Good morning, everyone. Hopefully, everybody can grab a seat. All right, good morning, everyone. Welcome to Quad's 2024 Investor Day. My name is Don Pontes. I'm the Executive Director of Investor Relations here at Quad. Happy to see a full house filling in here for the event at our New York City office. Thank you all for taking the time to join us. And thank you for those joining us virtually as well through our live stream. So for today's agenda, the team has put together really a detailed walk through our forward-looking strategy, our growth opportunities, as well as our long-term financial goals, and I know the group's excited to get started and kick things off.
We're actually going to start things with our CEO Joel Quadracci, who's going to provide a foundational overview of the company, of Quad's history, really help understand how Quad arrived to the point where we are today. Joel's also going to highlight some of the key takeaways you can expect throughout today's agenda. Joel, we followed them by several members of the senior team who are really going to highlight those growth opportunities, as well as really just detail Quad's continuous effort to innovate. Speaking of innovation, we actually do have a couple of our most recent innovations demonstrated in the room right next door. If you haven't checked that out, I encourage you to do so. Our CFO, Tony Staniak, is going to tie it all together, round things out by providing that detailed look at our long-term financial goals.
Before we get started, I've got some housekeeping that I do need to walk through. I would like to remind everyone that forward-looking statements are subject to safe harbor provisions. They are outlined in today's slide presentation on slide number five. Quad's financial results are prepared in accordance with generally accepted accounting principles. However, this presentation does also contain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, net debt, and debt leverage ratio. We have included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures. This event is being webcast with a replay to be available on the investors section of quad.com shortly after today's event. One last thing. At the conclusion of the event, we will have a full Q&A session.
So I encourage those joining us virtually to submit any questions you might have to ir@quad.com. We'll be happy to address those at the end of today's agenda. And with that, let's kick things off. I'd like to hand things over to Joel.
Thanks, Don.
There you go.
Welcome, everybody. We're excited to have you here. We put a lot of work into this because we're very excited about the work that the whole team has been doing. Joel Quadracci, President, Chairman, CEO. You know I've been doing this job since 2006. My father had passed away in 2002 at a young age of 66. I was in the business pretty young, but then by 2006, I was asked to kind of step forward. That was fun. 2007 was fun. The whole world ripped apart with the Great Recession. Digital disruption happened. We came from the printing industry. It's been a wild ride. I'm very proud of what the company is. A lot of it has to do with the roots of where it came from. I started in 2006, but the company was founded in 1971 by my father.
I was founded in 1969. We had the same parents. So what the interesting perspective is, is I grew up not just with the family company to see it grow, but also then to witness and be a part of the evolution of marketing as a whole and all that's happened during that time frame. And certainly, you know, you think about what I just said from, you know, call it 2008 on, the turbocharging effect of how the whole landscape has changed. The company was founded as a very entrepreneurial company. My father was an unbelievable entrepreneur. He came out of another printing company that had a lot of strife. Management and employees weren't getting along. You know, meanwhile, the company wasn't kind of progressing. So at a very young age, he put a second mortgage on the house. He was very irresponsible, by the way.
He had three kids, one on the way. I was number three. Number four is sitting right here, my sister Liz. And went off and started a company a different way. And back then, it started not just as a private family company, but it was an early ESOP. And he wanted the employees to own part of the pie because he said, look, if you own part of the pie, you're doing it for a different reason. It's not just for a paycheck. It's for making sure that the company's successful. And today, we are a public company, still a controlled public company. But the original employee group, the original ESOP, is still a large shareholder. All the employees who've come after that still have the same sort of mentality because it's built into the culture of act like an owner.
Don't act like you're doing it for a paycheck. That becomes really important when you navigate what we've had to navigate. We started out as a printer in 1971. Today, we're $3 billion in sales, 2,700 clients. These are kind of the who's who across a lot of categories: 13,000 employees and 40 global operations. This is sort of a diverse look at the types of lines that we deal with. While we started as a publication printer, and by the way, back then, when we really considered ourselves a printer, we were a product-based company. We supplied products to people who asked for them. That was in publications. We got into direct-to-consumer, but it was really just supplied catalogs or direct mail or retail inserts.
What you'll see today is we've migrated over the past 15 years to be a services-based company, an advisory company, helping marketers sell their product across all channels. We just happen to be attached and come from the print world. So when people look at what we're going to talk about today, they get a little confused at first. They say, "This is kind of complicated. Why is a printer kind of doing all this stuff?" It's actually pretty logical as we walk through it. So today, we've got access to a lot of the who's who of different categories, a very experienced leadership team. Most of our legacy team that evolved over time evolved because people retired from here, not because they left or they weren't good talent. Very proud of that.
And as we've evolved into being a marketing experience company, a huge chunk of these people came from a different part of the industry, from the holding company world, from the advisory world with people like Deloitte and things like that. So the caliber of people we're attracting today is based on the story that they understand, which they get to know the logic of why we're able to do what we're doing. And I think some of them will be able to opine on that later. And they're not just being nice to me, I hope, but we sort of have this great Pied Piper effect that you get some great talent who buy into the story. And they're like, "Wow, this is different." And this might be a solution to some of the things that annoyed me in my previous job.
We're getting a great influx of talent. I'm very proud of that. There's a big announcement today. Tim Maleeny, who's coming from Havas, is joining us. Josh will talk about that later. This is sort of a graphic I like to use. I'm not going to get into huge detail here, but it's kind of a truncated timeline. Think about the top blue of print in organic growth. That's 1971. There's a lot I call this the threads of a lot of things that we're doing today, whose foundation was built somewhere along the way in our history. We didn't just decide to be a marketing experience company and act more like an agency five years ago. It's been growing that direction for a long time. To explain that, you know, what is a marketing experience company? Let's talk about what is marketing.
I bring all my 13,000 employees along every step of the way because they need to understand and believe in how the company's evolved because they're all a part of it. We have a town hall here tomorrow with 13,000 employees. They're not going to be here. They're going to be. We're broadcasting to them to keep bringing them along. My father always taught me marketing's fairly simple. It's about you have a product and you're trying to put it in front of the right person at the right price, at the right time, and now more than ever in the right different parts of the ecosystem.
If you look at the old days of the madman days when marketing was simple, you had radio, TV, and offline. You'd go to an agency and say, "I've got this detergent to sell." They'd put some creative people at it. They'd come up with the funny commercial. They'd come up with the print content. They'd go out and help you buy that media and deploy it out there. And hopefully, everything will happen and people will know about your product and want to buy it.
But it was always the same thing to everybody back there. And the world's been trying to get to a point where it's very personalized. It's knowing Joel for his traits, knowing Joel for what his likes are, his passions of things that he does in his world and be able to speak that way. And so that is very easy to say and it's very complicated to do. You think about the Mad Men old days. It was some big agencies. When digital exploded and all the different things came to life of how you could sell your product, a lot of agencies came about to tell you how to spend your money. And then what happened is you started to see a big roll-up of those. And that resulted in the big holding companies that you have today.
It's like, "Well, let's try and supply the whole ecosystem to someone." The challenge for a marketer today is it's very complicated because they are not designed to be integrated together in helping you. And so your marketing departments have grown quite significantly to manage all these different agencies. And so we call ourselves an MX company now because it's really about the marketer, our customer. Their job is really hard. It's not a good experience. The average tenure now of a CMO, I think, is down to two and a half years because the clock is ticking. The brands have a lot of pressure on them. They want the answers. And the ecosystem that they're playing with is very dislocated.
So we come from print, which means that, again, when I said we were a product company, we'd get the phone call at the end of after the campaign was designed, the content was created, and they'd say, "Joel, go print a billion of these things." That's what we would do. Slowly, we went upstream and said, "Well, we can start creating some of that content." We got into photography, for instance, years ago to help create those contents. We started managing parts of people's processes. We got into data in a very interesting way.
Data is going to be kind of a story today that is really important to understand. So backtracking to being a printer, the way we distribute that media for our customers is through the post office mostly. Think about catalogs, direct mail. We do a lot of retail inserts that went through the newspaper, but publications, all that stuff goes through the post office. And so the cost to our customers to do that, 60% plus is postage. We're a small part of it. So over time, we learned how to offset that cost with the help of the post office. They incented our clients that if you skip most of the post office on their way to you, the consumer, they'll give you a big discount. The only way they could do that is if the printer could do the work for the post office.
So today, we merge all the different mail streams of our clients going out. We do the sortation for the post office. We send out bundles that are different sizes based on the postman it's going to. And all the postman has to do if we're sending it from Sussex, Wisconsin, to Marin County in California is open up that bundle. It's in the order he walks down the street. So to put it in perspective, though, if you take out first-class mail and you take out parcels, about 10% of the post office's volume comes out of our plants. So a huge amount of volume going to every mailbox, 95% of the mailboxes of the country every week. Not only that, but what we're sending to them, we get two files from our customers. We get a prospective file, which names they're renting.
They're saying, "I think this person looks like someone that would want to buy my product. Let's send them a marketing piece." And they're probably hitting you online with an email and all the other things. And try that out. The other part is they send us the customer file, people who keep transacting with them. That's always refreshed as the transactions happen. That's the important data we're sitting on. And so we have a data set, a data foundation, which is based on all the households in the country, based on the content going in, which allows us then to not just look at Joel and his demographic and where he lives geographically, but start to extrapolate what are his passions for life, what are his passion scores.
Then we can build around the foundation of that with a lot of different partnerships that people use in data and trying to target customers for audience and turbocharge that, and that's something we've been working on a long time. You're going to hear from Joshua Lowcock, who's going to talk about that later, and you'll also hear from Tim Armstrong as we do a fireside chat as we've gotten to know each other over time and more on that later. So fast forward, when I think about where we're at, that's an important part that understanding coming from manufacturing gave us that big data set. The other thing that I think in the important takeaways is that we're building on our momentum as a marketing experience company.
The three things that I think allows us to do that coming from where we came from, besides the data set, is a huge focus on process. And our focus very much is about helping those marketers integrate the ecosystem or have an ecosystem that's integrated where they're not having to manage all this mess. Okay? And because we come from content, we've gone upstream and creating that. We've got a very close relationship with a lot of those big brands. And the other thing to think about up here as we talk about products, old line products, offline products to new line services, think in the blue, really big invoices. Like we are like still one of the largest spends for a marketer when they're using print. Big invoices means relationships all the way up into the C-suite. And that's what we've had for many years.
These are long-term contracts. Many of them we get so embedded with where we're actually creating content. We have people sitting in people's marketing offices that are Quad people helping them market their company as well. So the big invoices create that opportunity. The further up you go, smaller invoices, higher margin. And so lower margin, high invoices, and also high cash flow. So a lot of the manufacturing creates that cash flow. And if you've looked at our debt paydown and how we've managed the balance sheet, that's super important as well as how we've been able to invest. But as we go forward and when we're marketing for people, helping them in the advisory side as opposed to just producing a product for them, the revenue flows back and forth.
We may enter as an agency with a big insurance company that would never knew us as a printer, but it may all of a sudden lead to the fact that, wow, we got out of direct mail. There's a live case. Got out of direct mail years ago, and we realized we have to get back in because it's really responsive. So suddenly you have a small invoice engagement that turns into a large invoice, large cash flow engagement down the line. And they work together. And the reason it works that way is it's actually how the consumer works. They use all things at their fingertips to interact with brands. I talked about the data thing. That's the other is leveraging our proprietary household data stack to help our clients market.
Because at the end of the day, when you look at the center here with intelligence, that's data. And I talk about the marketing equals, right product, right person, right price, right time. It's all about the data at the center telling you where to go, where to market, what works, what doesn't work. The worst kind of marketing is the stuff you're sending to someone who doesn't care about your brand and never will. But yet that's still about 30% of your marketing spend today. And so at the center, we believe that data is going to help our customers and does today really market more efficiently on into the future. Focusing on continuous innovation, product development, that's a competitive advantage we've had for years. Back to the family culture, the company that still got that thread of focus, we're very intense about our culture of very tight-knit teams.
That leadership team may represent different silos in the company, but I run the company where they're all very tightly intertwined. Like I know I have the guy in charge of manufacturing knows enough to be dangerous about the boutique creative agency that comes up with the funny commercials. Because ultimately, when you think about integration of the offering, they all touch each other at some point. And if you're going to sell an integrated offering that goes from creative all the way into direct mail or doesn't even hit print at all, but goes into deployment into digital channels, the execution has to be highly integrated. And that's the challenge of why the ecosystem is so fragmented today because it's really hard to do. And for those who cover or follow the big holding companies, they're all making big strides to become more integrated.
But it's a very difficult, hard thing to do. And I think that we have a big advantage for where we're going. We're not going to displace them, but we got a whole lot of existing customers and future customers that we can grow share of wallet with and help solve their problems. And so, streamlining the marketer by utilizing MX Solution Suite to enable marketing efficiencies drive positive business outcomes. That's process. That's the process discipline. We're a lean manufacturing company. I always joke with my creative friends here that you start in manufacturing, which is highly process-oriented. The further you get up into creative, it's like process just kind of goes away. Everyone's like, "You can't put process to something that's creative. It'll destroy it." No, that's not true. You have to have process if you're going to be integrated.
And that comes from where we come from as a marketer, as a manufacturing company. And using our flexible model to shift to services drive long-term financial goals, including margin expansion, net sales, and growth. That's the big invoice. And if you look, actually, you'll see in our operations side, the big invoice side continues to improve their margin. We've consolidated the print industry for all practical purposes, a very tough process that had to happen. But if you look at the last couple of years, we've actually improved margin as we've gone and dealt with decline on that side. And then, of course, we're adding more and more services which come with a higher profit margin.
And so most importantly, as we talk about and we shift gears and get into all this stuff that I just mentioned, we're very proud of some of the awards that we've won or the recognition we've had. We're one of the world's largest agencies. And we get a lot of people who didn't know us as a printer say, "How are you one of the biggest agencies I don't know about?" It's like, "Well, you're about to find out." And a lot of these other awards down below are very important to our clients and future clients. They do pay attention to that. And so we're always very excited when we see that recognition. So I'm going to turn it over to our Chief Marketing Officer, Josh Golden.
If you think about as we were turbocharging this MX experience, I wanted to wait till we were really proving this integrated offering and it was actually working. We didn't have to have the formalized marketing department like a lot of brands do because I could get back to the big invoice, small invoice thing. I could get $1 billion of print customers on the phone in an afternoon. As we transition to what we are today, we have to be able to scream from the hilltops now what we do. So I hired Josh three and a half years ago.
Yep, three and a half.
He'll give a little bit of his rendition and we'll jump in. I will be chiming in from time to time just to draw some context where appropriate.
Thank you, sir. Well, good morning, everyone. I'm Josh Golden. I'm the Chief Marketing Officer for Quad. I have been with Quad, as Joel suggested, for three and a half years. I have the wonderful opportunity at speaking to a room of investors to tell you why three and a half years ago I came here. I have a history on the agency side, on the brand side. I've been in a lot of wonderful different places and had the benefit of always evolving that brand to take it to the next level. This is what I enjoy doing. And three and a half years ago, I got a call from Eric Ashworth, who you'll hear a little bit from a little bit later. And he said, "Why don't you think about Quad as your next step?" And I was like, "That's funny. A manufacturer?
I don't know if I could, what are you trying to do?" And then I investigated a little bit. It turns out the story that they had and the access to the customers that they have and the data visibility that they have is enormous and it's unmatched. So I was super excited just to have the conversation. I was lucky enough to join the team. When I started the job, it was a small little team that was there, as Joel suggested. He could make a phone call and go get $1 billion, which I think is slight hyperbole, but I'm just going to give him the benefit of the doubt. The point is I had the benefit of creating a wonderful team that allows me to help tell all of you and frankly, all the rest of the marketing world this story.
So I started with my first partner in crime, Heidi Waldusky , who I'll bring up with me onto the stage. And she's going to walk you through a little bit of the marketing experience framing so we understand how we change and what we change too. Heidi, join me up on stage.
I'm sorry, Josh.
I'll mute my mic and talk to you.
We're not allowed to be on stage again, obviously. Good morning, everyone. My name is Heidi. I am indeed in charge of Quad's brand marketing, which means I get the privilege every day of telling Quad's story to the market. And something that I want to emphasize for you all today is something that I think is a really great part of our story, which Joel referenced, is in 1971, Quad was a startup, right? I love that part of our story. It's in our blood.
Billions of dollars later, we're not exactly a startup anymore, but we were in 1971. That's because Harry Quadracci was an entrepreneur. Like most entrepreneurs, he got into business because he believed that there was a better way to be doing the thing that he was doing. In Harry's case, he was in the print industry. Although we always sort of joke if it hadn't been the print industry, Harry would have disrupted something else because that's just the way that he was. He was in the print industry, looked around, saw some things that he didn't like, and said there has to be a better way to treat our employees. There has to be a better way to do business, and there has to be a better way to impact the communities that we live and work in.
And that's why Quad was founded, second mortgage, three and a half kids later, right? So when we think about this idea of a better way, it really still serves as our founding principle. When we look at all the ways that we piece Quad's story together, we think of this as our founding principle, but it's actually also our operating principle. It's the lens through which we make decisions for our company. It's why it was so important for us to reframe ourselves as a marketing experience company because at the end of the day, all marketing experience means is that we're here to make the marketers' experience better, right? Marketing experience is our commitment to the industry, our promise that we're going to use every tool at our disposal to solve our clients' problems and drive success for their business.
Now, the tools in the toolbox look a little different today than they did 50 years ago, right? Starting with our MX Solution Suite, right? We've taken all the products and services that we have to offer and organized them into these distinct MX Solution Suites. We have creative, production, media, all fueled by intelligence and technology. And we've organized them this way because we want to make it as easy as possible for people to do business with us. We believe that these suites are built to address critical marketer pain points. And that's why these suites exist. So it makes it really easy for clients to build a meaningful results-based relationship directly with Quad or with one of our agencies, Betty or Rise, who have full access to our MX Solution Suite.
And when we think about integration, the way that I like to think about it, I call it common sense integration. What makes sense for the client? How do we go within our suites and connect the dots in ways that make sense for the challenges that they're facing? How can we show them where one plus one equals three? That's what we're built to do. And so when we say things like better marketing is built on Quad, TM, it's more than just a campaign line for us, right? We truly believe that our products and services provide a foundation that clients can build real repeatable success upon. At the end of the day, we're constantly looking, how do we make this toolbox better? How do we build it better?
How do we build better tools, put them in the toolbox, and make sure that our clients have access to everything that we're able to do? So how do we know what tools to bring to market? We don't have a crystal ball, right? But we do it by taking that heritage of logistics and manufacturing, right? We're incredibly good at figuring out what's going to happen five steps down the road, right? So we take a look at what's happening in the industry. And Josh is going to go through, you know, this will sort of match up with Quad's timeline and trajectory. But we'll sort of start with what's been happening in the last 15, 16 years. So everyone's favorite, economic uncertainty. Starting in 2008, you know, we're really seeing that economic downturn, right?
