UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
Form 8-K
_________________________________________
CURRENT REPORT |
Pursuant to Section 13 or 15(d) |
of the Securities Exchange Act of 1934 |
Date of Report (Date of earliest event reported): November 1, 2017 |
__________________________________________
Cimpress N.V.
(Exact Name of Registrant as Specified in Its Charter)
__________________________________________
The Netherlands | 000-51539 | 98-0417483 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
Hudsonweg 8 | ||
Venlo | 5928 LW | |
The Netherlands | (Zip Code) | |
(Address of Principal Executive Offices) | ||
Registrant’s telephone number, including area code: 31-77-850-7700
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
__________________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | ||||
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||
Indicate by check mark whether the registrant is an emerging growth company, as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12.b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. Results of Operations and Financial Condition
On November 1, 2017, Cimpress N.V. issued a press release announcing its financial results for the first quarter ended September 30, 2017 and posted on its web site (ir.cimpress.com) a presentation with a script discussing its first quarter financial results. The full text of the press release is furnished as Exhibit 99.1 to this report, and the presentation with the script is furnished as Exhibit 99.2.
The information in this Item 2.02 and the exhibits to this report are not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor are they incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
November 1, 2017 Cimpress N.V.
By: | /s/ Sean E. Quinn | |
Sean E. Quinn | ||
Executive Vice President and Chief Financial Officer | ||
Contacts:Investor Relations:
Jenna Berg
ir@cimpress.com
+1.781.652.6480
Media Relations:
Paul McKinlay
mediarelations@cimpress.com
Cimpress Reports First Quarter Fiscal Year 2018 Financial Results
• | First quarter 2018 results: |
◦ | Revenue grew 27 percent year over year to $563.3 million |
◦ | Revenue grew 12 percent year over year excluding the impact of currency exchange rate fluctuations and revenue from businesses acquired or divested during the past twelve months |
◦ | GAAP income from operations was $46.6 million in the current period versus a loss from operations of $27.8 million in the year-ago period, largely due to a gain on the sale of Albumprinter, significantly lower acquisition-related charges, and restructuring savings |
◦ | GAAP net income per diluted share was $0.72 in the first quarter of 2018 versus a GAAP net loss per diluted share of $0.92 in the year-ago period due to the items above partially offset by significant non-cash currency-related losses |
◦ | Adjusted Net Operating Profit (Adjusted NOP) was $10.4 million in the current period versus $2.7 million in the year-ago period |
Venlo, the Netherlands, November 1, 2017 -- Cimpress N.V. (Nasdaq: CMPR), the world leader in mass customization, today announced financial results for the first quarter of its fiscal year ended September 30, 2017.
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"We are off to a solid start for fiscal year 2018," said Robert Keane, president and chief executive officer. "Our businesses delivered strong results in terms of the value they are creating for their customers, and our financial results are on track relative to our internal objectives for fiscal year 2018 growth in revenue and unlevered free cash flow. We entered this fiscal year with our new decentralized operating structure that we announced on January 25, 2017, and we have seen the intended benefits, including tightened coordination between marketing and manufacturing activities throughout our businesses, reduction of complexity and costs, and an improved ability to evaluate performance and assess returns on the capital we invest."
Keane continued, "That decentralization resulted, among many other changes, in the transfer to Vistaprint of nearly three thousand team members who were previously in central teams. We continue to see evidence that the Vistaprint business has successfully strengthened its customer value proposition and improved customer retention. Following more than six months of experience with their newly integrated organization, the Vistaprint leadership team has taken the difficult but appropriate decision to reorganize the business. These changes will reduce headcount and other operating costs, but also simplify and streamline operations and more closely align functions to increase the speed of execution. We believe these changes will improve the steady-state free cash flow of this business and, importantly, free up capital to reinvest in other areas of Vistaprint that provide the greatest benefit to our customers and our long-term shareholders."
Cimpress expects the Vistaprint headcount and cost reductions to be largely implemented over the coming two months and believes they will reduce fiscal year 2018 operating expenses by between $20 million and $22 million. Based on a preliminary assessment of these potential actions, the company expects to take a restructuring charge of approximately $15 million to $17 million during the quarter ending December 31, 2017, but we expect net savings for the full fiscal year 2018. Cimpress will provide additional information in its second quarter earnings documents after the Vistaprint restructuring is implemented.
Sean Quinn, chief financial officer, said, "First quarter revenue growth by segment was in line with our commentary at the beginning of the year. Our profits increased significantly year over year due in part to savings from the decentralization we announced last January and some non-operational benefits described below. Conversely, as anticipated, we continue to see pressure
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on Vistaprint's incremental gross profit from the rapid expansion of new products and design services. As described at our August 8, 2017 investor day, we believe that Vistaprint has multiple pricing and operating levers to alleviate some of this pressure throughout fiscal year 2018 as we scale the new product offerings, but we expect it to take time. In the meantime, our revenue from newly launched products continues to grow strongly, so the mix effect on our profitability is meaningful: Vistaprint's gross margin was about 400 basis points lower this quarter compared to the same period last year. Finally, we remain on track to reduce our leverage to approximately three times trailing-twelve month EBITDA by the end of our second fiscal quarter despite repurchasing $41 million of Cimpress shares during the first quarter."
The following year-over-year items positively influenced GAAP operating income in the first quarter:
• | A $47.5 million gain on the sale of our Albumprinter business, net of transaction costs. The amount of this gain was influenced by the partial allocation of goodwill to our other businesses in past periods, and the minimal carrying value of acquired intangible assets related to Albumprinter at the time of the sale, partially offset by negative currency-related impacts. |
• | Net restructuring savings of approximately $10 million related to the decentralization announced on January 25, 2017. These savings were realized largely in technology and development and general and administrative costs. From a segment reporting perspective, about half of the savings benefit Vistaprint's Segment Profit, with the bulk of the remaining benefit in our central and corporate costs. |
• | A year-over-year decrease in acquisition-related charges as follows: First, earn-out related charges were $15.1 million lower in the first quarter of fiscal year 2018 versus the prior-year period. Share-based compensation related to investment consideration also decreased year over year by $4.1 million. These reductions were partially offset by an increase in acquisition-related amortization of intangible assets of $2.5 million. |
• | Favorable year-over-year currency fluctuations that were offset below the line by year-over-year changes in realized gains and losses from hedging contracts in other expense, net. |
Quinn added, "As we look ahead to the remainder of fiscal year 2018, we are on track to recognize the financial benefits of the decentralization announced last January in line with our past commentary. We now also expect to recognize net savings and organizational benefits
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from the Vistaprint restructuring announced today. Finally, we see no material changes to our planned investment spend that we outlined in detail in our letter to investors dated July 26, 2017."
Sale of Albumprinter Business:
As anticipated, on August 31, 2017 we sold our Albumprinter business, net of transaction costs and based on the exchange rate as of the date of sale, for $93.1 million plus $11.9 million in pre-closing dividends. In connection with the divestiture, we have entered into an agreement under which Albumprinter will continue to fulfill photobook orders for our Vistaprint business via our mass customization platform.
Consolidated Financial Metrics:
• | Revenue for the first quarter of fiscal year 2018 was $563.3 million, a 27 percent increase compared to revenue of $443.7 million in the same quarter a year ago. Excluding the estimated impact from currency exchange rate fluctuations and revenue from businesses acquired or divested during the past twelve months, revenue grew 12 percent year over year in the first quarter. |
• | Gross margin (revenue minus the cost of revenue as a percent of total revenue) in the first quarter was 49.6 percent, down from 52.0 percent in the same quarter a year ago due to lower Vistaprint gross margins as a result of significant growth in lower-margin new products which are not yet at scale, as well as a continued mix shift toward our Upload and Print businesses which have a lower gross margin than our Vistaprint and National Pen businesses. |
• | Contribution margin (revenue minus the cost of revenue, the cost of advertising and payment processing as a percent of total revenue) in the first quarter was 31.0 percent, down from 32.5 percent in the same quarter a year ago. Advertising spend as a percent of revenue declined year over year for the first quarter, which partially offset the decline in gross margin as described above. |
• | GAAP operating income in the first quarter was $46.6 million, or 8.3 percent of revenue, compared to an operating loss of $27.8 million, or 6.3 percent of revenue, in the same quarter a year ago. The drivers of this significant improvement are described above, before the "Sale of Albumprinter Business" section of this release. |
• | Adjusted NOP for the first quarter, which is defined at the end of this press release, was $10.4 million, or 1.8 percent of revenue, up from $2.7 million, or 0.6 percent of revenue, |
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in the same quarter a year ago. This increase is primarily due to the savings from our fiscal year 2017 decentralization.
• | GAAP net income attributable to Cimpress for the first quarter was $23.4 million, or 4.1 percent of revenue, compared to a net loss of $29.1 million, or 6.6 percent of revenue in the same quarter a year ago. In addition to the impacts described above, GAAP net income was negatively influenced by year-over-year non-operational, non-cash currency impacts, and a reduction in our tax benefit in the current period compared to the year-ago period due to lower discrete tax benefits in the current period compared to the same prior-year period. In addition, we adopted a new accounting standard (ASU 2016-16) effective this quarter which changes how we account for the tax effects of certain intra-entity sales. We expect this change will be unfavorable to our GAAP tax expense and effective tax rate for the year, but in no way changes our current or future cash taxes. |
• | GAAP net income per diluted share for the first quarter was $0.72, versus a net loss of $0.92 in the same quarter a year ago. |
• | Capital expenditures in the first quarter were $20.5 million or 3.6 percent of revenue, versus $19.3 million, or 4.4 percent of revenue in the same quarter a year ago. |
• | During the first quarter, we generated $16.4 million of cash from operations and $(6.5) million in unlevered free cash flow, a non-GAAP financial measure, which is defined at the end of this press release. Cash from operations was impacted by approximately $4 million of payments related to our January 2017 restructuring as well as transaction costs from the sale of Albumprinter. |
• | As of September 30, 2017, we had $42.8 million of cash and cash equivalents and $820.8 million of debt, net of issuance costs. After considering debt covenant limitations, as of September 30, 2017 the company had $262.4 million available for borrowing under its committed credit facility. Based on Cimpress' debt covenant definitions, its total leverage ratio was 3.39 as of September 30, 2017. The company continues to expect to reduce its leverage ratio to approximately 3 times trailing twelve month EBITDA by the end of calendar year 2017 through a combination of debt repayment and EBITDA expansion. |
• | During the first quarter, Cimpress repurchased 452,820 shares for $40.7 million inclusive of transaction costs, at an average price per share of $89.82. |
Supplemental Materials and November 2, 2017 Conference Call Information
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Cimpress has posted an end-of-quarter presentation with accompanying prepared remarks at ir.cimpress.com. On Thursday, November 2, 2017 at 7:30 a.m. (EDT) the company will host a live Q&A conference call with management to discuss the financial results, which will be available via webcast at ir.cimpress.com and via dial-in at +1 (844) 778-4144, conference ID 86537588. A replay of the Q&A session will be available on the company’s website following the call on November 2, 2017.
Important Reminder of Cimpress’ Priorities
We ask investors and potential investors in Cimpress to understand the upper-most objectives by which we endeavor to make all decisions, including investment decisions. Often we make 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 net income, operating income, EPS, cash flow, EBITDA, and Adjusted NOP.
