Cimpress N.V. — Form 10-Q Summary
Business context and period. This filing covers fiscal third-quarter and year-to-date results for the three and nine months ended March 31, 2019; the company’s fiscal year ends June 30. Cimpress is a decentralized group of mass-customization businesses selling primarily customized print and related products, with reportable segments Vistaprint, Upload and Print, National Pen, and All Other Businesses. All dollar amounts below are U.S. dollars.
Key financial results
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Revenue | $661.8 million, up 4% reported and 9% constant currency; 3% constant-currency growth excluding acquisitions/divestitures | $2,076.4 million, up 6% reported and 9% constant currency; 6% constant-currency growth excluding acquisitions/divestitures |
| Operating income | $29.6 million, versus $16.6 million | $114.2 million, versus $135.9 million |
| Net income attributable to Cimpress | $6.5 million, versus a $2.3 million loss; diluted EPS $0.21 versus $(0.07) | $60.9 million versus $51.0 million; diluted EPS $1.92 versus $1.58 |
| Cash flow | Quarterly cash-flow figures are not provided in the filing text | Operating cash flow $222.5 million versus $144.6 million; free cash flow $129.9 million versus $116.6 million |
| Debt and liquidity at March 31, 2019 | $1,087.6 million total debt before debt issuance costs and discounts; $44.3 million cash; approximately $438.8 million available to borrow under the senior secured facility, subject to covenant and use restrictions |
Gross margin was 48.2% for the quarter versus 49.8% a year earlier, and 49.1% year to date versus 50.9%. Operating margin was approximately 4.5% versus 2.6% for the quarter and 5.5% versus 6.9% year to date. Current assets were $273.6 million and current liabilities $517.9 million at March 31.
Changes versus prior comparable periods
- Quarterly revenue growth reflected BuildASign, acquired October 1, 2018, and growth in Upload and Print; currency reduced reported growth. Excluding acquisitions and divestitures, constant-currency growth was 3%.
- Quarterly operating income improved by $13.0 million, principally from Vistaprint advertising reductions and lower share-based compensation, partly offset by $5.5 million more restructuring expense. Year-to-date operating income fell $21.7 million, mainly because the prior year included a $47.5 million Albumprinter sale gain.
- Year-to-date adjusted net operating profit, a company-defined non-GAAP measure, increased to $175.6 million from $129.4 million. Quarterly adjusted NOP was $55.2 million versus $25.3 million.
- Operating cash flow increased $77.8 million year to date; free cash flow rose $13.2 million. Investing cash outflow was $381.6 million, including $289.9 million for acquisitions, while financing provided $161.9 million.
- Debt increased from $839.4 million at June 30, 2018, principally reflecting borrowing for BuildASign. Interest expense rose to $47.4 million year to date from $38.3 million.
Management commentary, outlook, risks, and unusual items
- Management said Vistaprint’s constant-currency growth slowed as it reduced advertising that did not meet return thresholds; it cited lower new-customer revenue. National Pen growth was affected by reduced prospecting and supply-chain delays in direct-mail campaigns. Upload and Print continued to grow amid price-focused competition, paper-cost inflation, and currency headwinds.
- Management expects available cash, operating cash flow, and committed borrowing capacity to be sufficient for liabilities and planned investments. It provided no specific revenue or earnings guidance in the supplied filing text. Capital allocation may include organic investment, share repurchases, acquisitions, or debt reduction.
- Management expects additional Vistaprint restructuring charges in fiscal fourth quarter. Early-stage businesses in All Other Businesses are expected to continue operating at a loss over the next several years.
- The BuildASign acquisition cost $275.1 million; it contributed $3.1 million of quarterly and $7.7 million of year-to-date segment profit. Goodwill rose to $720.7 million from $520.8 million, largely reflecting acquisitions. VIDA was also acquired during the period.
- Adoption of ASC 606 changed the timing of National Pen direct-mail advertising costs—now expensed when sent rather than capitalized and amortized—causing quarterly earnings variability but, management said, no significant annual or cash-flow impact. The standard’s effect on reported net income was a $1.4 million decrease for the quarter and a $0.4 million increase year to date versus the prior accounting method.
- Management reversed $15.4 million of previously recognized supplemental performance-share-unit expense after concluding the performance condition was no longer probable. A Printi-related reserve and reclassification reduced results by $0.6 million of expense in the quarter, with $15.1 million total reserve against the related loan receivable.
- Key risks include substantial leverage and variable-rate borrowing, foreign-exchange and hedge-related volatility, competitive pressure and pricing, seasonal earnings concentration in the December quarter, acquisition integration and goodwill recoverability, supply-chain disruption, and tax uncertainty. A 100-basis-point rate increase was estimated to add about $1.7 million of interest expense over 12 months. The company reported compliance with debt covenants and no material legal proceedings; it had $4.9 million of unrecognized tax benefits. Cimpress moved its tax residence from the Netherlands to Ireland on February 12, 2019, with no material fiscal-2019 tax-provision effect expected.
Important facts for investors to verify
- Whether Vistaprint can restore growth and customer conversion while rebuilding marketing tools, and whether National Pen resolves direct-mail operational delays.
- BuildASign’s post-acquisition performance, integration progress, and the assumptions supporting the larger goodwill and acquired intangible-asset balances.
- Debt-service capacity and borrowing availability under covenants, including exposure to variable interest rates and the 7.0% senior notes due 2026.
- Underlying cash generation: reconcile company-defined free cash flow and adjusted NOP with GAAP results, acquisition spending, and the business’s seasonal December-quarter dependence.
- Potential effects of restructuring, currency hedges, tax audits and reserves, and the upcoming lease-accounting adoption, which management expected to materially affect the balance sheet.