We're really seeing a lot of pressure on the marketer to really have to kind of rationalize and justify every dollar that they're spending like never before, right? That's where this big push on efficiency comes into play. At the same time, there's a massive fragmentation of, you know, media and point solutions, right? It's really the rise of omnichannel marketing, that rise of marketing complexity that Joel's talking about, right? The marketer's job just continues to get more complex, right? So we're constantly thinking, what solutions do we have? How can we help our clients not just meet the challenges, but rise above and find the opportunities within? And lastly, you'll see, and Joshua will address this as well. This is real pressure on data privacy.
Consumers are able to kind of keep more of that data than ever before, which is good for them, not so great for the marketer, right? It puts this tremendous pressure on this complexity around audience strategy. How do I really make sure that I'm finding the right people and delivering them the right messages at the right time? And so you're going to see, again, how we've built really, you're going to hear this a lot, how we've built ourselves again to meet the challenges and help them rise to the occasion. So with that said, I'll turn it back over to you.
Thank you, Heidi.
You're welcome. I'm going to escape now.
So the world in which Quad, you know, was operating in forever, we can't ever forget that we came from manufacturing. So obviously, looking at our foundational growth, started with print, and this is our engine. This is our cash engine. This is where we make most of our money. This is, as Joel suggested, the large quantity of invoice dollars with zeros. That's in production. In my agency life, we could come up with a great campaign and we can make a couple million dollars on having a great creative idea. But the going to put it, you know, make it is millions and millions of dollars. And then going to get it in media is more and more millions of dollars. So when you have a campaign, a good idea is obviously important, but not going to be as much dollars as it comes in production.
So we will always have that cash engine making as part of our infrastructure. The question becomes, where do we add on and what do we do to make certain that we are there for the marketer to solve their problem wherever it is and then continue to add that? Obviously, we had to figure out, well, what other areas can we go invest in and acquire? It's in store. There's DM, there's all the catalog, all the other pieces that we can logically add on to be like, yes, of course. Yes, of course, let's do that. That's another thing that we can put into that production type pipeline. And then more recently, we've added on agencies, as Joel alluded to earlier, all the agencies that are in the media space or in the creative space. People are asking us, can the, we call it the can you do's.
Could Quad just do this for us? The answer, of course, is yes. Yes, of course we can because we have that infrastructure already built in place. This story continues to go on and on. As Heidi and the rest of the marketing team figured out, what we really are solving is this complexity that marketers are endlessly having. My job, but by the way, Joel's my timeline with Joel is I'm past a year over my deadline to be exited. It hasn't happened yet, but I'm waiting for it. It won't happen. The interesting part about Quad in particular is the commitment to endlessly solving the marketers' problem. If someone came to me and said, hey, Josh, what problems are you having?
If I can have just less companies help us solve your problems, would that be helpful too? I'm like, yes, please. Will you do that for me? It would be great. The truth is, it's really, really hard to solve the marketers' problem. The marketers' job is endlessly changing. Just think about the last three to four years. They just had AI added on. Okay, yeah, sure, handle that too. CRM was in there, email marketing, everything. Marketers just get that job added on. They have a lot of complexity that they need to handle. In particular, when you're thinking about a marketing experience and having their experience be easier, this is what Quad uniquely can provide. A vertically integrated through-the-line solution that allows someone to say, like, I have an idea. Can you help me execute that idea?
And then, can you help me deliver it to the right person in the right house in the right time with the right price? That is something that Quad can do really well. This evolution, this story, ladies and gentlemen, is exactly why we are in the position we are today and why I'm so excited to tell you all about it because this hasn't yet, we haven't, we are pushing this story out and we're ready to hit every single audience. And one critical audience is investors. We want you all to know how important it is that we are about to pivot. And this pivot is a moment at the time that we will mark in Quad's history as like, this moment mattered. Having you all here today matters. The stories you hear today about our innovations matter.
Where we're headed is going to be important, but it's all in service of feeding our cash machine, which is our manufacturing operation. Point taken. Moving on. All right. As Joel alluded to earlier, the access we have to the household is unmatched. I can say this because I have, you know, a long history on the media side as well. No one has access to 97% of the adult population or 92% of the household reach. And with 3 billion continuously revalidated household points, household data points, this gives us access to the consumer at their house, the consumer in the store, and the consumer online. All those three areas is the majority of where they'll be living. We know who they are, what they're interested in.
And Joel alluded to his personal interest. Imagine the capacity to communicate something different to me versus all of you in the audience versus anybody else. And this is what Quad does on an ongoing basis. This data point, this data set, which Joshua Lowcock will speak to shortly, is super, super exciting and I believe a real differentiator for where we exist within the marketplace. This is a solution suite which Heidi mentioned. This is actually the favorite slide that Julie Currie, who is our Chief Revenue Officer, will talk about later. This is the one slide that is, I understand, the most popular slide in the sales deck because it allows for the client to see first and foremost, what singular problem can we solve for you first?
Now, it might be most logically in the MX Production suite, which is our, if this were a Venn diagram, this would be a very large circle, but it's drawn not to scale, but this is effectively all of our manufacturing operations that we do, you know, for everyone, you know, a wide variety of individuals, but sometimes it's a creative challenge. Sometimes it's a media challenge. No matter what, they come in, talk to us, we understand their problem and we consultatively figure out how do we start with a singular solution that they need and land and expand, and that's what Julie is going to speak to later.
But this, the MX Solution Suite is how we organize our business so that when we're having a conversation with the client, they can see that we can handle any one of the pieces in the ecosystem, but ordinarily it's the problem they're having first that they want to solve for.
One thing we won't hit as much on is the tech line, the technology that threads throughout it. Back to my father being very entrepreneurial and innovative. Back in 1982, every employee at Quad had an email account. It's 82. That's how Liz and I used to communicate with my dad when he was at work. It was the old Digital VAX system. But what that triggered was over time, as we wanted to focus on process and really understand how we can become more efficient, you had to have toolsets to visualize the workplace.
So we ended up having to build our own ERP tools to see how the presses ran, how product ran through the plants because we couldn't get someone to do it for us. And so there's that in the fabric of our history. So today, when you start seeing some of the toolsets or some of the solutions, we're actually providing technology solutions to our customers to manage process. So back to that process thing.
Absolutely. And I am reminded by in the slide to tell you that while I'm going to highlight a few small solutions that are first, we're first to market in, these are not the only solutions we have. We have a wide variety. And you'll get the chance to see if you saw In-Store Connect, which we have in there and in the other room, you'll get to see that peek.
The point is all these things are ways we're looking at expanding. Well, how do we take MX Creative and make it bigger and more valuable? MX Production, what else can we do to solve the problems for our marketers as our customers and MX Media as well? So 3D C ommerce, Eric Ashworth is going to walk you through it later. It's our digital twinning tool. Imagine you're an e-commerce vendor. Imagine you're a retailer. You need a photo of a sneaker. That sneaker is sometimes you need it this way, you need it this way, you need it this way, you need it up and down. This solution is just wild. It's a 14-foot device which spins around an object and takes all the pictures that you possibly could need ever. And then we have it as a digital twin.
So you have the ability as a user to look at it from every single angle. This is something we have a unique relationship with a vendor that allows us to have this solution that clients need for us. Is it our only thing? No. It is a wonderful thing that's in addition to the MX Solution Suite. MX Production, as I'm reminded to say by my production friends, the largest cost for our clients is mailing. The postal costs are enormous for our clients. So we at Quad have the capacity to figure out, well, how do we help solve that problem? One of the best ways to do it is to say, well, you're going to get a piece of DM, a catalog, a magazine. We have the capacity to connect those into one package in the future and put it into people's mailboxes.
This singular solution can save an enormous quantity because we're taking effectively the effort out of the postal system and put it into Quad's hands, which allows you as the consumer to receive, oh, I got all this stuff in one package. How terrific. This cost is enormous cost savings for our clients. And lastly, just one, the In-Store Connect idea, which I mentioned before in the back. Imagine the ability as a grocer. You have a certain amount of costs you have in the system all the time, but you have a limited ability to monetize the eyeballs that come into your store. It's a horrible way of saying it, but consumers are looking to what they can actually purchase. When you have the ability to advertise to them as they're walking into a store about something that's relevant for them, they could pay attention to that.
In-Store Connect is our unique and owned solution that allows us to really hit very well this mid-tier retailer. I have not seen this kind of technology before, but you'll see it demonstrated in the room next door. It is fascinating and awesome. These just singular ideas, little first-to-market ideas that Quad is uniquely positioned to have a leadership position in a way that has not yet been done yet at all that we've seen. And we're super excited to get this in front of you and in front of all of our clients. But as a marketer, I am a professional exaggerator, I think. And exaggerating, right? It's five. Anyway, hyperbole. So I didn't want to just not have just trust me. I wanted to give you some data points so that we can back this up.
First and foremost, our wonderful Alicia Olson, which is somewhere, she's running our comms department. She wants me to talk slower, which I'm desperately trying to do, and I'm not doing great, and I'll let you know that the quantity of media placements that we've gotten in this year has been enormous. Why? Because there's extraordinary attention right now. What's happening in the world of touching content, being able to actually get something physical in your hands, so there was a story recently on the Today Show about the Amazon catalog. There was a story about the J.Crew catalog coming back. All these things that are coming back that are right in the center of the ecosystem for what we do has gained us tremendous visibility. A three-times increase in earned media placement. That's 300% more than we've had in the past.
That is, I mean, I've been at other brand marketers and other places. This number you don't get. So obviously there's a boom that's happening right now. And I believe that's because we're doing some research on this, but we believe that the younger audience, the Gen Z in particular, are really interested in touching physical objects. That's an enormously important facet that I want you all to remember. Remember that being able to touch something is valuable to the marketer, but even more valuable to the end consumer because they realize the endowment effect, like it's worth more to them. Also, LinkedIn, I'm a fan, but like knowing that the quantity of LinkedIn audience and our direct buyers are looking at us for the thought leadership there.
So it's a 20% growth that we've had in our decision makers, but it's like 70,000 people that we've grown in the last couple of, last year and a half from almost nothing. So people are interested in what's the story coming from Quad. Second piece is, and I won't belabor this, but really amazing client growth stories, which Julie Currie is going to walk you through. That I'm, every new client is like, wow, look at that. Look what they're buying from Quad. It isn't just the manufacturing piece. They're buying the other things, the integrated opportunities that they can speak to. And Julie will walk through that. And lastly, and I'll start with this one. Tim Maleeny, I think we're breaking news. I'm not positive. Might have gone out. Okay. Breaking news is joining us. He was the chief client and strategy officer.
He'll be the chief client strategy and integration officer for Quad. He was at Havas as their integration and strategy lead. Was at Deloitte, was at R/GA. That kind of talent, this kind of talent, Courtney Ballantini and Joshua Lowcock, who you'll hear from later, was as a president of media and ran UM Worldwide and Rachel Winer, who is our head of new business development. These individuals you wouldn't ordinarily get at a manufacturing company. You just wouldn't because why would you need that? You won't need this level of talent. We have created a really interesting magnet that makes people like a Tim and a Rachel and a Courtney and a Joshua all be interested.
This is just a small swath of the people that I could mention come to Quad because they see the opportunity of what could happen here and also can't undersell this. The culture of Quad is something I'm super proud about. I get to be a part of an organization where I'm proud to say that I work here. I'm proud to say that I work with people that I actually genuinely enjoy every day, and I've worked at companies where I haven't felt that way, so this puts me in a unique position to talk about the company and its evolution, and all the things you're going to hear today are about where we're headed, and I am wildly excited that you're here to hear. You guys are all here to hear the story as well as those of you online.
Next up is my friend Joshua Lowcock, who is coming in hot off the flight from Hong Kong last night. So he has had zero sleep. How much sleep have you had? Zero sleep, ladies and gentlemen. Joshua runs our entire media operation. You were literally in Hong Kong yesterday, was it? Or two days ago? What does it count like?
Hours ago.
Hours ago, and so Joshua's going to walk you through the media operation and our data story. Thank you so much for your time, Joshua. Here is the clicker.
Thanks, man. Thank you.
Center button is the forward. That's about to get you back.
Yeah, I got it. Thanks, Josh. So as Josh introduced, I'm Joshua Lowcock. I'm President of Media at Quad. I joined the company about a year and a little over a year ago. Prior to that, I was Global Chief Media Officer of Worldwide, part of Interpublic Group. I also spent a stint of time at Publicis Groupe at MediaVest. You've probably picked up an Australian accent. Like all Australians, I also worked for News Corp for a period of time. I've also worked in advertising and media throughout China and Europe, so one of the things I want you to take away from what I'm going to take you through is you've got to think about data and advertising like ink. It's core to doing business. You can't be in media or advertising today without data or data capability.
And so what you really need to think about and what attracted me to Quad is at its core, Quad has always been a data company. If you think about every piece of direct mail, every letter, magazine that goes into a mailbox, on that is an address slip. And what's on that address slip? Someone's first name, last name, and household address. That is data. And Quad has been living and breathing data since its inception. And so everything that we've done and everything I've done since joining is about taking this great historic value of data and transforming it into a data source that we can activate and use across our entire business, whether that's media, creative, In-Store Connect, or anywhere else we need to use it. The key thing about our data strategy is resilience. Resiliency is at the core.
What do I mean by that? There's only one place you call home. You only have one place that you go home to at the end of every day. That's where you build your identity from. That's where you make the decision of where you're going to send your kids to school. Most of your shopping and purchasing decisions are either in close proximity to home or they get delivered back to your home. Thinking about everything else out there in the market, what the big holding companies are doing, what other companies talk about, they have less resilient data sources. They're relying on email addresses. They're being deprecated. Literally, a couple of days ago, it came out that Google has finally made moves to deprecate the use of email and that you won't be exposing your Gmail address everywhere anymore. People relying on mobile phone numbers.
Again, mobile phone numbers are an unreliable data source. The FTC and FCC come down regularly on people that collect mobile phone numbers and use it for targeting. Think about privacy regulation. Privacy regulation makes a whole lot of things that everyone tries to rely on easily deprecated and less resilient, and then the last one is email addresses. I like to talk about this again and a lot because I have personally over 400 unique email addresses. I'm way ahead of the curve on deprecating the use of an email address, but email addresses are going to go away.
Home addresses are resilient. They're not going to be deprecated. They're not going to go away. Why? Because when things get delivered to a home, it has to be read by a carrier. It has to have a human-readable address to take it to, and so everything we do from our data strategy is about linking online and offline media together, but using the household address as that linking and keying mechanism.
So, in the online media world, you have device IDs, you have social handles, you have IP addresses, everything else. And on the offline physical world, you have that physical address, first name, last name, household address. What we've been working on is bridging those two worlds together, having the physical address as that keying mechanism. And from that, Quad has built a unified, unique data stack that's unrivaled in the market. So you heard Josh sort of tease it out there. Our proprietary household-based data stack has 250 million consumers in there. It's all linked back to a physical address. So yes, we can find them on connected television. Yes, I can find them on Netflix or on Facebook, on Google Search. I can find them anywhere they need to be found. But by linking it always back to a household address, we always know it's a real individual.
That means we reach real people. We target both at the individual and household level. Again, on that resiliency topic in question, that means we can actually be resilient from privacy regulations that might push back on targeting people at the individual level because we can target at that household level. We can leverage advanced audience modeling techniques. Knowing a bit more about the household and what those passions are in the household, we can actually go, okay, you might not be the purchase maker, but you're an influential person in that household making that purchasing decision. As Josh shared before, we have 97% reach of households, 97% reach of population, 92% reach of households. We have three billion data points. Again, unlike other people out there, because we're involved in the mail stream, we're constantly revalidating that data every day.
We don't send something into the mail stream unless it's been validated and we know it's going to be delivered. And that's the value of our unique data stack. The big actual, other powerful thing we have is passions. So to talk about passions a little bit, let's talk about the data that we can provide. Across our data, yes, we tick all the boxes. Yes, we have demographics. We have age, income, ethnicity. We have transactional data. So not only can we find the right people, we can actually prove that we drive media performance. We know that those transactions happen. We've added tutorial information. But the really powerful bit of data that Quad has that no one else has is passions.
Because we're linking everything back to our mail stream data and because we're linking it back to those households, we know at the household level what their passions are. You don't, as a marketer, send something to someone's house. And as an individual, you don't request something to your home unless you're passionate about it. So that passions data gives us a data set that's not available to anyone else out there in the ecosystem. The other thing that we bring, obviously, is all the behavioral data. So we know people's media consumption habits, what they're watching, where they're consuming media. So you think about that powerful data. We can identify the individual. We know the media they're consuming. We know what they're buying. When they buy it, we know what media channels to best reach them.
And we've got those passions to know how to use our creative smarts to better connect with them. That's the unique, amazing power of the data stack that Quad now has. This gives you an overview of the architecture. I'd love to talk for hours about this because I'm very techy and nerdy. But the things you need to know is it's an open architecture. So we've built it in a way that it's modern, extensible, and works with any data that we need it to be working with. It's extensible. So when we onboard new clients, and you remember that great client roster that Josh showed, any new client that comes in, if there's something that we don't have that they need, the data stack's flexible and agile enough to bring that in. We're activation agnostic. What that means is we don't care where we activate media.
We're not beholden to broken industry models. So if the data tells us that we need to buy a certain media channel, we buy that media channel. Straightforward. And then the last one is it's been built, and we were relentless in our focus on this to avoid unnecessary taxes and tolls. So the biggest challenge in the advertising ecosystem today is, while data is core to everything that gets done, there's tolls involved in actually activating that data. So if a marketer wants to do something, it might be $150,000, $250,000 just to do the data insights needed to activate it. We've worked very, very hard to eliminate that. It's seamless to activate our data anywhere, anytime, in any place. But just don't take it from me.
One of the leading agency industry pitch consultants, when we took them through all of what we've built, our capabilities, our models, the data, the way we've actually put it to work today for clients, he said it ticks all the boxes. It puts us on a, it takes our historic strengths, and it puts us on par with the industry. So when you think about those holding companies out there that have spent literally billions of dollars on data, we've been able to do that at a fraction of the price in a better way and a smarter way because we've taken the legacy value of Quad's household data. And now we have a seat at the table in all the major pitches that are happening in the U.S. The other thing, because everybody cares about AI these days, is it is AI ready.
What we've done is we have a partnership with Google. We're a premier Google partner, and we're leveraging our own data set with Google smarts to truly democratize access to data, so you'll hear a lot of companies talk about AI and the AI models they're building and the value that it's going to bring. That's a whole hell of a lot of hyperbole. The value of our data stack and what we believe in is democratizing access to the data, and that means that anyone within Quad will be able to go in, put a plain language text query, and I'll show you some examples of that in a minute, and actually find the right audience that they need. It's not a case of, and I have all the best data scientists that we need.
