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Cimpress(CMPR) - 2024 Q3 - Quarterly Results
CimpressCimpress(US:CMPR)2024-05-01 20:08

Letter from Robert Keane, CEO Q3 FY2024 Performance Highlights Cimpress reported strong Q3 FY2024 financial results, characterized by revenue growth, gross margin expansion, and operating expense efficiencies, with a significant year-over-year increase in operating income and adjusted EBITDA, alongside a reduction in net leverage from 4.8x to 3.0x, and active share repurchases reducing shares outstanding by 5% Q3 FY2024 Key Financial Metrics (vs. Q3 FY2023) | Metric | Q3 FY2024 | Change (YoY) | Note | | :--- | :--- | :--- | :--- | | Revenue | $780.6M | +5% reported, +4% organic | Easter holiday timing dampened growth | | Operating Income | $39.2M | +$51.4M | Includes lower restructuring charges | | Adjusted EBITDA | $94.2M | +$25.0M | Includes a ~$4.2M negative currency impact | | Adjusted Free Cash Flow | -$16.6M | -$3.8M | Driven by working capital outflows | | Net Leverage | 3.0x | Down from 4.8x | As defined by credit agreement | - The company repurchased 1.3 million shares for $120.0 million, reducing shares outstanding by 5%, executed under a $150 million board authorization5 - Trailing-twelve-month (TTM) adjusted EBITDA increased by $199.6 million to $463.2 million as of March 31, 20245 Segment Commentary All primary business segments contributed positively to EBITDA growth, with Vista's revenue growing 5% with expanded EBITDA, Upload & Print businesses seeing combined revenue growth of 6% and a 19% increase in EBITDA, National Pen delivering strong 10% revenue growth and significant EBITDA improvement, and the 'All Other Businesses' segment experiencing flat revenue with a slight EBITDA decline - Vista: Revenue grew 5% (reported and organic), with a 19% increase in segment EBITDA to $71.8 million, driven by higher customer count and average order value46 - Upload & Print (PrintBrothers & The Print Group): Combined revenue grew 6% (4% organic), with a 19% increase in combined EBITDA, benefiting from lower input costs and operating efficiencies78 - National Pen: Revenue grew 10% (reported and organic), with EBITDA improving by $8.2 million due to growth and efficiency gains9 - All Other Businesses: Revenue was flat, with strong growth in signage offset by headwinds in real-estate and home decor products, leading to a slight EBITDA decline10 Outlook, New Leverage Policy and Capital Allocation The company is shifting from near-term guidance to a multi-year outlook, expecting mid-single-digit annual organic revenue growth and slightly faster adjusted EBITDA growth, with a new leverage policy targeting net leverage at or below 2.5x TTM EBITDA, and capital allocation through FY2025 prioritizing organic investment and share/debt repurchases over significant M&A - The company is confident it will meet or exceed prior FY2024 guidance and will now provide multi-year guidance commentary instead of detailed near-term guidance1213 - Multi-year Outlook: - Annual organic revenue growth: Mid-single-digit rates - Annual adjusted EBITDA: Expected to grow slightly faster than revenue - Adjusted EBITDA to adjusted FCF conversion: Approximately 45% to 50% annually14 - New Leverage Policy: - Target net leverage at or below ~2.5x TTM EBITDA - May temporarily increase to ~3.0x for high-return investments15 - FY2025 Capital Allocation Priorities: - Continue operating expense growth investment - Increase capital expenditures for new products and productivity - No significant M&A - Repurchase shares and/or debt at attractive prices19 Consolidated Financial Results Consolidated Results: Three-Year Trend This section provides a three-year trend of consolidated revenue, operating income, and EBITDA, with Q3 FY2024 total revenue reaching $780.6 million (a 5% increase YoY), operating income showing a significant turnaround to $39.2 million from a loss of $12.2 million, and Adjusted EBITDA growing 36% YoY to $94.2 million, reflecting similar strong positive trends in YTD results Consolidated Revenue and Operating Income (in thousands) | Metric | Q3 FY2023 | Q3 FY2024 | YTD FY2023 | YTD FY2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $742,164 | $780,588 | $2,290,781 | $2,459,245 | | Income from Operations | $(12,197) | $39,238 | $3,414 | $181,017 | Consolidated Adjusted EBITDA (in thousands) | Metric | Q3 FY2023 | Q3 FY2024 | YTD FY2023 | YTD FY2024 | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $69,145 | $94,158 | $225,922 | $349,328 | | Adjusted EBITDA Margin | 9% | 12% | 10% | 14% | Consolidated Cash Flow (in thousands) | Metric | Q3 FY2023 | Q3 FY2024 | YTD FY2023 | YTD FY2024 | | :--- | :--- | :--- | :--- | :--- | | Net cash from operating activities | $12,599 | $8,427 | $68,474 | $225,627 | | Adjusted free cash flow | $(12,833) | $(16,647) | $(11,329) | $144,242 | Key Financial Metrics (Quarterly & TTM) This section visually presents key quarterly and trailing-twelve-month (TTM) trends, showing strong improvement in profitability metrics with TTM GAAP Operating Income reaching $235 million and TTM Adjusted EBITDA hitting $463 million, alongside a strengthened capital structure evidenced by a significant reduction in the consolidated net leverage ratio to 3.01x from 4.83x a year ago - Quarterly GAAP Operating Income was $39 million in Q3 FY2024, a significant improvement from a loss of $12 million in Q3 FY2023, with TTM GAAP Operating Income rising to $235 million3242 - Quarterly Adjusted EBITDA increased to $94 million (12% margin) in Q3 FY2024 from $69 million (9% margin) in Q3 FY2023, with TTM Adjusted EBITDA reaching $463 million (14% margin)3543 Net Leverage Ratios (per credit agreement) | Metric | Q3 FY2023 | Q3 FY2024 | | :--- | :--- | :--- | | Consolidated net leverage | 4.83x | 3.01x | | Senior secured net leverage | 2.97x | 1.95x | Segment Performance Analysis Vista Vista's revenue grew 5% YoY to $418 million in Q3 FY2024, with organic constant-currency growth also at 5%, while segment EBITDA increased 19% to $72 million, with the margin expanding to 17%, and advertising spend as a percentage of revenue remained stable at 15.0% Vista Q3 Performance ($M) | Metric | Q3 FY2023 | Q3 FY2024 | YoY Growth | | :--- | :--- | :--- | :--- | | Revenue | $397 | $418 | 5% | | Segment EBITDA | $60 | $72 | 19% | | EBITDA Margin | 15% | 17% | +2 p.p. | - Advertising spend was $63 million in Q3 FY2024, representing 15.0% of revenue, a 50 basis point increase YoY, with a higher mix in mid- and upper-funnel channels671 Upload and Print (PrintBrothers & The Print Group) The combined Upload and Print businesses reported 6% revenue growth to $238.2 million in Q3 FY2024, with PrintBrothers' revenue growing 8% to $150.3 million and The Print Group's revenue growing 3% to $88.0 million, as both segments saw EBITDA and margin expansion PrintBrothers Q3 Performance ($M) | Metric | Q3 FY2023 | Q3 FY2024 | YoY Growth | | :--- | :--- | :--- | :--- | | Revenue | $140 | $150 | 8% | | Segment EBITDA | $16 | $17 | 6% | The Print Group Q3 Performance ($M) | Metric | Q3 FY2023 | Q3 FY2024 | YoY Growth | | :--- | :--- | :--- | :--- | | Revenue | $86 | $88 | 3% | | Segment EBITDA | $14 | $18 | 29% | National Pen National Pen demonstrated strong performance with a 10% YoY revenue increase to $89 million in Q3 FY2024, also on a constant-currency basis, and segment EBITDA saw a significant turnaround, improving from a loss of $3.3 million in Q3 FY2023 to a profit of $4.8 million National Pen Q3 Performance ($M) | Metric | Q3 FY2023 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $81 | $89 | +10% | | Segment EBITDA | ($3.3) | $4.8 | +$8.1M | All Other Businesses The 'All Other Businesses' segment reported flat revenue of $49 million in Q3 FY2024, with strong growth in signage offset by headwinds in real-estate and home decor products, leading to a segment EBITDA decline to $4 million from $5 million in the prior-year quarter All Other Businesses Q3 Performance ($M) | Metric | Q3 FY2023 | Q3 FY2024 | YoY Growth | | :--- | :--- | :--- | :--- | | Revenue | $49 | $49 | 0% | | Segment EBITDA | $5 | $4 | -20% | Central and Corporate Costs Quarterly central and corporate costs, excluding unallocated share-based compensation (SBC), decreased by $3.4 million YoY due to cost reductions, however, total costs including unallocated SBC were higher, driven by increased SBC expense related to strong company performance against long-term incentive targets - Quarterly central and corporate costs (excluding unallocated SBC) decreased to $34.9 million in Q3 FY2024 from $38.4 million in Q3 FY202311134 - Unallocated share-based compensation expense increased, resulting in total central costs being higher year-over-year11103 Financial Details and Reconciliations Currency Impacts In Q3 FY2024, currency fluctuations had a positive 100 basis point impact on year-over-year reported revenue growth, but the net impact on adjusted EBITDA was negative, and other income (expense) was a net expense of $3.7 million, primarily driven by currency-related items Y/Y Impact from Currency (Q3 FY2024) | Financial Measure | Y/Y Impact | | :--- | :--- | | Revenue | Positive | | Operating income | Neutral | | Adjusted EBITDA | Negative | | Adjusted free cash flow | Negative | - Other income (expense) was a net expense of $3.7 million, which included a $0.3 million realized loss on certain currency hedges and $3.4 million in other net losses from revaluation of derivatives and balances109114 