Quarterly Report for Quarter Ending May 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read together with the unaudited consolidated financial statements and related notes of Ennis, Inc. (collectively with its subsidiaries, the "Company," "Registrant," "Ennis," or "we," "us," or "our"), included in Part 1, Item 1 of this report, and with the audited consolidated financial statements and the related notes of the Company included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.

All of the statements in this report, other than historical facts, are forward-looking statements, including, without limitation, the statements made in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relating to matters that are not historical in nature. The words "could," "should," "feel," "anticipate," "aim," "preliminary," "expect," "believe," "estimate," "intend," "intent," "plan," "will," "foresee," "project," "forecast," or the negative thereof or variations thereon, and similar expressions identify forward-looking statements.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for these forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that forward-looking statements are subject to known and unknown risks, uncertainties and other factors relating to its operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. These known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in, anticipated by or implied by such forward-looking statements.

These statements reflect the current views and assumptions of management with respect to future events. The Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its situation and circumstances may change in the future. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this report does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

We believe these forward-looking statements are based upon reasonable assumptions. All such statements involve risks and uncertainties, and as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including but not limited to: general economic, business and labor conditions and the potential adverse effects of potential recessionary concerns, inflationary issues, U.S. import tariffs and supply chain disruptions and the potential impact on our operations; our ability to implement our strategic initiatives and control our operational costs; dependence on a limited number of key suppliers; our ability to recover the rising cost of raw materials and other costs (including energy, freight, labor and benefit costs) in markets that are highly price competitive and volatile; uninsured losses, including those from natural disasters, catastrophes, pandemics, theft, sabotage; the impact of future pandemics on the U.S. and local economies, our business operations, our workforce, our supply chain and our customer base; our ability to timely or adequately respond to technological changes in the industry; cybersecurity risks, the impact of the internet and other electronic media on the demand for forms and printed materials; the impact of foreign competition, tariffs, trade regulations and import restrictions; customer credit risk; competitors' pricing strategies; a decline in business volume and profitability could result in an impairment in our reported goodwill negatively impacting our operational results; our ability to retain key management personnel; our ability to identify, manage or integrate acquisitions.; In addition to the factors indicated above, you should carefully consider the risks described in and incorporated by reference herein and in the risk factors in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026 before making an investment in our common stock.

Overview

Ennis, Inc. (collectively with its subsidiaries, "the "Company," "Registrant," Ennis," or "we," "us," or "our") was organized under the laws of Texas in 1909. We print and manufacture a broad line of business forms and other business products. We distribute business products and forms throughout the United States primarily through independent distributors. This distributor channel encompasses independent print distributors, commercial printers, direct mail, fulfillment companies, payroll and accounts payable software companies, and advertising agencies, among others. We also sell products to many of our competitors to satisfy their customers' needs.

Business Overview

Our management believes we are the largest provider of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders to independent distributors in the United States.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED MAY 31, 2026

We are in the business of manufacturing, designing, and selling business forms and other printed business products primarily to distributors located in the United States. As of May 31, 2026, we operate approximately 50 manufacturing plants throughout the United States in 20 strategically located states as one reportable segment: printing services. Approximately 95% of the business products we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors, number of parts, and quantities on an individual job basis, depending upon the customers' specifications.

The products we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels: Ennis®, Royal Business Forms®, CFC Print & MailSM, Block Graphics®, ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad ConceptsSM, FormSource LimitedSM, Star Award Ribbon Company®, Witt Printing®, Genforms®, PrintGraphics®, Calibrated Forms®, PrintXcel®, Printegra®, Forms ManufacturersSM, Mutual Graphics®, TRI-C Business FormsSM, Major Business SystemsSM, Independent PrintingSM, Hayes Graphics®, Wright Business GraphicsSM, Wright 360SM, Integrated Print & GraphicsSM, the Flesh CompanySM, AmeriPrintSM; StylecraftSM, UMC PrintSM; Eagle GraphicsSM, Diamond GraphicsSM and Printing TechnologiesSM. We also sell the Adams McClure® brand (which provides Point of Purchase advertising); the Admore®, Folder Express®, and Independent Folders® brands (which provide presentation folders and document folders); Ennis Tag & LabelSM (which provides custom printed, high performance labels and custom and stock tags); Allen-Bailey Tag & LabelSM, Atlas Tag & Label®, Kay Toledo Tag®, and Special Service Partners® (SSP) (which provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco®, Northeastern Envelope CompanySM, Envelope SuperstoreSM and National Imprint Corporation® (which provide custom and imprinted envelopes); Northstar® and General Financial Supply® (which provide financial and security documents); InfosealSM and PrintXcel® (which provide custom and stock pressure seal documents). School Photo Marketing and National School Forms are a one-stop shop for over 1,400 school portrait photographers and professional photo labs nationwide, providing them with a complete array of products and services that reach over 15 million families and 30,000 schools, primarily in the K-8 market. We sell predominantly through independent distributors, as well as to many of our competitors. Northstar Computer Forms, Inc., one of our wholly-owned subsidiaries, also sells direct to a small number of customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user). Adams McClure, LP, a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are generally through advertising agencies.