But right now, or in the past, what happened is you had to go to a data scientist, have a discussion, work out what data you might need. They'd run a query. It'd come back. You'd still go, I don't know if this is right. With the power of AI, we've accelerated that phenomenally. So every employee across Quad, whether that's a Quad person in manufacturing, whether that's someone in Betty and Creative, whether that's someone in Rise in the media side of things, can go in, access that data, and start getting insights. And that means that they'll have an omnichannel audience view, again, channel agnostic, activate anywhere, and measurable impact on results. It truly makes us the one holding company. So in this chart, what I'm trying to show you is the way that is put into action.
So in this example, any person within Quad can go in, type into a prompt, please create optimized ads for these four customer segments, more likely to purchase from Summerfield Gardens, a hypothetical client in this example. And our data stack can go through, find those audience segments. In this case, there's four identified that identifies not just the right audience, but the media channel mix that needs to be there, what media assets that we've got available to execute in those channels, and what the messaging they react to. Because it's not just about getting the ads out there. It's about actually connecting and resonating with those customers. So all of this from a transformational journey and where we've taken Rise, our media agency offering, is we've taken our media agency capability on a journey as well. So you've heard about the Quad MX journey.
On the media agency side of things, we've taken our media agency from being a digital agency to being an omnichannel agency. We're no longer reliant on platform data that's commoditized. So everyone's out there buying the same data from Facebook, from Google, from everyone else. We don't do that. We have our own proprietary data. We can actually focus on balancing brand and demand, those long-term results and short-term value drivers. We've moved beyond spots and dots. We can create connections between commerce and creators. And the thing that we're really proud of is we bring scale without sacrifice. There's no compromises in the way we go to market. Further to that, we've also brought new partnerships to bear. So from a marketplace clout perspective, Rise now has access to over $3 billion in negotiating leverage.
So we can actually go out there and compete shoulder to shoulder with everybody else that's out there in the market. We're executing new partnerships, which we'll announce in the next couple of days, to be able to activate our offline audiences anywhere. So any of our print customers, if they go, hey, I just need a digital extension and I want to be able to do email marketing or display marketing or anything like that, we can take their list and execute it in a turnkey, one-click approach. And the last one is because of Quad's long-standing values and commitment to transparency, we've partnered with an independent, I call them a data science auditing firm, but they're not one of the big auditing firms, who can identify and eliminate waste in the ecosystem.
That will actually help us drive better media effectiveness, but to do it in a more transparent way. If you hear about all the holding companies that talk about principal-based trading and principal-based buying, that creates a horrible prison for them. What that means is clients don't actually get quality media. They don't get what they need and what will actually drive business performance. There's a lot of waste. We're partnered with someone who can help identify that waste so we can actually start bringing those clients in from holding companies. Josh talked about how we solve marketers' pain points. The way we solve it from the media perspective is it's all about client-first media investment. We take the data, we read the data, we use the data to make the right decision. We can manage that brand and performance side of things.
We bring scale with agility. It's all about transparency and accountability. But more importantly, we're not holding to broken industry models. Everything's been built ground up from scratch to actually change the way that the industry operates and provide a better solution to market. With that.
Thank you, Joshua. We're throwing a lot at you very quickly. That's the goal and being efficient with your time. The transparency part is really important to us. And where Joshua comes from was a big connection point because back in the Mad Men days, there was an old saying that I know 50% of my marketing spend doesn't work. I'm just not sure which 50%. Well, today, about 20%-30% on average is marketing spend that's going to the wrong people. And so it's waste in the system. When you think about the dollars attached to it for a marketer, it's huge.
So when we talk about efficiency and driving efficiency, the data will set you free if you really pay attention to it as the core. It will tell you where to go, and it will tell you where not to go, most importantly. And unfortunately, I think in this ecosystem now, there's not enough people telling you where not to go. I do pride myself that I've told different clients to do less print. They say, why are you telling me to do less print? Because the data tells you to. Now, on the flip side, I've also told people to do more print because the data told me to. And that's what our brand stands for and has to stand for because our name is on the door.
With that, before we take a break, we're going to do a little switch of gears to give some perspective, and Tim Armstrong, good Quad friend for many years, Tim approached me several years back after he was with Google early on in the high-flying days of that development curve, then on to AOL, and then on to being an entrepreneur again, and contacted me based on some of the early stuff he saw us doing and what he was thinking about in the world, so we're going to do a little interview session with Tim, with Joshua, so welcome.
I'll hold the clicker up. I'll hold the clicker up on the stage. Tim. I know we had a small breakfast earlier. Look out. Look at that. Boom. Set changed, so Tim, thank you for joining. Do you do these often with investor crowds?
For a long time, actually, this morning, I was thinking I haven't been in front of investor crowds because I've been doing a private company, but I spent many years doing a lot of investor meetings. So good to get my muscles back in shape for the investors.
Right. Is there different words that you use in front of investors versus marketers? Like EBITDA .
No, I think the investors usually like the truth. So I found over time that I basically stick with being as straightforward as possible. And I'm just glad to be here. Thanks for having me.
Awesome. I'm thrilled you're here. So I know your history, but I'm not sure everyone has. I know Joel just hit on it a little bit. I think running the Americas for Google, making the transition with AOL, selling that to Verizon, those are some monumental shifts. And you were at the center of it. What was that like?
It was really, it's interesting. My career started. I started a newspaper in Boston after college and then went to go
A publisher, if you will.
Publisher.
Yes who printed your cup?
Actually had a printer called Bunker Hill. I was in Boston, and we had Bunker Hill Printing was doing our printing in Boston. And it was interesting because when I went to Quad for the first time, I used to spend a lot of time in manufacturing and printing and distributing and those things. So it was like a real kind of moment for me when I met Joel to come back to that.
B I think one of the things that I kind of realized during that time period was that the closer you get to knowing, guessing is like, hey, I want to run a marketing campaign at the Olympics. The knowing is who's there, what are they interested in, what's their passion, how do you get close to them, and how do you really know about the person. I think one of the things I talk about a lot at Flowcode is that CRM is cash. Like if you know your customer, it's really, really important. I think the same thing's true with your passion index and the household, which is HRM is cash, which is when you can take CRM and turn it into HRM, which is household relationship management. I think that becomes even a more kind of connected connection.
Yeah, we just trademarked that just so you know. That becomes a more kind of explosive connection point. So I think your job in media content, advertising, marketing is to really know your consumers. And one of the things I also founded Patch, which is one of the largest local media companies in the United States and to this day still does some of the largest amount of content every day locally.
Local media, right?
And households are really important. The average person, this is a little data, this data may have changed after the pandemic, but before the pandemic, the average person stayed in their household for 17 years. And so if you think about what Quad and what Joel talked about and Joshua talked about, Michelle talked about, is you basically are getting to stay connected with a household and those individuals in that household over an extended period of time. I think one of the things that also is true about the importance of marketing is how do you stay with a relationship over time? And I think that's why household in many cases is as important or more important than individuals.
Yes
Because in my household, I know there's certain decision makers that help other people facilitate decision making.
Do you make the decisions?
I'm not one of the decision makers, but I know the decision makers very well.
You know them.
She is an excellent decision maker. And so I think the ability to have that level of confidence in terms of marketing is. It really takes you not just out of the guessing game, it takes you out of the fraud game.
Sure.
And I think if you look at the, I love digital, I grew up in digital, but there is a tremendous amount of wasted money and energy in digital. And I think the reason I picked up the phone and called Joel is because I knew Joel had access to the households of America. The one thing I discounted was when I got there, I was expecting to go to Joel and have to be like, hey, look, I came from the internet. I want to mix offline and online together and put those things together. And Joel was actually right away already on it and knew it and had the vision.
So I'd say one thing, just a compliment to the Quad team, is I heard this probably four years ago when I went to see Joel. Joel said something at dinner that night. He said his dad used to have a saying, which is ready, fire, aim. You can't always do ready, aim, fire. And I think in business, you hear that and you're like, whoa, you always want to aim. And I think one thing is Joel has been able to build, and I look at the talent here on the stage in the transition over the last four years, talent has followed the mentality, which is like, I think actually Quad's done a lot of aiming. But I also think you guys have been doing the firing, meaning you guys have aimed and gone after the things that you're going after.
And talent follow. You can't talk talent into following an idea. You can talk them into following execution against a vision. And I think that all you have to do is look at people on the stage today at Quad. And I think it's pretty impressive what's happened.
Yeah, the household piece for me was a hook too. Like, well, that's fascinating. I have such tremendous access. I want to educate a little bit of the folks that are listening today because there was a pivot. Obviously, we've been talking about that there's something called the death of the cookie, which was effectively the way that we measured the digital audience. There was a change that happened recently. Tell me, describe a little bit of what's going on with the death of the cookie, but more importantly, is there an arbitrage opportunity in the data story out there?
Yeah, I think just taking a macro step back, 80% of the economy is still offline, and even during the pandemic, the highest it got to was like 19.8% and dropped back down to, I think, 18 point something, 8.3%. So 80% of the world in transactions is in the offline world, and out of that 80%, most of it has zero software attached to it in data. So there's payments data, but other than that, there's a lot of missing data there. So I think when you think about the cookie and the changes to the cookie, that gets a lot of discussion and it should get a lot of discussion. That's mainly concentrated on the 20% of the economy. that's digital. So I think when you zoom backwards out from that, you start to think about where are the places where you can see 100% of the economy.
Really, as a marketer, your job is like, as Tom Brady, a huge Patriots fan, so I know I went to Buccaneers, but what he used to say all the time is like, my favorite receiver is the open one. I think that what you want to do as a marketer is you want to have your favorite customer be the one in the channel at the right time at the right place that's open to your message. I think the powerful thing about the data is what we've done with you guys at Flowcode with Quad is like try to help connect that offline economy, which is 80% of the economy, and have it act like the digital economy. It's no secret that marketers have preferred digital because it's highly actionable, data-driven, scientific, those things.
And the ability, I think what Quad's doing and what we've been doing with Quad is helping make the science, the knowing part of the economy, be able to A/B test, move from just digital into omnichannel. And I think that's also Quad's doing it at an interesting time because most of the offline marketing was built in a time period where there wasn't any data. And actually, most of the players in that marketplace don't have any data.
Right.
And that's where I think makes Quad different is Quad actually has a set of data and the contracts, the infrastructure, and those things to be able to action that data. And so that's, I think when you think about the cookies, cookies are 20% of the economy and going away, getting squeezed. Or staying or whatever. We don't know anymore. We don't know anymore. Back and forth. But the reality is just to break it down, the average cookie stays with a consumer for about 30 days.
Right.
The average person's living in their household for 17 years. So you can do 21.
Which one really mattes to you?
Yeah, which one you want to spend more time with. And I think that's why what's getting discussed at Quad, not just discussed, what's getting operationalized as part of it.
We talk a lot about in our meetings internally and how best to serve the marketer, the mail, the content, the catalogs, the magazines, but also the ephemeral digital content, the distance, the quantity of time between a catalog that can sit on your kitchen table versus an ad unit placement is, it's almost astronomical the distance between the two of them. The Flowcode content piece that can take that person from a physical manifestation of an object to a digital, that is really, is that purely the magic? When you're talking about Flowcode in particular, do you say the real magic is our ability to go from, if you will, the young kids, IRL to digital space?
Yeah, I think that Flowcode does one thing. We basically build a tool that helps you connect to offline to online. And we do it like the reason we're partnered with Quad and partnered with other companies is like basically we are a tool that essentially instantly turns something from analog to digital and gets you in that ecosystem. And I think the powerful thing is like if you look at what that really consumers want, consumers want creativity, they want content, and they want connections.
And I think we help on the connections piece. Quad does all those things, but the power is like you're not just doing it in the home, but like the retail example you have in the other room over here, you're doing it in retail. So if you think about going back to this omnichannel approach to the world, basically if you have tooling that helps consumers connect to great content, commerce, and connections, you have a big field to play on. And I would argue it's a field that digital is super important and it's going to get more important. But I think there's a lot of ignorance on how big the playing field is outside of being on just a server farm. And I think that's where the powerful connection point is.
I want to talk a little about. I can't help myself but bring up AI and have us chat about it because I recognize the marketers in particular have a bright shiny object syndrome where see a new thing, like let's go think about that thing. The truth is there's been many in your history, frankly, from search to it's changed every three to four years. Do you see AI as different from everything else that's existed beforehand, or is it yet another brick in the wall, if you will, for a tool for the marketer to use?
I think it's different, but I think I would start off by saying it's super automation. I think the one thing that AI is going to bring to the table is a tremendous amount of speed on the automation capacity. And even if you look at Quad's business, like when I went to Quad for the first time, the variable data printing that's happening where you can personalize every single thing coming off the web into a printing machine and have something personalized and sent to the person within 24 hours is incredible. That you apply that with AI now and your passion index, you're going to end up with an explosion on the ability to automate basically the passion index to actual execution piece. So I think most of the advertising in the world is going to get affected by that automation.
That's kind of like base layer one. Base layer two, I think with AI is going to be how do you get people from a call like search historically has been a question engine into an answer engine. So the reality is you don't want consumers sifting through a huge amount of marketing. You want people getting to the right answer as fast as possible. And I think that's where the power of data comes into AI, which is like, can you condense the commerce funnel down much faster using AI? And I think the answer is yes. And I think you take the Joshua slide with a passion index on it, apply it to marketing, omnichannel marketing, you're going to be able to, you're not going to, the guessing is going to go away.
Much less, right?
And then I think the last piece with AI is just like how do consumers use AI to help them think about what they're doing and how they're doing it and where they're doing it. I think that's going to get a lot better, a lot faster. If you think about the mistakes in human decision making, I think AI is going to help shrink that down tremendously. So I'm a big believer in AI. I think it's a paradigm shift. And I think it will continue to close that guessing to knowing. It's going to accelerate the move from guessing to knowing in marketing.
When I think about Minority Report, the ad that is just focused on me about my specific recent purchases, there's a Big Brother effect of, I mean, there was a time in the '90s that I was uncomfortable putting my credit card into a computer. And I was like, now I'm like, I don't even care what you care. Just take it. I'm curious about the amount of time that you think it'll take for consumers to change how they feel about them having their Amazon catalog being different from neighbor to neighbor to neighbor.
You know, I'll just give you data on this. When I was at Google, you could go in and change all your personal settings on Google to what you could target, who can target, who can't, what you do with the data. And less than 1%, the noise level was huge on it.
Right. Lots of people talking about it.
Lots of people talking about it, the press, the government, all of this.
The Big Brother is coming after you.
You give consumers the tools. I hate to say it, but consumers were very selfish, which is if it's a benefit for me, I might be willing to share it. I think generally this is way dated information, 15 years old, but generally less than 1% of people would change their privacy settings. So I don't know if that's like the settings were hard to use. I don't think they were. But my guess is consumers are going to be willing to trade off information based on what the benefit to them is.
I have a streaming platform at home, a YouTube TV that I use, and I get ads that are like, wait, this is like a vendor I talked to on Tuesday. And I'm like, I can't believe they put a television ad to target me. So personally, I don't mind it. I think it's like kind of awesome. I don't get Pampers ads anymore because I'm like, I don't have babies.
Well, I think it's also like consumers are very good at optimizing time. I think one of the things is like if I'm passionate about sailing or whatever you're passionate about, and Quad's going to help you connect with information faster. I think getting rid of stuff I don't want to see and giving me more stuff that I do want to see in an omnichannel way. I think that's going to be really powerful because consumers are very adept at understanding use of time for marketers. And all of this work is going to help consumers use their time better.
I think so. We're doing some interesting research, and I want you to speak to this if you can on this concept of return on touch. Being able to physically touch the value differentiator that it has when you physically can touch something versus something that's ephemeral or in digital. Are you seeing a shift in movement back to the physical with the Flowcode?
Yeah, we say with Flowcode, one of the things we do, we do a lot of, we're basically an IRL company. So we do all of our partners basically use us in IRL. So I can tell you 100% just from like we're doing a bunch of major concert tours now. We do stuff for all the major professional sports leagues. We do a lot of stuff for colleges. I would say the engagement and movement into IRL is a really substantial change. And the industry, the IRL industry is moving from about a $500 billion industry to about a $4.5 trillion industry over time.
That's a team.
Yeah. So it will capture a lot of the commercial stuff if you go forward 10 or 15 years from now. IRL industry from a commerce and spending standpoint is going to be very substantial shift and change, and so that's why these omnichannel aspects are very, very important. I always say to people at work, I'm like, I'd love to be on Mars. Eventually, if Mars opens up and they have incredible Flowcode on Mars.
I want to be there.
Other than the seven to 10 people that are on the International Space Station, everybody else is on the surface of the Earth. That's it, and so basically improving the surface of the Earth from a standpoint of like making, forget about having things work really well on server farms, having the surface of the Earth work really well from an omnichannel standpoint would be great. Huge benefit. Huge benefit. So I think your touch point is you can just, if I pulled your phone out and said, scroll through your photos, I doubt you have any pictures of online services. You probably have a lot of pictures of your family, a lot of pictures of what you're doing. So I think the human touch aspect of life is getting more and more important.
I mean, do you think it's an impact of the pandemic that people wanted to be in person and have that, or is it something else? Or is it maybe a pendulum swing back from like everything is digital to like now?
I think if you're, a lot of people here are probably from New York, but if you're in New York, all you have to do is go out in the morning or go out at 5:00 or 6:00 P.M. One of the largest things you see happening are running groups. Where if you go on the West Side Highway, you see people dressed up in the same outfits running together. Where if you went five years ago, people were not alone together doing it. Like the coffee shops in my neighborhood in New York, like they're renting themselves out at night and people are doing IRL classes together.
While you see the mega growth of the platform companies, if you actually watch what humans are doing, humans are going to more events, getting together more often. Things like trunk shows or things that people are doing commerce stuff together is growing. I 100% believe the digital ecosystem is going to grow for a long period of time and be amazing, but don't sleep on the humans.
It's funny that remember they almost closed the patent office in 1920. They're like, no more ideas. This is it. We're done. And it seems like we kind of get humans to be like, oh, this is as far as it can go. And then another thing comes around. And now the old is becoming new again in that the coffee house at night would probably be less attended. So every business is thinking about how they can innovate and moderate their behavior. Quad has the benefit of having been around long enough where print was king. It's changed and now we've had to evolve into a new space. And with partners like with you at Flowcode, it allows us to do that. I'm curious about how you're seeing the biggest friction for the marketer. Where is the biggest friction for the marketer?
And then we're going to open it up to questions. So I'm getting yourself all warmed up for thoughts for Tim or me, but mostly for Tim.