Consolidated Financial Statements The consolidated financial statements detail the company's financial position and performance, with the balance sheet showing total assets of $1.78 billion, the statement of operations reflecting a significant YTD improvement from a net loss of $213.1 million to a net income of $59.6 million, and the cash flow statement indicating a substantial increase in YTD net cash from operating activities Consolidated Balance Sheets As of March 31, 2024, the company held $1.78 billion in total assets, a decrease from $1.85 billion at June 30, 2023, with total liabilities also decreasing to $2.41 billion from $2.47 billion, and cash and cash equivalents standing at $154.3 million Key Balance Sheet Items (in thousands) | Item | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $442,178 | $441,027 | | Total Assets | $1,784,313 | $1,854,859 | | Total Current Liabilities | $635,920 | $645,332 | | Total Liabilities | $2,407,568 | $2,466,652 | | Total Shareholders' Deficit | $(635,395) | $(622,686) | Consolidated Statements of Operations For the third quarter, the company reported a net loss of $5.2 million, a significant improvement from a $49.8 million loss in Q3 FY2023, and for the nine months ended March 31, 2024, net income was $59.6 million, a stark reversal from a net loss of $213.1 million in the prior-year period Statement of Operations Highlights (in thousands) | Metric | Three Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenue | $780,588 | $2,459,245 | | Income (loss) from operations | $39,238 | $181,017 | | Net (loss) income | $(5,181) | $59,642 | Consolidated Statements of Cash Flows For the nine months ended March 31, 2024, net cash provided by operating activities was $225.6 million, a substantial increase from $68.5 million in the same period last year, with net cash used in financing activities totaling $157.5 million, largely due to $100.7 million in share repurchases Cash Flow Summary (Nine Months Ended Mar 31, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $225,627 | $68,474 | | Net cash used in investing activities | $(44,709) | $(108,351) | | Net cash used in financing activities | $(157,506) | $(125,766) | Non-GAAP Financial Measures and Reconciliations This section defines the non-GAAP metrics used by the company, such as constant-currency revenue growth, Adjusted EBITDA, and Adjusted Free Cash Flow, and provides detailed tables reconciling these measures to their most directly comparable GAAP figures, offering further insight into underlying operational performance - Key non-GAAP measures used by management include: - Constant-currency revenue growth: To isolate underlying business performance from currency fluctuations - Adjusted EBITDA: To show operating performance excluding non-cash charges like D&A, SBC, and other specific items - Adjusted free cash flow: To measure cash generated by operations after capital expenditures121123 Reconciliation of GAAP Operating Income to Adjusted EBITDA (Q3 FY2024, in millions) | Line Item | Amount | | :--- | :--- | | GAAP operating income | $39.2 | | Depreciation and amortization | $37.1 | | Share-based compensation expense | $18.4 | | Certain impairments and other adjustments | ($0.3) | | Restructuring related charges | $0.1 | | Realized gains (losses) on currency derivatives | ($0.3) | | Adjusted EBITDA | $94.2 | Company Overview and Forward-Looking Statements About Cimpress Cimpress plc focuses on building and investing in customer-centric, entrepreneurial businesses in the mass-customization print sector, with its competitive strategy aiming to deliver individualized goods and services with nearly the efficiency of mass production, and its portfolio including well-known brands such as Vista, National Pen, and BuildASign - Cimpress's core strategy is mass customization, producing goods and services to meet individual customer needs with near mass production efficiency155 Safe Harbor Statement This section contains a safe harbor statement, cautioning that the earnings document includes forward-looking statements regarding future expectations, plans, and financial results, and warns that these projections are inherently uncertain and based on management's assumptions, with actual results potentially differing materially due to various factors, including economic conditions, supply chain issues, and market changes - The report contains forward-looking statements concerning financial results for FY2024, FY2025, and beyond, as well as plans for investments and capital allocation157 - Actual results may differ materially from projections due to risks such as flawed assumptions, supply chain constraints, inflation, failure to execute on business transformations, and general economic conditions158