Our priorities are:
• | Strategic Objective: To be the world leader in mass customization. By mass customization, we mean 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 our best judgment, will occur between now and the long-term future, appropriately discounted to reflect our 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 26, 2017 at ir.cimpress.com and to review materials that were presented at our annual investor day meeting on August 8, 2017.
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, free cash flow, unlevered free cash flow, constant-currency revenue growth and constant-currency revenue growth excluding revenue from acquisitions and divestitures made in the last twelve months:
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• | Adjusted Net Operating Profit is defined as GAAP operating income plus interest expense associated with our Waltham, Massachusetts lease, excluding M&A related items such as 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, impairments, or gains related to the purchase or sale of subsidiaries, plus certain realized gains or losses on currency derivatives 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. |
• | Unlevered free cash flow is defined as free cash flow as described above, plus the cash paid during the period for interest, minus the interest expense associated with our Waltham, Massachusetts lease. |
• | 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. |
• | First quarter constant-currency revenue growth excluding revenue from acquisitions and divestitures made during the past twelve months excludes the impact of currency as defined above and revenue from Albumprinter and National Pen. |
These non-GAAP financial measures are provided to enhance investors' understanding of our current operating results from the underlying and ongoing business for the same reasons they are used by management. For example, as we have become more acquisitive over recent years we believe excluding the costs related to the purchase of a business (such as amortization of acquired intangible assets, contingent consideration, or impairment of goodwill) provides further insight into the performance of the underlying acquired business in addition to that provided by our GAAP operating income. As another example, as we do not apply hedge accounting for our currency forward contracts, we believe inclusion of realized gains and losses on these contracts that are intended to be matched against operational currency fluctuations provides further insight into our operating performance in addition to that provided by our GAAP operating income. We do not, nor do we suggest that investors should, consider such non-GAAP financial
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measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of Non-GAAP Financial Measures” included at the end of this release. The tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.
About Cimpress
Cimpress N.V. (Nasdaq: CMPR) is the world leader in mass customization. For more than 20 years, the company has focused on developing software and manufacturing capabilities that transform traditional markets in order to make customized products accessible and affordable to everyone. Cimpress brings its products to market via a portfolio of more than 20 brands including Vistaprint, Drukwerkdeal, Pixartprinting, Exaprint, WIRmachenDRUCK, National Pen and many others. That portfolio serves multiple customer segments across many applications for mass customization. To learn more, visit http://www.cimpress.com.
Cimpress and the Cimpress logo are trademarks of Cimpress N.V. or its subsidiaries. All other brand and product names appearing on this announcement may be trademarks or registered trademarks of their respective holders.
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 our expectations for the growth and development of our business, our expectations for our debt position, and the expected effects of and savings from our recent decentralization and anticipated Vistaprint restructuring. Forward-looking projections and expectations are inherently uncertain, are based on assumptions and judgments by management, and may turn out to be wrong. Our actual results may differ materially from those indicated by the forward-looking statements in this press release as a result of various important factors, including but not limited to our failure to execute our strategy; our inability to make the investments in our business that we plan to make or the failure of those investments to achieve the results we expect; our failure to develop our mass customization platform or the failure of the platform to drive the efficiencies and competitive advantage we expect; the failure of our decentralization and restructuring to have the effects that we expect; our ability to accurately forecast the savings and charges relating to
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restructuring activities; unanticipated changes in our markets, customers, or business; our loss of key personnel; our failure to reposition our Vistaprint brand and to promote and strengthen all of our brands; our failure to attract new customers and retain our current customers; our failure to manage the growth and complexity of our business and expand our operations; the failure of the businesses we acquire or invest in to perform as expected; the willingness of purchasers of customized products and services to shop online; competitive pressures; general economic conditions; and other factors described in our Form 10-K for the fiscal year ended June 30, 2017 and the other documents we periodically file with the U.S. SEC.
In addition, the statements and projections in this press release represent our expectations and beliefs as of the date of this press release, and subsequent events and developments may cause these expectations, beliefs, and projections to change. We specifically disclaim any obligation to update any forward-looking statements. These forward-looking statements should not be relied upon as representing our expectations or beliefs as of any date subsequent to the date of this press release.
Operational Metrics & Financial Tables to Follow
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CIMPRESS N.V.
CONSOLIDATED BALANCE SHEETS
(unaudited in thousands, except share and per share data)
September 30, 2017 | June 30, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 42,800 | $ | 25,697 | |||
Accounts receivable, net of allowances of $4,297 and $3,590, respectively | 58,413 | 48,630 | |||||
Inventory | 56,754 | 46,563 | |||||
Prepaid expenses and other current assets | 75,921 | 78,835 | |||||
Assets held for sale | — | 46,276 | |||||
Total current assets | 233,888 | 246,001 | |||||
Property, plant and equipment, net | 511,890 | 511,947 | |||||
Software and website development costs, net | 50,312 | 48,470 | |||||
Deferred tax assets | 78,748 | 48,004 | |||||
Goodwill | 525,806 | 514,963 | |||||
Intangible assets, net | 268,678 | 275,924 | |||||
Other assets | 26,772 | 34,560 | |||||
Total assets | $ | 1,696,094 | $ | 1,679,869 | |||
Liabilities, noncontrolling interests and shareholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 121,119 | $ | 127,386 | |||
Accrued expenses | 186,502 | 175,567 | |||||
Deferred revenue | 39,239 | 30,372 | |||||
Short-term debt | 19,941 | 28,926 | |||||
Other current liabilities | 86,998 | 78,435 | |||||
Liabilities held for sale | — | 8,797 | |||||
Total current liabilities | 453,799 | 449,483 | |||||
Deferred tax liabilities | 58,805 | 60,743 | |||||
Lease financing obligation | 105,679 | 106,606 | |||||
Long-term debt | 800,860 | 847,730 | |||||
Other liabilities | 108,607 | 94,683 | |||||
Total liabilities | 1,527,750 | 1,559,245 | |||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interests | 83,841 | 45,412 | |||||
Shareholders’ equity: | |||||||
Preferred shares, par value €0.01 per share, 100,000,000 shares authorized; none issued and outstanding | — | — | |||||
Ordinary shares, par value €0.01 per share, 100,000,000 shares authorized; 44,080,627 shares issued; and 31,020,287 and 31,415,503 shares outstanding, respectively | 615 | 615 | |||||
Treasury shares, at cost, 13,060,340 and 12,665,124 shares, respectively | (627,002 | ) | (588,365 | ) | |||
Additional paid-in capital | 366,684 | 361,376 | |||||
Retained earnings | 432,273 | 414,771 | |||||
Accumulated other comprehensive loss | (88,325 | ) | (113,398 | ) | |||
Total shareholders’ equity attributable to Cimpress N.V. | 84,245 | 74,999 | |||||
Noncontrolling interests | 258 | 213 | |||||
Total shareholders' equity | 84,503 | 75,212 | |||||
Total liabilities, noncontrolling interests and shareholders’ equity | $ | 1,696,094 | $ | 1,679,869 | |||
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CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited in thousands, except share and per share data)
Three Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Revenue | $ | 563,284 | $ | 443,713 | |||
Cost of revenue (1) | 283,755 | 213,050 | |||||
Technology and development expense (1) | 62,103 | 59,010 | |||||
Marketing and selling expense (1) | 166,093 | 132,668 | |||||
General and administrative expense (1) | 38,778 | 56,580 | |||||
Amortization of acquired intangibles | 12,633 | 10,213 | |||||
Restructuring expense (1) | 854 | — | |||||
(Gain) on sale of subsidiaries | (47,545 | ) | — | ||||
Income (loss) from operations | 46,613 | (27,808 | ) | ||||
Other expense, net | (16,312 | ) | (2,132 | ) | |||
Interest expense, net | (13,082 | ) | (9,904 | ) | |||
Income (loss) before income taxes | 17,219 | (39,844 | ) | ||||
Income tax (benefit) expense | (6,187 | ) | (9,814 | ) | |||
Net income (loss) | 23,406 | (30,030 | ) | ||||
Add: Net (income) loss attributable to noncontrolling interest | (43 | ) | 927 | ||||
Net income (loss) attributable to Cimpress N.V. | $ | 23,363 | $ | (29,103 | ) | ||
Basic net income (loss) per share attributable to Cimpress N.V. | $ | 0.75 | $ | (0.92 | ) | ||
Diluted net income (loss) per share attributable to Cimpress N.V. | $ | 0.72 | $ | (0.92 | ) | ||
Weighted average shares outstanding — basic | 31,220,311 | 31,570,824 | |||||
Weighted average shares outstanding — diluted | 32,332,162 | 31,570,824 | |||||
____________________________________________
(1) Share-based compensation is allocated as follows:
Three Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cost of revenue | $ | 40 | $ | 43 | |||
Technology and development expense | 1,856 | 2,325 | |||||
Marketing and selling expense | 985 | 820 | |||||
General and administrative expense | 3,928 | 8,383 | |||||
Restructuring expense | 103 | — | |||||
For the three months ended September 30, 2017 we recognized $727 of restructuring costs related to a restructuring initiative within our All Other Businesses segment, as well as $127 of restructuring costs related to the January 2017 restructuring initiative.
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CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Operating activities | |||||||
Net income (loss) | $ | 23,406 | $ | (30,030 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 42,384 | 35,405 | |||||
Share-based compensation expense | 6,912 | 11,571 | |||||
Deferred taxes | (16,589 | ) | (18,163 | ) | |||
Gain on sale of subsidiaries | (47,545 | ) | — | ||||
Change in contingent earn-out liability | 827 | 16,020 | |||||
Unrealized loss on derivatives not designated as hedging instruments included in net income (loss) | 6,066 | 1,811 | |||||
Effect of exchange rate changes on monetary assets and liabilities denominated in non-functional currency | 8,386 | 3,027 | |||||
Other non-cash items | 23 | 670 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (8,839 | ) | 2,917 | ||||
Inventory | (8,985 | ) | (1,220 | ) | |||
Prepaid expenses and other assets | (4,893 | ) | 671 | ||||
Accounts payable | (1,621 | ) | (7,952 | ) | |||
Accrued expenses and other liabilities | 16,847 | (5,127 | ) | ||||
Net cash provided by operating activities | 16,379 | 9,600 | |||||
Investing activities | |||||||
Purchases of property, plant and equipment | (20,457 | ) | (19,319 | ) | |||
Proceeds from the sale of subsidiaries, net of transactions costs and cash divested | 93,779 | — | |||||
Business acquisitions, net of cash acquired | (110 | ) | (580 | ) | |||
Purchases of intangible assets | (24 | ) | (26 | ) | |||
Capitalization of software and website development costs | (8,934 | ) | (8,312 | ) | |||
Other investing activities | (1,956 | ) | 785 | ||||
Net cash provided by (used in) investing activities | 62,298 | (27,452 | ) | ||||
Financing activities | |||||||
Proceeds from borrowings of debt | 179,532 | 87,000 | |||||
Payments of debt and debt issuance costs | (237,929 | ) | (82,725 | ) | |||
Payments of withholding taxes in connection with equity awards | (1,190 | ) | (7,549 | ) | |||
Payments of capital lease obligations | (4,658 | ) | (3,276 | ) | |||
Purchase of ordinary shares | (40,674 | ) | — | ||||
Proceeds from issuance of ordinary shares | 6,070 | — | |||||
Issuance of loans | (12,000 | ) | — | ||||
Proceeds from sale of noncontrolling interest | 35,390 | — | |||||
Net cash used in financing activities | (75,459 | ) | (6,550 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 1,843 | 601 | |||||
Change in cash held for sale | 12,042 | — | |||||
Net increase (decrease) in cash and cash equivalents | 17,103 | (23,801 | ) | ||||
Cash and cash equivalents at beginning of period | 25,697 | 77,426 | |||||
Cash and cash equivalents at end of period | $ | 42,800 | $ | 53,625 | |||
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CIMPRESS N.V.
