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Quad/Graphics Credit Rating Upgrade: An Overview

Quad/Graphics, Inc. recently celebrated an important milestone as S&P Global Ratings upgraded its issuer credit rating from 'B+' to 'BB-' while maintaining a stable outlook. This assessment is a testament to Quad's proactive debt management strategies and the ongoing improvement in its financial health, despite facing revenue challenges.

Factors Behind the Upgrade

The S&P rating upgrade predominantly stemmed from Quad's successful reduction of debt and enhanced leverage metrics. The company managed to actively repay its debts, leading to a projected reduction in reported net leverage to 1.5x, with an adjusted basis of approximately 2.3x by the close of 2024. This dynamic shift underscores Quad's robust cost management practices that have enabled it to navigate ongoing revenue pressures effectively.

S&P further noted that the stable outlook reflects expectations that Quad's leverage will remain below a threshold of 3x and that its free operating cash flow (FOCF) to debt ratio will surpass 15% over the upcoming year. This optimistic forecast is greatly attributed to the company's debt repayment efforts, which have been funded through proceeds from asset sales. Additionally, an anticipated modest improvement in EBITDA margins to the range of 8%-9% in 2024 has fortified investor confidence.

Leadership Insight

Joel Quadracci, Quad's Chairman, President, and CEO, expressed satisfaction regarding the rating upgrade, emphasizing the firm's consistent dedication to operational excellence and maintaining a strong balance sheet. This achievement aligns with Quad's disciplined approach to managing all areas of its business, both strategic and financial. With strong cash generation capabilities and a deleveraged balance sheet, Quad is poised to pursue strategic investments in innovative solutions that align with both growth priorities and shareholder interests, which include dividends and share repurchase initiatives.

Strategic Session Insights

On November 20, during Quad's 2024 Investor Day, the company elaborated on its strategic vision, growth opportunities, and financial objectives. Highlights from the session included:

• - AI-Powered Solutions: Quad is harnessing its proprietary household-based data stack to develop AI-backed solutions that facilitate brands in creating highly personalized content across various marketing channels.
• - Investment in Retail Media Networks: The company is investing in omnichannel retail media networks, recognizing the substantial market potential in this area.
• - Operation Efficiencies: Utilization of Quad's MX Solutions Suite is helping brands streamline marketing processes and improve business outcomes.
• - Long-Term Financial Goals: Quad has outlined ambitious three-year objectives focusing on revenue growth, EBITDA margin enhancement, and increased free cash flow conversion.

About Quad/Graphics

Quad stands as a global marketing experience company dedicated to forging direct connections between brands and consumers across various platforms, including household, in-store, and online environments. The company employs cutting-edge technology and data-driven insights to simplify complex marketing processes and eliminate friction throughout the customer journey. By delivering tailored, scalable solutions, Quad is committed to providing value and improving efficiency in marketing efforts for its clients.

Emphasizing its extensive reach, Quad operates with approximately 13,000 personnel across 14 countries, serving around 2,700 clients. The client portfolio includes prominent blue-chip companies engaged in various industries, specifically targeting sectors such as retail, consumer packaged goods, health, and financial services. Notably, Quad ranks among the largest agency firms in the U.S., bolstered by its Rise media agency and Betty creative agency partnership.

For further insights into Quad’s commitment to innovation and sustainable practices, interested parties can visit Quad's website for more information.

Conclusion

In conclusion, Quad/Graphics' credit rating upgrade offers promising signals for investors and stakeholders. The company's strategic initiatives in debt management and operational excellence appear to position it well for future growth and innovation. With a focus on maintaining strong financial health and innovative solutions, Quad is set to navigate the intricacies of the marketing landscape effectively.