Cimpress plc — Form 10-Q summary
Period clarification: The filing covers the three and nine months ended March 31, 2022 (fiscal Q3 2022), not 2021 as stated in the request metadata. Unless noted otherwise, dollar amounts below are in millions.
Business context and reporting period
Cimpress operates a group of mass-customization businesses selling print, signage, design, photo products, promotional items and related services. Its five reportable segments are Vista, PrintBrothers, The Print Group, National Pen and All Other Businesses. During fiscal 2022, Vistaprint’s brand architecture began evolving to Vista; the reporting structure was unchanged.
Financial performance and liquidity
| Metric | Q3 FY2022 | Q3 FY2021 | Nine months FY2022 | Nine months FY2021 |
|---|---|---|---|---|
| Revenue | $657.4 | $573.4 | $2,164.7 | $1,940.8 |
| Operating income (loss) | $(28.4) | $(15.7) | $74.5 | $114.5 |
| Net income (loss) attributable to Cimpress | $(71.8) | $(39.1) | $(23.7) | $(17.5) |
| Diluted loss per share | $(2.75) | $(1.50) | $(0.91) | $(0.67) |
| Adjusted EBITDA, non-GAAP | $33.6 | $55.0 | $243.3 | $286.9 |
Q3 gross margin was approximately 47.1%, down from 48.3%; operating margin was approximately (4.3)%, compared with (2.7)%. For the nine-month periods, operating margin was approximately 3.4%, versus 5.9%. The filing identifies no separate consolidated net profit for these periods: Cimpress reported net losses.
Nine-month operating cash flow was $131.7, down from $218.9. Adjusted free cash flow, a non-GAAP measure, was $39.7 versus $150.9. Investing cash outflow was $48.6 and financing cash outflow was $98.7. Cash and cash equivalents were $161.5 at March 31, 2022; marketable securities were $107.8, and debt carrying value was $1,710.4. The company reported credit-agreement net leverage of 4.44x trailing-twelve-month adjusted EBITDA. It had no revolving-credit borrowings and reported compliance with debt covenants.
Material changes and management commentary
- Q3 revenue grew 15% reported, or 19% at constant currency; constant-currency growth excluding recent acquisitions was 17%. Nine-month revenue grew 12% reported, or 13% at constant currency and 11% excluding acquisitions.
- Revenue increased across all reportable segments. PrintBrothers and The Print Group showed strong growth and higher segment EBITDA; National Pen’s revenue and nine-month EBITDA also improved. Vista revenue grew, but Vista EBITDA fell to $27.4 from $64.3 in Q3 and to $188.1 from $266.8 year to date.
- Management attributed pressure on profitability to Vista growth investments and advertising, higher input and labor costs, and increased share-based compensation. Pricing and operational efficiencies partly offset inflation. The prior-year quarter included a $19.9 impairment that did not recur.
- Vista’s U.S. customer website migration performed better than expected but had a negative revenue effect. Lower demand for pandemic-related products, including masks, affected comparisons.
- Operating cash flow and adjusted free cash flow declined; management cited lower operating income and unfavorable year-over-year working-capital comparisons, including prior-period cash-preservation measures.
Outlook, risks and unusual items
- No specific revenue, earnings or cash-flow guidance is provided. Management expects higher input costs and supply constraints to persist but cannot predict their duration; it said pricing has not fully offset cost increases. Management expects to deleverage in fiscal 2023.
- Key risks include inflation in materials, freight, energy and wages; price increases potentially reducing demand; supply-chain disruption; pandemic developments; competition; execution of Vista’s transformation; and the ability to service debt and comply with covenants.
- Management said Cimpress had no material exposure to Russia or Ukraine in revenue, supply or tangible assets. It has employees in Ukraine through Depositphotos and is providing assistance; associated costs were described as immaterial.
- A $29.6 partial valuation allowance on Swiss deferred tax assets contributed to higher tax expense and the Q3 loss. Nine-month income tax expense was $56.2.
- The company acquired Depositphotos for a purchase price of $84.9 in October 2021 and acquired approximately 75% of a European company for $11.2 in January 2022. It also paid $43.6 of deferred 99designs purchase consideration during the period.
- The filing revised prior-period presentation for an immaterial 99designs one-to-one design revenue error and corrected foreign-currency hedge accounting errors. The latter reduced previously reported gains by $9.0 for the September 2021 quarter; management concluded the errors were not material to prior periods.
- National Pen recorded $3.4 of restructuring expense, primarily for moving European production from Ireland to the Czech Republic. Further charges are expected over the next 12 months and are not expected to be material.
- There were no material legal proceedings disclosed. The company reported $207.5 of unrecorded purchase commitments and $8.6 of deferred acquisition payments.
Important facts for investors to verify
- Confirm the fiscal-period comparison: this is fiscal Q3 2022, ended March 31, 2022.
- Track whether Vista’s investment and advertising spending translates into sustained growth and improved segment profitability.
- Assess the persistence of inflation and supply constraints, the effectiveness of pricing actions, and any resulting demand impact.
- Monitor leverage, cash generation and progress toward management’s stated fiscal 2023 deleveraging expectation, including debt costs and covenant headroom.
- Review the effects of the Swiss tax valuation allowance, currency-derivative volatility, and the completed prior-period revisions on future reported results.