SEGMENT INFORMATION AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited in thousands)
GAAP Revenue | |||||||||||||||||
Three Months Ended September 30, | Currency Impact: | Constant- Currency | Impact of Acquisitions/Divestitures: | Constant- Currency Revenue Growth | |||||||||||||
2017 | 2016 | % Change | (Favorable)/Unfavorable | Revenue Growth | (Favorable)/Unfavorable | Excluding Acquisitions/Divestitures | |||||||||||
Revenue growth reconciliation by reportable segment: | |||||||||||||||||
Vistaprint | $ | 319,043 | $ | 286,535 | 11% | (1)% | 10% | —% | 10% | ||||||||
Upload and Print | 160,390 | 131,957 | 22% | (6)% | 16% | —% | 16% | ||||||||||
National Pen | 59,717 | — | 100% | —% | 100% | (100)% | —% | ||||||||||
All Other Businesses | 28,054 | 26,334 | 7% | (2)% | 5% | 35% | 40% | ||||||||||
Inter-segment eliminations | (3,920 | ) | (1,113 | ) | |||||||||||||
Total revenue | $ | 563,284 | $ | 443,713 | 27% | (3)% | 24% | (12)% | 12% | ||||||||
Three Months Ended September 30, | |||||||
Profit (loss) by reportable segment ("Segment Profit"): | 2017 | 2016 | |||||
Vistaprint | $ | 30,895 | $ | 25,272 | |||
Upload and Print | 14,768 | 13,451 | |||||
National Pen | 1,185 | — | |||||
All Other Businesses | (7,551 | ) | (9,752 | ) | |||
Total Segment Profit | 39,297 | 28,971 | |||||
Central and corporate costs | (28,257 | ) | (28,186 | ) | |||
Acquisition-related amortization and depreciation | (12,687 | ) | (10,213 | ) | |||
Earn-out related charges¹ | (1,137 | ) | (16,247 | ) | |||
Share-based compensation related to investment consideration | (40 | ) | (4,103 | ) | |||
Restructuring related charges | (854 | ) | — | ||||
Interest expense for Waltham lease | 1,911 | 1,970 | |||||
Gain on the purchase or sale of subsidiaries2 | 48,380 | — | |||||
Total income (loss) from operations | $ | 46,613 | $ | (27,808 | ) | ||
¹Includes expense recognized for the change in fair value of contingent consideration and compensation expense related to earn-out mechanisms dependent upon continued employment.
2Includes the impact of the gain on the sale of Albumprinter, as well as a bargain purchase gain as defined by ASC 805-30 for an acquisition in which the identifiable assets acquired and liabilities assumed are greater than the consideration transferred, that was recognized in general and administrative expense in our consolidated statement of operations during the three months ended September 30, 2017.
Note: During the first quarter of fiscal 2018, we began presenting inter-segment fulfillment activity as revenue for the fulfilling business unit for purposes of measuring and reporting our segment financial performance. We have revised historical results to reflect the consistent application of our current accounting methodology. In addition, we adjusted our historical segment profitability for the allocation of certain IT costs that are allocated to each of our businesses in fiscal 2018.
Page 13 of 14
CIMPRESS N.V.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (CONT.)
(unaudited, in thousands)
Three Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Adjusted Net Operating Profit reconciliation: | |||||||
GAAP operating income (loss) | $ | 46,613 | $ | (27,808 | ) | ||
Exclude expense (benefit) impact of: | |||||||
Acquisition-related amortization and depreciation | 12,687 | 10,213 | |||||
Earn-out related charges¹ | 1,137 | 16,247 | |||||
Share-based compensation related to investment consideration | 40 | 4,103 | |||||
Restructuring related charges | 854 | — | |||||
Less: Interest expense associated with Waltham lease | (1,911 | ) | (1,970 | ) | |||
Less: Gain on the purchase or sale of subsidiaries2 | (48,380 | ) | — | ||||
Include: Realized (losses) gains on certain currency derivatives not included in operating income | (634 | ) | 1,888 | ||||
Adjusted NOP | $ | 10,406 | $ | 2,673 | |||
¹Includes expense recognized for the change in fair value of contingent consideration and compensation expense related to earn-out mechanisms dependent upon continued employment.
2Includes the gain on the sale of Albumprinter, as well as a bargain purchase gain as defined by ASC 805-30 for an acquisition in which the identifiable assets acquired and liabilities assumed are greater than the consideration transferred, that was recognized in general and administrative expense in our consolidated statement of operations during the three months ended September 30, 2017.
Three Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Unlevered free cash flow reconciliation: | |||||||
Net cash provided by operating activities | $ | 16,379 | $ | 9,600 | |||
Purchases of property, plant and equipment | (20,457 | ) | (19,319 | ) | |||
Purchases of intangible assets not related to acquisitions | (24 | ) | (26 | ) | |||
Capitalization of software and website development costs | (8,934 | ) | (8,312 | ) | |||
Free cash flow | $ | (13,036 | ) | $ | (18,057 | ) | |
Plus: cash paid during the period for interest | 8,430 | 5,362 | |||||
Less: interest expense for Waltham lease | (1,911 | ) | (1,970 | ) | |||
Unlevered free cash flow | $ | (6,517 | ) | $ | (14,665 | ) | |
Note: We continue to look at profit by reportable segment ("Segment Profit"); however, starting with the first quarter of fiscal 2018, we no longer use Adjusted NOPAT as an internal measure of consolidated profitability, and therefore we have stopped reporting it. Rather, we are using Adjusted Net Operating Profit, which corresponds to our prior Adjusted NOPAT measure, without the effect of cash taxes attributable to the current period.
Page 14 of 14
This document is Cimpress’ first quarter fiscal year 2018 earnings commentary. This document contains slides and
accompanying comments in the “notes” section below each slide.
1Cimpress N.V. Q1 FY2018 Earnings Presentation
Please read the above safe harbor statement. Additionally, a detailed reconciliation of GAAP and non-GAAP measures is
posted in the appendix of the Q1 fiscal 2018 earnings presentation that accompanies these remarks.
2Cimpress N.V. Q1 FY2018 Earnings Presentation
This presentation is organized into the categories shown on the left-hand side of this slide.
Robert Keane, CEO, and Sean Quinn, CFO, will host a live question and answer conference call tomorrow, November 2,
2017 at 7:30 a.m. U.S. Eastern daylight time which you can access through a link at ir.cimpress.com.
3Cimpress N.V. Q1 FY2018 Earnings Presentation
We have made three reporting changes at the start of fiscal year 2018 that reflect internal reporting changes we have made to improve our
ability to measure returns on investments and reflect the increased financial clarity that we have gained from our decentralization.
First, our primary externally reported profitability metric will be Adjusted Net Operating Profit ("Adjusted NOP"). The only change relative to
our prior Adjusted NOPAT metric is that it no longer includes the "cash taxes attributable to the current period". We do not use this view of
"cash taxes attributable to the current period" internally and don't believe it was meaningful to readers of our financial results. As a reminder,
the sum of the components of our Segment Profit will not equal our consolidated Adjusted NOP, since our central and corporate costs do not
constitute a reportable segment, and we do not allocate the gains or losses from hedging contracts included in Adjusted NOP to our
reportable segments since we hedge our net currency exposures at a Cimpress level. For clarity, we have changed the name of our segment
profitability measure to "Segment Profit" though we haven't changed the underlying calculation other than for the cost allocation described
below. Please note that unlevered free cash flow ("UFCF"), not Adjusted NOP or Segment Profit, is the in-year financial performance
measure that we use internally. This is because UFCF is a primary input to our estimate of our uppermost financial objective: intrinsic value
per share, and because UFCF incorporates factors such as working capital and cash taxes that impact the returns on invested capital which
each business delivers to Cimpress. The SEC requires that our segment measure of profitability is not a liquidity measure, which is why we
will continue to report Segment Profit. We believe Segment Profit and, on a consolidated basis, Adjusted NOP are good indicators of the
underlying profitability trends in the business.
Second, we now present inter-segment fulfillment activity as revenue for the fulfilling business for purposes of measuring and reporting our
segment financial performance. For example, if National Pen fulfills an order for Vistaprint, National Pen records both revenue and COGS for
that order, and Vistaprint correspondingly records the amount of revenue recorded by National Pen as Vistaprint COGS. Previously, we
would have recorded this inter-segment activity as a pure cost transfer. We made this change because we believe it will encourage our
businesses to leverage each other when doing so will create value for each business. This inter-segment revenue is, of course, eliminated
from our consolidated revenue so we do not double count revenue. Historically, the most meaningful inter-segment activity took place
between Vistaprint and All Other Businesses, but we expect this to expand in the future as more businesses leverage each other via our
mass customization platform. Please note that activity between businesses within a single segment are not presented in our segment
financial results. For example, when our upload and print businesses produce on behalf of each other, this activity is eliminated within the
single segment and, therefore, not seen in our external reporting. Tracking the growth of this inter-segment revenue will only help you
understand when cross-segment transactions take place, but it will not give you a full picture of the amount of business being transacted
between all of our businesses.
Third, we refined our historical segment profitability for the allocation of certain IT costs to further improve the comparability of profit results
between segments and central and corporate groups, resulting in a small change to Segment Profit and central and corporate groups costs.
These costs are for services performed by the Vistaprint business on behalf of our other businesses. The change has the effect of slightly
increasing Vistaprint Segment Profit, and correspondingly reducing profit for our other segments and increasing costs within our central and
corporate groups. This change results from the development and improvement of operating routines and reporting systems in the wake of
our 2017 reorganization. We have recast historical results for all of the above changes in our Financial and Operating Metrics spreadsheet
on ir.cimpress.com.
4Cimpress N.V. Q1 FY2018 Earnings Presentation
As a reminder and as context for the initiatives and examples discussed in the remainder of this presentation, Cimpress'
uppermost priorities are described above. Extending our history of success into the next decade and beyond in line with these
top-level priorities is important to us. Even as we report results on a quarterly basis it is important for investors to understand
that we manage to a much longer-term time horizon and that we explicitly forgo short-term actions and metrics except to the
extent those short-term actions and metrics support our long-term goals.
5Cimpress N.V. Q1 FY2018 Earnings Presentation
Total revenue for the first quarter was $563.3 million, reflecting a 27% increase year over year in USD and a 24% increase in
constant currencies. Excluding the revenue from the addition of our acquisitions in the past four quarters and from
Albumprinter (which we divested in the quarter), constant-currency revenue growth was 12%. Our first quarter constant
currency revenue growth by segment was in line with the commentary we provided at the beginning of the year, and we are
pleased with the progress we are making to improve customer value in our various businesses. We believe our recent
decentralization has contributed to improved operating results across the company, and we expect these benefits to
compound over time.
