Executive Summary / Key Takeaways

• Ennis, Inc. ($EBF) maintains its leadership in the specialized business forms and printed products distribution market, leveraging a robust network of independent distributors and a diverse brand portfolio. Strategic acquisitions, such as Northeastern Envelope Company and Envelope Superstore, are key to offsetting industry-wide volume declines and expanding product offerings.
• Despite a slight revenue dip in the recent quarter and six-month period, Ennis demonstrated strong profitability, with gross profit margins improving to 30.5% and 30.8% respectively, driven by effective cost management and targeted pricing actions.
• The company's financial health remains solid, characterized by substantial cash on hand and management's confidence in sufficient liquidity for anticipated operating and capital requirements over the next twelve months, including planned capital expenditures of $4 million to $7 million.
• A significant legal settlement of $5.7 million materially boosted net earnings and diluted earnings per share for the recent periods, underscoring the potential for non-core income streams to impact financial results.
• Ennis is actively investing in new technologies like print-on-demand and exploring niches such as healthcare wristbands and specialty packaging to transform its product portfolio and adapt to the ongoing digital disruption and consolidation within the print industry.

The Enduring Blueprint: Ennis's Foundation in a Transforming Print Landscape

Ennis, Inc., established in Texas in 1909, has built a century-long legacy as a manufacturer and distributor of business forms and other printed products. The company primarily serves the United States market through an extensive network of independent distributors, a channel encompassing commercial printers, direct mail services, and advertising agencies. This distributor-centric model, alongside sales to competitors, has solidified Ennis's position as a leading provider of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders in its niche. As of August 31, 2025, Ennis operates 55 manufacturing plants across 20 states, with approximately 96% of its output comprising custom and semi-custom products tailored to specific customer needs.

The broader print industry is currently undergoing significant transformation, marked by consolidation of traditional supply channels, product obsolescence due to digital alternatives, and volatility in paper supply and pricing. Electronic distribution of documents, internet hosting, and digital printing are increasingly offering cost-effective alternatives to traditional custom-printed materials. In this environment, Ennis's strategic locations and buying power are crucial, enabling it to compete effectively on service, quality, and price within the distributor market.

Technological Evolution and Strategic Diversification

Ennis recognizes the imperative to evolve its product offerings in response to the print industry's digital shift. The company is actively investing in new and existing technology to provide innovative solutions, including print-on-demand services and product offerings that facilitate customers' transition to digital business environments. These investments aim to lower labor and fixed charges, enhancing efficiency and customer value. While specific quantitative metrics for technological benefits are not publicly detailed, the strategic intent is clear: to maintain relevance and competitive advantage by adapting to changing customer demands and operational efficiencies.

Furthermore, Ennis is expanding into new market opportunities and niches through strategic acquisitions. This includes adding offerings such as envelope, tag, and folder products, as well as venturing into healthcare wristbands, specialty packaging, direct mail, pressure seal products, secure document solutions, innovative in-mold labels, and long-run integrated products with high-color web printing. These initiatives are designed to diversify the product portfolio, differentiate Ennis from competitors, and provide avenues for growth amidst the decline in demand for traditional business documents.

Financial Performance and Operational Discipline

Ennis's recent financial performance reflects a blend of industry headwinds and strategic successes. For the three months ended August 31, 2025, net sales were $98.7 million, a slight decrease of 0.3% from $99.0 million in the prior year period. This was primarily driven by a $5.9 million decline in sales volume due to weaker demand, partially offset by a $5.5 million increase in revenues from recent acquisitions. Over the six months ended August 31, 2025, net sales decreased by 3.1% to $195.9 million from $202.1 million in the comparable prior year period, with a $17.3 million volume decrease partially mitigated by an $11 million contribution from acquisitions.

Despite the sales volume challenges, Ennis demonstrated robust margin management. The gross profit margin improved to 30.5% for the three months and 30.8% for the six months ended August 31, 2025, up from 30.1% and 30.0% respectively in the prior year periods. This improvement is attributed to the company's ongoing cost management measures and targeted pricing actions aimed at mitigating market weakness and price competition. Selling, general, and administrative (SGA) expenses increased for both periods, primarily due to higher variable incentive compensation tied to profitability and the inclusion of SGA expenses from recent acquisitions.

Net earnings saw a significant boost, reaching $13.2 million for the three months and $23.0 million for the six months ended August 31, 2025, compared to $10.3 million and $21.0 million in the respective prior year periods. This increase was notably impacted by $5.7 million in cash proceeds from a legal settlement, which contributed approximately $0.14 to diluted earnings per share for both periods. Recent acquisitions also positively impacted diluted EPS by $0.03 per share.

