Cimpress Reports 13 Percent Revenue Increase, Operating Income Decline for Q1 2016 FY
VENLO, Netherlands—October 29, 2015—Cimpress N.V., a world leader in mass customization, announced financial results for the three month period ended Sept. 30, 2015, the first quarter of its 2016 fiscal year.
"Fiscal year 2016 is off to a solid start with continued execution against our long-term objectives," said Robert Keane, president and CEO. "We are pleased with the improving retention trends in the Vistaprint business unit and the performance of recently acquired businesses."
Keane added, "As we have said many times, we believe that a signbificant portion of our intrinsic value per share will come from intelligent capital allocation. In the first quarter we are pleased to have executed to plan and in line with the strategy and objectives we described in detail at our August 2015 investor day. We also repurchased almost 2 million Cimpress shares."
As described previously, Cimpress is making increased investments this year in its mass customization platform, product expansion, its Most of World business unit, acquisition integration, VBU advertising, and other key areas. As had been planned, first quarter operating income, Adjusted NOPAT, net income, operating cash flow and free cash flow were lower year over year due in part to these investment increases. Additionally, a portion of the year-over-year decline in operating income, adjusted NOPAT, and free cash flow was caused by a fire in one of its production facilities during the quarter, for which it has received some, but not yet all, insurance recovery payments. To the extent Cimpress is successful in recovering additional losses, these payments would be recorded in future periods.
Consolidated Financial Metrics:
- Revenue for the first quarter of fiscal year 2016 was $375.7 million, a 13 percent increase compared to revenue of $333.9 million reported 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 21 percent, and excluding both currency impact and revenue from businesses acquired during the past twelve months, revenue grew 11 percent year over year in the first quarter.
- Gross margin (revenue minus the cost of revenue as a percent of total revenue) in the first quarter was 58.1 percent, down from 61.0 percent in the same quarter a year ago due primarily to the increased weighting of our Upload and Print businesses.
- Adjusted net operating profit after tax for the first quarter, which is defined at the end of this press release, was $16.4 million, or 4.4 percent of revenue, down from $22.6 million, or 6.8 percent of revenue, in the same quarter a year ago.
- Operating income in the first quarter was $12.1 million, or 3.2 percent of revenue, a decrease in both absolute dollars and as a percent of revenue compared to $16.9 million, or 5.0 percent of revenue, in the same quarter a year ago.
- GAAP net income for the first quarter was $10.0 million, or 2.7 percent of revenue, compared to GAAP net income of $23.7 million, or 7.1 percent of revenue in the same quarter a year ago. In addition to increased investment levels described above, this decrease in net income was influenced by increased interest expense related to the senior unsecured notes offering completed in the third quarter of last fiscal year, as well as year-over-year non-operational, non-cash currency impacts.
- GAAP net income per diluted share for the first quarter was $0.30, versus $0.71 in the same quarter a year ago.
- Capital expenditures in the first quarter were $24.4 million, or 6.5 percent of revenue.
- During the first quarter, the company generated $25.7 million of cash from operations and $(1.9) million in free cash flow, which is defined at the end of this press release.
- As of Sept. 30, 2015, the company had $93.8 million in cash and cash equivalents and $655.3 million of debt net of issuance costs. After considering debt covenant limitations, as of September 30, 2015 the company had $430.7 million available for borrowing under its committed credit facility.
- During the quarter, the company purchased 1,976,250 of its ordinary shares for $140.2 million, inclusive of transaction costs, at an average per-share cost of $70.95, as part of the share repurchase program authorized by the supervisory board in December 2014.
"Although it is still early in the year and we have much left to accomplish, our investments are on track with the plans we previously communicated," said Sean Quinn, chief financial officer. "Please reference our investor day presentation from August for a reminder of the forecasted impact of discretionary long-term investment spend in fiscal 2016. Our overall outlook remains unchanged, though we have updated our forward-looking revenue commentary in our first quarter earnings presentation to reflect our new segment definitions."
Important Reminder of Cimpress’ Priorities
Cimpress asks investors and potential investors in Cimpress to understand the upper-most objectives by which it endeavors to make all decisions, including investment decisions. Often it 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.
Cimpress' 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.
Cimpress N.V. (Nasdaq: CMPR) is the world leader in mass customization. For 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.