Our Q1 GAAP operating income increased significantly year over year to $46.6 million compared to an operating loss of $27.8
million in the year ago period, primarily due to a $47.5 million gain on the sale of our Albumprinter business in the current
period, reduced acquisition-related costs, and the year-over-year savings from our January 2017 decentralization.
Adjusted NOP increased to $10.4 million versus the year ago period due primarily to the savings from our January 2017
decentralization.
6Cimpress N.V. Q1 FY2018 Earnings Presentation
The quarterly trends for reported revenue and revenue growth by segment are illustrated above.
A full discussion of segment performance is included in the next several slides, including the trend for constant-currency
growth excluding recent acquisitions and divestitures.
7Cimpress N.V. Q1 FY2018 Earnings Presentation
• First quarter revenue grew 11% in reported terms and 10% in constant-currency terms year over year. We saw continued growth in both
repeat and new customer bookings, and our focus product categories of signage, marketing materials, promotional products and apparel
continued to grow faster than total Vistaprint revenue. Repeat bookings as a percent of total bookings has been slowly but steadily
increasing and we continue to see positive trends in our repeat rate, which for the quarter was the highest it's been since fiscal 2012.
• First quarter Segment Profit for Vistaprint was up by $5.6 million year over year primarily due to savings from our 2017 decentralization.
Segment Profit margin was 10% in the first quarter, up 100 bps compared to the year ago period. Gross margin declined year over year
as our expanded design services and new product introduction continue to create an unfavorable mix shift. Advertising as a percent of
revenue declined 100 basis points year over year with typical fluctuations in both spend and revenue.
• As previously discussed at our investor day in August, one of Vistaprint's objectives is to optimize the large number of new products and
services that were launched in fiscal 2017 and which we continue to launch in fiscal 2018: we believe that there are pricing and operating
levers to improve the profitability of these products over time. That effort is underway but it will take time to scale and transition those
new products and services from being net investments to being incrementally cash generative. Vistaprint has begun to make such
improvements and will continue this effort throughout the year. While these investments in new products and services put pressure on
current period profitability, we expect they will continue to help us attract higher-value customers, improve customer loyalty and grow
gross profit dollars over time.
• Gross profit per customer in constant currencies was flat year over year. Although our gross margins have come down, this was largely
offset by higher-value customers and improved repeat rates. Please note that starting with this quarter, gross profit per customer now
includes products sold on the "Promotional Products" tab of Vistaprint's website, which has moved under Vistaprint management as a
result of our 2017 reorganization.
• We continue to see stable to improving year-over-year customer loyalty (NPS) scores within Vistaprint.
We conclude from the combination of these trends that Vistaprint continues to strengthen as a result of the many changes and investments
we have made over the past five years. We are optimistic about the progress we're making in Vistaprint and remain focused on achieving
strong returns on the capital invested over those years. We also expect growth rates to fluctuate as we continue to make further investments
that we believe will further improve the value proposition to Vistaprint customers, often at the expense of higher near-term revenue, gross
margin and/or profit.
As previously described, we expect the year-over-year impact of our shipping price reduction within the Vistaprint business to be minimal for
fiscal year 2018. The year-over-year profit impact for the first quarter was a slight benefit as returns from past changes more than offset the
impact from new changes.
New and repeat bookings as a percent of total Vistaprint bookings, and advertising spend as a percent of revenue are presented in the
appendix of this presentation.
8Cimpress N.V. Q1 FY2018 Earnings Presentation
Our Upload and Print segment results during the first quarter were as follows.
• Revenue grew 22% in reported terms and 16% in constant currencies. There were no acquisitions within the past 12
months for this segment, so both of these growth rates are organic.
• Segment Profit was up by $1.3 million year over year due to improved profits in several businesses, partially offset by
increased investments in technology and the expansion of support organizations. Segment Profit margin was 9% during
the first quarter, compared to 10% in the year ago period.
We continue to see evidence that the January 2017 decentralization is driving the desired impacts within Upload and Print in
terms of a tighter connection between customer facing teams and the manufacturing groups, allowing the businesses to be
more agile and work faster toward a common goal. We continue to see opportunities to shift production of certain products to
lower-cost and/or higher quality options through the mass customization platform. The current benefits remain small, but we
expect them to begin to grow through the fiscal year.
The performance across the Upload and Print group varies, with a wide range of revenue growth and cash flow contribution
by business. As described at our investor day in August 2017, the aggregate free cash flow of the full portfolio of Upload and
Print businesses has exceeded our aggregate deal model plans to date, and we expect it to continue to do so in the future.
9Cimpress N.V. Q1 FY2018 Earnings Presentation
• National Pen's revenue during the first quarter was $59.7 million. Since we did not own this business in the year-ago
period, reported revenue growth cannot be calculated as a percentage. On a pro forma basis, adjusted for a portion of its
business that was discontinued before our acquisition closed, revenue declined 3% in constant currencies year over year.
This quarter, we passed the anniversary of the discontinued operations, so that should not have a year-over-year impact
going forward. We continue to expect single-digit constant currency revenue growth for National Pen in fiscal year 2018.
As a reminder, National Pen made changes to its marketing team and approach in the second half of fiscal year 2017. We
believe these are value-creating decisions even though they hurt near-term revenue.
• First quarter Segment Profit was $1.2 million, or 2% of revenue. We expect National Pen to continue its pre-acquisition
seasonal pattern that means most profits are made in the December quarter.
We continue to work on targeted integration activities in line with those we discussed at investor day in August. We've made
great progress here and multiple other Cimpress businesses have begun to tap into National Pen's offering via our mass
customization platform. We've also delivered shipping and freight savings by leveraging Cimpress' contracts and scale
advantages, as well as through moving decoration of products for National Pen's Japanese customers to the Cimpress Japan
facility. We believe that these initiatives will drive attractive returns for National Pen and our other businesses over time.
10Cimpress N.V. Q1 FY2018 Earnings Presentation
Our All Other Businesses segment includes Most of World businesses in Japan, India, Brazil and China, and our Corporate
Solutions business. On August 31, 2017 we sold our Albumprinter business, net of transaction costs and based on the
exchange rate as of the date of sale, for $93.1 million plus $11.9 million in pre-closing dividends. As a result of the sale, we
recognized a gain of $47.5 million, net of transaction costs during the first quarter.
• First quarter revenue grew 7% in reported terms and 5% in constant currencies. Revenue growth was negatively impacted
by the divestiture of our Albumprinter business as there were only two months of revenue and profits in the results.
Constant-currency growth was 40% excluding the impact of the Albumprinter divestiture.
• First quarter Segment Profit (Loss) increased by $2.2 million year over year primarily due to incremental gross profit,
driven by revenue growth and volume absorption. Segment Profit (Loss) margin improved from (37)% to (27)% year over
year.
• During the quarter we recognized a restructuring charge of $0.7 million related to a restructuring initiative within this
segment.
Corporate Solutions continues to build foundations for new growth opportunities and remains early in this process. The Most
of World businesses continue strong growth off a relatively small base. Our objective in both of these young businesses
remains the same: to build foundations for the long term in these large and heterogeneous markets. In both of these
businesses we continue to operate at a significant operating loss as previously described and as planned, and expect to
continue to do so in the next several years.
During the September quarter our Corporate Solutions team chose to shift resources away from its very early stage
investments in Cimpress Open in order to concentrate on its Vistaprint Corporate offering. Cimpress Open will continue to
serve some of its existing customers but we do not see this portion of Corporate Solutions growing in the future. Despite this
change, our expectations for Corporate Solutions, in terms of investment and potential value creation, have not materially
changed. Please note that this change does not mean that we are not connecting our businesses to third-party fulfillers. We
currently connect to hundreds of external suppliers, and post decentralization, the responsibility for managing these
relationships lies with the businesses that are selling those third-party products.
11Cimpress N.V. Q1 FY2018 Earnings Presentation
Central and corporate costs consist primarily of global procurement, a central technology team whose responsibility is building
and operating technology that we have chosen to keep central including our mass customization platform, and corporate
services such as the corporate-level finance, CEO, board, investor relations, communications, strategy and legal functions.
First quarter central and corporate costs of $28.3 million were flat year over year, as planned increases in software
development investment was offset by savings in corporate services as a result of our fiscal 2017 decentralization.
Our Cimpress Technology team continues to build and deploy our MCP, which is a growing set of software services and
standards that deliver business and customer functionality to our various businesses. The objective of MCP is to build, over
time, a large collection of services that:
• Increase selection (i.e., the breadth and depth of delivery speed options, substrate choices, product formats, special
finishes, etc. which we offer to our customers)
• Improve conformance (i.e., the degree to which we deliver products to customers as specified, on time)
• Reduce cost (i.e., the total cost of delivering any given selection in conformance with specification)
• Enhance the quality of customer experience
We remain early in the journey toward our vision for MCP, but we are encouraged by the steady progress we are making. As
part of our 2017 decentralization, we redefined the scope of activities that would be managed centrally, and also changed our
engagement model between Cimpress Technology and our businesses so that new capabilities are generated in the
businesses, and therefore closer to our customers. This new approach has increased the internal adoption of our platform
technologies.
12Cimpress N.V. Q1 FY2018 Earnings Presentation
As we have described already, we are seeing the intended benefits of our 2017 decentralization, including tightened coordination between
marketing, technology and manufacturing resources that are now integrated into our various businesses, improved engagement between our
businesses and our central technology resources resulting in increased adoption of our mass customization platform technologies, and an
improved ability to assess which expenses and initiatives are likely to increase our intrinsic value and which ones are not.
That decentralization resulted, among many other changes, in the transfer to Vistaprint of nearly three thousand team members who were
previously in Cimpress-wide central teams.
Furthermore, even prior to the decentralization, Vistaprint's business had been evolving as it adapts to changes in the market and continues
to better understand the needs of its customers. Over recent years, its strategy has led the business to make many changes, including
increasing by orders of magnitude the number of products offered, introducing new services, and designing and implementing new
technologies to enable Vistaprint to evolve faster. The business is starting to see signs that the strategy is working, demonstrated by an
acceleration in its growth rate and NPS scores being the highest in the company's history.
Following more than six months of experience with their newly integrated organization, the Vistaprint leadership team has taken the difficult
but appropriate decision to reduce Vistaprint headcount and other operating costs, simplify operations and even more closely align functions
to increase the speed of execution. We believe these changes will improve the steady-state free cash flow of this business and, importantly,
free up capital to reinvest in other areas of Vistaprint that provide the greatest benefit to our customers and our long-term shareholders.
Cimpress expects the Vistaprint headcount and cost reductions to be largely implemented over the coming two months and believes they will
reduce fiscal year 2018 operating expenses by between $20 million and $22 million. Certain of the actions that are being considered are
subject to mandatory consultations with employees, works councils and/or governmental authorities. Based on a preliminary assessment of
the potential actions, Cimpress expects to take a restructuring charge of approximately $15 million to $17 million during the quarter ending
December 31, 2017, and we expect net savings for the full fiscal year 2018. The slide above has additional detail regarding the nature of the
anticipated charge and savings. As mentioned, we expect a minority portion of the savings will be reinvested in other areas of Vistaprint so
the annualized run-rate savings will be less than what would be implied by simply extrapolating the above partial-year savings range to a full
year. That said, we do expect to realize the majority of these anticipated run-rate savings.
