Cimpress Reports Solid Q2, Led by Vistaprint Sales, Settlement From Fire at Dutch Plant
VENLO, Netherlands—January 28, 2016—Cimpress N.V., the world leader in mass customization, has announced financial results for the three-month period ended Dec. 31, 2015, the second quarter of its 2016 fiscal year.
"Our second quarter results reflect successful execution in pursuit of long-term value creation," said Robert Keane, president and CEO. "In line with the objectives that we discussed in detail during ourAugust 2015 investor day, we deployed significant capital and resources across a broad group of long-term investments that we believe are expanding our foundation for future success."
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, Vistaprint Business Unit advertising and technology, and other key areas.
"Our financial results this quarter reflected strong holiday sales in the Vistaprint Business Unit, continued success in the Upload and Print segment, and a slower-than-anticipated decline of partnership-related revenue," explained Sean Quinn, chief financial officer. "Despite increased investments in key areas, our operating income and adjusted NOPAT grew year over year. This was due to strength across the business, as well as the recovery of $2 million of insurance proceeds included in cost of goods sold related to a previously described fire in our Dutch production facility that impacted first-quarter results. GAAP net income declined year over year, due largely to increased interest expense from our March 2015 senior notes offering. Free cash flow was also down year over year, in line with our expectations and investment plans. Even so, we were able to pay down over $100 million of debt during this seasonally strong quarter."
Quinn continued, "Year-to-date adjusted NOPAT growth of 10.2 percent versus the prior year reflects strength in the underlying profitability of our business, and long-term investment spending that is largely in line with plans presented in our August 2015 investor day. Aggregate year-to-date investment across categories is modestly lower than originally planned, particularly in capital expenditures. In the second half of the fiscal year we intend to continue to invest across our previously described strategic initiatives. Taking management bandwidth and debt limitations into consideration, we will continue to look for additional opportunities to make value-creating investments.
"One such investment is our planned acquisition of WIRmachenDRUCK. Should that close in early February as currently planned, we expect to see an increase in our fiscal 2016 revenue, adjusted NOPAT, adjusted EBITDA and free cash flow relative to our current expectations, and we should see slight pressure on net income due to increased interest and intangible asset amortization expense," Quinn concluded.
Consolidated Financial Metrics:
- Revenue for the second quarter of fiscal year 2016 was $496.3 million, a 13 percent increase compared to revenue of $439.9 million in the same quarter a year ago. The year-over-year strengthening of the U.S. dollar negatively impacted the company's revenue growth rate. Excluding the estimated impact from currency exchange rate fluctuations, revenue growth was 20 percent, and excluding both the currency impact and revenue from businesses acquired during the past twelve months, revenue grew 10 percent year over year in the second quarter.
- Gross margin (revenue minus the cost of revenue as a percent of total revenue) in the second quarter was 60.2 percent, down from 64.4 percent in the same quarter a year ago due primarily to the increased weighting of Cimpress' Upload and Print businesses.
- Adjusted NOPAT for the second quarter, was $82.5 million, or 16.6 percent of revenue, up from $67.1 million, or 15.3 percent of revenue, in the same quarter a year ago.
- Operating income in the second quarter was $67.6 million, or 13.6 percent of revenue, an increase in absolute dollars, but flat as a percent of revenue compared to $59.9 million, or 13.6 percent of revenue, in the same quarter a year ago.
- GAAP net income for the second quarter was $58.4 million, or 11.8 percent of revenue, compared to GAAP net income of $63.6 million, or 14.5 percent of revenue in the same quarter a year ago. While operating income increased, net income was negatively 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 second quarter was $1.80, versus $1.89 in the same quarter a year ago.
- Capital expenditures in the second quarter were $19.2 million, or 3.9 percent of revenue.
- During the second quarter, the company generated $134.0 million of cash from operations and $109.1 million in free cash flow. These numbers were negatively impacted by a year-over-year increase in cash interest expense of $10.4 million.
- As of December 31, 2015, the company had $73.2 million in cash and cash equivalents and $547.7 million of debt net of issuance costs. After considering debt covenant limitations, as of December 31, 2015 the company had $564.7 million available for borrowing under its committed credit facility.
- During the quarter, the company purchased 26,585 of its ordinary shares for $2.0 million, inclusive of transaction costs, at an average per-share cost of $74.97, as part of the share repurchase program authorized by the Supervisory Board in December 2014.
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, the company 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 the company's best judgment, will occur between now and the long-term future, appropriately discounted to reflect its 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 12 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 company's 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. Second 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 and Tradeprint.
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.
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 the company's 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.
Source: Cimpress N.V.