Cimpress Describes Actions Taken to Focus on Execution During and After the Pandemic and Announces Preliminary Third Quarter Fiscal Year 2020 Financial Results
Through the end of February, in line with our prior expectations, Cimpress’ quarter-to-date revenue, adjusted EBITDA and adjusted free cash flow all grew over the same quarter-to-date results in the prior year. However, the COVID-19 pandemic is impacting Cimpress’ small business customers around the world, which has led to materially reduced demand for our products starting in
Because the ultimate duration and scope of the pandemic cannot be known, Cimpress took the following measures during March and
Signed an amendment to our senior secured credit agreement to provide a temporary suspension of prior maintenance covenants and signed a purchase agreement to raise new capital to provide a partial pay down to senior secured credit facility lenders. We expect both transactions to close on or about
May 1, 2020.
- Enacted significant cost-reduction and cash-preservation measures.
- Maintained operational continuity to the greatest extent feasible while prioritizing the health and safety of our team members.
- Protected key investments in technology, data infrastructure and customer value improvements.
Temporary Maintenance Covenant Suspension and Capital Raise
Related to the amendment, on
The investment, which will be made by funds in the Apollo hybrid value business, is structured as 5-year second lien notes with a 12% coupon, of which up to 50% can be paid-in-kind at Cimpress’ option. Cimpress may prepay these notes in whole or in part after the first anniversary with a 3% premium, after the second anniversary with a 1% premium, and after the third anniversary with no premium with proceeds from certain debt financings. The Apollo Funds will also receive 7-year warrants to purchase approximately 3.875% of Cimpress’ outstanding diluted ordinary shares. The warrants will have an exercise price of
Subject to the satisfaction of various closing conditions, we expect to close and enter into the amendment and to close and issue the notes and warrants described above on or about
J.P. Morgan served as placement agent to Cimpress in connection with the private placement.
Cost Reduction and Cash Preservation Measures
Cimpress is working to make use of government support programs globally, as appropriate. In many locations in which we operate and employ many of our team members, including in
Cimpress has also proactively partnered with suppliers and landlords to delay more than
None of the actions taken to date has resulted in material restructuring charges.
Maintaining Operational Continuity
In these extraordinary pandemic times, Cimpress’ first priority has been to safeguard the health and safety of its team members. All team members who have the ability to do so have been working from home and are doing so productively. In cases where it is not possible for team members to work from home, such as in manufacturing or some customer service roles, Cimpress businesses are ensuring compliance with relevant laws and health guidelines and best practice, such as social distancing, temperature checks, mandatory face masks or face shields, and frequent deep cleaning of facilities.
Several Cimpress manufacturing and service locations have experienced temporary closures, but the vast majority of these operations have remained open or have reopened. Cimpress’ mass customization platform has been used in several circumstances to reroute customer orders to be produced by other facilities within the Cimpress network. Likewise, for several of our largest customer service facilities, work has been rerouted to other facilities as needed.
Cimpress plans to continue investing in technology, quality and cost improvements, data and analytics, new products and selective recruitment of talented team members.
Preliminary Third Quarter FY 2020 Financial Results
Cimpress’ results of operations for the three months ended
Total revenue of approximately
$598 million, a 10% year-over-year decline. Consolidated revenue grew 2% year over year through February in reported currencies but declined 30% in the month of March. Demand worsened through the month of March, with consolidated bookings declining approximately 65% year over year in the last week of the month and first week of April. In the week ended Saturday April 25, the rate of year-over-year decline lessened to approximately 40% as our customer and product focus has evolved in reaction to the current situation. Underneath those consolidated numbers, the impact of the pandemic on revenue growth has differed significantly by business, country, product line and week.
An operating loss of approximately
$88 million, inclusive of goodwill impairment charges of approximately $101 milliondue to the change in outlook in several businesses, including VIDA, which we divested subsequent to the end of March.
Adjusted EBITDA of approximately
$71 million, a year-over-year decline of 20%. This is a non-GAAP measure that excludes the following approximate items from the operating loss above: $101 millionof goodwill impairment charges, $42 millionof depreciation and amortization expense, $9 millionof share-based compensation, $1 millionof asset disposal losses, and $1 millionof restructuring charges. Additionally, adjusted EBITDA includes approximately $5 millionof realized gains for currency derivatives that are included below operating income in our income statement.
Total debt of approximately
$1,672 million, a cash balance of $228 million, gross leverage of 3.42 times trailing-twelve-month EBITDA and net leverage of 2.96 times trailing-twelve-month EBITDA using definitions in our debt covenants.
“Even though deep economic recessions are painful, they also create opportunities and accelerate competitive advantages for companies with strong business models that focus on execution, invest in key projects, and improve customer value. Our recent actions ensure that Cimpress remains financially robust during these uncertain times so that we can do exactly that,” Keane concluded.
Cimpress plc (Nasdaq: CMPR) invests in and builds customer-focused, entrepreneurial, mass customization businesses for the long term. Mass customization is a competitive strategy which seeks to produce goods and services to meet individual customer needs with near mass production efficiency. Cimpress businesses include BuildASign, Drukwerkdeal, Exaprint, National Pen, Pixartprinting, Printi, Vistaprint and WIRmachenDRUCK. To learn more, visit http://www.cimpress.com.
Cimpress and the Cimpress logo are trademarks of Cimpress plc or its subsidiaries. All other brand and product names appearing on this announcement may be trademarks or registered trademarks of their respective holders.
The securities of Cimpress to be sold in the potential transactions described above have not been and will not be registered under the Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold in
This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities of Cimpress, nor will there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction.
This press release contains statements about our future expectations, plans, and prospects of our business that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, including the anticipated closing of the transactions described in this press release, Cimpress’ liquidity and future cash flows, potential effects of the COVID-19 pandemic, and the expected effects of the actions we are taking. Forward-looking projections and expectations are inherently uncertain, are based on assumptions and judgments by management, and may turn out to be wrong. If the closing conditions to the transactions described in this press release are not satisfied, then one or both transactions may be delayed or may not close at all. Our actual results may differ materially from those indicated by the forward-looking statements in this document as a result of various important factors, including but not limited to flaws in the assumptions and judgments upon which our forecasts and estimates are based; the development, duration, and severity of the COVID-19 pandemic; our failure to anticipate and react to the effects of the pandemic on our customers, supply chain, markets, team members, and business; our inability to take the actions that we plan to take or the failure of those actions to achieve the results we expect; loss or unavailability of key personnel; general economic conditions; and other factors described in our Form 10-K for the fiscal year ended
Source: Cimpress plc