth and higher productivity, partially offset by higher restructuring, impairment and transaction-related charges.
- Adjusted EBITDA — Adjusted EBITDA was $79 million in the fourth quarter of 2022, an increase of $19 million as compared to $60 million of Adjusted EBITDA in the same period in 2021. As expected, Adjusted EBITDA increased sequentially each quarter in 2022, with benefits from production labor staffing initiatives in the first half of 2022, resulting in more efficient operations, high on-time shipping and increased profits during our seasonal volume peak.
- Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings Per Share increased to $0.41 in the fourth quarter of 2022, as compared to $0.10 in the fourth quarter of 2021, primarily due to higher recurring earnings, as well as the beneficial impact from the Company’s repurchase of 3.1 million shares of Class A common stock for $10 million during 2022, representing more than 5% of outstanding shares.
Results for the year ended December 31, 2022, include:
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- Net Sales — Net Sales were $3.2 billion in 2022, up 9% from the same period in 2021, or up 11% year-over-year excluding the impact of the QuadExpress divestiture. Net Sales growth was achieved due to increased sales in all offerings.
- Net Earnings — Net Earnings were $9 million in 2022 as compared to Net Earnings of $38 million in 2021. The decrease was primarily due to higher 2021 net non-recurring earnings of $72.0 million ($54.0 million, net of 25% normalized tax) from $51.2 million in net gains from asset sales and a property insurance gain in 2021 compared to $20.8 million in net losses from asset sales in 2022.
- Adjusted EBITDA — Adjusted EBITDA was $252 million in 2022 as compared to $261 million of Adjusted EBITDA in 2021. The decline was primarily due to cost inflation, investments made in hiring and training labor in the first half of 2022 in advance of the peak production season in the second half of the year, the negative impact of supply chain disruptions and a $13 million property insurance gain in 2021, partially offset by increased earnings from Net Sales growth.
- Adjusted Diluted Earnings Per Share — Adjusted Diluted Earnings Per Share increased to $0.89 in 2022, as compared to $0.60 in 2021, due to higher recurring earnings as well as the beneficial impact from the Company’s $10 million of share repurchases during 2022.
- Net Cash Provided by Operating Activities and Free Cash Flow — Net Cash Provided by Operating Activities was $155 million in 2022, compared to $137 million in 2021. Free Cash Flow was $94 million in 2022, an increase of $8 million compared to 2021. The increase in Free Cash Flow was due to the increased Net Cash Provided by Operating Activities, partially offset by a $10 million increase in capital expenditures. The Company dedicates significant capital to automation with $60 million of capital expenditures in 2022 and intends to increase its capital expenditures spend in 2023.
- Net Debt — Debt less cash and cash equivalents decreased by $79 million to $545 million at December 31, 2022, as compared to $624 million at December 31, 2021. The Debt Leverage Ratio decreased 23 basis points to 2.16x at December 31, 2022, from 2.39x at December 31, 2021.
2023 Guidance
The Company’s full-year 2023 financial guidance is as follows:
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Tony Staniak, CFO of Quad, said: “We ended 2022 strong and exceeded our guidance ranges by delivering 11% Net Sales growth in 2022, excluding divestitures, and generating Free Cash Flow of $94 million to reduce Net Debt Leverage to 2.16x. As we look forward, in 2023 we anticipate continued growth in our Agency Solutions offerings; however, with economic uncertainty, we expect the decrease in Net Sales and Adjusted EBITDA from lower print volumes will exceed the benefits from ongoing Agency growth.
"We are a strong Free Cash Flow generator and we plan to continue using our Free Cash Flow to reduce debt and achieve Net Debt Leverage of 2.0x by the end of 2023, at the low end of our long-term desired range of 2.0x-2.5x. By the end of 2023, we expect to have paid off $564 million of debt, which would be a 55% debt reduction, since January 1, 2020. This significant progress will enable us to continue to invest in our growth as a marketing experience company and seek opportunities to return capital to shareholders, while ensuring Quad’s continued financial strength.”
The preceding press release was provided by a company unaffiliated with Printing Impressions. The views expressed within do not directly reflect the thoughts or opinions of the staff of Printing Impressions.
