Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cimpress PLC (CMPR, Financial) reported a strong finish to the fiscal year with Q4 consolidated revenue growth of 6% on both a reported and organic constant currency basis.
- Adjusted EBITDA grew by $5 million year-over-year in Q4, reaching $190 million, despite currency headwinds.
- The company achieved its highest ever adjusted free cash flow for a fiscal year and fourth quarter, with $117 million for Q4 and $261 million for the full year.
- Cimpress PLC (CMPR) successfully repurchased 1.7 million shares, reducing shares outstanding by 7% while decreasing leverage and increasing liquidity.
- The company maintains a positive multiyear outlook, expecting to grow organic constant currency revenue at mid-single digit rates and adjusted EBITDA slightly faster than revenue.
Negative Points
- National Pen segment experienced a decline in revenue growth due to reduced advertising spend, although profitability improved.
- Currency headwinds negatively impacted adjusted EBITDA by $90 million for the full year and $3 million for Q4.
- Some segments, particularly those serving resellers, faced challenges due to market shifts towards direct-to-customer e-commerce models.
- The company plans to increase capital expenditures, which may impact cash flow, although it is within the context of their deleveraging policy.
- There are concerns about the subjectivity in estimating the attractiveness of organic investments in Vista, with past investments having been value-destroying.
Q & A Highlights
Q: Can you provide an apples-to-apples breakdown of run rate EBITDA growth for Q4 FY24 versus Q4 FY23, considering currency impacts and one-time items?
A: Sean Quinn, EVP and CFO, explained that currency negatively impacted EBITDA by over $3 million, and one-time benefits from the previous year did not repeat, totaling about $6 million in differences. Despite these factors, consolidated gross profit grew by $20 million year-over-year, and advertising spend increased by $9 million, primarily due to Vista. The run rate EBITDA growth was higher than the reported $5 million increase when normalizing for these items.
Q: Can you discuss the recent reseller challenges in Print Group and why these are broad-based market challenges rather than specific to Cimpress?
A: Robert Keane, CEO, stated that the challenges are due to a long-term trend of disintermediation and a shift towards direct-to-customer e-commerce models. Cimpress values reseller customers and continues to support them, but the shift benefits Cimpress overall as more volume goes directly to end customers. The company is fortifying its value proposition for resellers through new product introductions and faster delivery.
Q: Why is Cimpress planning to accelerate capital expenditures now?
A: Robert Keane explained that the focus on operational execution over the past two years has strengthened Cimpress financially and operationally. The planned capital expenditures will enhance manufacturing and supply chain advantages, driving production efficiency and supporting new product introductions. The investments are expected to yield quick paybacks due to high volumes and are aligned with the company's deleveraging policy.
Q: What are the plans for refinancing the 2026 bonds?
A: Sean Quinn stated that there are no new updates since the last quarter. Cimpress is considering options but has not made any decisions. The company values having both secured and unsecured debt in its capital structure for diversification and optionality. Refinancing is likely to occur within the current fiscal year.
Q: How does Cimpress ensure that organic investments in Vista are attractive and avoid past mistakes?
A: Sean Quinn highlighted improvements since 2019, including better data and analytics, organizational changes, and more experimentation. These changes have increased visibility and accountability, reducing the risk of value-destroying investments. Regular mechanisms are in place to review progress, and the company is not afraid to stop initiatives that do not show sufficient progress.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
