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Cimpress Reports Q3 Loss, Revenue Growth

Thursday, April 28, 2016

Press release from the issuing company

Third quarter 2016 results:

  • Revenue grew 29 percent year over year to $436.8 million
  • Revenue grew 10 percent year over year excluding the impact of currency exchange rate fluctuations and revenue from businesses acquired during the past twelve months
  • GAAP loss from operations was $17.5 million in the current period versus GAAP income from operations of $4.3 million in the year-ago period, largely due to a goodwill impairment charge of $30.8 million
  • GAAP net loss per diluted share was $1.06 in the third quarter of 2016 versus GAAP net income per diluted share of $0.25 in the year-ago period, largely due to a goodwill impairment charge
  • Adjusted net operating profit after tax (adjusted NOPAT) was $24.0 million versus $15.5 million in the year ago period.

VENLO, Netherlands - Cimpress N.V., the world leader in mass customization, today announced financial results for the three month period ended March 31, 2016, the third quarter of its 2016 fiscal year.

"We progressed toward our strategic objectives and deployed capital and resources across both organic opportunities and acquisitions," said Robert Keane, president and chief executive officer. "We improved the Vistaprint business unit across key customer, product, revenue, and profitability metrics and we grew our Upload and Print business units both organically and through acquisition, including through the recently closed WIRmachenDRUCK transaction. We also built foundations in our Most of World and Corporate Solutions business units. Our mass customization platform team increased product selection, including the launch of several products fulfilled via the platform to multiple Cimpress business units."

As a reminder, in fiscal 2016 Cimpress is increasing investments in its mass customization platform, product expansion, Most of World business units, post-merger integration, and other key areas.

"We grew constant-currency organic revenue by 10% for the quarter," said Sean Quinn, chief financial officer. "This was our fifth consecutive quarter of 10% or better constant-currency organic revenue growth: the Vistaprint business unit grew 10% and Pixartprinting and Printdeal, the business units in our Upload and Print segment that we have owned for at least a year, delivered a combined 25% growth. This was partially offset by anticipated and previously described partner revenue declines in the All Other business units segment."

Quinn continued, "Our GAAP operating income and net income were impacted this quarter by a goodwill impairment charge related to one of our 2015 acquisitions in Europe. Although we are disappointed that the outlook that prompted the partial impairment for this particular business is less favorable than originally expected, we still expect the upload and print portfolio as a whole to return above the 15 percent hurdle rate we use for M&A. Adjusted NOPAT, which excludes non-operational items such as this impairment charge, grew strongly, reflecting our underlying profitability improvements even as we continue to make significant operating expense investments in a number of strategic areas.

"Our approach to capital allocation remains unchanged and we continue to invest across the categories we described in depth at our August 2015 investor day," Quinn continued. "Nine months into fiscal year 2016, we are making good progress across the focus areas described at our investor day, though aggregate year-to-date investments across a few categories are lower than originally planned. We now expect the full year adjusted NOPAT burden of our 'major organic' investments, such as the plant network component of our mass customization platform, Columbus, Most of World, and post-merger integration, will be slightly lower versus our original expectations. At our August investor day we also said that, on an adjusted NOPAT basis, we expected our 'diverse other' investments, which include those in technology and advertising for the Vistaprint business unit, product selection, and other items, to grow in line with revenue for fiscal 2016. We now expect the growth of investments to be slower than the growth of our consolidated revenue in fiscal 2016 primarily due to leverage in certain investment categories, as well as the increased revenue from our acquisition of WIRmachenDRUCK. Additionally, aggregate capital expenditures have been lower than expected year-to-date, which should increase free cash flow relative to the expectations we outlined earlier this year. As we complete fiscal year 2016 and look ahead to fiscal 2017, we will continue to evaluate additional opportunities to deploy capital to value-creating investments."