This restructuring announcement is distinct from the Vistaprint efforts to improve, over time, gross profit from newer product lines that are not
yet operating at scale. With that said, the restructuring should help us improve the financial returns on the investments we are making in the
Vistaprint business, partly through a reduction in the cost structure where it makes sense, and partly by freeing up capital from the parts of
the business that yield lower returns to redeploy elsewhere.
We will provide additional information with our second quarter earnings announcement, after the restructuring is implemented.
13Cimpress N.V. Q1 FY2018 Earnings Presentation
No notes here - transition slide
14Cimpress N.V. Q1 FY2018 Earnings Presentation
The quarterly trends for reported revenue, constant-currency revenue growth, and constant-currency growth excluding recent
acquisitions and divestitures are illustrated above. As noted earlier, the consolidated growth is positively impacted by the
National Pen acquisition, for which we do not have a full year-over-year comparison. The Albumprinter divestiture did have a
smaller negative impact on reported revenue growth this quarter, as we had two months of revenue in the current period, and
three months in the year-ago period.
15Cimpress N.V. Q1 FY2018 Earnings Presentation
On a reported basis, the consolidated two-year stacked growth was 45% for the total of Q1 FY17 and Q1 FY18 versus
approximately 31% for Q1 FY16 and Q1 FY17. The stacked growth rate for constant-currency organic revenue was
approximately 18% for the total of Q1 FY17 plus Q1 FY18 compared to approximately 17% for the total of Q1 FY16 and Q1
FY17. The general trend in this number over time is encouraging to us as we believe it is a reflection of improving returns on
past investments in our business. As a reminder, we have now passed the period of time during which our reported and
organic revenue was negatively impacted by the loss of certain partner revenue.
16Cimpress N.V. Q1 FY2018 Earnings Presentation
The quarterly trends for various measures of income and profit are illustrated above.
Operating income increased significantly versus the year ago period. The following year-over-year items positively influenced
GAAP operating income in the first quarter:
• A $47.5 million gain on the sale of our Albumprinter business.
• Net restructuring savings of approximately $10 million related to the decentralization announced on January 25, 2017.
These savings were realized largely in technology and development and general and administrative costs. From a
segment reporting perspective, about half of the savings benefit Vistaprint's Segment Profit, with the bulk of the remaining
benefit in our central and corporate costs.
• A year-over-year decrease in acquisition-related charges as follows: First, earn-out related charges were $15.1 million
lower in the first quarter of 2018 versus the prior-year period. Share-based compensation related to investment
consideration also decreased year-over year by $4.1 million. These reductions were partially offset by an increase in
acquisition-related amortization of intangible assets of $2.5 million.
• Favorable year-over-year currency fluctuations that were offset below the line by year-over-year changes in realized gains
or losses from hedging contracts in other income, net.
Adjusted NOP increased year over year primarily due to the 2017 decentralization savings.
The following below-the-line items also influenced our GAAP net income during the quarter:
• Our "Other expense, net" was $16.3 million. The vast majority of this is currency related. Please see the next slide for a
detailed explanation of underlying currency drivers.
• "Total interest expense, net" was $13.1 million for the quarter.
• Lease-related interest expense of $1.9 million is related to our Waltham, Massachusetts office facility. We
include this lease-related interest expense in our Adjusted NOP calculation.
• The remaining portion of $11.2 million is primarily related to our Senior Unsecured Notes and borrowings
under our credit facility.
17Cimpress N.V. Q1 FY2018 Earnings Presentation
Below is additional color on the impact of currency movements on our P&L this quarter.
First, the currency impacts that affect our GAAP results and Adjusted NOP:
• Our year-over-year revenue growth rate expressed in USD was positively impacted by about 300 basis points for the first
quarter. Our most significant net currency exposures by volume are in the Euro and British Pound.
• There are many natural expense offsets in our business, and therefore the net currency exposure to our bottom line is less
pronounced than it is to revenue.
• For certain currencies where we do have a net exposure because revenue and certain costs are not well matched, we
enter into currency derivative contracts to hedge the risk. Realized gains or losses from these hedges are recorded in
Other expense, net and offset some of the impact of currency elsewhere in our P&L. The realized loss on these currency
derivative contracts was $0.6 million for the first quarter.
Second, the currency impacts that further impact our GAAP results but that are excluded from our Adjusted NOP are other net
currency losses of approximately $16 million for the first quarter, primarily related to unrealized non-cash net losses on
intercompany loans and currency hedges.
18Cimpress N.V. Q1 FY2018 Earnings Presentation
As of September 30, 2017 cash and cash equivalents were approximately $42.8 million.
For the first quarter, we generated $16.4 million in cash from operations, compared with $9.6 million in the first quarter of
fiscal 2017. The year-over-year increase in operating cash flow was primarily due to restructuring savings, cash flow growth in
our Upload & Print businesses, lower cash taxes, and working capital improvements including those associated with the
changes in our compensation programs in fiscal 2017 that we have previously outlined. The impact of the January 2017
decentralization savings is partially offset in operating cash flow by approximately $4 million of remaining severance payments
made in the quarter. These increases were also offset by transaction costs for the Albumprinter sale, higher cash interest
costs, and unfavorable working capital in our National Pen business based on its seasonality. The gain on the sale of
Albumprinter does not influence operating cash flow.
Unlevered free cash flow was $(6.5) million in the first quarter compared to ($14.7) million in the same period a year ago due
to the same reasons as our operating cash flow trends, partially offset by a slight uptick in capital expenditures and capitalized
software and development costs.
Because we have moved away from Adjusted NOPAT, we have revised the calculation for adjusted return on invested capital
(ROIC) which is simplified because it now uses cash taxes from the face of our cash flow statement. We also are now
presenting adjusted ROIC with and without share based compensation for added visibility given the accounting impact of our
recently changed long-term incentive program that requires awards to be expensed on an accelerated basis. On a trailing
twelve-month basis, adjusted ROIC as of September 30, 2017 decreased versus the year-ago TTM period to approximately
6% including share-based compensation not related to investment consideration, and 9% excluding all share-based
compensation expense, though we saw a slight sequential improvement. Adjusted ROIC is materially affected by the fact that
the numerator is not yet benefiting from a full year of National Pen operating results, which are highly seasonal, yet the
increased debt from National Pen is fully included in the denominator. This impact is exacerbated by our significant uplift in
organic investments in 2017, and the adjusted ROIC including SBC is also impacted by the increased accounting cost of our
new performance share units.
The GAAP operating measures which we use as a basis to calculate ROIC are total debt and operating income. The year-
over-year trend in both measures was up.
19Cimpress N.V. Q1 FY2018 Earnings Presentation
We provide commentary on EBITDA for our debt investors. Please note that we do not manage our overall business performance to
EBITDA; however, we actively monitor it for purposes of ensuring compliance with debt covenants.
Based on our debt covenant definitions, our total leverage ratio was 3.39 as of September 30, 2017, and our senior secured leverage ratio
(which is senior secured debt to trailing twelve month EBITDA) was 2.25. Our debt covenants give pro forma effect for acquired and divested
businesses that closed within the trailing twelve month period ending September 30, 2017. As often described, we are willing to temporarily
go above our long-term total leverage ratio target of 3x TTM EBITDA for the right opportunity and with a path to de-lever below that target
within a reasonable period of time. We continue to expect to manage our leverage back to approximately 3x TTM EBITDA by the end of
calendar 2017.
When including all acquired company EBITDA only as of the dates of acquisition, our adjusted EBITDA for Q1 FY2018 was $45.9 million, up
31.0% from Q1 FY2017 and our TTM adjusted EBITDA was $249.3 million, down 7.0% from the year-ago TTM period. This compares to the
trends in operating income discussed on slide 17. In addition to the exclusion of depreciation and amortization (including acquisition-related
amortization of intangible assets) which was up significantly year over year in the TTM period, the TTM EBITDA metrics exclude goodwill and
other impairment charges, restructuring charges, as well as the share-based compensation costs that are included in our TTM GAAP
operating income.
During the quarter, we repurchased 452,820 Cimpress shares for $40.7 million inclusive of transaction costs, at an average price per share
of $89.82. As we have described in the past, we consider share repurchases to be an important category of capital deployment. We make
our share repurchase decisions by comparing the potential returns of share repurchase (by looking at the difference between our current
share price and our estimate of intrinsic value per share) to the potential returns on other uses of that capital. Our choice to repurchase is
also guided by our debt covenants.
We have various covenants that prevent us from borrowing up to the maximum size of the credit facility as of September 30, 2017.
Purchases of our ordinary shares, payments of dividends, and corporate acquisitions and dispositions are subject to more restrictive
consolidated leverage ratio thresholds than our financial covenants when calculated on a pro forma basis in certain scenarios. Also,
regardless of our leverage ratio, the credit agreement limits the amount of purchases of our ordinary shares, payments of dividends,
corporate acquisitions and dispositions, investments in joint ventures or minority interests, and consolidated capital expenditures that we may
make. These limitations can include annual limits that vary from year to year and aggregate limits over the term of the credit facility.
Therefore, our ability to make desired investments may be limited during the term of our credit facility.
We are currently in compliance with all of our debt covenants. Key financial covenants pertaining to our senior secured credit facility are:
• Total leverage ratio not to exceed 4.5x TTM EBITDA (this steps up temporarily to 4.75x for 12 months after a material acquisition)
• Senior leverage ratio not to exceed 3.25x TTM EBITDA (this steps up temporarily to 3.5x for 12 months after a material acquisition)
• Interest coverage ratio of at least 3.0x TTM EBITDA
20Cimpress N.V. Q1 FY2018 Earnings Presentation
No notes here - transition slide
21Cimpress N.V. Q1 FY2018 Earnings Presentation
We have two housekeeping items to discuss:
• First, our expectation for share-based compensation expense for fiscal year 2018 is now approximately $40 million. This is
lower than the $45 million to $50 million that we previously expected, due to a combination of factors. The prior guidance
was an estimate as the grant date fair value for fiscal 2018 annual PSU grants was not yet available and is sensitive to
share price changes. This estimate does not yet incorporate a change related to the anticipated Vistaprint restructuring,
which may cause the SBC expense in FY18 to be slightly lower than this revised estimate and will be updated next
quarter.
• Second, in Q1 FY18, we adopted the new standard ASU 2016-16, which relates to the accounting treatment of tax effects
for intercompany transfers of assets. Under the old rules, the tax effects of intra-entity transfers were deferred until the
transferred asset was sold to a third party or otherwise recovered through use. We were recording a $10 million - $12
million per year benefit through our GAAP tax provision from the previous transfer of intellectual property for Vistaprint and
National Pen with a corresponding increase in our deferred tax assets. With the adoption of the new rules, as of the start
of fiscal year 2018, we have now fully recognized the related tax benefits as a deferred tax asset on our balance sheet
(through equity) and, starting this quarter, they will no longer flow through our GAAP tax provision. Therefore, there are
some large balance sheet movements this quarter, with deferred tax assets increasing significantly, and a decrease in
other current assets. Most importantly, the adoption of this new accounting standard in no way changes the cash tax
benefits that we expect to receive in the future related to prior transfers of intellectual property, which are now simply all
recognized in the balance sheet.
22Cimpress N.V. Q1 FY2018 Earnings Presentation
In summary, Q1 FY18 was a strong quarter for the reasons outlined above.
We believe the capital we are allocating across our business, and the capital we are choosing to free up and/or redeploy,
along with the organizational and strategic changes we implemented in fiscal year 2017, are solidifying our leadership position
in mass customization and continuing to increase our intrinsic value per share.