I think the friction, like Eric Ashworth, when he came in, when we first started the relationship with Quad, I think he talked a lot about this, which is like if you go into the advertising ecosystem, basically things were broken between TV, retail, digital. So from a friction, from a marketer standpoint, it's enormous. Basically, you could end up dealing with eight different companies with eight different data sources, eight different things, eight different types of vendors in terms of creative targeting, all those things. And I think one thing that's happening now is like the consolidation down into what you guys have been discussing, which is like how do you meet a marketer's needs.
Again, marketing is also like having been the CEO of a big company. Yes, you were. As soon as AI digital started to come out, the first thing you do is like, where's this going to make my business more efficient? If you're able to remove the friction points, because each one of those friction points also has a relationship dynamic, a billing dynamic, all those things. If you look at the full stack of time and calories, like one thing I measure at Flowcode all the time is calories and cash, which is like where do our calories and cash go? You know, between 30%-40% in marketing of calories and cash go to an entire wasted stack of things that that money and energy should be going to your consumers who you're marketing to. It gets zapped in that friction ecosystem.
That's a substantial amount of money. I mean, that's like probably $100-$150 billion of wasted spending. Like attacking that and removing the friction between the groups is like a really good business. Not only that, but your marketing customers are concerned about that. The people with the CFO, CFO of Quad, I'm sure he's talking. He's here. He's here. I'm sure he's concerned about it.
Yes. He is. He calls me now and then and mentions.
It's the last time he called you and told you to spend more money on one thing.
Tuesday, I expect him to tell me that. I'm hoping. He's like, Josh, you know what? More marketing for you. We have an email address. It's ir@quad.com is what it is. For those of you online on the webcast, please feel free to email that. Someone will come up to the conversation. I just have one more for you. Just to look future casting for me, Tim. It reminds me of what was that the game that you sort of swing over the alligator and jump over the side? Pitfall, something like that? Anyway, it was a game in the 1980s. I'm worried about things that marketers can't see, and for this investor community, what are the things that you are seeing that perhaps this community can't see and that they should, maybe, be aware of that you can help to educate them on?
I think one thing is like, the rising expectation of consumers is rising very quickly. And what I mean by that is most consumers are getting very, very used to frictionless environments and not having their time wasted. I think one thing I see a fair amount of still is if you ignore the consumer adoption curves, I think you will be left in the dust very, very quickly.
I think number two is for marketers that are not using data, I would say that you are going to be in a world of hurt and you're going to be in a world of hurt really quickly because the things we've been talking about on stage and the stuff that was talked about before, if you have a marketing competitor who's better at getting to the consumer in the way they want to get with stuff that's relevant to them, and you ignore that cycle, because that cycle is not just going to turn into marketing targeting. In the next 10 years, it's going to have payments attached to it.
Totally.
It's going to have loyalty attached to it. It's going to have other things. So like what looks like a small mistake now is going to compound. Yeah, it's the future. And I think that, like I'll give you one small example on shopping. Like if you look at what Shopify has done with Shop Pay or Apple has done with payments, the difference between going through a checkout where you have a Shop Pay or Apple Pay or a frictionless payment thing versus having to do with the old school way, it's not a 10% difference. It's an 80% difference. And my guess is if you did analysis on shopping cart, like broken shopping carts, I bet that one feature probably has a non-insignificant percentage.
So, like, that is a literal decision one marketer is making or one product person's making not to offer frictionless payments, which seems devoid from how marketing's getting done. You go forward five years from now, payments and marketing, I think, are going to be more connected. So those are areas that I would watch very closely, which is like the rising consumer expectation.
Yeah, we work on frictionless. Actually, we use it as a framing. How do we make the job of the marketer easier by us removing as much friction from their life as possible? Whether it's handoffs down vertical integration in the chain or the opportunity to think about, well, what are the things that they can do? How do we minimize the process to work, even working with us, to make it easier for them to do that? I'm going to pause for us for a moment. Allow the folks in the room to start asking questions. And then just give me a timeline of how long we have done. Good, okay. Anyone here in the audience have some questions for Tim? If not, I can continue going on and pressing. Yes, Barton.
Hi Tim, thanks for all of this. I was curious if you could talk a little bit about how you're in the QR code business with Flowcode. Visual search is ascendant, right? Does that supplant QR in the future? And what would that mean for Flowcode?
Yeah, so the Barton's question, products like Google Lens and Apple Vision and things like that are basically products that are allowing you to do. The way I think about the future of connecting with products is there's visual, verbal, meaning you're voicing something in tactile. There'll be other ways too, like NFC, things like that. But basically, the lens products are coming out where they're having visual search. And if you don't use it, I suggest you try it out and use it. They work really well. They dump people back into the ecosystem of, like for instance, Google dumps them back in the ecosystem. So as a brand, you're going to have the same issue you have with search today if you want to do direct-to-consumer.
They're kind of dumping you back into the competitive ecosystem. But for QR, QR is recognized on all the lens products. And my guess is they'll continue to be recognized. And it's important that as a marketer, I don't think marketers are paying attention to this yet. This is another potential pitfall. It's like you basically want to make sure your products are going to have a direct-to-consumer way to connect through the Lens-type products. And I think Google announced that they had 20 billion Lens searches a couple of months ago.
So it has traction. And I think it's going to get more traction. And I think the phone is going to become more important. I think in today's day and age, when you think about the phone and consumers, a lot of people think about people doing posts and Instagram and things like that. I think in the next few years, the phone is going to get turned into more of an external weaponization of not just doing apps and not just doing camera stuff for yourself, but also having the camera like it does for QR. Like basically, I like to say it turns your camera into a lightsaber.
You actually have something about the real world and use. And I think the lens products are going to gain traction. I think QR is going to gain traction. So I think for Flowcode, we're excited about that. And my guess is for marketers and for brands, you're really going to have to think about how do you not get cut off in the ecosystem again on the lens products. [inaudible] Yeah, the QR code becomes a way for you to directly connect. And I think that direct connection is the same way people use QR today. But I think it works on lens today. And it'll be a great way to connect directly for brands.
Other questions? I can't believe. Oh, sorry.
Just one question from the webcast audience. Tim, I also echo my thanks for you doing this. Question from the audience again. You mentioned viewing Quad as a partner. You view Quad as executing and knowing versus guessing. What is it about Quad that allows you to trust the team alongside your own growth plans? And that allows you to trust the Quad team with data that also seems to be a key theme here today.
Yeah, I think Quad and jump in here if I get anything wrong. No, no. It's a great question. From my perspective as a partner, I think that Julie and her team, sales team, we know Earl and the data team at Quad. We know basically every facet of Quad. So I think one of the things that we're really concerned about and we've been really focused on is one is how does data get used? Where does it get used?
Why is it getting used? And I think the reason we trust Quad is that Quad has one of the most trusted sets of relationships. So like the thing that didn't get discussed today is if you're a major bank and you're sending out all your statements through Quad and whether that's physical or digital, basically Quad has the most trusted relationships, hospitals, banks, all of those types of things. So I think it starts with a foundation that Quad's already proven through their execution and data management that they're probably one of the safer data plays. The second piece is like I think as they've been building the stack of data and the passion index and things like that, I think they've been very careful on the privacy front overall.
So, you know, I think you only get trust. It's really hard to get, and it's really easy to give away. And I think that one of the things I remember when I first met with Joel and getting a tour of the facilities also is when you look at the brands that are using Quad. These are not brands that just wake up in the morning and are like, "Hey, I'm going to do a marketing program with somebody. I'm going to choose Quad." The data and security teams, the procurement teams, all the people that Quad has to deal with from a customer relationship standpoint are run through probably the toughest wringer on the planet. And I think that Quad's coming from a place of data trust and security.
And working backwards from there allows you to basically not just have the brand relationships, but eventually also like Quad's had a trusted relationship in 97% of the homes in America also. So I think when we think about partners, Quad's at the top of that, at the top of the list, not just because I think so, but because they have a really long 40-year history of doing it with some of the world's biggest and best brands. And I think also the new brands they're picking up in terms of the people who are using MX and some of the other products are the same brands. So I don't think those, I know those brands, they're not like letting their guard down. So I don't think Quad's going on a trust me aspect.
I think they're going on a, you know they have the, again, it's the guessing versus knowing. Like I think as a partner of Quad, I know they have really a safe system. And also they have access to homes and they're a big partner of the U.S. government also. So my guess is Quad's very highly incentivized to be a trusted partner and safe with data. I could be wrong.
No, it's true and my name's on the door.
Other questions? Anyone else from online?
We've got a few more, but
I'm going to be sensitive on time. Okay. Please bring one more.
Okay.
Pick a good one.
Sure. So with the proliferation of AI among many other things over the past several years, how do you see the industry evolving and what do you believe, what do you believe separates companies like Quad and Flowcode apart from competition?
Yeah, I think it's been hit on here so far today. You know, AI is only as good as the inputs of data that go into it. And I think that having a unique set of, this is. I don't know this to be 100% it's going to happen, but this is what I think is going to happen. I think the third-party ecosystems in all industries that are basically cobbling together data versus have first-party data and access to data themselves are going to be really challenged. Like, I look at the ad tech industry, which I have deep background in, and I think about how big the third-party ecosystem there is. And I think AI is going to really remove a lot of the systems that are not first-party data related, number one.
And number two is like AI, the training data and AI and AI tends to get better for the larger scale data that you have. So if you look at like a Flowcode or a Quad, there we have, there's a lot of first-party data in those ecosystems. And it allows you to use, like we use a fair amount of AI in Flowcode's products. And that product gets better and better the more you feed it first-party data. So I think the benefits of organizing the data and the benefits of using the data and having it available for AI and whether it's AI you build yourselves or AI that you partner with, like Google, the partnership with Google between Quad, I'm sure there's going to be massive AI opportunities for Quad and Google together in that partnership.
But I think part of the reason that's a great partnership. It's not just a great partnership for Quad. It's also a good partnership for Google because Quad is bringing a first-party relationship with brands and I like to call them fans, but consumers. And that's a big advantage over somebody who's just scraping data in a third-party ecosystem. So AI I think is going to be an accelerant for companies like a Quad or a Flowcode that have first-party data. And it's probably going to be detrimental to companies that are third-party only. But I don't know what's going to happen, but that's what I would guess.
It's a good prognostication. All right. Shout out to Flowcode, particularly because of the partnership that we have, but also this is extraordinary to hear you educate me and this audience on what's happening. Thank you for joining us. Thank you for coming and thank you for being a part of this day. Thanks.
Thanks.
Few final thoughts before we do a quick break. Full disclosure, we are invested in Flowcode. We're a minority investor. And again, Tim mentioned this before, when we started talking about QR codes, it was kind of completing each other's sentences because Quad was very early on working with our clients in Flowcodes and in QR codes. But we were too early. The challenge was it wasn't frictionless. You had to download a specific app for each one. So we were working with a lot of the big catalogers. We saw it as a natural bridge because you have to remember when .com 1.0 came along, a lot of our customers who were like catalogers wanted to be .com something and be worth $1 billion.
They didn't know how to do it. They thought it was two separate things. And as a printer that does a lot of personalization, we started educating them on the data. Like, hey, when people start putting things in the shopping cart, let us know when someone takes something out. And when we print something for them, we'll inkjet an offer to them on that same product. When we did that, we saw the response rates go way up. And this is back in .com 1.0. So when Tim launched Flowcode, that's why Quad invested. And it is doing what we thought it would do, is it is frictionless now. We knew after that early experiment that once it got built into the phones and you didn't need a separate app, consumers will use it. And we're using it across lots of different brands today in partnership with them.
A final little funny thing, when Tim called, I remember when he called my office, my assistant, my wonderful assistant, Sherry Patil, who's awesome. She goes, "Oh yeah, Tim Armstrong called. You got to call him back." I'm like, "Oh, you know I know that name." And back in my head, I wonder what he wants. She goes, "No, you got to call him. You got to call him." I'm like, "Sherry, relax. What's up? What's wrong?" She goes, "I just Googled him." So with that, we're going to take a 10-minute break. When we come back, we're going to get a little bit more into some of the innovations specifically and also some of the customer use cases so you can get more of a feeling for what we're doing. So a 10-minute break.
Welcome to In-Store Connect by Quad, an in-store retail media network designed to enhance the shopping experience by helping customers make better-informed purchasing decisions. The journey begins inside the front entrance with a vibrant, large-format digital kiosk. This 4K screen allows brands and the retailer to deliver nutritional messaging, promotional information, meal planning, and other key inspirational content. As a shopper begins to navigate the store, strategically placed digital end-cap displays draw attention to the retailer's promotional real estate. These screens encourage greater brand or category consideration and extra items in the basket. The displays also help drive deeper customer engagement with both brands and the retailer. Throughout the store, dual-sided in-aisle vertical video banners deliver eye-catching motivation for shoppers to explore a particular aisle. The displays also provide SKU-level awareness and cross-promotional opportunities for brands to motivate customers to seek out items in other areas of the store.
For retailers, In-Store Connect by Quad provides a turnkey platform to implement a revolutionary in-store retail media network, delivering an enhanced customer shopping experience. In-Store Connect is a robust strategic offering that's creating a media channel for brands to connect with customers at the most critical moment of the purchasing decision. In-Store Connect by Quad, transforming how retailers and brands connect with their customers.
Their seats. I think Tim's already left, but I thought the session by Tim and Josh was pretty great. It's great to get somebody of his credentials and almost celebrity to come in and get a Q&A session like that. Hopefully, everyone feels the same way. My name is Eric Ashworth. I came to Quad nine years ago. Prior to joining Quad, I was the guy that Joel talked about earlier. There was the frustrated client. So I was at Levi Strauss and Clorox out in California. And then I actually worked right up the street here at Colgate-Palmolive for years before jumping to the agency side.
And getting on the agency side of the business, my ambition was to remove the friction that Joel talked about earlier. It's really hard to be a marketer and do things efficiently. And the MX strategy that we've created and the way that we're going about building the business is very much in service of a better marketing experience for our clients. And being an ex-client, it's right in the core of who I am as we build this. So I met Joel nine years ago and immediately started thinking about where can we take the offering and how can we grow it. I wore two hats.
At the time, Joel and I were working on the evolution of the offering. I eventually became President of Quad Agency Solutions, but I'm also Executive Vice President of Market and Product Strategy. So I'm going to talk more about market and product today, but I'm also aware of the hat of running the agency side. So Joshua, with regards to what we're doing with the Rise business, the other main agency business we have is called Betty, after Joel's mom, is the creative side of the business. So the thing to think about that in the way that Joshua presented today on the media side is we're constantly evolving and innovating the way we bring these offerings to market. We don't really stop, and we've got a fairly traditional innovation process at Quad.
Those of you that know about the innovation industry, it follows along something that an IDEO-type model of traditional stage gate all the way through. But right now, we focus on three core areas in evolving the offering. First is on content evolution. I'll talk about one of those examples in a second. The second, Joshua hit really hard. It's around data. What do we do to continue to innovate in the data space the way that Joshua and then Tim spoke about? But really, it's data towards audiences. So we have a whole workstream that innovates around data and data evolution to audiences. Because at the end of the day, if you can own the audience configuration, then you have a very credible conversation of how you converse with that audience, be it online, offline, or in store. And then the last one is media transformation.
What's happening in the marketplace, and you're hearing about cookies, and you're hearing about the deprecation and everything else. Media is in a phase of transformation. The walled gardens did a great job of growing over the years, and that has reached a point where it's getting oversaturated, quite frankly. So think of it. Tim mentioned earlier, direct-to-consumer companies are more quickly hitting a benchmark of oversaturation and audience aggregation online, and it's getting expensive. So they're looking for other ways to grab audiences, which includes coming back offline. So we're seeing a better harmony between online and offline than what happened five, ten years ago. And that's why Quad's in a perfect position for that. Because we come obviously from offline, but over the last five, nine years, we've been building our online prowess as well. So it's the combination of those two things.
This innovation process doesn't stop at Quad. We continue to innovate in those three core areas that I mentioned earlier. One of them that Josh brought up earlier is what we call 3D commerce. In the world of content, if you're printing, that's content. And as that evolves, we now have a marketplace that has an insatiable appetite for more and more content, primarily online. But what needs to evolve now is that content needs to be usable across any media form. When we started investigating what's the maturation and the innovation on the content side, we started thinking about deeply rich, high-resolution content for marketers.
And now where this goes with a relationship we have with a company called Covision out of Italy is we now have the only installation of a three high-res 3D piece of equipment that allows you to not only have an asset to use online or offline in high resolution, but you can also do next-generation virtual try-ons. So literally, take your phone, put it on your shoes, and your shoes are wearing our asset that we scan for our customers. We had the first installation of this in North America. This is innovation. We brought it to North America. We signed one of the largest footwear manufacturers in the U.S., and we have two more tests happening with two of the other top five that we're hoping to move into full relationships with in the first quarter of next year.
This is just an example of the way that we're thinking about innovating in those spaces where we're already leading.
And Eric, just to add on, when you mentioned the virtual try-on technology, Quad, just as I said, we were doing QR codes a long time ago. We were doing augmented reality for our clients a long time ago as well when it was first coming out. But it was the same friction problem of technology. You had to have a specific app. And then when you do something equivalent to a try-on technology, it was very cartoony. Yeah. Now this whole process that we've embarked on allows for high-definition imagery, but all this other stuff that we've played with in the past, it's coming back together.
Well, and we even, Joel, if I remember correctly, we printed a cardboard cutout that almost became like the first version of virtual.
Yeah. Yeah, you would slide your phone in here, and then you'd look at something, and it was very awkward. But it was cool at the time.
But it's an example of, I think, the company's commitment and Joel's personal commitment to making sure we're constantly at the very front edge of where we can go. And it's certainly part of the culture at Quad. In-Store Connect. I'm sure everyone in the room is aware of the explosion of retail media. Retail media is essentially, think about advertising, so instead of searching for toothpaste on Google, you can now do a very refined search on Amazon. And everything you're seeing that pops up on that Amazon search results is paid for.
And that media, that market has been growing dramatically over the last three to five years. Actually, Rise, our media agency, was one of the first ones to partner with Amazon as they developed their retail media offering. And when it was nascent, Amazon saw some really good success. Then Walmart got on board, and the marketplace is continuing to grow. So online, everyone's forecasting north of a $100 billion marketplace by 2027. I've heard as high as $175 billion. And I've heard over $250 billion by 2030. So it's a significant marketplace. The growth of that got our team thinking about how do we help take a piece of this and bring it into our mid-market grocery clients. We have a great roster of mid-market retail, specifically mid-market grocery at Quad. And we looked at this as a great opportunity for us to facilitate our partners in this space.
