ENNIS, INC.

Previous wording

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.

Current wording

On November 14, 2025, we acquired the assets and business of CFC Print & Mail ("CFC"), which is based in Grand Prairie, Texas. In the last full year preceding the acquisition, CFC generated approximately $7.1 million in sales. CFC specializes in serving a national distributor network with business-document printing and mailing services, offering industry-leading turnaround times and automation. The acquisition of CFC further strengthens our leading position in business products and the commercial print sector.

Previous wording

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.

Current wording

On April 11, 2025, we acquired the assets and business of Northeastern Envelope Company ("NEC"), which is based in Old Forge, Pennsylvania and Envelope Superstore ("ESS") which is based in Hiram, Georgia. In the last full year preceding the acquisition, NEC and ESS generated approximately $26.0 million in sales. The acquisition of NEC and ESS strengthens our envelope converting and printing capabilities to serve our customers in the Northeast United States.

Previous wording

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:

Current wording

Our industry is currently experiencing consolidation of traditional supply channels, product obsolescence, paper supplier capacity adjustments, volatility in raw material availability and pricing, and changes in international trade conditions. Technology advances have made electronic distribution of documents, internet hosting, digital printing and print-on-demand solutions valid cost-effective alternatives to traditional custom-printed documents and customer communications. Improved equipment has become more accessible to our 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:

Previous wording

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.

Current wording

Transformation of our portfolio of products– While traditional business documents are essential in order to conduct business, many are being replaced through the use of cheaper paper grades or imported paper, or displaced by advances in digital technologies, causing steady declines in demand for a portion of our current product line. Transforming our product offerings in order to continue to provide innovative, valuable solutions through lower labor and fixed charges to our customers on a proactive basis will require us to make investments in new and existing technology and to develop key strategic business relationships, such as print-on-demand services and product offerings that assist customers in their transition to digital business environments. In addition, we will continue to look for 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. The ability to make investments in new and existing technology and/or to acquire new market opportunities through acquisitions is dependent on the Company’s liquidity, capital resources, and operating results.

Previous wording

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.

Current wording

Production capacity and price competition within our industry – Industry supply of paper products is subject to fluctuation as changing industry conditions have and will continue to influence producers to idle or permanently close individual machines or mills, convert them to different product lines, or otherwise adjust production capacity in response to changes in demand, operating costs and market conditions. These actions can affect the availability and pricing of certain grades of paper and other raw materials we purchase.

Previous wording

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.

Current wording

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 our customers but it is possible that these consolidations and acquisitions, which we expect to continue in the future, ultimately will impact our margins and sales.

Previous wording

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.

Current wording

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 and six months ended August 31, 2026 and the comparative period for 2025 are set forth in the tables below.

Previous wording

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.

Current wording

Selling, general, and administrative expense. For the three months ended August 31, 2026, our selling, general, and administrative ("SG&A") expenses were $16.9 million compared to $17.7 million for the three months ended August 31, 2025, a decrease of $0.8 million, or 4.5%. The decrease was primarily attributable to lower incentive compensation expense and other changes in operating expenses. As a percentage of net sales, SG&A expenses for the current quarter were 16.6% compared to 18.0% for the same quarter in the prior year.

Previous wording

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.

Current wording

Income from operations. Primarily due to the factors described above, income from operations was $13.6 million, or 13.3% of net sales, for the three months ended August 31, 2026 compared to $12.4 million, or 12.5% of net sales, for the three months ended August 31, 2025, an increase of $1.2 million or 9.7%.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

Net Sales. Our net sales were $200.6 million for the six months ended August 31, 2026, compared to $195.9 million for the same period in the prior year, an increase of $4.7 million, or 2.4%. Our acquisitions completed during fiscal year 2026 contributed approximately $6.8 million in revenue during the six-month period for the ownership periods not included in the comparable prior-year. Sales from the remaining business decreased approximately $2.1 million primarily reflecting weaker customer demand and ongoing industry-wide pressure in the U.S. printing market.

Previous wording

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.

Current wording

Cost of Goods Sold and Gross Profit Margin. Our cost of goods sold increased $3.5 million, or 2.6%, from $135.5 million for the six months ended August 31, 2025 to $139.0 million for the six months ended August 31, 2026. Our gross profit was $61.6 million or 30.7% of revenue for the six months ended August 31, 2026 compared to $60.3 million or 30.8% of revenue, for the same period in the prior year. The year-to-date gross profit margin remained relatively consistent despite higher carbonless paper costs recognized during the second quarter.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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, compensation and benefits, and dividends to shareholders. As of August 31, 2026, we had cash and cash equivalents of $54.0 million and no long-term debt. We currently maintain a significant portion of cash and cash equivalents in interest-bearing money market accounts and funds. Based on our current cash position and anticipated cash flows from operations, we believe our cash on hand and funds generated from operations will be sufficient to meet our operating and capital requirements for at least the next twelve months including anticipated expenditures and acquisition opportunities. Capital expenditures are expected to range between $4.0 million and $7.0 million over the next twelve months, consistent with historical spending levels.

Previous wording

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.

Current wording

Working Capital. During the six months ended August 31, 2026, our working capital increased $13.2 million or 13.7%, from $96.4 million at February 28, 2026 to $109.6 million at August 31, 2026. The increase primarily reflects cash generated from operating activities, partially offset by dividends and capital expenditures. Our current ratio, calculated by dividing our current assets by our current liabilities, increased from 3.7 to 1.0 at February 28, 2026, to 3.8 to 1.0 at August 31, 2026.

Previous wording

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.

Current wording

Pension Plan –The funded status of our Pension Plan is dependent on many factors, including returns on invested assets and market interest rates. We are not required to make a contribution to the Pension Plan for fiscal year 2027 and did not make a contribution during the six months ended August 31, 2026. Future contributions, if any, will depend on the Pension Plan’s funded status and applicable funding requirements. Changes in investment returns or discount rates could significantly affect the Pension Plan’s funded status and future funding requirements. At August 31, 2026, we had a funded pension asset of $2.2 million.

Previous wording

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.

Current wording

Inventories–We believe our inventory levels are sufficient to satisfy customer demand and we anticipate having adequate sources of raw materials to support future business requirements. In fiscal year 2026, following the closure of the only U.S. mill producing rolls of carbonless paper, we increased inventory levels to mitigate potential supply shortages and maintain supply continuity while qualifying alternative sources. We have an agreement with and have received shipments from a carbonless paper supplier whom we anticipate will be a successful partnership. 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.

Previous wording

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.

Current wording

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 fiscal year 2027, exclusive of capital required for possible acquisitions, will be within our historical range of between $4.0 million and $7.0 million. For the six months ended August 31, 2026, we spent approximately $1.9 million on capital expenditures that were 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.