Cimpress (NASDAQ:CMPR), the global leader in mass customization, has announced a strong close to fiscal year 2024, with its fourth-quarter earnings revealing a 6% increase in consolidated revenue and a significant growth in adjusted EBITDA. The company's strategic investments in technology and customer value enhancement have paid off, leading to an increase in both the number of customers and the value per customer, particularly in the Vista segment.
Key Takeaways
- Consolidated revenue and organic constant currency revenue both grew by 6%.
- Adjusted EBITDA increased by $5 million year-over-year, reaching $119 million for Q4.
- Full-year adjusted EBITDA showed a substantial 38% growth, totaling $469 million.
- Adjusted free cash flow stood at $117 million for Q4 and $261 million for the full year.
- Cimpress repurchased 1.7 million shares for $157 million and reduced net leverage to under 3.0x trailing 12-month EBITDA.
- The company anticipates mid-single-digit rates growth in organic constant currency revenue and slightly faster growth in adjusted EBITDA in the future.
- Plans for increased capital expenditures aim to enhance manufacturing and supply chain capabilities.
Company Outlook
- Cimpress expects to continue growing its organic constant currency revenue at mid-single-digit rates.
- Adjusted EBITDA is projected to grow slightly faster than revenue in the coming years.
- The company is preparing to boost capital expenditures to strengthen its manufacturing and supply chain.
Bearish Highlights
- The company has not decided on refinancing their 2026 bonds yet.
- Investments that do not show sufficient progress may be halted as part of the company's strategic review process.
Bullish Highlights
- Cimpress has seen growth in the Upload and Print segment, driven solely by volume.
- The company is enhancing its value proposition for resellers with new products, quantity choices, and faster delivery.
- There is a long runway for growth in the Upload and Print segment.
- Cimpress is financially and operationally stronger than in previous years.
Misses
- The company’s growth in the Upload and Print segment has not been driven by a mix shift towards newer products and pricing improvements.
Q&A highlights
- Cimpress plans to maintain the EUR 46 million TLB tranche until maturity.
- The company has improved data and analytics, organizational structure, and technology, increasing the likelihood of good returns on organic investments.
- Cimpress will provide more details on their strategic progress during their upcoming Virtual Investor Day on September 10.
Cimpress emphasized its financial and operational strength, and its commitment to strategic investments in technology that have already begun to yield faster incremental improvements. The company has learned from past missteps and is aligning its investments more closely with its goals. With regular reviews and a willingness to discontinue underperforming investments, Cimpress is demonstrating a disciplined approach to growth. Investors and stakeholders can expect to hear more about the company's strategic direction and progress at the Virtual Investor Day in September.
InvestingPro Insights
Cimpress (CMPR) has shown robust financial performance in the last twelve months, as indicated by key metrics. With a market capitalization of $2.23 billion, the company's financial health and growth prospects are of particular interest to investors. The company's price-to-earnings (P/E) ratio stands at 26.94, which adjusts to a slightly lower 25.99 when considering the last twelve months as of Q3 2024. This suggests a valuation that may catch the eye of value investors, especially when paired with a PEG ratio of 0.19 for the same period, indicating potential undervaluation relative to earnings growth expectations.
A standout feature of Cimpress's financials is its impressive gross profit margin of 48.29% over the last twelve months as of Q3 2024, which showcases the company's ability to maintain profitability. This aligns with one of the InvestingPro Tips highlighting the company's impressive gross profit margins. Revenue growth remains steady, with a 7.78% increase over the last twelve months, pointing towards a solid top-line performance.
InvestingPro Tips further enhance the picture with insights into Cimpress's strategic financial moves. The company's aggressive share buyback program and high shareholder yield are strategies that often resonate well with investors looking for companies committed to returning value. Additionally, the company's low P/E ratio relative to near-term earnings growth could signal an attractive entry point for investors.
It's noteworthy that Cimpress does not pay dividends, which could be a factor for income-focused investors to consider. However, the company's capital allocation towards share repurchases might be seen as a reinvestment into the company's growth potential.
For investors seeking a deeper dive into Cimpress's financials and strategic positioning, there are additional InvestingPro Tips available at https://www.investing.com/pro/CMPR. These tips provide further analysis and context on Cimpress's market performance and financial health.
Full transcript - Vistaprint N.V. (CMPR) Q4 2024:
Operator: Welcome to the Cimpress Q4 FY 2024 Earnings Call. I will introduce Meredith (NYSE:MDP) Burns, Vice President of Investor Relations and Sustainability.