Why? Because Amazon's got 77% of that $100 billion I just showed you guys. Walmart's getting the other chunk, and then the rest are going to players that are marginally important. If I'm a retailer, I look at the slide and say, if I'm not in the media business as a retailer, I got a big, big problem. Because Amazon's taking the proceeds from this, and they're essentially funding their retail price decreases. So now they've got a disproportionate billions of dollars to fund retail sales that my mid-market grocers don't have. Because quite frankly, when they tried to do retail media online, guess who gets all the revenue? Instacart. They not only get the revenue, but they also get the data. Instacart doesn't share the data with the retailers, even if they're shopping in your local stores to pick up that product.
So we saw an opportunity to take a big bite out of that $100 billion that's growing and bring that back into the stores. Because we know that 80% of purchases are still happening in brick and mortar. So you got this massive growing retail media network online, but you still have 80% of the purchases still taking place in brick and mortar. And if you look at food, drug, mass, or grocery mid-market, particularly for Quad, it's 88%. Still happens in physical stores. So we've got a huge opportunity here to take the dynamics of retail media online and bring them into physical environments. So we set out to solve for this, started looking at different opportunities to bring this to life, and I'll talk about the acquisition we did to kickstart this off.
But from a math standpoint, if you go in the next room, you'll see an example of an end cap, and you'll see an example of our end aisles. Behind you is an example of what we call the kiosks. We have a program in place with two retailers already where we have 14 screens in stores. And if you start putting math against 14 screens against one store, you have a weekly audience impression of roughly 15,000. Now, Quad has hundreds of mid-market grocers that we work with. So if you start thinking about the math as this sort of compounds out, you get to 15 stores. We have a weekly audience of 225,000. 250 stores, we have a weekly audience of 3.7 million. That's more than the local news.
So if you think about local markets that are small to mid-size, when we're in 250 stores, which is easy to do in a geography of, say, Sacramento, Nevada, Northern California, it's very easy to get to that size of penetration. And we already have more than the local news. Now, when I was on the brand side, that would start to get my attention. If I can start to advertise in an environment that's highly targeted, I could take it off of my news broadcast media fund, and I'd move it towards more deep funnel in-market spend. That's interesting to me. By the time we get to 800 stores, we're bigger than Monday Night Football.
So if I'm a national, if I'm a brand, I'm now thinking about, okay, hold on, I'm moving from that 50% of the advertising, I don't really know what happens to it, to deep funnel engagement in a physical shopping environment where people are actually engaging with my product or seeing my product at least. They can buy it. This is the compilation of what we're doing. When you hear Quad and In-Store Connect, this is it. The magic in this is that we're talking to Save Mart in California and Nevada. We're working with Homeland in Oklahoma. We're talking with one of the largest mid-market grocers in the Midwest, the largest mid-market grocer in Texas, as well as Florida and all through the Northeast.
So we're taking these entities that, quite frankly, don't have the traffic or the eyeballs by themselves, and we're creating a national network that Quad owns the media inventory. That's a really important part of this. While we do the installation of the hardware, we're also managing the software that serves the ads. So if somebody wants into this 12 million weekly audience impression network, they've got to go to Quad. And then we sell that back to the consumer packaged goods companies. So a very unique offering. I was around when Tim was at Google, and I remember Web 1.0. When you're in that business, it was very easy to get meetings. I haven't had an experience as similar to that as we are now. When we call up a retailer and we want to talk about this, we're always getting the meeting.
So it's a really exciting time to not only be in the space, but also have the resources of Quad to deploy it. Now, again, I mentioned earlier, we have great relationships with retail. Here's some examples of them on the left-hand side. And because of Quad packaging and some of the other work we're doing with Betty and with Rise, we're developing a really good profile of consumer packaged goods companies as well. So the nice thing about Quad and In-Store Connect is these retailers are now taking us to the CPGs and saying, "Hey, Procter & Gamble, Kimberly-Clark, S.C. Johnson , you should be buying inventory on the Quad's In-Store Connect because it's helping us move product."
And Eric, just I think one thing to point out too is that while we're focused on grocery because it's the most natural, we're actually testing with a few regular retailers as well. Some of this will be just different applications.
Yeah. The key to it being when we can build out a network and own that inventory. I'll move through this really quickly, but it's essentially what you're doing is taking the traditional marketing funnel that works and moving it into a physical environment. So the kiosk behind you, we have people with some promotional information as they walk in the store.
Hey, maybe I hadn't thought about buying fresh fruit," or maybe "I didn't realize that Chips Ahoy had a vanilla flavor." So you start to create some awareness on the way in. You get consideration by doing the end cap execution again in the room next door. Okay, that's interesting. I didn't know I could pair that type of wine with that type of bread. So we can even start doing co-merchandising on these end caps. And then when you get into end aisle, you can be more specific about either a promotional message or some other form to make sure you drive that purchase. So we've essentially replicated the marketing funnel that's really worked well on online retail media, and we're doing it now in the physical store.
The other thing to think about this is, as Tim and Josh were talking about this earlier, as people get comfortable with this format and you're willing to give your information, and we're going to be able to put more technology on these screens, we're going to be able to see you traverse the store, so as you traverse the store, we could actually create a proprietary journey for you versus you because we know who you are as you move through the store, especially if you've given us permission. Some of that's going to come from ID off cameras that we could put in place. Some of it's just by the technology we have to be able to follow your mobile phone through the store.
Or loyalty programs that the retailer is doing.
Exactly. And that's the ultimate opt-in because not only do we want to help sell product, but we're also using this network to help our clients get much deeper loyalty subscription. And that's obviously gold for all the retailers. How does who?
The store?
The question is, for those online, how does the store benefit from this?
So again, doing this type of thing, if I was on the outside when I was in my startup world, I wouldn't have the capital to do it. We've built this model through an acquisition called DART, which was where we got the software and the hardware relationships from. But we're also in Save Mart and the programs today, we're funding all the CapEx to put the screens in. They're getting benefit by a rev share of helping sell that media time to the CPGs. And we're obviously have our own efforts against that as well.
As well as doing their promotions like they might do on a coupon or something like that.
Yep. So there's a rev share as the media grows, they're getting a percentage of the media dollars. The other thing we've done is partnered closely with them. Most of the mid-market grocers have third-party partners that are handling either their digital circulars or their couponing or their e-comm sites. So we're also partnering with those third parties because they can help us develop the relationships with the consumer packaged goods companies to sell the inventory. So while they're selling inventory for the online experience, they're also helping facilitate brokering the inventory sale of the Quad In-Store Connect as well. So multiple fingers moving in to help move the inventory as we get the stores installed.
And just you see the Flowcode there. It's funny how that happens. Imagine also using a Flowcode when you see a brand to pull up a recipe for it on the fly as you're buying the ingredients. So the store wins in many different ways.
Yeah, and these are very dynamic. So over time, you could do a treasure hunt for kids with the signs. There's lots of different ways we could evolve the media message. It's obviously great for promotions, but there's another way to create stickiness for retailers. Because we're not going to we'll probably end up selling 70%-80% of the inventory. 20% of the inventory is another benefit back to the retailer is we're going to allow the retailer to have that inventory, that remnant inventory, and they can create other cool programs that make Save Mart stand out from a Safeway. So it's going to be pretty dynamic as it evolves.
The other key element of this is not only as we develop the media network and we're responsible for selling the inventory, we're also making it really easy for the advertisers to get onto our screens and utilize them the right way. So there is no other agency that does the creative or another production shop that produces the spots. We're doing the entire continuum. So once someone gets into the Quad In-Store Connect network, all they have to do is sign up, give us a brief on what they'd like to see, and we're going to develop the campaign, refine it for our screens, and make sure it's flighted in the proper manner. Oh, and one thing I did mention is that because of the technology relationship that we got through the DART acquisition, we're able to literally control each screen in each store.
So if I'm a marketer and I'm selling Gallo’s very interested in the network, if I'm wanting to sell wine, of course, in the wine department, but I also want to cross-sell it, say, in cheese or in salty snacks, it's an opportunity for me to purchase it separately on a screen-by-screen basis. As we roll out, we're doing what they call vendor days where they're bringing in their core merchants, and then we have the opportunity to present to them. They're very active. I mentioned one earlier, and there's others that have essentially come to us and said, "As soon as you get the inventory, I want to buy a full alignment."
We also, you'll see a picture later of the laboratory we created in one of our plants that Dave will show that is basically a grocery store setup with all the screens. So we bring brands in there or retailers and brands. It becomes a virtual lab where they're really starting to brainstorm on how this could all work. And this is a lot of the talk right now in retail and in CPG side is how do you activate the brick-and-mortar stores? So this is already a topic the industry is talking about. If you were at Grocerys hop in Vegas this year, it was a lot of the topics that were being discussed.
It's gotten so big that NRF, the big National Retail Federation trade show every year, they have a whole day on a Saturday that they just talk about retail media networks and in-store retail media. It's gotten to be that big. People are giving up their set.
Now, again, big invoices on the print side. We do a lot of retail flyers for years for grocers and retailers. So big invoices going upstream, we do a lot of content creation for them already. There's a built-in trust factor. A lot of times when the retail insert goes down. Here's a silly secret about retail inserts: they actually work. These are the things that go in your newspaper. It's our biggest declining product line because it's distributed through the newspapers. Grocers, if they could do more, they would.
But what we've done for them is switched over to personalized direct mail and other products to offset that. And my point being is back to being the printer originally, big invoices, big trust. And so we're very embedded where they know we can execute across the whole integrated channel, not just put in screens. There's a lot of people just trying to say, "I can put in the hardware, slap a screen on the wall, and we'll figure it out." We're actually coming with the solution upfront.
Including helping sell the inventory. Tamara Pattison has been with us from the beginning of the onset of this concept, when the innovation process sort of kicked it up. But we brought Tamara in. SaveMart was the first store that we did a deployment on earlier in the year. We've run some tests.
We're not sharing the results of those tests because, quite frankly, the sample size was pretty small and the results were too good, so we got to get a bigger sample size. But look, I've been in branding and in marketing for a long time. It wasn't what we normally see, so we've got to get a bigger base because the results were that good. We were not only having significant results for a brand that we promoted, but we were seeing category lifts that were beyond what I would normally think of a single brand promotional drive, so we're seeing some significant opportunities here. We just have to get a bigger sample size before we start sharing that up publicly, so Tamara was very involved from the beginning. She kind of worked with us.
It was a very sound strategic partnership over time. We also worked very closely with the CEO of Save Mart, Joel and him have formed a relationship, and we have a very tight match with Save Mart, and ran a campaign, had great results. I did a quick interview with Tamara a little while back, and we'll share a clip from that, hopefully.
I've been at TSMC for two years. When I joined, we were at the very early stages of our online retail media network and spent the first year to a year and a half really focusing in on building out that infrastructure, making sure that we were doing the right thing by our customers, not bombarding them with ads that didn't make sense, but being very focused and personalized and targeted where we could, and really making sure that our supplier partners were providing us with high-quality content that was relevant to the shopper. When we achieved that goal, which is an always progressing goal, so I say achieved in air quotes, we started to look at what was the next frontier from that perspective. And at that time, there were a lot of different vendors in the space of putting screens in stores, different form factors, different financial models.
So we got very interested in how do we then take everything that we're doing online and pay it off in the store for that shopper who is being influenced online, but still actually completes the transaction in the store. And we were looking at different suppliers around that in-store retail media or in-store screen activation when the Quad team approached us with the solution that they had, that you have. And what was very, very interesting to us was this software that was powering the screens behind. What was most compelling to us when we started to talk with the team was around the capabilities around targeting, around activation, and around analytics that came with the Quad solution.
How are you feeling after being through a 15-store rollout in a couple of weeks now and a couple of tests and being able to see what the results were looking like? How are you feeling about the results?
We're really excited, and I will tell you, not only excited about what we've seen from an in-store activation perspective, but probably prior to that, the excitement that we saw from the supplier community when we launched this with the Quad team at our vendor summit earlier this year. It was amazing to see how our supplier partners really gravitated towards this solution as a way to pay off on all of the different forms of advertising that they were currently doing in the market.
The idea that they knew exactly where this shopper was because they were experiencing it on a screen in our store was what was most interesting to them, and as we rolled it out to the 15 stores and evaluated both the customer engagement and the benefit to suppliers, it certainly hasn't disappointed.
If you were to look at the next year or so, how are you looking at the in-store media network growth? I think we're seeing it in two areas. Obviously, some potential expansion of the stores that we're activating in and then dialing in the content that we're showing, but we see a lot of opportunity for us to engage more in a daypart factor so that we're really targeting the message for exactly when the shopper's in the store.
Yeah, and that gets back again to the targeting that's available because of the software solution that's been deployed.
Absolutely.
Well, first off, thank you very much for the time today. And thank you very much for being such a great partner as we look at growing the in-store media network at Quad.
Absolutely. We're super excited for the future.
Thanks, Tamara. Great results with Tamara and team at Save Mart. Continue to look at the expansion plan. We're in 15 stores currently at Save Mart, going to be expanding that in Q1 of next year. We're also in 15 stores in Homeland, which is in Oklahoma. We have a couple of other retailers already in queue to be a third partner still this year. The pipeline, as I mentioned earlier, it's not difficult to get meetings on this topic.
The pipeline continues to mature as we get more store penetration with our current partners. And as we're starting to get to the point where we can share more of the results, I think that'll be a shot of adrenaline into the sales cycle because once we can start to publish those we just have to get a bigger sample size. Beyond that, Joel mentioned earlier, we continue to get pinged. So we've set up a great innovation center in West Allis. Clients hear about it. They want to see it. Some of them are apparel retailers. Some of them are convenience store. And they want to know when we're going to be rolling out an offering for those formats as well. We're working on those. We're trying to stay super focused, as Julie Currie, who's coming on next, likes to say.
But we're trying to stay super focused on mid-market grocery. But we can see extension. Think about C-stores where you could have a simple video promotion either above the cooler case or on the top of the cooler case window. There's lots of ways this can work in C-store. There's lots of ways it can work in apparel. Right now, we're trying to stay focused on grocery through 25 to make sure that we're building it out.
And I think one of the important parts is the measurement aspect because you work with the retailers to watch checkout happening as you're playing the ads at the same time. So we can triangulate into is it really working? Because, again, go back to data at the center. The data is going to tell you where to go with this. First, it's going to tell you does it work. And so far, we're seeing it really works. But now, how do you go to what's the right number of screens? What's the right type of content? That will evolve as the data tells us.
Can you actually talk a little bit more about that? Like, what is the tracking currently? What are you guys planning to do? Is there going to be cameras on every single one of these things? Is there going to be privacy issues?
You have the ability to do cameras. That's not what we're doing now. It's actually correlating to what's happening at checkout. You can expand on that.
Yeah, we get the TLOG data. So a lot of it's just simply the TLOG data. And then we're running, I would say, a fairly traditional shopper marketing playbook of, as I mentioned earlier, with the funnel of engagement, then more promotion, and then you try to get to conversion. So there's going to be ability to build the technology in a far more sophisticated way. Right now, it's essentially a dumb terminal that we're pushing ads onto. We can do phone tracking via the store Wi-Fi. And that's even better for people that have opted into the loyalty program at those stores. But right now, it's simply the existing mobile tracking via Wi-Fi pings.
Is that like a cost issue? Or is it just you guys don't see value in having camera data?
We'd rather just we think we can have a disproportionate market effect without having to get into that level of personal discomfort for a portion of the audience. We're seeing that in the numbers. Quite frankly, to get the results we're getting, we don't have to have any of that yet. We're waiting for that to sort itself out.
I'm just thinking, like, if it's equivalent of having one of the best behavioral data sets. Yeah. Yep. Like, if you can actually have cameras on these people making purchase decisions.
Yep. But we actually work now where we can actually see your cell phones walking through. So we've worked with growth where you see what, okay, take all the cell phones and what is the general traffic pattern? That's being done now. That's a great behavioral way of also monitoring it. But also think about it, you got to go in steps, right? First, we got to prove the ability to activate, which we know is there.
Then we'll keep moving up the chain. Now, where I see also going is the integration is we're an agency for them is how does that tie into the rest of the stuff? Yeah. Great. Joel's in your loyalty program. We saw when he was buying Pepsi, he just bought Pepsi. How do I trigger some direct mail that happens? How do I trigger other things, an email, whatever, that will expand the relationship around Joel? That's where I see it kind of going also in the future is that integration of being around the consumer.
Do you see the proprietary software becoming more valuable over time?
Yes. So yeah, it's got to. Yeah, because if you're a brand, I may not want to buy this part of Milwaukee. Maybe I do. Maybe I want to buy just a smatter. We can slice and dice right down to the screen across all the stores, no matter how many we add.
And to Joel's point, as we develop our relationships and sign agreements to put the screens in stores, we're also getting access to take all that, either the transactional data or eventually the shopper behavior data and pull that back into the data stack. So it's another proprietary feed into exactly back into the data stack.
Now, Barton.
Yeah. I have two questions, if I could. One, for Joel or Tony or someone or you, Eric. How large does this have to be before it's meaningful for your company's P&L?
Well, you know, I think, first of all, it's a race to eyeballs, right? So getting to that meaningful audience, right? Like those ads you saw running at Save Mart or live, those are brands that have opted in to be in the testing phase. But we got to get to the place where it scales and brands in general want to buy it. So I think as we get to that 250- to 800-plus stores, it's not just the revenue that will come from that. It's all the support revenue too. So I'd say it's probably as we get closer to that 800.
Yeah, it's going to be and Tony, I'm going to look to you to give the latest. Because the thing to think about this, I don't know how old some old guys in here. Do you remember AltaVista when search first started? It was Tim was still here. The ability to charge for search was all over the place.
It obviously refined over time to where it is today. We're going to be like that for a little bit as far as how do we price this and make sure that we're getting the right return until we get the sales data. Once we get the sales data, it's easy to reverse engineer that to get to the cost of the media data. But while we go through the testing, it's moving around a little bit as far as the revenue side.
Yeah, and I'd agree with Barton with Joel's range on once you get over that 250 store mark, that then starts becoming more meaningful both from a revenue and even to contribution standpoint.
And then the other question I had was, to what extent, you know, because you guys are putting together a network, you know, with mid-market kind of grocers and others. But obviously, there's some big chains out there that have full kind of capability to deploy technology. I know whether you're talking Walmart or Safeway, Kroger. To what extent have those guys deployed technology like this and are getting results and are really, you guys are just following what they have already done?
You've touched on, and I would include Target in there, that you've touched on the, if you get into mass merch and obviously Amazon, they're operating in a different strata. The difference for them is they already have national distribution, so they can create a national network. But we're talking to, they're left out of that because they're regional mid-market grocers. They don't have a national network. So where they're weighing in to true monetization of eyeballs or creating a media revenue stream.
But I would leave Amazon aside because they're an online retailer. We're talking about the physical retailer.
They're full of hope. They're figuring it out. So was it Walmart bought Vizio, right, to kind of be able to provide that? You're going to see them.