The printing industry generally sells its products either predominantly to end users, a market dominated by a few large manufacturers, such as R.R. Donnelley and Taylor Corporation, or, like the Company, through a variety of independent distributors and distributor groups. While it is not possible, because of the lack of adequate public statistical information, to determine the Company's share of the total business products market, management believes the Company is the largest producer of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders in the United States distributing primarily through independent distributors.

There are a number of competitors that operate in this segment. We believe our strategic locations and buying power permit us to compete on a favorable basis within the distributor market on factors such as service, quality and price.

Our products are sold throughout the United States primarily by independent distributors, including business forms distributors, resellers, direct mail, commercial printers, software companies, and advertising agencies.

Raw materials principally consist of a wide variety of weights, widths, colors, sizes, and qualities of paper for business products purchased primarily from one major supplier at favorable prices based on our high volume of business with that supplier relative to our competitors.

Business products usage in the printing industry is generally not seasonal. Acquisitions of new business, general economic conditions and contraction of the traditional business forms industry are the predominant factors in quarterly volume fluctuations.

Recent Acquisitions

On November 14, 2025, the Company acquired the net assets and business of CFC which is based in Grand Prairie, Texas. Prior to the acquisition, CFC generated approximately $7.1 million in sales for its fiscal year ended December 31, 2024. CFC specializes in serving a national distributor network with business-document printing and mailing services, offering industry-leading turnaround times and automation.

On April 11, 2025, the Company acquired the net assets and business of NEC, which is based in Old Forge, Pennsylvania and ESS, which is based in Hiram, Georgia. The acquisition of NEC and ESS, which prior to the acquisition generated approximately $26.0 million in sales for its fiscal year ended December 31, 2024, strengthens our production capabilities to serve our customers in the Northeast United States.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED MAY 31, 2026

Our Business Challenges

Our industry is currently experiencing consolidation of traditional supply channels, ongoing product obsolescence, paper supplier capacity adjustments, and increased pricing and potential supply allocations resulting from demand and supply imbalance. Technological advances have enabled electronic document distribution, web-based hosting, digital printing and print-on-demand solutions to serve as viable and cost-effective alternatives to traditional custom-printed documents and customer communications. Improved equipment has become more accessible to both existing and new competitors. We face highly competitive conditions throughout our supply chain in an already over-supplied, price-competitive print industry. The challenges of our business include the following:

Transformation of our portfolio of products - While traditional business documents remain essential to conducting business, many are being replaced through the use of lower-cost paper grades or imported products, or are being devalued by advances in digital technologies, resulting in continued declines in demand for a portion of our product line. Transforming our product offerings in order to provide innovative, value-added solutions on a proactive basis requires ongoing investments in new and existing technologies, as well as the development of key strategic business relationships, including print-on-demand services and product offerings that support customers transitioning to digital business environments. We continue to evaluate new market opportunities and niches, including through acquisitions, and to expand our offerings in areas such as envelopes, tags, folders, healthcare wristbands, specialty packaging, direct mail, pressure seal products, secure document, in-mold labels, and long-run integrated high color web print, which provide opportunities for growth and further differentiate us from our competition. Our ability to make such investments or pursue acquisitions is dependent on our liquidity, capital resources, and operating results.

Production capacity and price competition within our industry - Industry supply of paper products continues to fluctuate as market conditions influence producers to idle, permanently close, or convert paper machines and mills to alternative product lines. These actions, together with ongoing demand declines in certain paper grades, have contributed to supply constraints and pricing volatility across portions of the industry.