Meredith Burns: Thank you, Dee, and thank you, everyone, for joining us. With us today are Robert Keane, Founder, Chairman and Chief Executive Officer; and Sean Quinn, EVP and Chief Financial Officer. We appreciate the time that you've dedicated to understand our results, commentary and outlook. This live Q&A session will last about 45 minutes and we'll answer both presubmitted and live questions. You can submit questions via the questions-and-answers box at the bottom left of your webcast screen. Before we start, I'll note that in this session, we will make statements about the future. Our actual results may differ materially from these statements due to risk factors that are outlined in detail in our SEC filings and the documents we published yesterday on our website. We also have published non-GAAP reconciliations for our financial results on our IR website, and we invite you to read them. And now I will turn things over to Sean.
Sean Quinn: Great. Thanks a lot, Meredith, and thanks to everyone who's joined us today. Before we get into questions, I'm just going to highlight a few things from the 2 documents that we published yesterday. That first document was our earnings document that we normally publish. And then the second one is Robert's annual letter to investors. As we noted in the earnings documents, Cimpress had a strong finish to a strong year. In Q4, consolidated revenue grew 6% on both a reported basis and organic constant currency basis. For the full year, revenue grew 7% on a reported basis and a little over 5% on an organic constant currency basis. Adjusted EBITDA grew $5 million year-over-year in Q4 to $119 million, off of a tougher comp last year that had some onetime benefits and we had year-over-year currency headwinds of a little more than $3 million as expected. For the full year, adjusted EBITDA grew $129 million year-over-year to $469 million, which is 38% growth. And that growth is inclusive of year-over-year currency headwinds of $19 million, which is consistent with the expectation for currency impact that we said at the beginning of the year. Our full year adjusted EBITDA margins were up over 300 basis points to 14.2% in fiscal 2024, and that was driven by a combination of revenue growth, gross margin expansion and then also the cost reductions that we announced last March. From a segment perspective, every segment accelerated revenue growth sequentially this quarter with the exception of National Pen, where we made a choice to reduce advertising spend and that impacted the revenue growth rate, but significantly improved profitability. In Vista, we continue to see growth in per customer value, which is a trend that we've been talking about for several years now. And we had our sixth consecutive quarter of growth in the number of customers we're serving as well. Those 2 things combined are having a positive impact, and that's been driving a lot of incremental -- that's been driven by a lot of incremental improvements in the customer experience, but also new product introduction that's supporting the attraction and retention of higher-value customers across our geographic markets. Over the last 2 years, the value of Vista's new customer cohorts has been strong. And over time, what we're seeing is that's starting to have more impact on the health of repeat customer performance as well. Adjusted free cash flow was $117 million for Q4 and $261 million for the full year, a great result that benefited from our strong profit growth that I just went through but also strong working capital inflows. Q4 did include proceeds from the sale of a building for just over $17 million. That was something that we referenced last quarter. But nonetheless, a very strong cash flow result. It was our highest ever for a fiscal year and also for our fourth quarter. During fiscal 2024, we repurchased 1.7 million shares for $157 million at an average price per share of $91.09. That represents a 7% reduction to the shares outstanding at June 30, 2023, and we're able to do that while substantially reducing leverage and increasing liquidity. Of that total fiscal 2024 repurchase, we repurchased 638,000 shares in Q4 for $56 million at an average price per share of $88.20. We finished the quarter with net leverage at June 30 of just under 3.0x trailing 12-month EBITDA as defined by our credit agreement, and that's down from 3.9x last year. Our multiyear outlook remains both positive and also unchanged. We expect to grow organic constant currency revenue at mid-single-digit rates, possibly a little higher. We expect to grow adjusted EBITDA slightly faster than revenue. And we expect a multiyear conversion rate of adjusted EBITDA to adjusted free cash flow to be approximately 45% to 50% with fluctuations from year-to-year. In our earnings document, we also shared some housekeeping items that hopefully will be helpful for all of you as you seek to estimate our profitability and free cash flow for FY '25. I'm not going to go through all those details here, but I'm happy to take any questions that you may have on that. And our plans for this next fiscal year, fiscal 2025 will be done all within the context of the leverage policy and commentary that we introduced last quarter, which also remains unchanged. This is a strong year. It's a year that just ended. And now all of our focus is on continuing to build on that progress in fiscal 2025 in the years ahead. I'd encourage everyone to read Robert's annual investor letter that was also published last night, it gives an update on our strategic progress. After years of hard work through transformation, technology migrations, increased investment, we feel we're poised to continue the progress that we had in fiscal 2024, leveraging our scale-based advantages that we're seeking to build upon, including in the area of production and supply chain where we'll be investing more in CapEx in the year ahead to take advantage of opportunities there. So with that, Meredith, why don't we get into questions?