But is there a meaningful revenue stream at these guys that you can point to as a comparable to what you could become in time?
Yeah, I believe so because they're already doing it in the digital sense of digital media networks.
It's building. And Walmart, obviously, ahead because they've been on the front end of this. They will build national networks. Quad In-Store Connect will be the alternative if you want to go to, it's a mid-market grocery. That's the strategy on this.
So you would say that Walmart has not yet assembled what you're talking about in their stores, but they're working on it. They have.
I want to be, they've definitely established an in-store media network. They haven't established it to the sense that brand dollars are moving off of online the way that we're forecasting to in-store the way we expect. They're still doing department-by-department deployments versus, hey, Procter & Gamble, you can buy laundry care, fabric care, and surface care all at once. They're doing more, they're still doing testing as it gets developed.
And I'd also just remind you, yeah, so the big guys have the girth to do it because they have the footprint. All the rest of the world, which is, you know, I think there's 13,000 grocery stores, something like that.
It's even more than that.
So getting to 800 is not this huge stretch, but most of that stratosphere, that strata is not up here in the size. They can't assemble that same footprint number of eyeballs on their own. So they're okay being part of a network of many other stores to do it because they all win.
You mentioned earlier convenience stores and having to do some customization of the offering. How much or what needs to be done to get into some of the other areas, convenience stores, department stores?
I think, yeah, I think the first thing that needs to be done is we have to show that it's going to be as successful as we think it's going to be in mid-market grocery. Because what we want to do is go into those markets with a little bit more force. So we can then take the performance that we're seeing in mid-market grocery, do some refinements to that model and say, here's how it's going to perform at convenience and go in with more authority on the pricing side and be able to get penetration faster that way.
And convenience is going to be a little bit different consumer behavior as well. So we got to adopt to that, right? Versus going into a big grocery store where there's a journey. Sometimes it's a little more transactional when you're going into that. But like I said, we're already testing in some big box type retail or regular retail. And we've got conversations going on with some of the convenience.
Yeah. Just a quick question on the inventory, since you're going to actually own 70%-80% of the inventory. If we think about success and the audience reach, how do we think about where CPG is willing to pay for that inventory as you guys go to 250 or 800? Is there any sense of other mediums today that we can compare?
Yeah, well, we can talk about where the market is going. And one of the providers that was brought up earlier that could have a national network, they're talking CPMs between $15 and $25. So that's in their marketing information as they're trying to sell inventory in. I don't see that as, I see that as being a great goal. We're going to have to find our way until we get the penetration and can show the results. But you're looking at CPMs that will rival and be superior to online. Once this is fully mature, it's going to take some time. Thank you. Any other?
So, just to finish this off, I'll work my way from the bottom. I've already talked about number three. We're also working on the programmatic side. So, if I'm a CPG, how cool would it be for me to be able to go in? If I'm Procter and I'm looking to move some product in baby care and I've got a little bit of a marketing spend towards the end of the year, we're going to be able to set up a buying desk for those brands where they can get access to our remnant inventory and buy up remnant inventory. So, as brands get more familiar with this platform, we're also going to get them familiar that they're going to have access to remnant inventory personally or from a business level over time. They don't necessarily have to go through our solution.
And programmatic for us to be able to do that is close in. It's not far out.
Exactly. Yeah. And programmatic, we're looking to test Q1 of next year. Thanks, Joel. And then the national coverage to rival platforms. Again, if you start thinking about the math Joel mentioned earlier, there was last time we looked at 800 stores, I think it was 10% of the, it was less than 10% of the mid-market retail grocery stores that Quad already works with. So this 800 stores is a smidgen of who we could actually take this to. We just liked it because it's bigger than Monday Night Football. Take that to my friends at CPG and they loved it. And so all of you, keep your eye out for Quad and In-Store Connect at your local grocery. Hopefully, it'll be there soon. And make sure you buy whatever's being promoted. And next, I'm going to invite up Julie Currie, our CRO.
Am I standing up here? So I have the shortest section, but I think it's going to be your favorite. And it's going to be your favorite because I have the pleasure of being able to take what a marketing experience company that has the breadth and the depth of all the services that you heard us talk about today, how that feels and manifests itself in the shoes of our clients. And so I'm going to talk a couple of client stories here that is going to bring some of this to life.
However, you might be asking yourself, Julie, how are you taking a sales organization and getting them excited about and keeping pace with the market changes that are making, being able to digest all of the wonderful services that we are bringing to market? And I'm going to say my sales organization, first of all, we're super proud of them, but what we're so proud of is that they do complex well. You know, when you think about our origins as a manufacturer, like we love complexity, and as you've heard about today, marketing can be a complex organization, and we love that, so feel confident that our sales organization, our account organization is actually super excited about and energized by how we can begin to transform our client relationships from more historical print relationship into one that is truly solving these marketing problems.
So anyway, with that, what I want to do is I'm going to go through just a couple of examples, and these examples are ones that look across the portfolio that you saw earlier today, where we're using intelligence, we're using print production, we're using creative, we're using media, and you're going to see a wrapper or technology that actually makes it the easy button for our customers, so with that getting going as a startup start, so there are two industries that I'm going to talk about today and two case studies. One of them is around process and one is around personalization, so keep that in mind, so the first industry that we're going to talk about is the mother of all complex industries, which is healthcare.
And clearly, not only because of what customer requirements are, but also the complexity that is wrapped around the compliance that has to happen. So we have to be super careful when we're applying solutions in an industry like healthcare. Humana is the customer that I'm going to talk about today. And the thing that is so, so if you don't know about Humana, Humana is the fourth largest healthcare insurance company in the U.S. They do about $100 billion of revenue. So no small feat here. But the thing that is most interesting for us and where this, like the sweet spot of Quad's relationship came in with Humana is really based off of this client challenge.
When you think about Humana sitting there from the central marketing organization, remember, always walking in the feet of our marketing clients, they have a brand promise and brand standards that are developed from the center. Their sales organization is actually a network of about 10,000 agents, independent agents, whether they be brokers, whether they be their own Humana agents, or they be independent agents. They're all licensed, but that is Humana's sales organization to go out and sell Humana products into the marketplace. It's this localization that was the big challenge for their marketing organization. How does the central organization provide the easy button to those local agents? That's where Quad came in. As I think Joel talked about this earlier, we always start with process. Again, big manufacturing company, big marketing challenge.
We always start with how are you doing it today and how can I improve on that as we look to bring a new solution to them, so in this case, any intake form that starts with a spreadsheet and ends with a spreadsheet is never going to be your friend, and so what we were able to do is to bring an automation to that, and the automation starts with information and data, right, so we can take their CRM data, we can augment it with our market intelligence, and we're able to actually now, again, imagine yourself a local broker sitting in Poughkeepsie and you're trying to sell their products. I can actually provide a tool for you to go in and order the marketing that you want, the engagement that you want with your customers or your potential customers with that easy button.
And that's what we've done. So again, a couple of things to remember. We got the information, the data. That's the underpinning of this solution. We have to understand the content that needs to be there at scale. So the versioning of the content has to be there. We have to have media. We're placing media, again, back to the easy button on all channels. And then we have to wrap technology around it so that the end user has an experience that used to take a couple of weeks to a couple of minutes. Again, super exciting.
Let me just add on to that. So that was an example of technology using the software tool to take the intake of information. And that's kind of how we got into it through lean manufacturing when we were doing our own ERP systems and automating administrative flows internally. The customer was giving us stuff that was on napkins and spreadsheets. And so we started going upstream like that so we could help automate our own process. But in that process, we helped automate their process. And so now you can see the flow because the output on some of this, like in direct mail, is heavily personalized direct mail. And we can't do that unless we've helped fix the client's process.
The next industry that I'm going to take a walk through is retail. Retail is very familiar to Quad given our origin. But in this case, what I'm going to tell you is a story that started with us as a printer handling retail inserts through a journey of very personalized direct mail. And ultimately, what you're going to see is how we're now actually a full media agency for Meijer across all channels. The one thing that is always interesting when you think about retail, keep in mind, even though a lot of us are online shoppers in the grocery sector, about 95% of purchases are still done in brick and mortar. And we as consumers go into a store about 1.3 times a week.
So if you're a retailer, capturing that shopping trip, and then when I get you in the store, making sure that you fill your basket, your share of basket, your share of wallet is predominantly spent in my store, that is a really important KPI. It's a really important kind of success measure relative to these retailers. That means you have to really be really in service of creating loyalty. And so that really was at the heart of what our Meijer engagement is all about. You'll be blown away. I think you'll be blown away by really the breadth of what we're doing here at Meijer.
It really has been a fabulous partnership. If you don't know who Meijer is because you're a little East Coastie, it's a Midwest retailer. They're in six geographies. They kind of pioneered the Supercenter store in the Midwest, but they have about 500 locations across all their different formats. They do about $24 billion in revenue. So albeit a Midwest and regional retailer, it's a highly important retailer. So I said again, these are all examples of where we have the full breadth of Quad capabilities.
This is another example. I start with, though, even though we're starting the relationship in the print side of the business, we have evolved that because it's not just the in-store flyers and, when you walk in, the inserts that you walk into a store and see kind of what's on deal. For these retailers, remember, capturing the trip, it's very important that their trading area, their consumers know what is on deal for them in that week. So being able to personalize in my mailbox what it is that I'm interested in shopping and what would most likely bring me into the store is a very important attribute for our personalized direct mail.
But we didn't stop there because now that we have some confidence that Quad can bring a loyal customer into the store, now we want to reach those customers through any channel that they might be in. So we are now their full media agency of record. And again, all aimed at trying to make sure that the Meijer customer is the most loyal customer to their banner. So this is where you'd be blown away by the information and the analytics and the intelligence part of our offering. I spent most of my career at Nielsen, so I understand the complexity of retail and the data world. What was always interesting for me when I was at Nielsen, where we were all about the analytics, we were never about the execution.
So all of a sudden, we're at a company. I'm at a company here that's not only about the analytics, but it's most importantly about the execution because great analytics is one thing. Being able to execute and actually get the results is another thing. So analytics that allow us to go into the detail of a trading area and understand how to apply media to specific markets and bring in specific products. The audience, being able to understand the audience. We're all very different kinds of audiences. I might be a top-up trip type of person. My type of shopping might be different than others. But understanding that audience allows us to really customize the media for that particular audience. Pretty exciting. Everybody's like, yeah.
So even though I've only told you two examples, I want to go back to the point that we have a tremendous portfolio of blue-chip customers. 84% of our clients buy more than one product from us. So again, back to a sales organization, the ability to expand our relationships off of where we've landed has been kind of paramount to kind of how we go to market. And so what I want to leave you with, not only about the relationships that we're expanding off of, but the solutions that we're able to come into a client with, regardless of the vertical they're in, to be able to navigate where their pain point is, where our opportunity is to be able to start a relationship or expand a relationship is tremendous.
I mean, the innovation that Eric talked about, again, our sales organization is definitely on their toes, always wanting to see like, how do I continue to bring in and expand the Quad relationship at these customers? I talked about the configurability. You just saw two different technology solutions, and obviously, the data and the analytics that underpins both of the retail example as well as the healthcare example. And then the last thing I think you've heard this thread throughout is that we really are investing in talent. Showing up to our customers really does require us to be very knowledgeable about the industry, the position that we're selling to, the expertise that's needed.
So while we're continuing to really rely very heavily on our very experienced sales organization that knows how to navigate these blue-chip customers, we're also sprinkling in other talent where we need it so that we make sure that our sales organization really can manifest and deliver the revenue that we're going to need from all of these great solutions. That was my section.
One point before we get to questions two is the other challenge is a lot of our customers are siloed, right? So as we kind of go, we start with retail insert. Suddenly, we're in direct mail out of a need because they've lost circulation through the distribution channel. A lot of times, we're playing that thread across their different parts of the marketing departments.
In many cases, we start tying that together for them in a very holistic way, which is a pretty powerful place to be. I saw some questions real quick.
Thanks. I just wanted to get an idea about the kind of the size and composition of the sales and account management team and how aggressively you're looking to grow that.
We are looking at our, what we call our talent strategy kind of continuously. Numbers speaking, we probably have about 400 sales reps across different parts of the business. That's kind of a combination of new business development reps as well as sales folks that are embedded in kind of some of our client relationships. Again, to be honest, we are looking to expand as it relates to kind of the type of salespeople we might need, the subject matter experts, a little bit more consultative selling in some areas. There really is, like each year, we kind of look at our kind of current mix of sales talent. We've been over the last four years that I've been here, we've been doing nothing but really investing in and making sure that we have enough firepower.
She's kind of selling herself short because going from a product sales organization to a solution sales organization is a very different deal, right? You're suddenly, instead of having the flashy salesperson show up and say, "Let's go have cocktails and decide what you're going to give me," I'm oversimplifying it. It's "Hey, tell me what the business problem is.
What are your pain points?" and then figuring out in our huge tool shed of what tools to pull out. You don't want to go in there and say, "This is all that Quad can do," because that will overwhelm them. You got to find out what the problem is, and that's a very different skill set, so we've done a lot of hiring on the outside. We've done a lot of education. Some people can make the switch, some can't, but then in any one of these engagements, the help tree is very broad, so you might take them into direct mail and you'll pull a direct mail salesperson, and I came from somewhere else as the original salesperson, but at some point, you might need some more technical people.
One of the things I don't hear from people coming from the outside is that Quad is resource weak. We're very resource rich, especially as you get into the execution because we have to get it right. And so there's a lot of support around when we can get that upfront sales group correct. These customers must be pretty sticky after going through all the information to get their problem solved. The question is, is the customer base pretty sticky? And I'd say going back to just being the printer, these were three- to five-year contracts, again, because there's massive things going on. And that's the thing. We're not your typical manufacturer where you can just start up and make widgets. We have to wait for them to decide what the marketing plan is. The content has to be manufactured, and then it streams to us.
And so the process of content is very sticky because you can't just lift and shift. There's elements that you can do it, but when you talk about a holistic basis, the further up we go, the stickier it is. But we still hold ourselves to a very high performance level.
Julie, so I can see with Meijer, you've got them working really smart. From their perspective also, does this turn into an agency of record? Does this turn into a material value play for them?
For them?
Yeah.
Well, again, I'm not sure exactly what you mean by that. I just want to make sure.
By rolling up a lot of. By rolling up a lot of the things that you're doing for them versus if they went to Leo Burnett and then they got to piece it together, are we at 0.6 of what that would all cost?
Oh, I wish, I wish that would.
But I would say you have to look at the continuum. So remember, there's a lot of waste in having the breaks in the chain from planning to execution and a lot of time. So I'd say yes, there's typically they don't always share with us, right? Did we save you a lot of cost? Did we save you a lot of time? But anecdotally, they'll typically say yes. The more we do, the more we can collapse the cycle time and the more we can therefore pull out cost. And in many cases, we're actually then they're starting to outsource parts of their marketing department to us. We have hundreds of people sitting in other people's marketing departments today. Some of the big brand names up there that you'd be surprised at, we have people embedded because of it. And so there's two ways to look at that.
I think also to your point around because we have so many different solutions now in play there. I mean, we have to compete and continue to compete and continue to delight all of our customers around not only the collection, but each piece and part. And so I think the team does a really nice job of kind of coming at the client in a way that makes sure that we are continuing to earn the business every year. Are we more material now than we were before prior to us becoming their agency of record? Sure, because we have a deeper partnership. It just gives us more tools in our toolbox to make sure that we're adding as much value and integrating as much of our solutions so that it does add value for one plus one equaling three at our customers.
We're not touching on everything. I'd say based on my last comment, about a third of these brands, we have people on their walls today. About a third of that right there. Then the other thing to note is then even there's a couple up there. I see one in particular where we actually created a studio for them, a content studio to help them with all their in-store branding design that's really developing everything. There's a whole lot of aspects of things that we do for these clients that help create the complexity solution.
How is the sales process organized? Because most of the customers. You have a huge amount of customers. So most of your sales effort is to your existing customers, I imagine. So you have at Whole Foods, you have a team of two or three that manage that account, and then they draw in specialists to come and help sell new solutions.
Yeah, exactly. No, exactly. So our account management structure, Joel touched on that a little bit. You've got an account management structure that is there in order to make sure that we're continuing to light and deliver on our promises. So that's first and foremost what that group is there to do. Again, our hope is that they're also listening to areas that we can expand into. And then we also have a pretty robust new business development engine as well that we've put in place. You saw a name here earlier, Rachel Weiner, that is just in charge of bringing in new logos. So we do both.
So that being said, this is the proverbial cross-selling that everyone says they do and no one does well, right? It's because it's very hard. And I think because we're so embedded in the execution, we're doing well with it, we need to be better because this is scaling, right? And so I think of Josh as the guy out there shaking the trees by yelling from the treetops of what we're doing, and that's creating a lot of top of funnel. Julie's the who. It's the salesforce and how they interact, the questions you have.
Our new hire today that you'll see the press release at the end of day, Tim Maleeny, who comes from Havas, is really going to help us scale to the next level, the how, which is that strategy to make sure that we're really tightening this up from A to Z when we're selling complex things and helping us to continue to lay process down to keep it scaling. Because right now, we're doing it really well, but it's almost like I always say it's like a duck swimming along the water. It looks so peaceful, but his feet are swimming like mad underneath. That's what it takes to do a complex integrated sale, is a lot of effort, but a lot of coordination of all parts of the company.
And that's where I say I'm really proud of how I run this company with my team, which is very integrated. The manufacturing guys knows what the creative people are dealing with because ultimately that all comes together. When she goes and sells something complex, the execution becomes complex because it becomes very intertwined. And it's very apparent to the customer if you're not integrated in the execution. You have to, if you're going to be one company doing multiple processes and bring down the number of people they have to deal with, it can't feel like multiple companies executing on it.
All right, I said I was going to be the shortest, but I did tell you it was going to be your favorite. So if it went a little bit long, that's the end. Anyway, I'm now, oh, sorry, I'm passing it over to Dave.
Thank you, Julie. I'm Dave Honan. I've been with Quad just over 15 years. My job is to take everything that Julie sells and have our team deliver on that integrated execution. In particular, Julie brought up the stat that 80% of our customers buy more than two products or services from us. So that does bring up how do we deliver on that marketing experience promise at scale and take very complex programs, simplify them through process and continuous improvement, and deliver for our customers. So how do we do that? Well, you heard today kind of the journey from strategy to innovation, how we're marketing our company, and ultimately how we're selling it. But we really focus on three things to deliver for our clients, these tenets of our strategy. It really starts with our people. It's our relentless focus on products and always adjusting our platform.