23Cimpress N.V. Q1 FY2018 Earnings Presentation
Cimpress N.V. Q1 FY2018 Earnings Presentation
Q&A Session
Please go to ir.cimpress.com
for the live Q&A call at
7:30 am EDT on November 2, 2017
Q1 Fiscal Year 2018 Financial and Operating Results Supplement
Cimpress N.V. Q1 FY2018 Earnings Presentation
(1) Please see non-GAAP reconciliation to reported revenue growth rates at the end of this presentation.
Revenue Growth Rates
FY15 FY16 FY17
Constant-currency growth 23% 24% 21%
Constant-currency growth excl. TTM Acquisitions & Divestitures 9% 11% 8%
26
Reported Revenue by Segment
Quarterly, USD in millions
For a description of acquisitions, divestitures and JVs that are excluded from constant currency growth, please see reconciliation to reported revenue growth rates at the end of
this presentation. Percentage of total revenue calculated based off of total segment revenues, inclusive of inter-segment revenues.
Q1 FY2018
Vistaprint
56% of total revenue
11% y/y growth
10% y/y constant currency growth
Upload and Print
28% of total revenue
22% y/y growth
16% y/y constant currency growth
National Pen
11% of total revenue
100% y/y growth
100% y/y constant currency growth
All Other Businesses
5% of total revenue
7% y/y growth
5% y/y constant currency growth
Inter-segment Elimination $(0.8) $(0.9) $(0.8) $(1.1) $(1.1) $(1.4) $(1.6) $(1.6) $(3.9)
Total Consolidated Revenue $375.7 $496.3 $436.8 $479.2 $443.7 $576.9 $550.6 $564.3 $563.3
27
Cimpress N.V. Q1 FY2018 Earnings Presentation
Reported Revenue Growth
(1) National Pen was acquired on December 30, 2016, and therefore reported revenue growth cannot be calculated as a percentage since we did not own this business in the year-ago period.
(2) Q1FY18 All Other Businesses revenue growth impacted by the divestiture of Albumprinter business and includes only two months of revenue. 28
Organic Constant Currency Revenue Growth (excl. TTM acquisitions/divestitures)
N/A N/A
(1) National Pen was acquired on December 30, 2016, and therefore organic constant currency revenue growth cannot be calculated as a percentage since we did not own this business in the
year-ago period.
N/A
29
Cimpress N.V. Q1 FY2018 Earnings Presentation
Vistaprint Bookings Mix & Advertising Spend
% TTM Bookings from Repeat Orders
% TTM Bookings from New Orders
30
Segment Profit
Quarterly, USD in millions
Segment Profit Segment Profit Margin
Note: In Q1FY18, we recast historical segment profitability for the allocation of certain IT costs, which previously burdened our Vistaprint business, but have now been allocated to each of our
businesses in fiscal 2018. 31
Cimpress N.V. Q1 FY2018 Earnings Presentation
Segment Profit Reconciliation to OI
Quarterly, in thousands
Segment Profit Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18
Vistaprint $36,138 $85,021 $45,631 $48,157 $25,272 $67,016 $37,627 $37,772 $30,895
Upload and Print $10,543 $14,877 $15,448 $17,339 $13,451 $16,798 $12,983 $19,957 $14,768
National Pen N/A N/A N/A N/A N/A N/A ($3,226) $1,001 $1,185
All Other Businesses ($1,213) $6,750 ($3,996) ($10,869) ($9,752) ($2,107) ($10,085) ($9,361) ($7,551)
Total Segment Profit $45,468 $106,648 $57,083 $54,627 $28,971 $81,707 $37,299 $49,369 $39,297
Central and corporate costs ($22,589) ($23,105) ($26,077) ($25,901) ($28,186) ($31,228) ($28,028) ($30,653) ($28,257)
Acquisition-related amortization and depreciation ($9,782) ($9,655) ($10,879) ($10,518) ($10,213) ($10,019) ($13,508) ($12,662) ($12,687)
Earn-out related charges (1) ($289) ($3,413) ($883) ($1,793) ($16,247) ($7,010) ($4,882) ($12,245) ($1,137)
Share-based compensation related to investment consideration ($802) ($1,735) ($1,168) ($1,130) ($4,103) ($601) ($375) ($4,559) ($40)
Certain impairments (2) $— ($3,022) ($37,582) ($1,216) — — ($9,556) — —
Restructuring related charges ($271) ($110) — — — ($1,100) ($24,790) ($810) ($854)
Interest expense for Waltham lease $350 $2,001 $1,975 $1,961 $1,970 $1,956 $1,897 $1,904 $1,911
Gain on the purchase or sale of subsidiaries — — — — — — — — $48,380
Total (loss) income from operations $12,085 $67,609 ($17,531) $16,030 ($27,808) $33,705 ($41,943) ($9,656) $46,613
(1) Includes expense recognized for the change in fair value of contingent consideration & compensation expense related to cash-based earn-out mechanisms dependent upon continued employment.
(2) Includes the impact of impairments or abandonments of goodwill and other long-lived assets as defined by ASC 350 - "Intangibles-Goodwill and Other" or ASC 360- "Property, plant, and equipment."
(3) Includes the impact of the gain on the sale of Albumprinter, as well as a bargain purchase gain as defined by ASC 805-30 for an acquisition in which the identifiable assets acquired
and liabilities assumed are greater than the consideration transferred, that was recognized in general and administrative expense in our consolidated statement of operations during the three months
ended September 30, 2017.
32
Quarterly, USD in millions
Share-Based Compensation
*Q1FY18 investment consideration of acquisition-related SBC was immaterial.
Note: Share-based compensation excludes SBC-related tax adjustment. Q4 FY17 includes incremental expense for the accelerated vesting of the Printi shares due to current period amendment
to the arrangement. In Q3FY17 there was a $6.3M acceleration of share-based compensation expense related to our restructuring activities undertaken in that period. Q1 FY17 includes
modification expense related to the RSA granted as part of the Tradeprint acquisition. Starting in Q1 FY17 results include the effect of our new shareholder-approved LTI program which includes
performance share units which have a different accounting treatment than restricted share units.
FY15 $24.1 FY16 $23.8 FY17 $48.6
33
Cimpress N.V. Q1 FY2018 Earnings Presentation
Balance Sheet Highlights
Balance sheet highlights, USD in millions, at period end 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/2017
Total assets $1,456.3 $1,663.9 $1,637.9 $1,679.9 $1,696.1
Cash and cash equivalents $53.6 $49.6 $43.5 $25.7 $42.8
Total current assets $175.2 $242.0 $216.8 $246.0 $233.9
Property, plant and equipment, net $495.2 $505.3 $513.1 $511.9 $511.9
Goodwill and intangible assets $680.2 $821.5 $796.1 $790.9 $794.5
Total liabilities $1,243.9 $1,522.3 $1,510.6 $1,559.2 $1,527.8
Current liabilities $331.7 $436.0 $429.5 $449.5 $453.8
Long-term debt $654.3 $830.0 $860.2 $847.7 $800.9
Shareholders’ Equity attributable to Cimpress NV $147.2 $99.5 $84.4 $75.0 $84.2
Treasury shares (in millions) 12.4 13.0 12.9 12.7 13.1
Note: June 30, 2017 cash and cash equivalents excludes $12.0M of cash classified as part of "held for sale" 34
Appendix
Including a Reconciliation of GAAP to Non-GAAP
Financial Measures
Cimpress N.V. Q1 FY2018 Earnings Presentation
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 EBITDA, free cash flow, unlevered free cash flow, trailing twelve month return on
invested capital, Adjusted NOP, constant-currency revenue growth and constant-currency revenue growth excluding revenue
from acquisitions, divestitures and joint ventures from the past twelve months. Please see the next two slides for definitions of
these items.
• These non-GAAP financial measures are provided to enhance investors' understanding of our current operating results from the
underlying and ongoing business for the same reasons they are used by management. For example, as we have become more
acquisitive over recent years we believe excluding the costs related to the purchase of a business (such as amortization of
acquired intangible assets, contingent consideration, or impairment of goodwill) provides further insight into the performance of
the underlying acquired business in addition to that provided by our GAAP operating income. As another example, as we do not
apply hedge accounting for our currency forward contracts, we believe inclusion of realized gains and losses on these contracts
that are intended to be matched against operational currency fluctuations provides further insight into our operating performance
in addition to that provided by our GAAP operating income. We do not, nor do we suggest that investors should, consider such
non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
• For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of Non-GAAP
Financial Measures” included at the end of this release. The tables have more details on the GAAP financial measures that are
most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.
36
Non-GAAP Financial Measures Definitions
Non-GAAP Measure Definition
Free Cash Flow FCF = Cash flow from operations – capital expenditures – purchases of intangible assets not related to acquisitions – capitalized software expenses + payment of contingent consideration in excess of acquisition-date fair value + gains on proceeds from insurance
Unlevered Free Cash Flow Unlevered Free Cash Flow = Free Cash Flow as defined above + cash paid during the period for interest - interest expense associated with Waltham lease
Adjusted Net Operating Profit (NOP) Adjusted NOP = GAAP operating income + the impact of M&A related items including acquisition-related amortization and depreciation, the change in fair value of contingent consideration, and expense for deferred payments or equity awards that are treated as compensation expense + the impact of unusual items such as discontinued operations, restructuring related charges, and impairments -interest expense related to our Waltham office lease + realized gains or losses from currency derivatives that are not included in operating income as we do not apply hedge accounting
Trailing Twelve Month Return on Invested Capital ROIC = Adjusted NOP / (debt + redeemable non-controlling interest + total shareholders equity – excess cash)Adjusted NOP is defined above.Excess cash is cash and equivalents > 5% of last twelve month revenues; if negative, capped at zeroOperating leases have not been converted to debt
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)
Adjusted EBITDA = Operating Income + depreciation and amortization (excluding depreciation and amortization related to our Waltham office lease) + share-based compensation expense + proceeds from insurance + earn-out related charges + certain impairments + restructuring related charges + realized gains or losses on currency derivatives - interest expense related to our Waltham office lease -gain on purchase or sale of subsidiaries
Constant-Currency Revenue Growth 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.
Constant Currency Revenue Growth, excluding TTM Acquisitions Constant-currency revenue growth excluding revenue from trailing twelve month acquisitions excludes the impact of currency as defined above and revenue from acquisitions for which there is not a full-quarter year-over-year comparison.
Two-year stacked constant-currency organic revenue growth Two-year stacked growth is computed by adding the revenue growth from the current period referenced and that of the same fiscal period ended twelve months prior. Constant-currency revenue growth excluding revenue from trailing twelve month acquisitions is defined directly above.