A - Meredith Burns: Great. Thanks, Sean. [Operator Instructions] We have received a couple of pre-submitted questions, and then I'll add the live ones as they come in. So our first question, I'm going to have Sean answer. Can you provide an apples-to-apples breakdown of run rate EBITDA growth for Q4 FY '24 versus Q4 FY '23? I note from the release that currency lowered EBITDA by $3.1 million in FY '24, onetime items benefited FY '23 EBITDA by $3 million and that Vista advertising was up by 130 basis points in FY '24. I also note that the quarter ended on a Friday last year and on a Sunday this year, which might adversely impact this year. It would be helpful to understand how much run rate EBITDA grew in Q4 FY '24 normalizing for the unusual items.
Sean Quinn: Great. Well, thanks for the question. It's a good one. And there's a lot to dig on there. We always have some timing differences and shifts in things like timing of holidays or how many days fall in a quarter, and that can impact comparisons to last year. So to some extent, there's always some of this. But I would say this quarter in Q4, that impact was definitely more notable. And there are a few things that we called out in the release, as you noted in the question, just to go through them. The first is that, and I mentioned it in my opening remarks as well, currency was a negative year-over-year impact of just over $3 million on EBITDA. It was $19 million for the full year, $3 million for the quarter. So that's one. Two is that, as we called out in the release, there were some onetime benefits in Vista last year that didn't repeat this year. And so that's a little over $3 million as well. So between those two, you're at $6 million. And then if you look at kind of the top half of our P&L, our consolidated gross profit grew $28 million year-over-year in the quarter, which was quite strong. Advertising spend was higher by $9 million year-over-year, and that was mostly driven by Vista. And we talked about this sometimes, in our advertising spend, it's normal also to see some fluctuations in intensity quarter-by-quarter. But that was accentuated in Q4 because last year, in Vista, we were doing pretty extensive testing where we were going dark in certain channels and markets to test incrementality. And so that impacts the year-over-year comparison and is one of the reasons why advertising spend in absolute dollars year-over-year is up as much as it is. We also had a creative shoot in Vista that generates assets that we use for well more than a year. But when we do that, we expense all that upfront, that was about $1.4 million. So reported EBITDA grew $5 million. But if you add up all those things, that's another about $16 million of year-over-year impact if you compare it back to Q4 last year. I think last year, I would say, advertising spend was lower than the normal run rate given the testing that we were doing. But in any case, I think it's very fair to say that the run rate EBITDA growth in Q4 was higher than the headline number that we reported.
Meredith Burns: Great, Sean. The next question, I'm going to ask Robert to answer. Robert, can you talk a little bit more about the reseller challenges in Print Group? What gives us confidence that these are broad-based market challenges and not idiosyncratic to our businesses, that is somebody is eating our lunch?
Robert Keane: Yes. So to your specific question, we do not see any reseller competitor "eating our lunch." First of all, we do value our reseller customers and we work hard to make them very competitive by serving them. But in the end, it is the end customer, the ultimate consumer of our products, who chooses whatever channel is most convenient for them and most competitive. And this shift that we are speaking about is part of a long-term disintermediation and a shift towards direct-to-e-com -- direct-to-customer e-commerce models continue to grow. Now we've described this reseller disintermediation in our Upload and Print space for many years even as we've continued to grow our revenues in Upload and Print very nicely. We've spoken about it again because it is continuing. But if you step back, some of our Upload and Print businesses including our largest ones today have transitioned to a point where they serve mostly end customers, and so they're not exposed to these negative side of this trend. But we do have a couple of businesses that historically and even currently primarily serve resellers. So their growth is more muted as a result. Again, this isn't new. Going back to why we spoke about it again this year, because this year, our revenue growth in Upload and Print, which is driven by our traditional, certainly our traditional products, has been coming from volume alone or primarily. Whereas in the past, there was some mix shift towards newer products and pricing improvements that we drove. This underlying reseller trend shows through our results in that environment. And now as we step way back, we continue to think and believe that there's a long runway for growth in Upload and Print. Again, most of our businesses and our largest businesses in the segment primarily serve end customers, not resellers. Now this shift is happening. I would say, more volume going direct to end customers' benefit, same price overall. And finally, I just say repeating, we do have an important business with our resellers and we certainly are continuing to fortify our value proposition for them via things like new product introductions, quantity choices, which are right for their customers, faster delivery speed and other things, again, once again, as we do for all of our customers, whoever they are.