What do I mean by that? People, you have to take care of your people. We want a safe work environment that provides for development opportunities for those people and constantly developing and helping their skill sets so that we have a more experienced and talented workforce. From a product standpoint, it's relentless focus on delivering on that marketing experience promise. How do we do that? We make sure that we do things at scale. We simplify it for our clients, but we deliver for them on time because ultimately, if we can help our clients do things at less cost, it increases their ROIs on their marketing spend.
And then finally, on platform, simply, it's also a focus on how do we treat all of our costs as if they're variable and go after fixed costs so that we can quickly ramp up as volume ramps up or ramp down if we come into seasonal valleys. And so that's that ability to really flex our costs despite a significant amount of our costs being fixed. How do we flex those well? And if we do all those things correctly, we drive growth for the company, but also margin enhancement. And I'll talk about that in a little bit. But again, it's the scale that really leads us, and it's our qualifications and being able to deliver and execute on behalf of our clients across multiple products and services that really give us an advantage in the marketplace.
From a people standpoint, it's really focusing on safe work environments, optimizing crew schedules. And I'm going to talk about this from an employee perspective, but also come back to it from a Quad perspective in a little bit. But from an employee perspective, our employees come to us and look for more flexibility in their hours in which they're doing, whether that's on a manufacturing floor or it's delivering services. And so especially in manufacturing, we've been able to align more flexibility into those schedules. And that's the key part where I'll come back to about how do you treat your costs as variable. We also rotate crews across various equipments and experiences in our facilities.
Joel early on talked about we have 40 facilities around the world, and that's really key to developing people, getting that stickiness with people and how they develop careers in many of the manufacturing sides and the services sides that we do. And ultimately, if you do all those three things well, it gives you a better work environment for the employees. But what's been a game changer for Quad is how we've addressed labor to take advantage of our employees asking for more flexibility, but that also helps Quad because we can ramp up and ramp quickly down by flexing our labor more. What do I mean by flex? Sometimes employees want overtime. Sometimes we can't get enough employees, so we lean into temporary agencies. And sometimes people just don't want to work a full-time schedule, so we have a part-time opportunity for them.
So what we've done is we've really focused on how do we flex a little bit more. We've added 10 full points to the hours, so 10 full points to the percentage of the hours that our employees work in flex time. That's huge for us. That's enabled our full-time headcount, which is costly and it's fixed, to come down 37% over the last two years. 37%. And that's been really instrumental across other productivity initiatives that the teams have been working on in driving 350 basis point improvement over the last two years, 350 basis point improvement in margins for our manufacturing side of the business. And that's despite somewhat lower volumes coming through the platform. Again, relentless pursuit of treating all costs as if they're variable and being able to really flex up and down well with the business.
So really proud of what the team has accomplished here over the past two years. And I don't think it's done. I think we can continue to drive at this as we go forward. But it's not all about defense. There's some offense I wanted to talk to you about. Eric went through some innovation that their processes have been working on. But one of the big areas on the manufacturing side is we took an existing facility in West Allis, Wisconsin. This was primarily a magazine facility and short-run magazines. We were able to consolidate that volume into another plant and open up this space for a different product line. But why would we want to open that up? We have a product line of retail in-store signage that has been growing for us.
It was actually a small part of an acquisition we did several years back, under $10 million in revenue. This year, it's approaching $100 million in revenue. They were under four different roofs, leased facilities, and they needed more space. So we consolidated them under an existing facility and gave them room for growth. But we didn't stop there. We really leaned into how do we want to sell in the retail space. And so we developed and dedicated space to an innovation center in this building. Joel mentioned it before. Our retailers can come in in mocked-up space. So we have three types of mocked-up space. We have grocery, we have convenience stores, and we have department store. Or even if they wanted to, big box stores, we can replicate that in this space. What does it do?
It allows our customers to test marketing programs ahead of getting to production. For example, in the upper right of this slide, you see biometric testing going on optically on packaging that happens in this space, in which we bring consumers in and we test our clients' packaging before they go to market with us to see the consumer interact with that, and we'll give them various tests to go through to allow them to see, are you delivering on what you want your consumer to do? We do the same type of things for our in-store signage. The same disciplines apply, and we can use other forms of biometrics and camera and watching what these consumers do in our space, and that saves time for our marketers because after all, they want to make sure what they're doing is going to work.
And this helps them execute it at scale coming out of it. So innovation is a key lead for us with a lot of our retailers and marketers in this space. Additionally, I'll point out In-Store Connect. Eric covered a lot of that In-Store Connect business, but you can see this is mocked up in our innovation space. That gives you an example of what a grocery location can look like for our customers as they come in to test out their marketing. So really proud of this front-end innovation we've built into this facility. And I won't stop there. The third thing we do is we help fulfill on our production for our customers. Fulfillment and distribution sounds a little bit of a boring topic to talk about, but we used to fulfill for our customers across multiple locations. We've been able to put it into one location.
But more importantly, for many of our customers, fulfillment is an afterthought. Fulfillment of marketing materials is an afterthought because they can be world-class at distributing consumer products to their retail environment, but oftentimes the marketing team gets frustrated that that same world-class distribution doesn't apply to their in-store signage or doesn't apply to other marketing peripherals that they want to distribute. So we help them do that because we're producing it anyways. We'll store it for them. We'll kit it, and we'll get it out to all the retail locations. So whether it's a Kohl's, 2,000 stores, or if it's a convenience store for 250,000 locations, we can do that fulfillment. And I'll come back to that a little bit because there's been a huge automation incentive that we've done and what we built into our West Allis plant.
Pause there. So back to big invoices, small invoices. We grew that in-store business because we were doing a lot of retail flyers for retailers. Once we acquired that, we didn't know what to do with it. And we're like, "Whoa, there's a real need here because it's a mess for a lot of our customers and how they do in-store marketing." So we applied process and technology. A good example is one of our, when we were fairly early on, a big retailer we did a lot of work for. They said that in-store is really tough. We came up with technology to manage the content for in-store marketing. And they said, "Don't you guys do in-store signage?" We're like, "Yeah, it's a fledgling business, but we're growing." They said, "Can you do it for us?" Well, the $1 million for the technology I did turned into $15 million of in-store signage pretty much overnight.
And so that's a great example of how we were able to grow that business. And obviously now, because we're also doing a lot of in-store signage for a lot of those brands you saw now, that's why also the in-store media network has been a natural conversation to the next level.
Yeah, and a growing form of print for us where we can lean into that into the future. Postage, you've heard us talk about postage before. It's a big topic for our marketers who want physical marketing materials and they want that distributed. It represents over 60% of their costs to manufacture marketing materials. So to put that in perspective, when clients will come to us and say, "How do we save more on our print costs?" We lean into postage because that's 60% of the cost pie for them.
If you can save $1 in postage, it's like saving $5 in manufacturing costs. So it's a big deal not only to us, but to our customers. What matters with postage is scale. We mail over six billion pieces of marketing materials annually. Six billion. That represents over 10% of the post office's volume for marketing materials and periodicals. So we move a lot of the mail for the post office. What do I mean by move? Well, a way to save costs for our clients is actually to do a lot of the processing for the United States Post Office. So we can do the processing of that mail and just get it into the post office so they can deliver the last mile. They'll incentivize that with lower postage rates. And that's a way to address and come after postage costs.
So for example, we will put together all the printed material for our customers and other customers. We will put it from a co-mail perspective. We'll put it in a sequence of the walk order sequence of how a postal carrier will deliver that route. We'll bundle it up. We'll deliver it into the post office. And simply the carrier just rips the bundle and delivers the route. And for that, our clients can save 20%-30% on their postal costs. But even if our clients, one of the new products for us is called Household Fusion. So say our clients want to just be specific to an address. So we want to take all the mail specific to an address. We can bundle that specific to that household and deliver just a bundle. So the postal carrier can just put a bundle into that customer's mailbox.
So it's a big deal for customers and costs. And also, as you heard Joshua talk about, it's a big deal for data because our data stack is focused on household data. So this allows us to continue to drive improvement in that data as we expand more print because of the ability to help them save money. So it all serves itself virtuously to build out our data stack much more robustly. Our platform invests really heavily in automation on a manufacturing side. And I'll give you two examples of this. So we spend $65 million a year in capital expenditures. It's not a small chunk of investment into the platform. Most of that investment is around productivity and automation. So two examples here. On the upper right, you'll see our OPEX Perfect Pick system. Now, I referenced this from our West Allis plant in fulfillment.
By the way, this is not to scale. That looks like the size of a computer. It's actually the size of like a Boeing 777 sitting in our warehouse. What it allows us to do is to take all those marketing materials and store it in that. Little robots fly around, pick it, put it in a package, and deliver it out the back into that system. We can then service our customers at retail locations. If you've got a convenience store customer that needs particular things about the 250,000 locations, this can handle it in an automated manner. It's really a game changer for us. What it has done, it's reduced our headcount around fulfillment nearly two-thirds. Two-thirds of labor savings in how we pick.
And it's increased our quality because our error rate has gone basically down to zero because of the automation. I do invite you to visit this West Allis facility. It's really an interesting thing to come and see and understand what Quad's about in terms of execution for our customers. In fact, we'll take you back to this OPEX system, and you'll be mesmerized by watching the robots work. The final thing I'll mention is we, over the last five years, have invested heavily into the next technology of printing. The Manroland 4x8 press is a wider, faster, more labor-efficient press. It also allows us to run shorter lengths and changeover jobs much more quickly. The result is this press is nearly three times more efficient than its previous press it was replacing. And for Quad, we've always invested ahead of the curve for this.
It also leads to a 36% reduction in headcount for us, so really a game changer. The last two we put in, one was in our Mexico market to really increase capacity because that's been a lot of growth for us in Mexico, and I'll come back to that in a little bit, and the other is in our Hartford facility that now has three of these stacked right next to each other.
And so back to the history of Quad, I mean, one of the things that really set us up well to be the consolidator of the printing industry was this methodology. We never stopped investing in better efficiency. And later, when you get to the later 1990s, early 2000s, a lot of the industry just stopped investing in the platform, and then print got disrupted. But we had the best, most efficient platform by far.
We were number three, a distant number three at $1.8 billion. The number two asked us to acquire them. We did, and then did several more. And today, we're in the areas we compete number one. But that's because when you're the low-cost producer, it's hard to fight against you. And it takes a long time. And we had to deal with pricing declines during that period, but we made it through the other end. And so we still, even though print's been disrupted, my point before, and you'll see it when we talk about top-line sales and where that's going, we've had some pressure on that. It's a lot about the tale of two cities. With retail inserts, a very important product line for our customers, but it's double-digit decline because of its carrier. We're not getting out of that because our customers need it.
Because we do that for our customers, it helps us expand what we do for our customers on the other side. And so, but this investment strategy has been very important. In the old days when we were going greenfield, we were buying a lot of those big presses, which was huge CapEx. Most of what we do, we do that where it makes sense. Most of it is continued automation, which is lower CapEx, but high labor takeout. I hope that's helpful.
Yeah, thanks, Joel. The other ways we've been addressing fixed costs is really looking at addressing excess capacity. Really, our goal here is to utilize as much of our capacity as we can. So over the years, we've consolidated our footprint into our most productive plants. To Joel's point, the investment in technology, the investment in automation has been geared to mostly plants that will ultimately receive more and more volume as we take out excess capacity across the board. An example of that was our Saratoga Springs plant in New York, where we closed that earlier this spring. Then later in the third quarter, we were able to sell that to a great buyer who's going to use that facility. It actually employs a lot of our former employees. So we were really happy about that.
But within a year, we were able to close that plant, bring it into our Wisconsin platform, mega-platform that has all that automation and investment that we just went through, and sell the facility, use those proceeds to redeploy capital back into the business or pay down debt or distribute it to our shareholders, as Tony's going to walk through in a little bit. But a real success story, we continue to do that. It's been a big part of how we've brought down our debt over the last several years. We have four other closed facilities that are for sale that were done recently at the beginning of the year for us as we continue to drive out fixed costs and move that into our mega-plant. You'll hear the term mega-plant once in a while at Quad.
Those are plants well over a million sq ft where this investment has been going into. We have nine remaining owned plants representing 9 million sq ft of manufacturing power for Quad. We've also focused internationally. We recently announced the sale of our European print manufacturing operations. So that was about focusing on print manufacturing in the Americas, North America, South America, and really just exiting the European market. We expect that that will be completed by the end of the year. Let me be clear when I say the European market, that's for printing and manufacturing printed products, not for selling them. So we still have the ability to sell for our clients globally through managing and procuring those services for them. We also have services that are still present in Europe and in Asia, which we perform for our clients.
We just decided from a print manufacturing standpoint, it was a good time to focus on North America. And just the other thing I'll just point out internationally is, I referenced it before, is Mexico. With clients in COVID experiencing supply chain disruption, the nearshoring strategy started to happen for a lot of U.S. companies as they wanted to source their products closer to the U.S. market, but still have the advantage of a low-cost country from a labor standpoint. In addition, there's been continued worries about tariffs, etc., for Asia. And so we continue to see growth in our Mexican operations as those nearshoring strategies are occurring. We've seen this particularly in the book publication market. When I mention books, it's more of educational workbooks. These are the workbooks that students will use. They'll consume it during the year. They'll tear our pages out, fill those out.
Every year, these get replenished. It's a wonderful business. It's a business that has really nearshored from Asia into Mexico for us and has allowed us to go from basically no exports three years ago from Mexico to the U.S. to now almost 50% of the Mexican business is exported into the U.S. as an alternative to Asian supply chains coming in. It's been wonderful. The reason I referenced it is one of those 4x8 massively efficient presses was put into Mexico to expand their capacity to take on more of this work. Mexico has been a huge success story for us internationally. Just in summary, I mean, we continue to lean into our three staples and pieces of our strategy, starting with people because we can't execute any of this integrated marketing experience without great people in our facilities.
I'm really proud of what our team does to build and develop people skills throughout our manufacturing operations and our service operations. If we can take those great people and produce great products and services that drive efficient delivery for our customers and increase their ROI, we'll win all day long, and so that integration that Julie was referencing is really key to what we focus on moving forward to seamlessly integrate, so a client is just basically pushing a button for us moving forward, and we can deliver well for them, and then ultimately, the platform. There is volume pressures on many parts of print, but we've demonstrated over the last two years, you can get a little smaller and make more money, and that's through the relentless focus on the cost structure and delivering well for our clients.
So with that, I'll leave it to Tony, who can take you through the rest of the financials. I do want to point out that I was the CFO until 2014. Or no, sorry, that's what I became to 2021, 2022. Yeah, 2021. I'm not really good with numbers. And so Joel decided we need to make a change at CFO, and he brought Tony Staniak in. And immediately, the nickname for Tony Staniak was Upgrade. So I'm really proud to present Tony as our new CFO.
My favorite part of the transition was watching Dave have to ask Tony for CapEx approval.
It's not easy. It's not easy.
Hi. So I've been at Quad for 15 years, progressive finance roles. I joined right before Quad went public in 2010. And I've been CFO now for three years, taking the role over for Dave. So we get into the numbers, which I think is going to tie together nicely a lot of what you've heard today. This is the numbers that we released for 2024 in our third quarter earnings call at the end of October. You see our original 2024 guidance released at the beginning of the year. And when you look at the updated 2024 guidance, all of these numbers are coming within the guidance ranges. And even better on the debt leverage, where we're reducing it by the end of the year to 1.5 times.
That's with the sale of Saratoga that took place in the third quarter. It's also with the pending sale of the European operations. So we're working through the closing conditions on that. But assuming that closes, we're on track for 1.5 leverage at the end of the year.
We'll talk a lot more about debt during this presentation. On the sales side, so 5%-9% declines what we came into the year with. We're now guiding to approximately 9%. So the higher end of decline in that range. The first half of the year was a little slower for us. There was some carryover impact from postal increases. You've heard a lot about postal. There was a big one in July 2023, also one in January 2024. That impacted volumes down a little bit more than we expected. Also, interest rates being higher has corresponded to less direct mail volume than we expected. And the other thing that I'll talk about with revenue is that at the beginning of the year, we lost a large grocer that we talked about in all our quarterly earnings calls. That's about 3% of revenue.
So we don't lose customers often like that. If you would take that out, we'd be at more of a 6% decline this year. But still, with that revenue decline, due to the higher productivity that Dave talked about with all the investments in automation that we've made and cost-saving moves, we're still guiding to an adjusted EBITDA range and a free cash flow range that are centered around the midpoint of the original guidance: $225 million of EBITDA, $60 million of free cash flow. So really proud of that. That's corresponding to increased adjusted EBITDA margin. So while a smaller business, a more profitable business. CapEx, you heard plenty about from Dave and Joel in the last presentation, $65 million this year. That's a little bit more than 2% of our revenues, which is what we typically do every year, about 2%.
So to the point made, we definitely invest in our platform. This is showing a revenue pie chart that we typically show in all of our investor calls. The left side of the screen is 2024, where we think we're going to end up this year. The right side is our estimate of five years down the road, 2029, where we think we're going to end up. I'll talk about each of these categories. If we start with integrated solutions, that's our agency business that you've heard a lot about today, as well as logistics, which is us getting mail and marketing materials into the post office or to other end destinations. We think we can increase services from 22%-32% over the next five years. And we'll talk about the significance of that on the next slide. But we'll focus on services growth.
We're also continuing to grow in targeted print. Catalogs and direct mail are very targeted to individual consumers. You heard Tim Armstrong talk about that earlier, how they're customized and can resonate and be more sticky with customers that way. Packaging and in-store signage are also growth areas for us. So we expect more growth in targeted print. If I keep working around the circle, large-scale print, that's where we're seeing the largest organic decline. Retail inserts, we've talked about. Joel talked about how the newspapers, less ability to get those coupons to people, even though grocers like them. Magazines are also an area of decline, but primarily that retail inserts area, where you see that going from 23% of our revenue now to 11% in five years. So we'll keep managing our platform accordingly.
And then international print, the left side of the screen, 2024 still includes our European operations in it, as we have those operations this year. That's about 5% of our revenue. So if you back that out, it'd be about 8% for Latin America. We expect to grow in Latin America to 10% of our revenue by 2029. Now, the right side of that screen, 2029, I'm going to pull forward to the next slide. So same pie chart here for 2029, but now we've added the long-term margin profiles to it. And this is accepting certain corporate expenses that aren't in here. But when you look at the business units, integrated solutions, which is the area just to remind you from the last slide, that's going from 22% to, we think, 32%.
That's going to be our highest long-term margin area at 15%-20% Adjusted EBITDA margin with strong margins and agency that you can see in other creative firms that we compete against, as well as our logistics offering. As we then make our way around the circle, both 10%-15% in the targeted print and the international print and large-scale print, 8%-10% will be the most challenged over time when you look from the long term, but Dave and his team have been doing outstanding work to maintain that profitability and cash for the business. With all of that, we think we can increase our Adjusted EBITDA by at least 100 basis points in a three-year timeframe, so we're at about 8.4% Adjusted EBITDA margin today. We're looking to get to 9.4% or more about three years out.