During fiscal year 2026, the sole domestic producer of carbonless paper permanently closed its manufacturing facility. In response, we increased inventory levels and developed alternative supply sources. While we continue to transition to these alternative suppliers and do not currently anticipate disruptions to customer service, product availability or product quality, changes in industry supply conditions could result in continued supply constraints and input cost volatility for certain paper grades. In addition, changes in tariff policies, trade regulations and transportation costs may increase raw material, freight and product sourcing costs. Industry conditions continue to reflect ongoing capacity rationalization and pricing actions within certain paper grades.

Margins continue to be affected by volume variability in certain markets, input cost inflation and pricing competition. We seek to mitigate these impacts through disciplined pricing practices, strategic sourcing initiatives, operational efficiency improvements and effective management of our manufacturing cost structure.

Continued consolidation of our customers - Our customers are primarily distributors, many of which are consolidating or are being acquired by competitors. We continue to maintain a high volume of the business with these customers but such consolidations and acquisitions, which we expect to continue, could ultimately affect our sales volumes and margins.

For further information, please see "Cautionary Statement Regarding Forward-Looking Statements," above and "Risk Factors" contained within our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED MAY 31, 2026

Critical Accounting Estimates

Our Annual Report on Form 10-K for the year ended February 28, 2026, includes a description of certain critical accounting estimates, including those with respect to the pension plan, impairment assessments on goodwill and other intangible assets, allowance for credit losses and accounts receivable, and allowance for excess and obsolete inventories, which we believe are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. During the quarter ended May 31, 2026, there have been no material changes to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended February 28, 2026.

Recent Accounting Pronouncements

See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements.

Results of Operations

The following discussion provides information which we believe is relevant to understanding our results of operations and financial condition. The discussion and analysis should be read in conjunction with the accompanying interim unaudited consolidated financial statements and notes included in this filing. The operating results of the Company for the three months ended May 31, 2026 and the comparative period for 2025 are set forth in the tables below.

Consolidated Summary

Three months ended May 31, 2026 compared to three months ended May 31, 2025

Net Sales. Our net sales were $98.6 million for the quarter ended May 31, 2026, compared to $97.2 million for the same quarter in the prior year, an increase of $1.4 million, or 1.4%. Organic sales volume decreased $3.1 million due to weaker customer demand and ongoing industry-wide pressure in the U.S. printing market. This decline was offset by more than $4.5 million of incremental revenues from acquisitions, primarily reflecting revenues generated during periods not owned in the comparable prior-year quarter. We continue to focus on providing our customers with quality products and responsive customer service.

Cost of Goods Sold and Gross Profit Margin. Our cost of goods sold increased $0.5 million, or 0.7%, from $67.0 million for the three months ended May 31, 2025 to $67.5 million for the three months ended May 31, 2026. Gross profit was $31.1 million or 31.5% of revenue for the quarter ended May 31, 2026 compared to $30.2 million or 31.1% of revenue for the same quarter in the prior year. Gross margin improvement was primarily attributable to pricing discipline, product mix and the continued integration of acquired operations.

Selling, general, and administrative expense. For the three months ended May 31, 2026, our selling, general, and administrative ("SG&A") expenses were $17.5 million compared to $16.9 million for the three months ended May 31, 2025, an increase of $0.6 million, or 3.6%. As a percentage of net sales, SG&A expenses for the current quarter were 17.8% and 17.4% for the three months ended May 31, 2026 and May 31, 2025, respectively. The increase in SG&A expense is primarily attributable to expenses associated with prior year acquisitions not yet fully integrated, along with higher incentive compensation.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED MAY 31, 2026

Gain and loss from disposal of assets. The $10,000 net gain from disposal of assets during the three-month period ended May 31, 2026 was primarily attributed to the sale of unused equipment.

Income from operations. Primarily due to factors described above, our income from operations for the three months ended May 31, 2026 was $13.6 million, or 13.8% of net sales, as compared to $13.3 million, or 13.7% of net sales, for the three months ended May 31, 2025.

Other income (expense). Other income was $0.1 million for the three months ended May 31, 2026 compared to other income of $0.2 million for the three months ended May 31, 2025.

Provision for income taxes. Our effective income tax rate was 28.0% and 27.5% for the three months ended May 31, 2026 and 2025, respectively. The effective tax rate for the three months ended May 31, 2026 was higher than the prior-year period primarily due to changes in state income taxes and nondeductible executive compensation.

Net earnings. Net earnings, due to the factors above, were $9.9 million for the three months ended May 31, 2026 as compared to $9.8 million for the comparable quarter in the prior year. Earnings per diluted share for the three months ended May 31, 2026 were $0.39, compared to $0.38 for the same quarter last year. Diluted earnings per share for the current quarter were positively impacted $0.02 per diluted share from our recent acquisitions.