Meredith Burns: Great. Robert, I'm going to stick with you for the next question, which is about our CapEx spend. So what makes now the time to accelerate those capital expenditures?
Robert Keane: Right. We brought that up and singled that last night because in summary, for the past 2 fiscal years and for the coming fiscal '25, we've been really focusing on operational execution, and this capital expenditure will really fortify the manufacturing and supply chain advantages, which are fundamental to that operational capability we have and a core part of operational execution. Now again, I give you some context to this. You certainly should read for more detail about what I'm about to say in my annual letter, which we published last night. But today, in summary, we are stronger financially and importantly, operationally than we've been in many years because of the work we did to 6 years ago, the significant investment we did over those past years. And that has given us a solid foundation on which we are moving forward and building forward. And that solid foundation certainly is across many different aspects of our competitive advantage and our customer value proposition. I wrote about those in our letter last night. From a CapEx perspective, specifically, most of this is going into production operations. And it directly drives what we are really the best in the world at, which is the mass customization of print and print-related products. And we think the financial returns make a lot of sense. Some of these investments are really no-brainers as they're going to drive much greater production efficiency with relatively quick payback given our high volumes. Other investments are for new product introductions that will allow us to expand how we serve our customers and attract new customers. Others provide an improvement in quality or quality attributes that we can offer to customers. And many of them will do multiple of the things I just mentioned, they'll help efficiency, they'll help NPI and they'll help with quality attributes. So finally I'd say, we have been -- again, I spoke about this in my letter, but we are in a period that's quite exciting in terms of the equipment market where there's been a lot of competition, a lot of innovation, some of that innovation codeveloped with us and our suppliers. And across the supply chain for equipment, we see new equipment, which is very, very productive and very attractive. Finally, let's just say, as we've communicated when we increase CapEx or we increase any other aspect of our cash flow consumption, it is within the guardrail of the leverage policy statements, which we said before, which we reiterated last night in our documents.
Meredith Burns: Great, Robert. All right. I'm going to shift gears. We're going to talk about the debt side of things. I'm going to pass the next couple of questions over to Sean. So Sean, any new thinking about refinancing our 2026 bonds?
Sean Quinn: Yes. The short answer is that nothing, there's nothing new there from what I said on last quarter's call, we had a similar question. We haven't made any decisions on exactly when or how we'll refinance the bonds. But of course, it's something that we are regularly thinking about. We still have a little under 2 years to maturity. And so we can be patient, but we're kind of getting into that window now where we'll be ready to act. And so we'll be ready when it makes sense to do so. We're in regular contact with our rating agencies so that they understand the financial progress that we've made, and we'll continue to do that. This is something we regularly do. And then as I said last quarter as well, when we got this question, we do like having both secured and unsecured debt in our capital structure. We think that diversification of our capital base is a good thing for a number of reasons, keep some secured capacity, gives us some optionality over time as well as our base of profitability growth. So no change in thinking there. But we'll be ready to act when it makes sense to do so. And I think that's probably likely to be in this fiscal year.
Meredith Burns: Okay. So a question here. What are the plans for the small EUR 46 million TLB tranche ? Just as an aside for folks who are listening. If you remember, during the quarter, we did reprice our Term Loan B and that actually involved shift in the balance between U.S. dollar and euro tranches of that. So well, the question is, will it be repaid or will we hold it in until maturity?
Sean Quinn: Sure. Yes, and it made sense to do this in our repricing, we were able to get a benefit by shifting around the proportion of euro and U.S. dollar in the Term Loan B. But we still have a plan to hold that until maturity unless we do something else with the term loan overall. Yes, that can always change, but for now, plan is to hold it.
Meredith Burns: Okay. Next question. For I think, Sean, and then Robert, if you want to add anything after, please feel free. We'll start off on Sean on this one. For the 50% of organic investments in Vista that are more subjective. So this person has read our annual letter, folks. If you haven't read it yet, this is something that's out of our annual letter. For the 50% of organic investments in Vista that are more subjective, how do we increase the likelihood that these are, in fact, as attractive as we think? Put differently, a few years ago prior to the management changes at Vista, we were making investments that at the time we thought were great, but in hindsight, were value destroying. What guardrails do we have in place today to avoid recommitting the sins of the past?
