• Revenue Growth: 6% increase on both a reported and organic constant currency basis.
• Adjusted EBITDA: Declined slightly to $88 million, including currency headwinds of just under $1 million.
• Gross Margins: Flat year over year.
• Advertising Spend: Increased by 12% year over year.
• Vista Organic Constant Currency Revenue Growth: 8% increase.
• Free Cash Flow: Lower year over year due to higher outflows from changes in working capital and increased cash interest payments.
• Cash Interest Payments: Increased by $10.6 million due to senior notes refinancing.
• Share Repurchases: $168 million allocated over the last three quarters, repurchasing about 8% of shares.
• Net Leverage Target: Aim to end fiscal year with net leverage at or below approximately 2.75 times current 12-month EBITDA.

• Warning! GuruFocus has detected 5 Warning Sign with CMPR.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cimpress PLC (NASDAQ:CMPR) reported a 6% growth in consolidated revenue on both a reported and organic constant currency basis.
• The company is continually improving customer experience through enhancements in product development and service processes.
• Cimpress PLC (NASDAQ:CMPR) is driving efficiency and improving quality across its production facilities, which is reducing costs and improving delivery speed.
• The company is experiencing strong growth in new product categories such as flexible and corrugated packaging, with growth rates over 25% annually.
• Cimpress PLC (NASDAQ:CMPR) has successfully strengthened its balance sheet by reducing leverage and extending debt maturities, while also repurchasing shares at attractive valuations.

Negative Points

• Adjusted EBITDA declined slightly year over year in Q1, impacted by increased operating expenses.
• Despite revenue growth, profitability did not increase due to flat gross margins and higher advertising spend.
• Free cash flow was lower year over year, driven by higher outflows from changes in working capital and increased cash interest payments.
• The company faces a modest ongoing revenue headwind in its mature product categories, such as business cards and consumer products.
• Currency fluctuations resulted in realized losses on currency hedges, impacting financial results.

Q & A Highlights

Q: What makes you confident enough to make such high levels of growth investments and share repurchases? A: Robert Keane, CEO, explained that the confidence stems from Cimpress's strong performance in customer value improvements, competitive advantage, and financial results. The company plans to continue growth investments similar to previous years, as these investments underpin customer value and competitive advantage. Share repurchases are considered attractive due to the current share price relative to cash flow per share, even after growth investments.

Q: Will the current share price impact investment activities given the 2.75 times leverage constraint? A: Robert Keane, CEO, stated that Cimpress plans to take advantage of the attractive share price, potentially investing over $100 million in share repurchases this fiscal year while maintaining leverage targets. However, the company is cautious about making abrupt changes to investment levels due to the importance of consistent operational execution.

Q: Can you explain the $18 million quarter-over-quarter swing in other income/expense? A: Sean Quinn, CFO, clarified that the swing is primarily due to realized and unrealized currency gains and losses. The realized currency losses from hedges impacted adjusted EBITDA and cash flow, while unrealized gains and losses do not affect cash flow but will be realized over time.

Q: What drove the large use of cash in payables last quarter, and what are the expectations for working capital? A: Sean Quinn, CFO, noted that the use of cash in payables was due to timing differences and specific supplier agreements. Working capital is expected to be a source of cash for the full year, with inflows typically in Q2 and Q4, aligning with revenue seasonality.

Q: Have your CapEx plans changed, given the lower cash outflow for PP&E this quarter? A: Robert Keane, CEO, indicated that CapEx investments are expected to occur later in the year, with no significant changes to plans. The timing of cash outflows can vary due to equipment testing and payment terms.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.