Cimpress Reports Q3 Fiscal Year 2016 Financial Results With 29% Revenue Growth
VENLO, Netherlands — April 28, 2016 — Cimpress N.V., the world leader in mass customization, has 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," comments Robert Keane, president and CEO. "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," remarks Sean Quinn, CFO. "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 continues, "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% 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 continues. "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% 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 its revenue growth rate. Excluding the estimated impact from currency exchange rate fluctuations, revenue growth was 31%. Excluding both the currency impact and revenue from businesses acquired during the past twelve months, revenue grew 10% 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%, down from 63.1% in the same quarter a year ago due primarily to the increased weighting of the 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% of revenue, up from $15.5 million, or 4.6% of revenue, in the same quarter a year ago.
- Operating loss in the third quarter was $17.5 million, or (4.0)% 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% of revenue, in the same quarter a year ago.
- GAAP net loss for the third quarter was $33.4 million, or (7.6)% of revenue, compared to GAAP net income of $8.6 million, or 2.5% 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 its 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% 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 its supervisory board in December 2014.
- During the third quarter of fiscal 2016, Cimpress issued 112,364 of its ordinary shares as part of its acquisition of WIRmachenDRUCK.
Cimpress has posted an end-of-quarter presentation with accompanying prepared remarks at ir.cimpress.com.
Important Reminder of Cimpress’ Priorities
Cimpress asks investors and potential investors in the company to understand the upper-most objectives by which it endeavors to make all decisions, including investment decisions. Often the firm makes 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.
Its priorities are:
- Strategic Objective: To be the world leader in mass customization. By mass customization, it means 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 its best judgment, will occur between now and the long-term future, appropriately discounted to reflect the 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.
About Non-GAAP Financial Measures
To supplement Cimpress’ consolidated financial statements presented in accordance with U.S. generally accepted accounting principles, or GAAP, Cimpress has used the following measures defined as non-GAAP financial measures by Securities and Exchange Commission, or SEC, rules: adjusted net operating profit after tax, free cash flow, constant-currency revenue growth and constant-currency revenue growth excluding revenue from acquisitions made in the last twelve months.
Adjusted net operating profit after tax is defined as GAAP operating income, less cash taxes attributable to current period operations and interest expense associated with the Waltham lease, excluding M&A related items including acquisition-related amortization and depreciation, changes in the fair value of contingent consideration, and expense for deferred payments or equity awards that are treated as compensation expense, plus the impact of certain unusual items such as discontinued operations, restructuring charges, or impairments, plus realized gains or losses on currency forward contracts that are not included in operating income. Free cash flow is defined as net cash provided by operating activities less purchases of property, plant and equipment, purchases of intangible assets not related to acquisitions, and capitalization of software and website development costs, plus payment of contingent consideration in excess of acquisition-date fair value, plus gains on proceeds from insurance.
Constant-currency revenue growth is estimated by translating all non-U.S. dollar denominated revenue generated in the current period using the prior year period’s average exchange rate for each currency to the U.S. dollar. Third-quarter constant-currency revenue growth excluding revenue from acquisitions made during the past twelve months excludes the impact of currency as defined above and revenue from druck.at, Easyflyer (FL Print), Exagroup, Alcione, Tradeprint and WIRmachenDRUCK.
The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of Non-GAAP Financial Measures” included at the end of this release. The tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.
Cimpress’ management believes that these non-GAAP financial measures provide meaningful supplemental information in assessing its performance and liquidity by excluding certain items that may not be indicative of its recurring core business operating results, which could be non-cash charges or discrete cash charges that are infrequent in nature. These non-GAAP financial measures also have facilitated management’s internal comparisons to Cimpress’ historical performance and its competitors’ operating results.
Cimpress N.V. (Nasdaq: CMPR) is the world leader in mass customization. For more than 20 years, the company has been 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. The company produces more than 46 million uniquely designed items a year. Cimpress’ portfolio of brands includes Vistaprint, Albelli, Drukwerkdeal, Pixartprinting, Exaprint and others. That portfolio serves multiple customer segments across many applications for mass customization.