Cimpress Reports Fourth Quarter and Fiscal Year 2016 Financial Results
Thursday, July 28, 2016
Press release from the issuing company
VENLO, Netherlands - Cimpress N.V. (Nasdaq: CMPR), the world leader in mass customization, today announced financial results for the fourth quarter and fiscal year ended June 30, 2016.
"In fiscal year 2016 we made significant progress against our strategic initiatives outlined at the beginning of the year," said Robert Keane, president and chief executive officer. "We are entering the new fiscal year with strong momentum and optimism for our business. In light of this, we have established plans to increase our level of organic investment in fiscal 2017."
Keane continued, "Our philosophy and approach to allocating capital and tracking the return on such investments remains consistent with last year. I encourage investors to review my letter to investors published today on our investor relations website. That letter focuses on Cimpress' capital allocation philosophy, a financially oriented view of our investments past and future, and our views as to the underlying 'steady state' cash generation capabilities of our company. We will also review those subjects and provide a qualitative view into our strategy and operations at our upcoming investor day on August 10th which will be webcast live at ir.cimpress.com."
Sean Quinn, chief financial officer added, "Turning to our financial results, top-line growth for the fourth quarter was 26 percent in both reported and constant currency terms, reflecting an acceleration of growth in the Vistaprint business unit, solid performance from our faster growing Upload and Print portfolio of brands, and a decline in our All Other business units segment which was impacted by the previously described wind-down of two partnerships. Excluding the impacts of currency and acquisitions made in the trailing twelve months, our fourth quarter organic revenue grew 11 percent versus a tough comparison in the fourth quarter of 2015, as the net year-over-year revenue impacts of the release of deferred revenue related to group buying activities for Vistaprint was a headwind of $3.7 million. We are starting to see the financial benefit of years of past investments in our Vistaprint value proposition.
"Our GAAP operating income, net income and adjusted NOPAT results for the fourth quarter reflect increased profits in our Vistaprint and Upload and Print business units, which includes profits from companies we acquired in the last year," Quinn continued. "These metrics were also influenced by a negative profit impact of roughly $5 million from the wind-down of two partnerships mentioned earlier, as well as planned higher investment spending versus fiscal 2015. Additionally, our fourth quarter GAAP net income was positively impacted by year-over-year swings in unrealized currency gains and losses. Please refer to our fourth quarter and fiscal year 2016 earnings presentation for an update on our outlook for the business and planned levels of investment for fiscal year 2017."
Consolidated Financial Metrics:
- Revenue for the fourth quarter of fiscal year 2016 was $479.2 million, a 26 percent increase compared to revenue of $380.5 million in the same quarter a year ago. Excluding the estimated impact from currency exchange rate fluctuations and revenue from businesses acquired during the past twelve months, revenue grew 11 percent year over year in the fourth quarter. For the full year, total consolidated revenue grew 20 percent year over year. The year-over-year strengthening of the U.S. dollar negatively impacted our revenue growth rate for the full year. Excluding the estimated impact from currency exchange rate fluctuations revenue growth was 24 percent. Excluding the estimated impact from both currency exchange rate fluctuations and revenue from businesses acquired during the past twelve months, revenue for the full year grew 11 percent.
- Gross margin (revenue minus the cost of revenue as a percent of total revenue) in the fourth quarter was 53.5 percent, down from 58.9 percent in the same quarter a year ago due primarily to the increased weighting of our Upload and Print business units. For the full fiscal year, gross margin was 56.7 percent compared to 61.9 percent in fiscal year 2015, due to the weighting of our Upload and Print business units as well as impairment charges of $11.0 million related to write-downs of proprietary technology investments during the year.
- Operating income in the fourth quarter was $16.0 million, or 3.3 percent of revenue, an increase in absolute dollars but a decrease as a percent of revenue compared to operating income of $15.2 million, or 4.0 percent of revenue, in the same quarter a year ago. For the full fiscal year, operating income was $78.2 million, or 4.4 percent of revenue, down from operating income of $96.3 million, or 6.4 percent of revenue, in the prior fiscal year.
- Adjusted NOPAT for the fourth quarter, which is defined at the end of this press release, was $16.9 million, or 3.5 percent of revenue, down from $19.8 million, or 5.2 percent of revenue, in the same quarter a year ago. For the full fiscal year, adjusted NOPAT was $139.8 million, up from $125.1 million in fiscal year 2015.
- GAAP net income attributable to Cimpress for the fourth quarter was $16.9 million, or 3.5 percent of revenue, compared to a GAAP net loss of $(3.7) million, or (1.0) percent of revenue in the same quarter a year ago. GAAP net loss in the prior year quarter was significantly impacted by year-over-year non-operational, non-cash currency impacts. The net impact of the release of previously deferred revenue in the fourth quarter of fiscal 2015 related to unredeemed group buying vouchers was a year-over-year headwind of $3.7 million to revenue growth, operating income, net income and adjusted NOPAT in the current period. For the full fiscal year, GAAP net income attributable to Cimpress was $54.3 million, or 3.0 percent of revenue, down 41 percent compared to GAAP net income of $92.2 million, or 6.2 percent of revenue, in the prior fiscal year. For the full year both operating income and GAAP net income were significantly influenced by a goodwill impairment charge of $30.8 million related to one of our acquired businesses in Europediscussed in detail in our Q3 FY16 earnings materials, as well as impairment charges of $11.0 million related to write-downs of proprietary technology investments during the year, included in cost of goods sold.
- GAAP net income per diluted share for the fourth quarter was $0.51, versus a net loss of $(0.11) in the same quarter a year ago. This was heavily influenced by year-over-year non-operational, non-cash currency impacts. For fiscal year 2016, GAAP net income per diluted share was $1.64, versus $2.73 in the prior full fiscal year.
- Capital expenditures in the fourth quarter were $17.8 million, or 3.7 percent of revenue. During the full fiscal year capital expenditures were $80.4 million or 4.5 percent of revenue.
- During the fourth quarter, the company generated $52.1 million of cash from operations and $34.8 million in free cash flow, a non-GAAP measure, which is defined at the end of this press release. During the full fiscal year, the company generated $247.4 million of cash from operations and $152.4 million in free cash flow.
- As of June 30, 2016, the company had $77.4 million in cash and cash equivalents and $678.5 million of debt, net of issuance costs. After considering debt covenant limitations, as of June 30, 2016 the company had $427.5 millionavailable for borrowing under its committed credit facility.
- Cimpress did not repurchase shares during the fourth quarter. For the full year, Cimpress purchased 2,159,613 shares for $153.5 million inclusive of transaction costs, an average price per share of $71.06.
Cimpress has posted an end-of-quarter presentation with accompanying prepared remarks at ir.cimpress.com. On Thursday, July 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 46119955. A replay of the Q&A session will be available on the company’s website following the call on July 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 net income, operating income, EPS, cash flow, EBITDA, 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 27, 2016 at ir.cimpress.com and to attend (in person or by webcast) the company’s upcoming investor day meeting on August 10, 2016.
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