37
Cimpress N.V. Q1 FY2018 Earnings Presentation
Reconciliation: Unlevered Free Cash Flow
Q1 FY17 Q1 FY18
Net cash provided by operating activities $9,600 $16,379
Purchases of property, plant and equipment ($19,319) ($20,457)
Purchases of intangible assets not related to acquisitions ($26) ($24)
Capitalization of software and website development costs ($8,312) ($8,934)
Free cash flow ($18,057) ($13,036)
Plus: cash paid during the period for interest $5,362 $8,430
Less: Interest expense for Waltham lease ($1,970) ($1,911)
Unlevered free cash flow ($14,665) ($6,517)
Quarterly, in thousands
Reference:
Value of capital leases
$2,077 —
38
Reconciliation: Unlevered Free Cash Flow
TTM, in thousands
TTM Q1FY16 TTM Q2FY16 TTM Q3FY16 TTM Q4FY16 TTM Q1FY17 TTM Q2FY17 TTM Q3FY17 TTM Q4FY17 TTM Q1FY18
Net cash provided by operating activities $216,509 $212,151 $242,142 $247,358 $229,532 $199,702 $175,782 $156,736 $163,515
Purchases of property, plant and equipment ($83,522) ($84,410) ($88,349) ($80,435) ($75,361) ($73,146) ($74,710) ($74,157) ($75,295)
Purchases of intangible assets not related to acquisitions ($522) ($507) ($502) ($476) ($145) ($162) ($133) ($197) ($195)
Capitalization of software and website development costs ($18,694) ($22,001) ($22,990) ($26,324) ($29,726) ($33,307) ($36,818) ($37,307) ($37,929)
Payment of contingent consideration in excess of acquisition-date fair value $8,055 $8,055 $6,806 $8,613 $8,613 $8,613 $8,613 — —
Proceeds from insurance related to investing activities $2,075 $3,624 $3,624 $3,624 $1,549 — — — —
Free cash flow $123,901 $116,912 $140,731 $152,360 $134,462 $101,700 $72,734 $45,075 $50,096
Plus: cash paid during the period for interest $10,611 $20,663 $24,036 $37,623 $37,623 $39,780 $42,171 $45,275 $48,343
Less: Interest expense for Waltham lease ($350) ($2,351) ($4,326) ($6,287) ($7,907) ($7,862) ($7,784) ($7,727) ($7,668)
Unlevered free cash flow $134,162 $135,224 $160,441 $183,696 $164,178 $133,618 $107,121 $82,623 $90,771
Reference:
Value of capital leases $12,385 $6,449 $11,301 $7,535 $7,219 $9,430 $12,390 $14,422 $12,345
39
Cimpress N.V. Q1 FY2018 Earnings Presentation
Reconciliation: Unlevered Free Cash Flow
Annual, in thousands
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Net cash provided by
operating activities $34,637 $54,377 $89,032 $129,654 $159,973 $165,149 $146,749 $141,808 $153,739 $242,022 $247,358 $156,736
Purchases of property, plant
and equipment ($24,929) ($62,982) ($62,740) ($76,286) ($101,326) ($37,405) ($46,420) ($78,999) ($72,122) ($75,813) ($80,435) ($74,157)
Purchases of intangible
assets not related to acquisitions — — ($1,250) — — ($205) ($239) ($750) ($253) ($250) ($476) ($197)
Capitalization of software
and website development costs ($2,656) ($4,189) ($5,696) ($7,168) ($6,516) ($6,290) ($5,463) ($7,667) ($9,749) ($17,323) ($26,324) ($37,307)
Payment of contingent
consideration in excess of acquisition-date fair value — — — — — — — — — $8,055 $8,613 —
Proceeds from insurance
related to investing activities — — — — — — — — — — $3,624 —
Free cash flow $7,052 ($12,794) $19,346 $46,200 $52,131 $121,249 $94,627 $54,392 $71,615 $156,691 $152,360 $45,075
Plus: cash paid during the period for interest $1,089 $1,789 $1,635 $1,391 $883 $219 $1,487 $4,762 $6,446 $8,520 $37,623 $45,275
Less: interest expense for Waltham lease — — — — — — — — — — ($6,287) ($7,727)
Unlevered Free Cash Flow $8,141 ($11,005) $20,981 $47,591 $53,014 $121,468 $96,114 $59,154 $78,061 $165,211 $183,696 $82,623
Reference:
Value of capital leases — — — — — — — — $300 $13,193 $7,535 $14,422
40
Reconciliation: Adjusted NOP
Quarterly, in thousands
Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18
GAAP operating (loss) income $12,085 $67,609 ($17,531) $16,030 ($27,808) $33,705 ($41,943) ($9,656) $46,613
Exclude expense (benefit) impact of:
Acquisition-related amortization and depreciation $9,782 $9,655 $10,879 $10,518 $10,213 $10,019 $13,508 $12,662 $12,687
Earn-out related charges (1) $289 $3,413 $883 $1,793 $16,247 $7,010 $4,882 $12,245 $1,137
Share-based compensation related to investment consideration $802 $1,735 $1,168 $1,130 $4,103 $601 $375 $4,559 $40
Certain impairments (2) — $3,022 $37,582 $1,216 — — $9,556 — —
Restructuring related charges $271 $110 — — — $1,100 $24,790 $810 $854
Less: Interest expense associated with Waltham lease ($350) ($2,001) ($1,975) ($1,961) ($1,970) ($1,956) ($1,897) ($1,904) ($1,911)
Less: Gain on the purchase or sale of subsidiaries (3) — — — — — — — — ($48,380)
Include: Realized (losses) gains on certain currency derivatives not included in operating income $316 $3,319 $1,391 $837 $1,888 $6,839 $4,591 $3,156 ($634)
Adjusted NOP $23,195 $86,862 $32,397 $29,563 $2,673 $57,318 $13,862 $21,872 $10,406
(1) Includes expense recognized for the change in fair value of contingent consideration & compensation expense related to cash-based earn-out mechanisms dependent upon continued employment.
(2) Includes the impact of impairments or abandonments of goodwill and other long-lived assets as defined by ASC 350 - "Intangibles-Goodwill and Other" or ASC 360- "Property, plant, and equipment."
(3) Includes the impact of the gain on the sale of Albumprinter, as well as a bargain purchase gain as defined by ASC 805-30 for an acquisition in which the identifiable assets acquired
and liabilities assumed are greater than the consideration transferred, that was recognized in general and administrative expense in our consolidated statement of operations during
the three months ended September 30, 2017. 41
Cimpress N.V. Q1 FY2018 Earnings Presentation
(1) Includes expense recognized for the change in fair value of contingent consideration & compensation expense related to cash-based earn-out mechanisms dependent upon continued employment.
(2) Includes the impact of impairments or abandonments of goodwill and other long-lived assets as defined by ASC 350 - "Intangibles-Goodwill and Other" or ASC 360- "Property, plant, and equipment."
(3) Includes the impact of the gain on the sale of Albumprinter, as well as a bargain purchase gain as defined by ASC 805-30 for an acquisition in which the identifiable assets acquired
and liabilities assumed are greater than the consideration transferred, that was recognized in general and administrative expense in our consolidated statement of operations during
the three months ended September 30, 2017.
Reconciliation: Adjusted NOP
TTM, in thousands
TTM
Q1FY16
TTM
Q2FY16
TTM
Q3FY16
TTM
Q4FY16
TTM
Q1FY17
TTM
Q2FY17
TTM
Q3FY17
TTM
Q4FY17
TTM
Q1FY18
GAAP operating (loss) income $91,550 $99,271 $77,399 $78,193 $38,300 $4,396 ($20,016) ($45,702) $28,719
Exclude expense (benefit) impact of:
Acquisition-related amortization and depreciation $27,138 $31,325 $37,690 $40,834 $41,265 $41,629 $44,258 $46,402 $48,876
Earn-out related charges (1) $11,887 $11,599 $4,970 $6,378 $22,336 $25,933 $29,932 $40,384 $25,274
Share-based compensation related to investment consideration $3,874 $4,509 $4,178 $4,835 $8,136 $7,002 $6,209 $9,638 $5,575
Certain impairments (2) — $3,022 $40,604 $41,820 $41,820 $38,798 $10,772 $9,556 $9,556
Restructuring related charges $3,473 $3,429 $2,909 $381 $110 $1,100 $25,890 $26,700 $27,554
Less: Interest expense associated with Waltham lease ($350) ($2,351) ($4,326) ($6,287) ($7,907) ($7,862) ($7,784) ($7,727) ($7,668)
Less: Gain on the purchase or sale of subsidiaries (3) — — — — — — — — ($48,380)
Include: Realized (losses) gains on certain currency derivatives not included in operating income $7,783 $6,924 $6,513 $5,863 $7,435 $10,955 $14,155 $16,474 $13,952
Adjusted NOP $145,356 $157,729 $169,937 $172,017 $151,495 $121,951 $103,416 $95,725 $103,458
42
Reconciliation: ROIC
(1) Excess cash is cash and equivalents > 5% of last twelve month revenues; if negative, capped at zero.
(2) Average invested capital represents a four quarter average of total debt, redeemable non-controlling interests and total shareholder equity, less excess cash
(3) Adjusted NOP already excludes SBC related to investment consideration. Here we remove the remaining SBC, so that the Adjusted NOPAT excluding SBC excludes all SBC.
TTM, in thousands except percentages
Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18
Total Debt $655,317 $547,726 $696,647 $678,511 $682,521 $876,113 $891,453 $876,656 $820,801
Redeemable Non-Controlling Interest $65,120 $64,833 $64,871 $65,301 $64,949 $41,824 $42,604 $45,412 $83,841
Total Shareholders Equity $110,072 $158,054 $151,783 $166,076 $147,488 $99,819 $84,725 $75,212 $84,503
Excess Cash (1) ($33,271) — — — — — — — —
Invested Capital $797,238 $770,613 $913,301 $909,888 $894,958 $1,017,756 $1,018,782 $997,280 $989,145
Average Invested Capital (2) $712,325 $742,206 $818,383 $847,760 $872,190 $933,976 $960,346 $982,194 $1,005,741
TTM Q1FY16 TTM Q2FY16 TTM Q3FY16 TTM Q4FY16 TTM Q1FY17 TTM Q2FY17 TTM Q3FY17 TTM Q4FY17 TTM Q1FY18
Adjusted NOP $145,356 $157,729 $169,937 $172,017 $151,495 $121,951 $103,416 $95,725 $103,458
Less: Cash Taxes $13,698 $17,473 $14,728 $19,750 $23,596 $29,314 $44,628 $49,342 $46,156
Adjusted NOPAT $131,658 $140,256 $155,209 $152,267 $127,899 $92,637 $58,788 $46,383 $57,302
Average Invested Capital (2) (from above) $712,325 $742,206 $818,383 $847,760 $872,190 $933,976 $960,346 $982,194 $1,005,741
TTM Adjusted ROIC (cash tax) 18% 19% 19% 18% 15% 10% 6% 5% 6%
Adjusted NOPAT (from above) $131,658 $140,256 $155,209 $152,267 $127,899 $92,637 $58,788 $46,383 $57,302
Less: SBC included in Adjusted NOP (3) $20,649 $19,696 $19,286 $18,937 $21,017 $27,362 $28,799 $32,733 $32,137
TTM Adjusted NOPAT excluding SBC $152,307 $159,952 $174,495 $171,204 $148,916 $119,999 $87,587 $79,116 $89,439
Average Invested Capital (2) (From above) $712,325 $742,206 $818,383 $847,760 $872,190 $933,976 $960,346 $982,194 $1,005,741
TTM Adjusted ROIC excluding SBC (cash tax) 21% 22% 21% 20% 17% 13% 9% 8% 9%
43
Cimpress N.V. Q1 FY2018 Earnings Presentation
Reconciliation: Adjusted EBITDA
Quarterly, in thousands
Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18
GAAP Operating income (loss) $12,085 $67,609 ($17,531) $16,030 ($27,808) $33,705 ($41,943) ($9,656) $46,613
Depreciation and amortization $30,226 $31,805 $34,561 $35,527 $35,541 $36,977 $44,522 $42,616 $42,384
Waltham lease depreciation adjustment ($328) ($1,045) ($1,030) ($1,030) ($1,030) ($1,030) ($1,030) ($1,030) ($1,030)
Share-based compensation expense $6,190 $6,066 $5,897 $5,619 $11,571 $11,277 $6,541 $12,982 $6,912
Proceeds from Insurance $1,584 $1,553 — $824 $650 — $157 — —
Interest expense associated with Waltham lease ($350) ($2,001) ($1,975) ($1,961) ($1,970) ($1,956) ($1,897) ($1,904) ($1,911)
Earn-out related charges $289 $3,413 $883 $1,793 $16,247 $7,010 $4,882 $12,245 $1,137
Certain Impairments — $3,022 $37,582 $1,216 — — $9,556 — —
Gain on purchase or sale of subsidiaries — — — — — — — — ($48,380)
Restructuring related charges $271 $110 — — — $1,100 $24,790 $810 $854
Realized gains on currency derivatives not included in operating income $316 $3,319 $1,391 $837 $1,888 $6,839 $4,591 $3,156 ($634)
Adjusted EBITDA (1,2) $50,283 $113,851 $59,778 $58,855 $35,089 $93,922 $50,168 $59,219 $45,945
In Q3 FY16 the definition of adjusted EBITDA used in external reporting was modified to include certain impairment charges and adjust for depreciation related to our Waltham lease resulting in a change to
adjusted EBITDA for Q1 and Q2 FY16. Also note that for Q3 FY17, the SBC expense listed here excludes the portion included in restructuring-related charges to avoid double counting.