Consolidated Financial Metrics:

  • Revenue for the third quarter of fiscal year 2016 was $436.8 million, a 29 percent increase compared to revenue of $339.9 million in the same quarter a year ago. The year-over-year strengthening of the U.S. dollar negatively impacted our revenue growth rate. Excluding the estimated impact from currency exchange rate fluctuations, revenue growth was 31 percent. Excluding both the currency impact and revenue from businesses acquired during the past twelve months, revenue grew 10 percent year over year in the third quarter.
  • Gross margin (revenue minus the cost of revenue as a percent of total revenue) in the third quarter was 54.8 percent, down from 63.1 percent in the same quarter a year ago due primarily to the increased weighting of our Upload and Print business units and a $6.7 million impairment charge related to the write-down of proprietary technology investments in the quarter.
  • Adjusted NOPAT for the third quarter, which is defined at the end of this press release, was $24.0 million, or 5.5 percent of revenue, up from $15.5 million, or 4.6 percent of revenue, in the same quarter a year ago.
  • Operating loss in the third quarter was $17.5 million, or (4.0) percent of revenue, a decrease in both absolute dollars and as a percent of revenue compared to operating income of $4.3 million, or 1.3 percent of revenue, in the same quarter a year ago.
  • GAAP net loss for the third quarter was $33.4 million, or (7.6) percent of revenue, compared to GAAP net income of $8.6 million, or 2.5 percent of revenue in the same quarter a year ago. During the current period, both operating loss and GAAP net loss were significantly influenced by a goodwill impairment charge related to one of our acquired businesses in Europe and the write-down of proprietary technology investments. GAAP net loss was also impacted by year-over-year non-operational, non-cash currency impacts.
  • GAAP net loss per diluted share for the third quarter was $1.06, versus net income of $0.25 in the same quarter a year ago.
  • Capital expenditures in the third quarter were $19.1 million, or 4.4 percent of revenue.
  • During the third quarter, the company generated $23.9 million of cash from operations and $(1.3) million in free cash flow, which is defined at the end of this press release.
  • As of March 31, 2016, the company had $76.7 million in cash and cash equivalents and $696.6 million of debt, net of issuance costs. After considering debt covenant limitations, as of March 31, 2016 the company had $414.7 million available for borrowing under its committed credit facility.
  • During the quarter, the company purchased 156,778 of its ordinary shares for $11.3 million, inclusive of transaction costs, at an average per-share cost of $71.84, as part of the share repurchase program authorized by our supervisory board in December 2014.
  • During the third quarter of fiscal 2016, we issued 112,364 of our ordinary shares as part of our acquisition of WIRmachenDRUCK.

Cimpress has posted an end-of-quarter presentation with accompanying prepared remarks at ir.cimpress.com. On Thursday, April 28, 2016 at 7:30 a.m. (EDT) the company will host a live Q&A conference call with management to discuss the financial results, which will be available via webcast at ir.cimpress.com and via dial-in at +1 (855) 319-5923, conference ID 90505846. A replay of the Q&A session will be available on the company’s website following the call on April 28, 2016.

Important Reminder of Cimpress’ Priorities

We ask investors and potential investors in Cimpress to understand the upper-most objectives by which we endeavor to make all decisions, including investment decisions. Often we make decisions in service of these priorities that could be considered non-optimal were they to be evaluated based on other criteria such as (but not limited to) near- and mid-term cash flow, EBITDA, EPS and adjusted NOPAT.

Our priorities are:

Strategic Objective: To be the world leader in mass customization. By mass customization, we mean producing, with the reliability, quality and affordability of mass production, small individual orders where each and every one embodies the personal relevance inherent to customized physical products.

Financial Objective: To maximize intrinsic value per share, defined as (a) the unlevered free cash flow per share that, in our best judgment, will occur between now and the long-term future, appropriately discounted to reflect our cost of capital, minus (b) net debt per share.

To understand these objectives and their implications, Cimpress encourages investors to read Robert Keane’s letter to investors published on July 29, 2015.

 

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