Liquidity and Capital Resources

We fund our operations primarily through cash generated from operating activities. Our principal cash requirements include payments to vendors in the ordinary course of business, capital expenditures, employee compensation and benefits, and dividends to shareholders. As of May 31, 2026, we had a cash balance of $49.1 million. We expect operating cash flows to be consistent with prior periods, and we anticipate reduced purchasing needs over the next several quarters due to our recent strategic stockpiling of carbonless paper inventory. Based on these factors, we believe our cash on hand, together with anticipated cash flows from operations, will be sufficient to meet our operating and capital requirements the next twelve months. Our capital expenditures to maintain our manufacturing facilities are expected to range between $4.0 million and $7.0 million over the next twelve months, consistent with historical spending levels.

Working Capital. During the three months ended May 31, 2026, our working capital increased $6.4 million or 6.6%, from $96.4 million at February 28, 2026 to $102.8 million at May 31, 2026. The increase in working capital primarily reflects an increase in cash and cash equivalents of $14.5 million, offset by a decrease in accounts receivables of $4.1 million and an increase in income tax payable of $3.8 million. Our current ratio, calculated by dividing current assets by current liabilities, 3.7 to 1.0 at February 28, 2026, decreased slightly to 3.5 to 1.0 at May 31, 2026.

Cash flows from operating activities. Cash provided by operating activities was $21.2 million for the three months ended May 31, 2026, compared to $8.0 million in the prior comparative period, an increase of $13.3 million. The increase was primarily due to $10.6 million less in cash used for inventories and a favorable $11.3 million change in accounts receivables and other receivables, partially offset by an $8.5 million smaller increase in accounts payables and accrued expenses compared to the prior period.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED MAY 31, 2026

Cash flows from investing activities. Cash used in investing activities decreased to $0.3 million in the current quarter from $30.8 million in the prior-year quarter, primarily because the prior-year quarter included $34.9 million of acquisition spending while the current quarter did not.

Cash flows from financing activities. Cash used in financing activities was $6.4 million in the three months ended May 31, 2026 compared to the cash used of $11.5 million in the prior comparative period, primarily due to the lack of share repurchases of $5.0 million.

Credit Facility - As of May 31, 2026, we had $0.2 million outstanding under a standby letter of credit arrangement secured by a cash collateral bank account. It is anticipated that our cash, short-term investments and funds from operating cash flows will be sufficient to fund anticipated future expenditures, including acquisitions.

Pension Plan - The funded status of our Pension Plan is dependent on many factors, including returns on invested assets, the level of market interest rates and the level of funding. We are not required to contribute to the pension plan for fiscal year 2027. As our pension assets are invested in marketable securities, changes in actual investment returns or in discount rates could change funding status and requirements significantly. At May 31, 2026, we had a funded pension asset of $2.2 million.

Inventories - We believe our inventory levels are sufficient to satisfy customer demand, and we expect to maintain adequate access to raw materials to support future business requirements. Recent consolidation within the paper industry and the closure of the sole U.S. mill producing rolls of carbonless paper are expected to create volatility in paper pricing and supply availability. In anticipation of this disruption, we made a strategic decision to increase inventory levels to mitigate the risk of shortages and ensure continuity of supply. We maintain long-term supply agreements with key paper vendors that establish pricing parameters but do not impose minimum purchase obligations. Certain rebate programs, however, are contingent on achieving minimum purchase volumes and management currently expects to meet those requirements.

Capital Expenditures - We continue to make capital expenditures for operational maintenance purposes, as may be required. Additionally, we will carefully review and make capital expenditures for additional equipment to the extent such additions make economic sense by improving our operations and not jeopardizing our strong liquidity position. We expect our capital requirements for our current fiscal year, exclusive of capital required for possible acquisitions, will be within our historical levels of between $4.0 million and $7.0 million. For the three months ended May 31, 2026, we spent approximately $0.4 million on capital expenditures that was funded out of our cash balance. We expect to generate sufficient cash flows from our operating activities to cover our operating and other normal capital requirements for the foreseeable future.

Contractual Obligations - There have been no significant changes in our contractual obligations since February 28, 2026 that have, or are reasonably likely to have, a material impact on our results of operations or financial condition. We do not have off-balance sheet arrangements or special-purpose entities.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED MAY 31, 2026