(1) This presentation uses the definition of adjusted EBITDA as outlined above and therefore does not include the pro-forma impact of acquisitions; however, the senior unsecured notes' covenants allow for the
inclusion of pro-forma impacts to adjusted EBITDA.
(2) Adjusted EBITDA includes 100% of the results of our consolidated subsidiaries and therefore does not give effect to adjusted EBITDA attributable to non-controlling interests.
This is to most closely align to our debt covenant and cash flow reporting. 44
Reconciliation: Adjusted EBITDA
TTM, in thousands
TTM Q1FY16 TTM Q2FY16 TTM Q3FY16 TTM Q4FY16 TTM Q1FY17 TTM Q2FY17 TTM Q3FY17 TTM Q4FY17 TTM Q1FY18
GAAP Operating income (loss) $91,550 $99,271 $77,399 $78,193 $38,300 $4,396 ($20,016) ($45,702) $28,719
Depreciation and amortization $103,254 $112,164 $124,400 $132,119 $137,434 $142,606 $152,567 $159,656 $166,499
Waltham lease depreciation adjustment ($328) ($1,373) ($2,403) ($3,433) ($4,135) ($4,120) ($4,120) ($4,120) ($4,120)
Share-based compensation expense $24,523 $24,205 $23,464 $23,772 $29,153 $34,364 $35,008 $42,371 $37,712
Proceeds from Insurance $1,584 $3,137 $3,137 $3,961 $3,027 $1,474 $1,631 $807 $157
Interest expense associated with Waltham lease ($350) ($2,351) ($4,326) ($6,287) ($7,907) ($7,862) ($7,784) ($7,727) ($7,668)
Earn-out related charges $11,888 $11,600 $4,971 $6,378 $22,336 $25,933 $29,932 $40,384 $25,274
Certain Impairments — $3,022 $40,604 $41,820 $41,820 $38,798 $10,772 $9,556 $9,556
Gain on purchase or sale of subsidiaries — — — — — — — — ($48,380)
Restructuring related charges $2,799 $2,909 $2,909 $381 $110 $1,100 $25,890 $26,700 $27,554
Realized gains on currency derivatives not included in operating income $7,783 $6,924 $6,513 $5,863 $7,435 $10,955 $14,155 $16,474 $13,952
Adjusted EBITDA (1,2) $242,703 $259,508 $276,668 $282,767 $267,573 $247,644 $238,034 $238,398 $249,254
In Q3 FY16 the definition of adjusted EBITDA used in external reporting was modified to include certain impairment charges and adjust for depreciation related to our Waltham lease resulting in a change to
adjusted EBITDA for Q1 and Q2 FY16. Also note that for Q3 FY17 (and Q4 FY17), the SBC expense listed here excludes the portion included in restructuring-related charges to avoid double counting.
(1) This deck uses the definition of adjusted EBITDA as outlined above and therefore does not include the pro-forma impact of acquisitions; however, the senior unsecured notes' covenants allow for the
inclusion of pro-forma impacts to adjusted EBITDA.
(2) Adjusted EBITDA includes 100% of the results of our consolidated subsidiaries and therefore does not give effect to adjusted EBITDA attributable to non-controlling interests.
This is to most closely align to our debt covenant and cash flow reporting. 45
Cimpress N.V. Q1 FY2018 Earnings Presentation
Reconciliation: Revenue Growth Rates by Segment
Quarterly
Vistaprint Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18
Reported revenue growth (1) 3% 2% 8% 11% 7% 7% 11% 5% 11%
Currency Impact 5% 5% 2% —% 1% 2% 1% 1% (1)%
Revenue growth in constant currency 8% 8% 10% 12% 8% 9% 12% 6% 10%
All Other Businesses Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18
Reported revenue growth (6)% (4)% (7)% (8)% (17)% (7)% (8)% 6% 7%
Currency Impact 14% 12% 4% —% (2)% —% (1)% 1% (2)%
Revenue growth in constant currency 7% 8% (3)% (8)% (19)% (7)% (9)% 7% 5%
Impact of TTM Acquisitions and Divestitures (4)% —% —% —% —% —% —% —% 35%
Revenue growth in CC excl. TTM acquisitions & divestitures 4% 8% (3)% (8)% (19)% (7)% (9)% 7% 40%
Note: In Q4 FY2015, we recognized deferred revenue related to group buying activities, a net $3.7 million headwind to Vistaprint year-over-year growth rate in Q4FY16.
(1) National Pen's reported revenue growth was 100% since we did not own this business in the year-ago period.
National Pen Q3FY17 Q4FY17 Q1FY18
Reported revenue growth (1) 100% 100% 100%
Impact of acquisition (100)% (100)% (100)%
Year-over-year growth without the acquisition —% —% —%
Impact of pro forma actual revenue growth (8)% (5)% (5)%
Pro forma revenue growth in U.S. dollars (8)% (5)% (5)%
Currency Impact 3% 3% (2)%
Pro forma revenue growth in constant currency (5)% (2)% (7)%
Impact of discontinued operations 3% 3% 4%
Pro forma revenue growth in constant currency, excluding discontinued operations (2)% 1% (3)%
Upload and Print Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18
Reported revenue growth 98% 112% 201% 94% 72% 63% 22% 10% 22%
Currency Impact 20% 16% 2% (2)% 1% 3% 5% 4% (6)%
Revenue growth in constant currency 118% 128% 203% 92% 73% 66% 27% 14% 16%
Impact of TTM Acquisitions (87)% (97)% (178)% (71)% (61)% (55)% (14)% —% —%
Revenue growth in constant currency excl. TTM acquisitions 31% 31% 25% 21% 12% 11% 13% 14% 16%
46
Quarterly
Reconciliation: Consolidated Revenue Growth Rates
Q1 FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18
Reported Revenue Growth 21% 19% 19% 13% 13% 13% 29% 26% 18% 16% 26% 18% 27%
Currency Impact —% 4% 7% 9% 8% 7% 2% —% 1% 2% 2% 2% (3)%
Revenue Growth in Constant Currency 21% 23% 26% 22% 21% 20% 31% 26% 19% 18% 28% 20% 24%
Impact of TTM Acquisitions, Divestitures & JVs (15)% (16)% (15)% (9)% (10)% (10)% (21)% (15)% (13)% (10)% (17)% (11)% (12)%
Revenue growth in constant currency ex. TTM acquisitions, divestitures & JVs 6% 7% 11% 13% 11% 10% 10% 11% 6% 8% 11% 9% 12%
Reported revenue growth rate ex. TTM acquisitions, divestitures & JVs 6% 3% 4% 3% 3% 3% 8% 11% 6% 6% 9% 7% 15%
Note: Q3FY17, Q4FY17 and Q1FY2018 total company revenue growth in constant currency excluding TTM acquisitions, divestitures and joint ventures excludes the impact of
currency and revenue from National Pen. 47
Cimpress N.V. Q1 FY2018 Earnings Presentation
Annual
Reconciliation: Revenue Growth Rates
Total Company FY14 FY15 FY16 FY17
Reported Revenue Growth 9% 18% 20% 19%
Currency Impact (1)% 5% 4% 2%
Revenue Growth in Constant Currency 8% 23% 24% 21%
Impact of TTM Acquisitions & JVs (4)% (14)% (13)% (13)%
Revenue growth in constant currency ex. TTM acquisitions & JVs 4% 9% 11% 8%
FY2017, by Reportable Segments Vistaprint Upload & Print National Pen All Other Businesses
Reported Revenue Growth 7% 36% 100% (7)%
Currency Impact 2% 3% —% —%
Revenue Growth in Constant Currency 9% 39% 100% (7)%
Impact of TTM Acquisitions & JVs —% (26)% (100)% —%
Revenue growth in constant currency ex. TTM acquisitions & JVs 9% 13% —% (7)%
48
Reconciliation: Two-year Stacked Constant-Currency Organic Revenue Growth
Quarterly
Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18
Reported Revenue Growth 9% 6% (1)% 21% 21% 19% 19% 13% 13% 13% 29% 26% 18% 16% 26% 18% 27%
Currency Impact —% —% —% (2)% —% 4% 7% 9% 8% 7% 2% —% 1% 2% 2% 2% (3)%
Revenue Growth in Constant Currency 9% 6% (1)% 19% 21% 23% 26% 22% 21% 20% 31% 26% 19% 18% 28% 20% 24%
Impact of TTM Acquisitions, Divestitures & JVs —% —% —% (15)% (15)% (16)% (15)% (9)% (10)% (10)% (21)% (15)% (13)% (10)% (17)% (11)% (12)%
Revenue growth in constant currency ex. TTM acquisitions, Divestitures & JVs 9% 6% (1)% 4% 6% 7% 11% 13% 11% 10% 10% 11% 6% 8% 11% 9% 12%
2 Year Stacked
Q1'14+Q1'15 Q2'14+Q2'15 Q3'14+Q3'15 Q4'14+Q4'15 Q1'15+Q1'16 Q2'15+Q2'16 Q3'15+Q3'16 Q4'15+Q4'16 Q1'16+Q1'17 Q2'16+Q2'17 Q3'16+Q3'17 Q4'16+Q4'17 Q1'17+Q1'18
Year 1 9% 6% (1)% 4% 6% 7% 11% 13% 11% 10% 10% 11% 6%
Year 2 6% 7% 11% 13% 11% 10% 10% 11% 6% 8% 11% 9% 12%
Year 1 + Year 2 15% 13% 10% 17% 17% 17% 21% 24% 17% 18% 21% 20% 18%
Note: Q3FY17, Q4FY17 and Q1FY18 total company revenue growth in constant currency excluding TTM acquisitions, divestitures and joint ventures excludes the impact of currency
and revenue from National Pen. 49