Cimpress plc — Form 10-Q Summary
Reporting period: First quarter of fiscal 2022, the three months ended September 30, 2021; comparison is with the three months ended September 30, 2020. Cimpress operates a portfolio of mass-customization businesses. Its Vistaprint segment began adopting the parent brand “Vista.” Amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 FY22 | Prior-year quarter | Change / context |
|---|---|---|---|
| Revenue | $657.6 million | $586.5 million | Up 12%; up 11% at constant currency and 9% excluding acquisitions |
| Gross profit / margin | $318.6 million / 48.5% | $287.7 million / 49.0% | Margin declined about 0.5 percentage point |
| Operating income / margin | $16.9 million / 2.6% | $36.0 million / 6.1% | Down $19.0 million |
| Net income (loss) attributable to Cimpress | $2.3 million | $(10.8) million | Turned positive, aided substantially by other income and lower interest expense |
| Diluted earnings (loss) per share | $0.09 | $(0.41) in the financial statements | MD&A cites prior-year loss per share of $0.39; verify the discrepancy |
| Adjusted EBITDA (non-GAAP) | $67.6 million | $88.5 million | Down $20.9 million; margin approximately 10.3% versus 15.1% |
| Cash from operating activities | $36.6 million | $105.7 million | Down $69.1 million |
| Adjusted free cash flow (non-GAAP) | $12.3 million | $82.5 million | Down $70.2 million |
Cash and cash equivalents were $193.2 million; marketable securities totaled $192.4 million, for $385.7 million in combined cash and securities. Debt, excluding issuance costs and premiums or discounts, was $1.752 billion. The company had no revolver borrowings and reported $244.0 million of available revolver capacity; it was in compliance with debt covenants. Current assets of $574.1 million were below current liabilities of $663.2 million. Cash flow included $24.3 million of capital expenditures and capitalized software and website development costs combined.
Business and segment trends
- Vista: Revenue increased 6% reported, but segment EBITDA declined 25% to $68.0 million. Organic constant-currency growth was 2%; 99designs contributed acquisition revenue. Higher advertising and transformation investment weighed on earnings.
- PrintBrothers: Revenue rose 25% and segment EBITDA rose 68% to $16.3 million, supported by economic recovery, new products, and German election-related demand.
- The Print Group: Revenue rose 10% and segment EBITDA rose 18% to $14.4 million.
- National Pen: Revenue rose 2%; segment EBITDA improved to a loss of $8.0 million from a loss of $10.7 million, reflecting improved product mix and cost reductions.
- All Other Businesses: Revenue rose 10%, while segment EBITDA fell 43% to $4.9 million amid higher advertising and input costs.
Material changes, outlook, and risks
- Management said demand was nearing pre-pandemic levels, with recovery in some product categories and continued weakness in certain marketing-material products. Face-mask demand fell materially year over year.
- Increased hiring, technology and other growth investment, normalized advertising, higher compensation, and reduced government wage incentives more than offset profit gains from higher revenue. Adjusted EBITDA also faced an approximately $4.0 million unfavorable year-over-year currency impact.
- Supply-chain disruption raised costs for materials, freight, shipping, and labor. Pricing and manufacturing-efficiency measures largely offset the effects on gross profit in the quarter, but management expected inflation, cost volatility, and pockets of product-availability challenges to continue through the fiscal year and possibly beyond.
- Other income was $22.2 million versus an $8.8 million expense a year earlier, mainly reflecting derivative and currency-related gains. Management cautioned that GAAP earnings may remain volatile because most currency derivatives do not receive hedge accounting.
- Interest expense declined $4.8 million year over year following the fiscal 2021 refinancing. A hypothetical 100-basis-point rate increase, after swaps, was estimated to raise interest expense by $4.0 million over the next 12 months.
- The effective tax rate was 69.8%; management attributed the higher tax burden to earnings mix and losses in jurisdictions where tax benefits could not be recognized. Tax examinations or resolution of uncertain tax positions could affect results or cash flows.
- No quantified revenue, earnings, or cash-flow guidance is provided in the supplied filing text. Management described ongoing investment in technology, data, products, customer experience, and Vista’s brand evolution, while aiming to preserve cost flexibility.
- On October 1, 2021, after quarter-end, Cimpress acquired Depositphotos for $84.8 million, subject to adjustment, using available cash. The acquisition will be managed within Vista.
Other notable disclosures
- The company identified an immaterial prior-period revenue presentation error for 99designs one-to-one design services, concluding it acted as agent and should report those transactions net. The filing says this did not affect operating income, balance sheets, or cash flows and did not affect the comparative quarter presented; certain later fiscal 2021 revenue and cost-of-revenue figures will be revised.
- Unrecorded contractual purchase commitments were $250.5 million. Deferred acquisition payments were $44.9 million, including $44.4 million due in February 2022 for 99designs.
- The filing reports no material legal proceedings and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Reconcile the prior-year diluted loss per share: the financial statements show $(0.41), while MD&A cites $(0.39).
- Assess whether revenue recovery, especially outside Vista, can offset Vista’s lower segment EBITDA and the higher investment and advertising base.
- Track supply-chain and labor inflation, pricing effectiveness, shipping costs, and product availability as the fiscal year progresses.
- Monitor cash generation against substantial debt, contractual commitments, and the cash-funded Depositphotos acquisition; confirm the impact on liquidity and leverage.
- Evaluate the effect of foreign-exchange and derivative volatility on reported earnings, and monitor variable-rate debt exposure and covenant headroom.