Liquidity and Capital Allocation

Ennis maintains a strong liquidity position, primarily funding operations through cash generated from operating activities. As of August 31, 2025, the company held a cash balance of $31.9 million. Management anticipates consistent operating cash flows and reduced purchasing needs in the coming quarters, expressing confidence that current cash and anticipated cash flows will be sufficient to meet operating and capital requirements for the next twelve months.

Working capital decreased by $21.6 million, or 18.1%, from February 28, 2025, to August 31, 2025, primarily due to the $34.9 million acquisition of Northeastern Envelope Company (NEC) and Envelope Superstore (ESS) and a strategic decision to increase inventory levels. This inventory build was a proactive measure to mitigate supply risks following the permanent closure of the sole U.S. mill producing carbonless paper rolls. The current ratio, while still healthy, decreased from 4.60 to 1 to 3.40 to 1 over the same period. Capital expenditures for operational maintenance are projected to be between $4 million and $7 million over the next twelve months, consistent with historical levels. The company also continued its share repurchase program, utilizing $8.6 million for common stock repurchases during the six months ended August 31, 2025.

Competitive Dynamics and Strategic Positioning

Ennis operates in a highly competitive print industry, distinguishing itself from large end-user focused manufacturers like R.R. Donnelley (RRD) and Taylor Corporation by primarily serving independent distributors. Its direct competitors in this distributor-centric segment include companies like Quad/Graphics (QUAD), RRD, and Deluxe Corporation (DLX), all of whom offer various commercial printing and business forms services.

Ennis's competitive advantages stem from its extensive brand portfolio and robust distribution network. The company's wide array of branded products, such as Ennis and Royal Business Forms, coupled with its ability to offer highly customized solutions, fosters strong customer loyalty and recurring revenue streams, potentially leading to superior margins in niche segments. This focus on personalized solutions helps Ennis differentiate itself against larger, more diversified players like QUAD, which might prioritize scale and efficiency in broader markets. Ennis's distribution network provides broad market reach and efficient customer relationships, offering an edge in serving smaller clients compared to RRD's global, high-volume approach.

However, Ennis faces vulnerabilities due to its smaller scale compared to industry giants, which can lead to higher per-unit costs and potentially limit throughput. Its reliance on traditional printing also exposes it to the ongoing digital transformation, where competitors like DLX are making advancements in digital payments and business services. While Ennis is investing in print-on-demand and digital transition support, it may lag in the speed of innovation and operational execution in rapidly evolving digital markets compared to rivals with broader technological integration. Barriers to entry in the industry, such as high capital requirements for printing facilities and established distribution networks, generally favor incumbent players like Ennis by protecting its market share against new entrants.

Risks and Outlook

The print industry presents several ongoing risks for Ennis. These include continued consolidation of traditional supply channels, the accelerating obsolescence of certain products due to digital technologies, and persistent volatility in paper pricing and supply availability, exacerbated by recent mill closures. The ongoing consolidation among Ennis's distributor customers also poses a potential risk to future margins and sales. Furthermore, the company is involved in a legal proceeding in Arizona concerning a former facility, with a preliminary ruling against it and an accrued liability reserve of approximately $0.4 million. The case is scheduled for trial in the first calendar quarter of 2026.

Despite these challenges, management's outlook remains grounded in its financial discipline and strategic initiatives. Ennis expects operating cash flows to remain consistent and believes its current liquidity will adequately cover anticipated expenditures, including capital investments and potential future acquisitions. The company's strategic decision to increase inventory levels in response to paper supply disruptions demonstrates a proactive approach to operational continuity. The focus on transforming its product portfolio through technology investments and targeted acquisitions is central to its long-term growth strategy.

Conclusion

Ennis, Inc. stands as a resilient leader in its specialized segment of the print industry, characterized by a deep history, a strong distributor network, and a commitment to profitability through operational efficiency. While facing the secular decline of traditional print and intense competition, the company's strategic acquisitions, such as NEC and ESS, and its disciplined cost management have enabled it to maintain healthy margins and bolster net earnings, significantly aided by a recent legal settlement. Ennis's ongoing investments in technology, particularly in print-on-demand and niche product diversification, are critical steps in adapting its business model to the evolving digital landscape. For investors, Ennis represents a financially sound entity with a proven ability to generate cash flow and return capital through dividends and share repurchases. However, sustained success will hinge on its continued ability to innovate, integrate new technologies effectively, and strategically expand its product offerings to offset the persistent pressures of a transforming industry. Monitoring the impact of its technological roadmap and the success of its diversification efforts will be key to assessing its long-term investment appeal.