Sean Quinn: Yes. Great question. But let me try and provide a little context, especially for those who may not have read Robert's annual letter yet. I definitely recommend you read it when you have a moment. But as you see there, every year, we give an estimate of our growth investments and also our steady state free cash flow. And in our growth investments that we have, most of that is invested, it's about 3/4 of our growth investment is in Vista. And what we referred to in the letter is that there's about half of that investment in Vista that we believe is easy to estimate because it's very discrete. So I'll just give you 3 examples, things like CapEx for new products or growth capacity or there's portions of our advertising spend that are very clear and discrete. And so those are easy to estimate. And then in the other half of the Vista growth investments, there's just more subjectivity or judgment, and we refer to that in the letter because there are investments like, for example, in product development, where it's less discrete. You might have a product team that's working on a mix of maintenance topics and growth topics. And so the subjectivity that's referenced in the letter is with respect to the precision by which we estimate whether those investments or those costs are needed for steady state or not. And so we make estimates of that, and we take that given the range of $30 million that we used between our low and high end of the range of estimated investments, we think that's more than sufficient to capture the range of judgment involved. So that's just some context. But I think the substance of the question is really around the past investments that we've made and how do we make sure that, particularly in Vista, that we can improve the probability of good returns on those investments. So let me highlight a few things in terms of what's changed since prior to 2019, when we made some significant changes in the Vista business. I think the first is that we have much better data and analytics that gives us just more visibility and has allowed us to be more data-driven in our decision-making. And that's something we've talked about for the last years in our Investor Days and other forums. The next one is that in many areas, we've also changed the way that we're organized. There's less coordination cost. I think accountability is clear. Teams are closer to customer problems we're trying to solve. And then the results that are being derived from the investments that we're making or the teams that are performing these things are clearer as well. And that sounds like a small thing, how we're organized, but it actually has a really big impact. And I think in a way, that's sort of analogous to some of the changes that we made back in 2019 in Upload and Print in terms of decentralizing further, improving accountability, improving clarity of results and we've seen the benefit of that there as well. And I think this is analogous to that in many ways. We're doing a lot more experimentation and the tools, the data and all the practices that we're using there, they're just far better understood, they're far more embedded throughout the organization. And that, what that means is that the unit of investment that's required to get customer feedback is just much smaller and then we can iterate from there. So that's also quite a big change. And then the migration of technology that we went through for multiple years, that provides far more flexibility and it has actually enabled us to do a lot of the things that I've just outlined. And the pace of the incremental improvements that we're making is much higher. We see that and the impact of that in our new customer cohorts I referred to in the opening remarks and our overall performance as well. And so I think it's just -- before, it was simply -- it was a lot more costly, a lot more engineering intensive to advance the unit of improvement and get feedback. And that's improved greatly because of all these things. In terms of guardrails, I think there's a lot, there's a number of regular mechanisms that we have in place to review progress. And we've made pretty significant changes to the way that we do our planning and also how that maps back to our resource allocation across our product team. So I think that's important to note. And I think hopefully, it was evident last year as well. We're not afraid to stop doing the things if we don't see sufficient progress. And that said, big shifts like we did last year in terms of cost reduction are quite painful and so we want to avoid those. They're disruptive to progress. And so, yes, but after we took out a lot of costs last year and narrowed the focus of our investments, the bar there is going to remain very high for sure. And then I think lastly, we've always tried to continue to learn and improve. And I think Robert has been very candid about where we've learned and improved when he does his recap in his annual letter, which we just published last night as well. We'll still make mistakes and get things wrong. But I think the nature of the investments that we're making now, I would say, relative to prior to 2019, it's a bit near in versus the ones that you referred to in the question in terms of the ones that we thought were great and didn't fully play out. So hopefully, that provides some context. Robert. I'm not sure if there's anything you want to add.
Robert Keane: No, I agree with everything you said, but I wouldn't add anything.
Meredith Burns: Well, we are actually through all of the live questions at this point. And I'm going to hand the call back over to Robert to wrap things up.
Robert Keane: Okay. Thanks, Meredith. Thank you all, as investors, for joining the call and continuing to entrust your capital with us. As I said in my annual letter, Cimpress is financially strong, and that reflects the significant investment work that we've completed over the past 6 years. It made us stronger operationally and technologically and most importantly, stronger in terms of the value we deliver to our customers. And that strength really does bode well for our future and our ability to continue to drive increased customer value, and in doing so, grow our intrinsic value per share. We'll certainly give more details on our strategic progress and what we're doing as a business in our upcoming Virtual Investor Day, which will be held on September 10 of this year, and we hope you will join us for that as well. Thank you all.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.