We'll come back to that again a little bit later. Long-term goal is to get to low double-digit Adjusted EBITDA margin. We're going to continue to focus on profitability in this business. There are some external drivers that impact things. We talked about postal. We talked about the interest rates and how that impacts our volumes. We're watching tariffs now as well with the election. That could be a factor for us. We do export printed product from Mexico into the United States. We also get some of the materials for the printing process from international locations. We're going to watch closely that tariff volume and think about how we have to adjust pricing accordingly. We're a strong cash generator. It's always been part of our story.
The chart on the right side of the screen shows since basically COVID or the beginning of 2020 that we've generated over $830 million of cash. The light blue is free cash flow, pretty typical definition of free cash flow, cash from operating activities minus CapEx, and then asset sales that Dave talked about earlier, like Saratoga this year. At times, it also includes sale leasebacks. We did a couple in 2021. We'll continue to look at that based on the cap rates, and it can include divestitures of non-core parts of our business. In 2021, we divested of a small part of our logistics business called Quad Express. This year, that $114 million number is including that potential sale of the Poland European operations. We think we're going to be able to increase free cash flow generation to 35% in a three-year timeframe.
The drivers down below explain that, one, we're planning on increased profitability. But then also, when you look at the walk from Adjusted EBITDA to free cash flow, three big things that impact that: CapEx requirements, which we're going to continue to focus on that 2% of revenue. But then we expect to have lower restructuring costs where we're seeing consolidation in the future, as well as interest expense with all the debt paydown that we've done. We'll talk about that in a future slide. And decreasing interest rates that will provide a benefit year over year in the free cash flow profile. On the cash taxes side, we are utilizing some NOLs and credits to be able to lower cash tax payments. At some point, with increasing profitability, those will run out. But of course, we'll have increasing profitability. So that'll be the plus.
So strong cash generator, as you see on the right. Oh, wait, I missed one point. The one bullet point about our real estate portfolio. We own a bunch of plants. Dave's slide talked about nine manufacturing facilities. We own other warehouses and items beyond that. We think that the value of that at current cap rates is at least $250 million. It provides further opportunities for sale leasebacks or other proceeds in the future. All that cash, we've used a lot of it to go towards net debt. Right before this time, at the end of 2019, we were acquiring agencies to build out that offering: Rise Interactive, Periscope, now Betty, and Ivie & Associates. That drove our net debt to over a billion dollars. Since then, by the end of this year, we'll have paid off $700 million of debt, 68% of the debt profile.
With that, one thing we're announcing today as part of this investor day is that we're lowering our long-term targeted debt leverage range from 1.75-2.25 down to 1.5-2. Again, we think we're going to be at 1.5 at the end of this year, given the Poland sale. We may operate outside of that range at certain times if there's a particular investment opportunity or M&A could cause that. Also, we're a very seasonal business in our cash flow. We do a lot of the print in the third quarter and early fourth quarter. We collect that by the end of the year.
So leverage will go up with working capital during the year and then sharp decline in the fourth quarter. So when you kind of think about that 1.5-2 leverage range, think about kind of our year-end guideposts. As you can see on the right, that's a steady reduction down in leverage.
I'm super proud of this and what the team has done here because think about being in an industry where we have declined yet, but also changing what we are. Someone told me there was a pandemic in here where people literally stopped marketing for a time. So the ability to kind of power through that and how we've managed this has been part of a long-term plan we had as we were consolidating the industry. It's played out how we sort of planned years and years ago.
With the debt paydown and the great relationships we have with the banks, kind of a who's who of banks that you see at the bottom, we recently refinanced our debt. We always remain aware of when there's opportunities in the market and with the banks to be able to refinance that debt. We were a couple of years out. The bank said, "This is a good time." We took advantage of that. So we've been able to extend our $690 million term loan and revolving credit agreement out through 2029. We have now, as you can see on the right, a low manageable amortization profile. The light blues are the annual amortization and the maturity in 2029 of the $193 million remaining on the term loan and the revolver.
Of course, we'll look to refinance before we get to that point. But that's how the current leads. So it gives us a lot of flexibility to consider what we can do for growth, what we can do returning capital to shareholders. This last bullet point, I want to make sure to make a point that goes beyond what I typically say during the earnings calls. We always talk about how we have, roughly speaking, a 60% floating-rate debt, 40% fixed. The term loan and the revolver are floating, a variable-rate debt. But we use derivatives, interest rate hedges, and swaps and collars to be able to reduce the exposure on that and kind of cap the risk on it. We have $150 million of collars right now that goes against this debt.
What that means is, as rates decrease, which everyone's expecting, our rate will float down with that more than the 60%-40% ratio because our swap, our collars allow for SOFR to go all the way down to 2%. Right now, the one-month SOFR is about 4.6%, so quite a bit of room. And we're going to see our interest rate move down with that throughout the way here as rates decrease.
And that interest rate, I mean, based on people who are closer to how we compete. With us, it's a very different story of what has been done with that.
Right. So what are we going to do with our cash? So if I start in the middle with that debt reduction, again, we've been on this multi-year debt reduction journey. We're happy with getting a 1.5 times leverage. So we're now focusing on maintaining that low debt leverage, right? And that versus kind of our previous wording of primary drive-down debt, that's where we're going to focus. Now we can maintain that low debt leverage, and we can do more in thinking about growth investments, which can take multiple forms. That can be adding talent.
That can be more CapEx, like screens for In-Store Connect. That could be small M&A, like when we acquired DART at the end of last year. Shareholder returns, an area that we're focusing on. From a dividend perspective, we reinstated the dividend this year. It's $0.05 per quarter, $0.20 per year. That's a little under a 3% yield at today's stock price. So strong yielding shares. And then share buybacks. Over the past three years, we've repurchased 11% of our shares. We continue to keep an eye on share buybacks. So far this year, we have not repurchased any as we've been focused on debt. But again, share buybacks, we're going to continue to watch for the right times to buy back shares. This is a little bit about long-term outlook.
Numbers that we kind of haven't talked about before are directional that we have not talked about previously. When we think about net sales, a question we frequently get asked is, when will it grow? And so we're saying in a three-year outlook, we're expecting that net sales inflection point as you continue to scale, we continue to scale agency. We're going to grow that Latin American operation. And we're also going to grow in targeted print. And that will exceed at that point the decline from the organic decline in the large-scale business. And we're focused on being long-term net sales growth. Adjusted EBITDA margin, we're going to get more profitable at the same time. Get at least 100 basis points three years out, long-term double-digit adjusted EBITDA margin going forward. We also will improve cash flow as interest continues to reduce. Restructuring costs continue to reduce.
We think we can get to 40% free cash flow conversion, and lastly, we already talked about the leverage being at 1.5-2.
One of the things to talk about the growth side of the inflection point, I call it the flip. When is the flip going to happen from dealing with declined total revenue to growth? The challenge there is you think about we're very good at managing the natural organic decline. One big thing that happened to us in the last two years, which I would call unnatural, is what the post office did. So the Postmaster General who's there now, he embarked on the Delivering for America plan to try and fix the post office and his plantified logic. He's increased postal rates by 50% in the last couple of years alone, and it's our customer's biggest cost.
Now, that was supposed to work, and they'd be in a much better position now, but they just announced they lost $9 billion. Because the problem is when your biggest cost for a marketer, think back to what I said, they supply us names that are prospective names that they rent and then customer names. They'll keep mailing to the customers. When they have a big hit in their biggest cost, they quickly pull back on the prospecting side. And that impacts our volumes pretty quickly. So that pushed. I would have called this earlier if we didn't have that big organic unnatural decline happen. It does speak to our strength in co-mailing, and it's hurting a lot of the smaller competitors a lot more, but it's still unhealthy for the industry. However, we're very good at offsetting that. So that's where that postal fusion product came up.
And so we're doing a lot of things to manage that. And obviously, the other thing Tony just stepped on in the 224 is we have a $100 million client that we parted ways with.
Right. And so my closing slide, why might you consider investing in Quad? We think we have a unique, one-of-a-kind integrated platform. So you work with other ad agencies, Ted, you had this point a little bit earlier. You might go to 15 subcontractors to get your campaign delivered, right? 15 different things that have to be coordinated. We all have that all in one shop. Our clients like that. 2,700 existing clients that now are used to us from the print world that we can expand what we sell to them. 2,700 clients also an advantage because we have low customer concentration, no one larger than 3%. Transformation momentum, new clients coming on.
Some new just straight into the agency, and then they learn we have print. So exciting to see that area. And then the last two you heard about from me, strong cash generation that gives us what we think is an industry-leading financial foundation, the flexibility to be able to invest, give money back to shareholders, and keep our debt low. All right. On to Joel.
Okay. So we're right at the tail end here before we'll do open Q&A. But I hope that kind of going through this whole thing, that this chart makes a little more sense. But again, what we're doing and how we're playing, regardless of where we came from originally, is helping to solve the marketers' needs. It's the right product in front of the right person at the right price, the right time, and in the right channels.
A very complicated ecosystem that we believe, because of all the things we talked about, are doing a great job for existing clients, but also future new clients on why they should want to come with Quad. So we're very excited about the offering, how it's evolved, and how we've navigated this industry as a whole. And I'm just super proud of our team. And so with that, we'll open up for Q&A. I'll have my team just sort of come up here so that the appropriate people can answer any questions. And we have a mic runner, and we have questions online. Do you want to start with one online?
Yes. Sure. I'll start with one online. Guys, fantastic presentation today. A lot of interesting stuff, a lot of positive news flow and momentum in the business. What excites you guys the most about Quad over the next three to five years?
I'll start with what the team answer here. Start down here at that end.
Yeah. I mean, the mic is better than I answered. Being the new guy, I'm always thinking about, to be honest, the data story is the most exciting for me because I think that it is going to be something that is really, we haven't fully connected those dots yet to help sell that. And we're just activating with Joshua joining from Hong Kong. No, more recently than that. But it allows us to tell a story very differently that we haven't really had the benefit of doing it. And with the new innovations that we're rolling out, including In-Store Connect, we have different things that we're endlessly iterating with and using new ways to extend what we currently have as an existing platform. So those two are just the first to come to my mind.
We don't all have to answer because we want to get to a lot of questions. But anybody else want to jump in? And then I'll...
For me, it's the evolution of the client portfolio. Quad has a fantastic roster of clients. And for us to continue to come back to them and transform the way we work with them and transform the way we engage, that's the biggest thing I'm looking forward to the next couple of years.
We talked about inflection points or flipping. One of the biggest areas we've already flipped because we're talking about growth and revenue is our capitalization. We've paid down a significant amount of debt, $700 million. Now we've got it to where we need it. Now it's offense. You're seeing In-Store Connect, which you mentioned, and other offense opportunities for Quad to grow going forward. The balance sheet's in such a strong position right now. It's fun to be around that because we can take advantage of opportunities as they come around.
I'll just finish that. After a lot of blood, sweat, and tears in navigating the printing industry, coming out the other end while also transforming who we are, what I'm excited about now is that people are buying our solution and that we're scaling it. And so that's very fulfilling to me, and it gives me a lot of confidence in where we're going.
You're next.
All right. Hi. It's Barton Crockett again. Tony, I was wondering if you could walk through a little bit more of the bridge from 9% revenue decline this year to revenue growth at some point in the future. It seems like you were leaning meaningfully on Latin America, which I haven't heard you talk a lot about before. But just kind of give me the build. What are the biggest bricks that need to fall into place for that to turn?
Yeah. I mean, I think agency and integrated solutions is the biggest component. Targeted print two, and then Mexico and Latin America three. It's also a component, Barton, of the math that as the dollars get smaller in large-scale print, even if you take out the same percentage decline, it's not as big of a dollar impact as it was when it was a bigger business. So it's the combined math of that.
Okay. So you're not factoring in, I mean, or maybe you are, some of the innovation that we've found.
That would count in the agency offerings like In-Store Connect that got talked about. I'm including that in the agency line in the pie chart. Okay. Part of our services.
Thanks. Kevin?
So just to clarify with the three-year outlook and the flip to net sales growth, is that kind of you're thinking 2028 or 2027? I'm just trying to see when you're thinking the exact point you're thinking about. Yeah, we have 2028 as that number. Okay. And then in the pie chart from 2024 to 2029, the mix shift occurring there, are you factoring in any M&A at all?
I know you mentioned possibility of doing a little bit more on that, but. Yeah, we're not figuring in material M&A, which could accelerate any of the time frames that I talked about. But we typically modeled based on kind of what our current business is and then layer that on top as it comes.
Lastly, obviously, you talked about the headwinds from the postal service. Any potential change in the outlook given the change in administration?
Do you want my hopes or what I really think?
Well, yeah.
Yeah, I mean, look, the reality of the post office is it's very important to the taxpayer. I know this because right now, it's a bipartisan issue that everyone's pissed off at the post office. Congressmen are upset because, believe it or not, when your mail is late, they get a zillion calls from their consumers. It's a big deal. And that is part of their transformation that has been happening in the last couple of years. The performance has tanked. For our customers, the price has gone like this. And so we're hitting it on both fronts. I think part of the challenge is that the PRC, which is in charge of monitoring the rates, and then there's the Board of Governors that is in charge of the Postmaster General.
There's a rate review going on two years early with the PRC. Their rates used to be capped at CPI. And a couple of years ago, with some postal reform, they took the chains off. And he decided to just try and make up lost volume with price, which just accelerates decline.
And so there's a lot of looking being done at that. And part of the challenge is they have a universal mandate to go to every address, and there's a million of them being added every year. And so what they worked into the rate structure now is not just inflation, but when you have more addresses, spread the cost of that among less volume. And that used to not be in the pricing mechanism. So I think there's going to be a change. I know that there's a lot of work on this because the existing can't happen. And the taxpayer is not going to let the post office go down, regardless of what you think of print. It's very important. It's a very political issue.
I think what they'll have to do is recognize that if you want to have universal delivery to every post office, because there's a lot of commerce involved, think about medications getting to the consumer in rural areas. They're going to have to recognize that the taxpayer is going to have to take on some of the burden. Keep in mind, postage is supposed to pay for all the post office. It's not a taxpayer-funded organization. I think it's going to have to change. And so that's my sort of thoughts on where it goes.
If I can just follow up. So Tony, what's baked into your term? Are you assuming that the postage rates continue to go up like they have for the past couple of years? Or are you assuming that that changes?
We're still assuming postal rate increases and driving the organic decline.
Postal rate increases comparable to what we've just been going through?
Yes. Okay. Other questions?
First of all, thanks so much. Fantastic presentation. I can just feel how you guys are rubbing sticks together trying to make something happen. I think I wanted to ask, I think it was Joshua, you were at Publicis, I believe. I saw a transaction or read about that Mars, which holds itself out, is Marilyn, I believe. First of all, Marilyn, Betty, I love it. I wonder if there's any, was someone influenced? And then secondarily, something like Publicis paid $600 million, and I think it was something like $100 million in revenue, so six times revenue. I mean, that seems like within our group, that could be people will start to behold the value of the agency similarly. I'm interested.
Yeah, so that's a good question. On the agency side of the businesses, there's a couple of levers that I'm really excited for us to pull. What Josh touched on that he's most excited about, which is the data stack side of things, so if we can, in the modeling that we've worked through with Tony and his team, if we can turn the key on that and actually get clients to shift across and use our data rather than syndicated data out in the market, that will drive significant growth opportunities for us. The other part of that is, if you think about all the privacy and regulatory headwinds that are facing everyone, there's this desperate desire for more transparency in the data that they have access to, and everything that we've done and built from has transparency at the core.
You look at what Publicis has or IPG or Dentsu. Their non-transparent data platforms are basically built on a brokerage business, and I'm not convinced that brokerage-based data businesses are going to be sustainable long term. If you keep those two things in mind, I think we've got a lot of room for growth.
And as a larger shareholder, I'm okay with your math if that were the case.
Also, Mars is essentially a commerce company, an and shopper marketing group. We're working right now at polishing up our commerce and shopper marketing offering, and the big differentiator for Quad is we actually have the equipment to print the in-store assets that Mars has to come to us to print for. So much like the other areas of the business where we fully integrated them, we're actively working on how to better piece together our shopper offering that's always going to be differentiated because we have the print platform behind it.
It's a tough partnering for you guys. Obviously, look at Google. I can't imagine all the opportunities you're going to be seeing. If this works the way you think it's going to work, it could be incredible and add a whole another level of growth to what you're trying to do.
And it is working. So people are buying into this. And to his point, when you think about even the data foundation we have, we're already partnering with different people to build around the data foundation. I'm okay being an execution partner of a big agency too, by the way. 100%.
Because I think there's places we compete and there's places we're going to be participating with them on. It's a huge ecosystem, and they have a lot of needs. And like I said, we're not going to replace any of these guys. We're just going to grow our company really profitably. That's our goal, right? And so if that's partnering to create better offering or even partnering with people you sometimes compete with, I'm okay with that. Other questions? Okay. We're good? One more. Right here.
Just want to go back to that. The one slide that you had for 2029, and you had different EBITDA margins for each one of those subclasses. Is the business for each one of those segments today at those margins?
It's not.
Okay. And so how much, I guess, when you do the math on that, it suggests 12%-16% if you get to that point out in the future, just looking at the segments?
So there's certain corporate costs that aren't allocated to that level. And so that bridges kind of the remainder of the gap. You just can't take kind of the rough averages of the four around the pie, including corporate costs. That's why we're saying low double-digit margins over the long term.
Okay. Great. Thank you.
Thanks, Dan.
Any going once, going twice? Any other questions? All right. Well, we wrap.
So you had an activity in this past year in terms of sales. Does the pipeline kind of take a breather next year? And how do you feel about the pipeline for kind of asset sales? For asset sales, sorry. I missed that.
Okay, sorry. I got to worry about that. I thought I heard pipeline and then like, okay. So we still have a few buildings for sale. We've got the recently closed Waukee, Iowa, our directories plant. It's a little over 100,000 sq ft. Effingham, Illinois, two buildings over 500,000 in total, over 500,000 sq ft. And Sacramento, a little over 100,000 sq ft. So in total, about 750,000 sq ft that we're actively marketing. And so I'm hoping and planning that they come in in 2025, but I'll be prepared if they don't. It's always event-based on that market and what is resonating at the time.
But if you look at our history, we've closed a lot of printing plants. We've been very successful at selling off those assets. And again, we'll continue to manage the platform for some of the decline, but that's what's known. All right. With that, we really appreciate everybody, those in person who came in, those online. Thank you for joining us. We always invite anybody to come visit us in Sussex. There's cool stuff. We might even and we'll take you to that OPEX machine, and we'll probably already be there staring at it. But we really appreciate it, and we appreciate your support. So thank you for coming.