A message to our shareholders

Read the 2020 Proxy Statement

Quad was founded on a simple yet powerful premise: create a better way for our employees, our clients, our shareholders and, ultimately, our world. Our inventive nature has fueled our transformation as a marketing solutions partner with a strong foundation in print. Our unique integrated platform helps clients reduce the complexity of working with multiple agency partners, increase workflow efficiencies, and improve the effectiveness of their overall marketing spend.

In 2019, we continued to accelerate our transformation with the goal of repositioning our company for long-term sustainability and growth. Our transformation strategy, known as Quad 3.0, drove $225 million of organic net sales growth in 2019, which helped offset more than five percentage points of annual print sales decline. Our principal objective is to completely offset this decline through growth in higher margin marketing services, which also drives incremental print revenue across all our product categories. With our expanded service offerings, we provide clients unmatched scale for on-site services, and expanded subject expertise in marketing strategy, creative solutions, media deployment for all channels, and marketing management services.

We continued to accelerate our transformation in 2019 and early 2020 through:

  • Aggressively managing our product portfolio with a focus on long-term value creation and strategic fit. For example, in 2019 we divested our industrial wood-crating business, Transpak, and announced a decision to divest our book business, as we determined these businesses could no longer be leveraged as part of our greater integrated marketing solutions offering. In early 2020, we sold our Omaha, Nebraska, packaging plant, to better focus our future efforts on higher-value packaging solutions that help clients create a cohesive brand experience across all channels.
  • Expanding partnerships with clients. Given the pressure on retailers to effectively market to today’s consumer and differentiate themselves, our expanded offering creates new opportunities for us to help companies optimize their marketing spend across all media types to improve return on investment. We help retailers identify and implement a high-performing media mix strategy that includes direct mail, catalogs, online, broadcast, out-of-home and in-store programs, as well as traditional retail advertising inserts. Then, with our data analytics expertise, we measure outcomes, so retailers can further tailor campaigns for even greater effectiveness.
  • Introducing the power of print to direct-to-consumer (DTC) brands. Many DTC brands market exclusively in social media channels; however, they are finding that social media alone is not enough to support long-term growth. As online customer acquisition costs increase — and the effectiveness of those efforts decrease — we are helping DTC companies expand into print to build their customer base. They are finding that print can effectively create an engaging experience, drive traffic, and increase frequency of engagement.

While 2019 was a challenging year, we finished with strong momentum, driven by continued execution against our strategic priorities, aggressive cost management, improved manufacturing productivity, and winning new work to offset organic sales decline.

Operationally, the fourth quarter was one of our company’s best within the past decade in terms of customer service. We achieved strong quality and on-time delivery performance for our clients in their busiest season. These improvements were driven in large part by our decision to invest an estimated $40 million in increased hourly production employees’ wages. Given this performance, we were able to exceed our fourth quarter financial expectations.

Net sales in 2019 decreased 1.6% to $3.9 billion. Excluding acquisitions, organic sales declined 3.5%. Organic sales reflected $225 million of new revenues generated from our Quad 3.0 transformation strategy offset by ongoing print industry volume declines and pricing pressures primarily in our large-scale print category of retail inserts, magazines and directories.

Net loss from continuing operations was $56 million as compared to net earnings of $30 million in 2018. Non-GAAP Adjusted EBITDA was $335 million as compared to $428 million in 2018. Non-GAAP Adjusted EBITDA margin was 8.5% compared to 10.7% in 2018. These results reflect the impact from the organic sales decline, the impact from strategic investments made to increase hourly production employees’ wages, and a decrease in print profits from the reduction in market price for paper byproduct recycling, which was partially offset by cost reduction activities.

Net cash provided by operating activities was $156 million as compared to $261 million in 2018, primarily due to lower net earnings and $61 million in transaction costs associated with a terminated acquisition. Free Cash Flow, excluding the $61 million in transaction costs, was $106 million as compared to $164 million in 2018, primarily due to lower net earnings and increased capital expenditures on long-term investments in automation and productivity improvements in the manufacturing platform.

We closed 2019 with a Debt Leverage Ratio of 3.12x. This is above our long-term target leverage range of 2.0x to 2.5x due to the timing of compelling strategic investments, including the 2019 Periscope acquisition.

As we continue to transform our company and our future, we remain focused on the following financial objectives to make Quad a compelling long-term investment:

  • Generate significant Free Cash Flow to support our disciplined capital deployment strategy, and respond effectively to the rapidly evolving coronavirus (COVID-19) situation and its ramifications for the global economy.
  • Drive earnings and increase margins through organic net sales growth related to our transformation strategy, as well as through effective cost management and productivity improvements.
  • Strengthen the balance sheet through ongoing debt reduction, with a continued focus on being within our targeted debt leverage range of 2.0x to 2.5x.

We will continue to closely monitor the COVID-19 pandemic and its impacts on our clients and the worldwide economy, and will adjust our priorities to support our financial objectives.

Since our founding in 1971, Quad has drawn on our strong values and unique company culture to create a better way, every day, for all our stakeholders. Our ingenuity has led us to evolve our offering at a critical time of media disruption and worldwide economic uncertainty amidst the COVID-19 situation to deliver more value for our clients as a marketing solutions partner. I am proud of our ability to transform, which is fueled by our employees who approach their jobs with the ownership mentality of being empowered to create a better way. In this way, we are inventing the future.


J. Joel Quadracci
Chairman, President &
Chief Executive Officer